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its share in preventing the disaster. i move now to this morning ’ s breakfast presentation on the first mps for 2010. while you can read what ’ s in the mps in today ’ s newspapers, my presentation will deal with two main subjects : 1. what is defined as price stability by the bank of papua new guinea ; and 2. what effect might the liquefied natural gas ( lng ) project have on the economy in general and on monetary developments in particular? the bank of papua new guinea defines price stability as a non volatile single digit or low level of inflation supported by stable levels of interest and exchange rates. the term “ non volatile ” is a very important part of the definition. the objective is, to create a conducive environment for investment and growth in economic activity by the private sector. for the private sector to plan ahead, it must have some certainty of what will be the price of inputs during the period of investment and the selling price of the outputs. an entrepreneur knows that there is risk involved in future flows from any investment. what central banks are trying to achieve is a stable macro - economic environment that will reduce the risk of price volatility. the risk of producing a salable product that has a market, at a competitive price rests with the entrepreneur. based on this paradigm it is clear that we do not want a negative inflation. expectation of negative inflation will reduce investment, entrepreneurs will delay activity to benefit from the lower future costs. reduction in investment and activity and its multiplier effects will result in a decline in economic activity and negative growth. the most important decision the governor has to take is what level of inflation will define price stability. as you already understand it will depend on the level of expected economic activity and growth. it is clear that there is a trade off between the two, i. e. inflation and economic growth. i want to clearly express to you my definition of price stability. at the level of average real economic growth of 5. 25 % realized in the four years 2006 – 2009, the acceptable level of inflation as defined by the central bank and even in government budget documents is 5. 0 % to 6. 0 %. the actual average inflation outcome for the same period was 5. 265 %. this is within the range that i clearly define as a period of price stability. looking at each year you will see that the range of annual inflation rates varied from 2. 4 % in 2006 to 11. 2 % in 2008 | projects. i went back to study what can be deduced about the impact they have had on economic growth, inflation, foreign exchange flows and employment. in the decade 1981 to 1991 five major projects were constructed, ok tedi, misima, hides gas, porgera and kutubu, all at a total cost of us $ 6. 0 billion. they commenced production in the years 1984 to 1992. the information about their impact was distorted by the second oil crisis in the early 80 ’ s, and the bougainville uprising in 1989. in spite of those events the lesson we can draw is that economic activity as measured by gdp increased from around 4 % to 5 % before reaching 11 % to 12 % during the period of construction of the mining projects, and to 17 % when the kutubu petroleum project was constructed. the construction of these projects has had a very moderate impact on inflation, if at all. it increased to 11. 7 % in 1980 mainly as a result of the second oil crisis. for the period of construction of these projects, inflation rate averaged 5. 5 % with some outliers in 1982 and 1983 at 6. 9 % and 8. 5 % and in early 1990 ’ s by around 7. 0 %, respectively. most of the projects in the 80 ’ s and 90 ’ s were in remote areas in the star mountains, misima island, southern highlands, and enga and these areas are not measured in the urban based cpi we are using. the lessons learnt are limited. the lng project is two and a half times larger at around us $ 15 billion to be spent in four years. but what is expected is that png will experience a period of heightened economic activity with gdp growth increasing, combined with inflation rate moving up to a new level. this is expected to occur during the construction phase of the lng project. the mps makes mention of some of these impact based on a study we carried out jointly with the monash university. the project is important but we have to be careful not to exaggerate its benefits. the gdp may increase significantly ( expected to be around 50 % ) but what matters most are the expenditures on domestic factors of production for the construction and set - up phase. upon the production phase, the main means through which to spread the benefits of the project throughout png over time is the government ’ s fiscal policy. the best fiscal strategy is to save some of the windfall revenue gain in | 1 |
about each one in a bit more detail. trade liberalization the first principle is trade liberalization, and our economic relationship with the united states has reflected that goal. as you and i discussed last year, the canadian and u. s. economies made difficult adjustments to freer trade in the early 1990s. the canada - u. s. free trade agreement and the north american free trade agreement exposed many canadian companies to stiffer competition. but freer trade also opened up new markets. and canadian companies have risen to the challenge. some of the sectors that we used to protect the most — such as furniture, clothing, and wine — have established a strong presence in international markets. on the whole, canadian industry has flourished with the competitive pressures generated by these agreements. and so has the trading relationship between canada and the united states. as you can see from chart 1, freer trade has clearly meant increased volumes of exports and imports. and now that we have made the adjustment, the more open trading environment is clearly helping to raise living standards for canadians. that should strengthen our resolve to see freer trade extended both within and beyond north america. we need to continue to work towards reduced trade barriers, both within nafta and at the doha round of multilateral talks. it won't be easy, but the long - term economic benefits will make our efforts worthwhile. structural reform the second principle focuses on improving the structure of national economies, to facilitate adjustment to changing economic conditions and to ensure the longer - term viability of social - and income - security arrangements. a number of initiatives have been undertaken in canada, but i'm going to focus on only three. i am sure that you're familiar with them, and many of you have participated in the debate surrounding these reforms. first, employment insurance ( ei ) benefits were restructured to strengthen the incentive to work. with these changes, and with improved economic performance, ei payments as a share of gdp have declined significantly over the past decade, from more than 2 1 / 2 per cent to just over 1 per cent, as shown in chart 2. second, the canada and quebec pension plans were revamped, to put them on a sustainable footing. the reforms meant some restructuring of benefits and a sharp increase in contributions — moves that were necessary, if unpopular. the results are shown in chart 3. the assets of the cpp are now managed by the independent canada pension plan investment board, the mandate of which | setting in motion an adverse feedback loop between the real economy and financial markets. collateral facilitates credit. if a weakening economy reduces the value of collateral, access to credit will be reduced. reduced access to credit constrains consumption and capital investment, further weakening the economy and – closing the loop – the value of collateral that can be pledged. and if along the way, some banks are forced to shut their doors, the information gap at the origin of this problem becomes even harder to bridge. 1 these are crucially important mechanisms. they have been understood for a long time and formed part of the economist toolkit. 2 this understanding proved to be a huge asset during the last crisis, motivating policy - makers throughout the world to act swiftly to break the adverse feedback loop once the crisis started. meeting in unsuspected places many of the connections between the economy and finance were perceived to be relevant mainly to countries in crisis, limiting interest to the study of historical episodes or economies with poorly developed financial markets. consequently, many of the models used by economists to analyze usually stable, advanced economies abstracted from features of the financial sector. this was seen as a reasonable approximation. but as we know, the recent crisis detonated in advanced economies after a long period of exceptional calm, often referred to as the “ great moderation. ” how does the economy shift from stability to crisis? while the links between the financial sector and the real economy are sometimes smooth and continuous, they can also be highly non - linear. these non - linear effects can manifest themselves by the slow buildup of imbalances in stable times – when many have been lulled into a false sense of security – followed by abrupt crashes. this underlines the need to improve our understanding of where the economy and finance meet during stable times and how crises erupt : many important breakthroughs in our understanding of the role of financial market imperfections on the real economy are rooted in the work of joseph stiglitz, michael spence and george akerlof, who were awarded the 2001 bank of sweden nobel prize in economics for their 1970s analysis of markets with asymmetric information. bernanke and gertler ( 1989 ) later formalized these financial market imperfections in a macroeconomic model to improve our understanding of the great depression. this is often referred to by economists as the financial accelerator model. see bernanke ( 2007a ) for a summary of the financial accelerator and the credit channel. models incorporating the financial accelerator in | 0.5 |
. consequently, whereas consumer credit cards are the biggest driver of revenue in the us payments industry6, their role in the euro area is less prominent. it has been rightly pointed out in one of the presentations today that, in contrast to the us, the sustainability of euro area 332. 4, us 312 million, source : statistics pocket book march 2013, 2011 figures. us €12. 1 trillion ( ppp ), euro area €9. 4 trillion ( ppp ), source ibid. us €29, 600 hgdi per capita ( ppp ), euro area €18, 700 hgdi per capita ( ppp ), source ibid. us 8. 3 % of hgdi, euro area 13. 2 % of hgdi, source ibid. us, 366 transactions, euro area 183, source : red book for us, sdw for euro area, 2011 figures. source : mckinsey. bis central bankers ’ speeches card business models in the euro area depends – notably because of regulatory interventions – on improvements in efficiency and on the cost side, and not on driving revenue. an occasional paper published by the ecb in september 2012 entitled “ the social and private costs of cash and retail payment instruments – a european perspective ” shows that in europe debit card payments have on average the lowest social costs per euro transaction value. in other words, society may benefit from an increase in their usage. the same paper reported that cheques were the most expensive form of payment. thus, they are not part of the integration efforts in the retail payments market in europe. in the us however, despite a steady decline, cheques still play an important role as a cashless payment instrument. in fact, they are used more often than credit transfers and direct debits put together. the low number of electronic payments ( i. e. credit transfers and direct debits ) in the us has not only to do with consumer preference and systemic restrictions on consumerinitiated transfers but also with the set - up of batch processing of electronic payments. the ceo of western union has commented that bank - to - bank credit transfers in the us are so complicated that banks ask western union to process them. 7 as you heard this morning, the creation of domestic credit transfer and direct debit schemes formed the basis of the single euro payments area ( sepa ). these electronic payment instruments facilitate straight - through - processing ( stp ) and are | yves mersch : aligning accountability with sovereignty in the european union - the ecb's experience speech by mr yves mersch, member of the executive board of the european central bank, at the ecb legal conference, frankfurt am main, 4 september 2017. * * * ladies and gentlemen, let me also welcome you on behalf of the executive board to the ecb legal conference 2017. today and tomorrow we will discuss matters that are relevant not just to the ecb and the legal community, but also to the public. the legal order indeed has a direct impact on all our daily lives. and it is of crucial importance to what we do at the ecb. with the ratification of the eu treaties, the citizens of europe made us independent and gave us a clear mandate. so it is entirely legitimate that we are held to account. we need to be able to show that we continue to act in accordance with our mandate ; we do not need to enter into a contentious debate about changing it. in fact, the demand for accountability has been increasing across advanced economies and across institutions. it ’ s a trend that reflects questions stemming from the crisis as well as societal and technological change – people want more answers, more quickly. but we need to be mindful that direct, instant and constant communication does not necessarily translate into stronger accountability. in our constitutional democracies, parliaments and courts provide fundamental checks and balances, for good reasons. the increased attention and stronger scrutiny we are facing at the ecb also reflects the growing importance and more direct impact of decisions taken at european level. citizens in europe witness the power exercised by eu institutions – and they want to be able to see that it is not wielded arbitrarily or from behind closed doors. today, i will discuss how these trends are affecting the ecb. and i will aim to draw some conclusions on how to align accountability with sovereignty in the eu ’ s multilevel governance framework at a time when, according to the latest eurobarometer survey1, 68 % of those polled say they feel they are citizens of the eu as well as citizens of their own country. independent, accountable and european the survey shows that trust in the ecb has increased, albeit from a lower level than trust in other public institutions. still, during the crisis, reduced trust in public institutions tempted some people to reopen the debate on central bank independence. they often argued that independence was incompatible with accountability on the basis of the trends | 0.5 |
economic downturn. recent years have also witnessed a dramatic increase in the issuance of collateralised loan obligations ( clos ). in this regard, there are growing concerns about the quality of the leveraged loans ( i. e. loans to highly leveraged firms ) that are pooled into these securities, an issue that is particularly relevant for their lower tranches. against this background, any negative surprise in terms of the macroeconomy or monetary policy expectations could have a sizable impact on market valuations and, more broadly, on global financial stability. what could be done to minimise the risks associated with these developments? certainly, the build - up of debt across different sectors needs to be monitored. also, the regulation and supervision of the non - bank financial sector needs to be revisited. despite some recent improvements, it is fair to say that, compared to the banking sector, we do not have enough information about the activities of non - bank financial intermediaries, nor sufficient understanding of their interconnectedness with other market players. we also lack consistently tested macroprudential policy tools that could be used to address the risks that have been already identified in this market segment. progress in this direction is of the utmost importance. “ new ” risks of course, the risks to global financial stability originating from low profitability in the banking sector and the search for yield by different market participants should be carefully monitored and addressed going forward. yet as i mentioned before, in a rapidly changing world and in an ever - evolving financial sector, regulators should likewise heed a set of emerging risks which could also be potentially dangerous for financial stability. and this because, in many cases, we do not have the data, or even the conceptual framework, to analyse their implications ( especially when compared to the more traditional risks ). - technology - related risks : cyber risks i will launch the discussion on these “ new ” risks by referring to those associated with the adoption of new technologies. clearly, new technologies are not just a risk, they are also an opportunity. in particular, as earlier mentioned, banks should harness the new technologies to achieve efficiency gains. naturally, that may require some large initial outlays, which could be difficult to achieve in an environment where banking sector revenues remain relatively subdued. but those institutions that fail to adopt the new technologies will find it harder to compete with their more technologically advanced peers. that said, new technological developments pose a significant challenge for financial stability. a recent study | new risks are emerging, ranging from cyber - risks and risks related to crypto - assets to misconduct and legal risks, physical and transition risks associated with climate change, and risks related to regulatory arbitrage. both regulators and market players are just starting to learn how to deal with and address all these new threats. let me now share some thoughts on some of the risks i have mentioned and then suggest some policy actions that policy makers could consider implementing in an effort to mitigate them. - low bank profitability starting with low bank profitability, i would like to highlight three messages. first, this is more a regional than a global issue. in fact, the profitability ratios of banks across countries show marked heterogeneity. for example, the return on equity of canadian, swedish and us banks is relatively high. in contrast, banks in japan and the euro area find themselves in the lower part of the distribution. moreover, in the case of european banks, their return on equity is not only well below that seen prior to the crisis ; their roe is also lower than their cost of equity. needless to say, this may have negative implications for financial stability. put simply, low profitability limits banks ’ capacity to generate capital buffers internally and therefore their ability to absorb negative shocks. at the same time, low returns may push entities towards risky search - for - yield strategies. my second message is that caution is required when drawing a simplistic and causal relationship between low profitability and monetary policy. take for instance the case of sweden, where the riksbank has pursued a negative interest rate policy from 2015 until very recently ; yet, banks ’ profitability ratios in that country are relatively high. more broadly, low or even ( mildly ) negative interest rates tend to have counteracting effects on bank profitability : while they may exert downward pressure on unit intermediation margins, they also promote loan demand, improve credit quality and produce capital gains in banks ’ securities portfolios. we may well appreciate the different channels through which low ( and even negative ) interest rates help boost economic growth and repair banks ’ balance sheets. but we cannot ignore the possibility that, if persistent enough, such a scenario may ultimately impair bank profitability and the bank - based transmission of monetary policy. precisely for this reason, the ecb introduced last september a two - tier system for the remuneration of bank reserves. looking forward, we should remain vigilant ahead of any | 1 |
at 4 1 / 4 per cent. the current level of the policy interest rate is judged, at this time, to be consistent with achieving the inflation target over the medium term. mr. chairman, paul and i will now be happy to answer your questions. | advisors or radiologists. modern social media enable grievances to be amplified many times over. by contrast, the opportunities being created by the application of new technologies — and the broad, positive spillover benefits to the rest of the economy — are much harder to identify and measure. this brings me to my first policy implication : it falls to policy - makers to explain the process, and offer concrete evidence that it is unfolding as usual. we need to demonstrate that beyond the initial negatives are many positives, which are likely to dominate over time. we need to acknowledge that real people and businesses are being disrupted and require policy support. and we need to point to the new and different jobs that are being created and explain that the new incomes are being spent in a wide array of traditional economic sectors. in other words, when mushrooms grow, they have yeast - like second - round effects as the growers spend their incomes. we can do this now because the narrative around technological disruption is not much different from the disruption associated with globalization, which has been with us for some 20 years. but 1 / 3 bis central bankers'speeches beyond explaining and documenting these complex dynamics, we also need to be attentive to potential pitfalls, such as those connected with the rise of so - called superstar firms, as we discussed earlier here. these and other legitimate public policy concerns make it imperative that policy - makers reallocate some of the benefits of growth to cushion the impact on those who are directly affected by disruption, and help them adjust. all that being said, let us consider the possibility that we are living in a profound, global, positive expansion of aggregate supply — the product of digital disruption. as with all major supply shocks in the past, it could take a long time for us to truly understand that it is happening. still, we must conduct monetary policy in the meantime. we can start by measuring growth in the digital economy itself. one rough proxy for the digital economy — the computer system design and related services sector — accounts for close to 2 per cent of canadian gross domestic product today and has been growing by about 7. 5 per cent annually for the past five years. but that growth is likely to be only the tip of the iceberg — what we need to know is how it is spreading through other sectors and affecting aggregate supply. for example, in the automobile industry, advances in computer technology are driving improvements in quality and represent significant value added from one model year to the next | 0.5 |
the riksbank in its contacts with the general public and make monetary policy more transparent. analysis and debate would be concentrated on factors that monetary policy influences. this, however, presupposes the existence of an underlying yardstick that can take every conceivable transitory effect into account. such measurements are difficult to construct. specifying all the circumstances that have to be considered so as to obtain the best picture of underlying inflation and doing this in advance is not a simple matter. using underlying inflation also has the drawback that essential information about the inflation process may be overlooked. for example, changes in import prices are a part of the domestic inflation process because they affect price setting in trade. in the present state of our art, the drawbacks of changing to a measure of underlying inflation for the riksbank ’ s monetary policy are greater than the advantages. as i have indicated, however, the cpi may be markedly affected by transitory effects. it is therefore important to monitor measurements of underlying inflation that have been stable over time. the path of the underlying inflation process is an important factor in the riksbank ’ s monetary policy decisions. gradual recovery in growth terms, 1996 was weaker than 1994 and 1995. the slowdown mainly came from marked stock reductions and a contraction of public sector operations. but even the growth of final demand in the private sector tended to slacken in 1996. there are now clear signs of an economic recovery ; the volume growth of exports remains high, along with indications that a stronger increase in private consumption is on the way. what, then, will be inflation ’ s path in the years ahead? the riksbank considers that at present the swedish economy has unutilised resources and even if growth does pick up during 1997 and 1998, it is unlikely that these resources will be activated to such an extent that the inflation target is in danger. the scenario in the december inflation report involves a gradual increase in the rate of inflation in the coming years. the main explanation for this upward movement is that the transitory effects - from lower interest rates and a stronger exchange rate - which kept inflation down in 1996 will be fading. the registered rate of cpi inflation is then expected to approach inflation ’ s underlying trend, which in the years ahead is judged to be more or less in line with the inflation target. lower inflation propensity the new price and other economic information in recent months reinforces the impression that price pressure is low. to this extent, the conditions | policy is perceived as the phillips curve t h e p h illip c u r ve in f latio n * b * a u n e m p lo ym e n t in f latio n * b * c u n e m p lo ym e n t focusing primarily on the stabilisation of employment. as we have seen, people ’ s expectations play a major part in the inflation process. if people expect monetary policy to concentrate in the first place on stabilising employment, then firms and employees will not regard unduly high wage increases as all that serious because they will count on measures being taken to stimulate demand if employment is in danger. sweden in the 1970s and ’ 80s is a good illustration of the problems that may arise. wage and price increases in that period were systematically higher than in other countries, which led to recurrent cost crises and problems with competitiveness. an important reason for the lack of adjustment to wage increases in the rest of the world was that employees and firms reckoned that the government and the riksbank would ultimately bail them out with devaluations, which is what actually happened. in this way inflation expectations were adjusted in advance to an anticipated pattern of economic policy reactions, whereby high price and wage increases were accepted or accommodated by devaluing the krona. as a result, strong inflationary mechanisms were built into the economy. as we have seen in recent years, once such mechanisms have been established, they are difficult to change. 3. monetary policy ’ s rule system experience has shown that more is needed than proud declarations from political decision - makers that they will safeguard a stable value of money and are not prepared to adapt policy to excessively high wage increases. we heard plenty of that in the 1980s. one way of enhancing credibility that has been found to work well and is supported by economic theory is for the democratically elected body to delegate monetary policy to a central bank with a clear, specified obligation to safeguard the value of money. the central bank is given full control over the instruments, principally the short interest rate, for fulfilling the stipulated objective. this arrangement limits both the room for short - run attempts to boost employment and the risk of inflationary mechanisms taking root in the economy. that also lessens the risk of a repetition of what happened in the early 1990s when the inflation bubble burst and unemployment rose. credibility provides greater manoeuvrability it may be worth underscoring that a system | 1 |
. only a small part of the programme is subject to risk sharing among the central banks of the eurosystem. additionally, the governing council decided on limits for the eurosystem ’ s purchases of individual bond issues and for its overall purchases of debt of any individual 3 / 7 bis central bankers'speeches country. this is designed to ensure that governments continue to rely on the capital markets for their funding. these measures make the qe programme less problematic than earlier sovereign bond purchase programmes that aimed to reduce the risk premiums of individual countries. nonetheless, one important risk of sovereign bond purchases remains. the national central banks have become the most important creditors to their governments, which might ultimately put the independence of monetary policy at risk. exiting its ultra - loose monetary policy would influence governments ’ financing conditions much more directly than our conventional monetary policy instruments. and the pressure might rise on the eurosystem to keep funding costs low in order to ensure the sustainability of public finances. if one adjusts the recent deficit figures for the currently favourable business cycle, one cannot fail but see that consolidation has in effect stalled in the euro area member states. the european commission expects practically no improvement in the structural balance this year and next. and there is the risk that the current low interest rates might make public finances appear to be in better shape than they actually are. high public debt ratios can become a burden when interest rates begin to rise again. in the european monetary union, however, fiscal discipline is absolutely essential. the set - up of the monetary union can further compound the tendency of governments to finance their spending through debt, as the consequences of bad policy choices can more easily be externalised to neighbouring countries. 4 monetary policy and heterogeneity ladies and gentlemen when comparing us and european monetary policy, the institutional set - up is not the only difference that springs to mind. in the euro area, monetary policy is complicated by a higher degree of heterogeneity compared to the us. let ’ s take unemployment : in the euro area, the weighted standard deviation of member states ’ unemployment rates from 2009 to 2017 is 5. 7 percentage points. in the us, the weighted standard deviation is only 1. 2 percentage points for the same period. heterogeneity was higher pre - crisis as well, at 2. 2 percentage points from 1999 to 2008, compared to 0. 8 percentage point in the us. a common monetary policy in a currency union means that one size has to fit all – | would agree that no monetary policy strategy should be set in stone. instead, it should adapt to changing circumstances, and circumstances have certainly changed over the past 18 years. in this sense, our current review should translate this strategy to the challenges of our time. 3 personal relationship otmar, with your firm commitment to monetary stability and central bank independence, based on your strong academic reasoning, you should serve as a role model for every central banker. and you have personally given me guidance and advice on numerous occasions as well. 1 / 2 bis central bankers'speeches even in my days as a student, i became well acquainted with your perspective by studying your textbooks. i preferred your books to others because they offered better explanations of the intricate interrelations of monetary policy and also introduced the reader to the challenges and issues of practical monetary policymaking. many years later, i had the privilege of working together with you personally. in the aftermath of the global financial crisis, you chaired the working group neue finanzmarktarchitektur. this working group was convened by chancellor angela merkel and was better known as the issingkommission. its task was to prepare the german agenda for dealing with the financial crisis for a packed series of g20 summits over the subsequent years. it was a very intensive and productive time that i remember vividly. today, i enjoy being able to exchange ideas about monetary policy and central banking with you – sometimes as a sparring partner. when we converse over the phone, i feel that we see many things from a very similar perspective, but what makes these exchanges so valuable and engaging is the sharpness of your intellect. and for this i offer my sincerest thanks. 4 conclusion although you already celebrated your 85th birthday a few weeks ago, i would nevertheless like to take this opportunity to wish you many happy returns as well as continued good health and vitality. your word carries weight beyond our country ’ s borders, even to this day. i hope that we will continue to hear your clear, credible, and authoritative voice in policy debate for many years to come. thank you and all the best! 2 / 2 bis central bankers'speeches | 0.5 |
support the supply of credit to the economy, thus mitigating the impact of the downturn of the financial cycle. it is worth noting that the central bank of cyprus is one of the five countries in the eurozone that have enacted a positive, cycle neutral countercyclical buffer. the bottom line is that a stable price environment can foster economic growth and financial stability, while a stable financial system can make it easier for central banks to achieve their price stability objectives. turning now to another important question, is the ecb monetary policy setting bringing price stability? the recent data on inflation affirms that monetary policy transmission is effective and having an impact on inflation. in addition, the ecb has managed to keep inflation expectations anchored, as most measures of longer - term inflation expectations currently stand at around 2 per cent, which is the inflation target rate. as i mentioned earlier, this is important in order to avoid a wage - price spiral. although inflation has been reduced relative to 2022, it's still above the 2 % target, but some of the transmission of monetary policy decisions that have been made, still remains in progress. based on the recent ecb macroeconomic projections of september, a continued inflation correction in the euro area is anticipated, with inflation decreasing from 8. 4 % in 2022, to 5. 6 % in 2023, and further decreasing to 3. 2 % in 2024 and 2. 1 % in 2025. 2 / 3 bis - central bankers'speeches as regards the inflation outlook in cyprus, according to the latest cbc projections, also of september 2023, a significant reduction in the inflation rate is expected from 8. 1 % in 2022 to 3. 9 % in 2023. this downward trend is anticipated to continue, with inflation decreasing to 2. 7 % in 2024 and 2. 0 % in 2025. according to the same projections, the cyprus economy will continue to exhibit resilience, with the gdp growth rate expected to reach 2, 4 %, 2. 7 % and 3. 1 %, in each year from 2023 to 2025. unemployment in cyprus is expected to decrease to 6. 3 % in 2023 compared to 6. 8 % in 2022. in the years 2024 - 25 unemployment is expected at 5. 9 % and 5. 6 %, respectively. despite the lower inflation readings that i just mentioned, material uncertainty continues to persist for the eurozone. for instance, the recent spike | also led some to question whether markets are now less resilient in periods of stress. the value of sterling fell by 17 % against the us dollar over 2016, largely as market participants digested the impact of the eu referendum decision on its long - term sustainable level. although sterling was in the spotlight for much of the year, two key episodes stand out : the sharp adjustment in the exchange rate these issues are examined in more detail in a financial stability paper released by the bank in october 2015 which draws together a body of analysis looking across a number of previous events of this nature. http : / / www. bankofengland. co. uk / financialstability / pages / fpc / fspapers / fs _ paper34. aspx and by 15 % on a trade - weighted basis. all speeches are available online at www. bankofengland. co. uk / speeches immediately after the referendum result, and the so - called flash event in the early ( uk ) hours of 7 october ( chart 1 ). markets displayed resilience in the immediate aftermath of the referendum : the record 11 % depreciation of sterling against the us dollar that took place over the succeeding two trading days was accompanied by exceptionally high trading volumes ( chart 2 ). the market facilitated an orderly correction in the sterling exchange rate, while enabling individual participants to adjust their portfolios in response to the news, and can therefore be reasonably judged to have functioned effectively. this was aided in no small part by the well - telegraphed nature of the event. informed by the lesson of the chf de - peg a year and a half earlier, our market intelligence was that dealers engaged in extensive planning and preparation to cater for the possibility of sharp movements in sterling, including by reducing trading positions, pre - defining trading strategies and risk appetites for a range of scenarios, recalibrating algorithms and engaging in conversation with their clients to manage their expectations. the contrast with the events of 7 october – less than four months later – could not be stronger. in the early hours of the morning sterling depreciated by around 9 % against the us dollar in a matter of seconds, before quickly retracing almost all of the move. not only did this represent almost unprecedented volatility, but for short periods market depth on key trading platforms all but evaporated. the amihud measure of liquidity, based on the price impact of individual trades, suggests that there was a | 0 |
nestor a espenilla, jr : beginning a meaningful conversation - first coordination dialogue on developing the local debt market speech by mr nestor a espenilla, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the local debt market development workshop, manila, 25 august 2017. * * * the securities and exchange commission, the bureau of treasury, and the bangko sentral ng pilipinas are no strangers to coordination and collaboration ( many of our achievements come from working together! ) and while this is not our first time to collaborate, it is the beginning of a new and meaningful conversation. today, we mark a milestone as we unveil the philippine roadmap for developing the local debt market. at the same time, we look forward to engaging in an initial discussion with market participants. this is a great time to begin this conversation! recently, our capital market was recognized as an emerging investment hub in asia by three major debt watchers – moody ’ s, standard and poor ’ s, and fitch. robust economic conditions coupled with government ’ s thrust to promote infrastructure create favourable conditions for capital market deepening. government ’ s vision of a “ golden age of infrastructure ” to support value - added output to the housing, manufacturing, connectivity and agricultural sectors is a game changer. 1 a deeper capital market will mobilize long - term savings for the financing requirements of these priority industries. moreover, gdp is projected to grow at 6. 8 percent in the medium term, with the inflation outlook for the next two ( 2 ) years manageable and within the government ’ s three ( 3 ) percent ± one percentage point target. our international reserves are at a level of eighty point eight billion us dollars ( usd80. 8b ) as of end - july 2017 — enough to cover eight point six ( 8. 6 ) months of imports and payments of goods and services. as if these are not encouraging enough, our discussion on capital market reform received support via technical assistance from the imf. the time is right to talk and take up reforms. colleagues and friends, it is our pleasure to start this conversation with you and to make local history. i am honoured to represent the bsp in this regard. sec commissioner ephyro amatong, treasurer of the philippines, rosalia de leon, representatives of the bankers association of the philippines ( bap ), headed by president nestor tan and bap open | . ladies and gentlemen. the overall success of financial and economic education rests on the concerted efforts of the bsp, our educators and our partners in the private sector. aside from the various programs and initiatives of the bsp, our contributions to this advocacy lie in providing support to similar efforts of individual organizations. that is why we are particularly happy to host this awards night, together with finex and citi foundation. both the private sector, as well as the bsp, stand to gain from a citizenry that better understands economics and finance, and we pledge our support to programs and initiatives that will help us attain this end. for finex and citi foundation, we look forward to building upon our collaboration and partnerships in the area of promoting financial and economic education. for our educators, nominees and winners all, i salute you for your dedication to an ideal that we at the bsp and the banking community as a whole, hold dear. i know that you do all these things not for personal glory or monetary reward. however, your actions should be recognized because they serve to inspire others to do better and to continue the work at hand. i challenge our educators to develop new and innovative methods of reaching our students, and to continue to inspire and enkindle in the hearts of the youth, the thirst and zest for knowledge you hope to impart. once again, thank you for your dedication and congratulations to our winners! mabuhay ang pilipinas! salamat sa inyong lahat. | 0.5 |
and semi urban areas signifies an attractive opportunity for islamic banks. you must be knowing that our survey based research study on islamic banking “ knowledge attitude and practices of islamic banking in pakistan ” identified the potential greenfield growth for islamic banking in the country. this implies that the true potential of islamic banking industry of the country lies in underserved areas / sectors, particularly balochistan, interior sindh, south punjab. however, islamic banking branches are still concentrated in very few regions ; 80 percent of islamic banking branches are concentrated in eighteen big cities only. moreover, at present the share of islamic microfinance is insignificant, though, the inclination of islamic banking institution towards this sector is encouraging. ladies & gentlemen ; there are three challenges to rapid growth for islamic banking : the first is developing new instruments to cover all aspects of banking. we as stakeholders of islamic banking industry should recognize that we cannot move the industry to the next level of growth trajectory unless innovative shariah based solutions for all financial services needs of the clients generally and business community particularly are developed. this highlights the need of research and development to be the core ingredient of the strategy of islamic banking industry. the industry needs to establish knowledge sharing and research platforms to evolve strategies on how best to meet the surging demand for shariah compliant products and services in pakistan. to this end industry can capitalise on strengths and expertise of centres of excellence in islamic finance education that have been established as research incubator and for the capacity building of the industry. moreover, collaboration between academia, shariah scholars and industry professionals can be established through these research centers which will allow synergies along with identifying priority research area. ladies & gentlemen ; the second challenge is capacity building and awareness. the state bank of pakistan, as a regulator performs the role of facilitator for islamic banking industry in the country. in this role, our major focus is on capacity building and awareness raising about islamic banking and finance in the country. to this end we are not only using our training arm, national institute of banking and finance ( nibaf ) for undertaking multiple capacity building programs but have also been page 3 of 4 supportive for such initiatives of industry and academia. while talking about human resource of islamic finance industry, the discussion about role of ulema in promoting islamic banking and finance cannot be ignored. fortunately we are among those countries which are regularly producing good number of shariah scholars with many of those being of international repute. however, with the high growth | would also be befitting to acknowledge the commitment and determination of the government of pakistan towards developing conducive infrastructure for growth of islamic finance industry in the country. formation of a high level steering committee for promotion of islamic banking in pakistan followed by formation of implementation committee for implementing recommendations of the steering committee, issuance of international sukuk after a gap of nine years and allowing tax neutrality for islamic financial institutions and their customers through finance act 2017 are few examples in this regard. i would also like to take this opportunity to applaud other stakeholders of the islamic finance industry for their strenuous efforts in achieving stellar growth. ladies & gentlemen ; islamic financial institutions have the potential to be major contributors towards growth and broad based development of a country owing to their closer link with real economic activities. however, in line with global trends the domestic industry is also concentrated in corporate clients and few big sectors ignoring others that are either unserved or underserved by conventional industry. i believe that given their risk sharing model and ability of financing ventures on the basis of their feasibility, islamic financial institutions can penetrate into underserved sectors like agriculture, small & medium enterprises ( smes ) and housing, particularly low cost housing, which are sectors of paramount importance in terms of their contribution to inclusive and sustainable gdp, employment generation and overall development of the country. this will also contribute towards improving financial inclusion in the country. recognizing the importance of these sectors, state bank of pakistan is persuading the industry to increase their financing to smes and agriculture sectors. we are assigning annual indicative targets to banking industry including islamic banking institutions for sme and agriculture sectors. we at state bank of pakistan do not compromise on stability of the sector and hence fully acknowledge issues like adverse selection and moral hazard linked with participatory based modes of financing particularly to these sectors. however, this challenge demands the industry to diverge from traditional business approaches and develop adequate risk management framework through coordinated efforts. this can enable page 2 of 4 industry to tap these strategically important sectors and create value for their shareholders, depositors and country ’ s economy as a whole. while talking about these unserved sectors i would also like to draw your attention to the fact that like any muslim dominant country financial exclusion in pakistan is voluntary and involuntary. islamic banks can play a key role in minimizing both segments of this incidence. along with significant faith - sensitive voluntary exclusion in the country the prevalence of huge unbanked population in rural | 1 |
there was a lengthy period in which households saved progressively less from current income, increased their leverage and enjoyed a sense of rising prosperity from the increase in asset values. that was most likely a one - time, if rather drawn out, adjustment to a number of important factors. it is quite understandable that it occurred – and it should be equally understandable that it wasn ’ t going to continue like that indefinitely. the “ new normal ” – which is actually the old normal – is where households save a non - trivial fraction of income and keep their debt levels more in line with income. one positive is that the adjustment to this “ new / old ” normal has been pretty fast, which means that a lot of it may already have been accomplished. nonetheless, in view of the financial turmoil of recent weeks, it would not be surprising if a degree of caution remained for a while yet. bis central bankers ’ speeches three months ago, the bank voiced concerns over the outlook for inflation in australia, on the basis that measures of underlying inflation looked like they had ended a decline that had lasted for more than two years, were starting to turn up and were forecast to rise over the three - year forecast horizon. that outlook suggested that policy would need to be tightened “ at some point ”. the bank did not have a pre - committed notion of when that point might be. such indications are, in any event, always conditional on the ongoing assessment of the outlook. the policy decision must consider not only the central forecast but also the possibility that things turn out differently from that forecast. in the intervening period, the international situation has become more clouded and evidence of caution at home has, if anything, intensified. asset prices have declined, credit growth has moderated further and the exchange rate remains very high. while each of these is affected by factors other than monetary policy, together they suggest a fair degree of restraint is being exerted by financial conditions. under the circumstances, the board judged the most prudent course was to sit still through this period, in spite of inflation data that, on their face, continue to be concerning. looking ahead, the year - ended cpi inflation rate will probably remain well above 3 per cent in the september quarter. it is then likely to come down as the impact of last summer ’ s floods on food prices continues to unwind ; we will see those effects around the end of the year and the early part of next year. after that, the assumed impact of the carbon pricing | alan greenspan : regulatory reform of the government - sponsored enterprises testimony by mr alan greenspan, chairman of the board of governors of the us federal reserve system, before the committee on banking, housing and urban affairs, us senate, 6 april 2005. * * * mr. chairman, senator sarbanes, and members of the committee, thank you for again inviting me to discuss the role of housing - related government - sponsored enterprises ( gses ) in our economy. as i described at length last year, the federal national mortgage association and the federal home loan mortgage corporation ( hereafter fannie and freddie ) have contributed importantly to the development of the secondary home mortgage market and thereby to the diversification of funding sources for depository institutions and other mortgage originators. in particular, fannie and freddie played a critical role in promoting mortgage securitization - the key to the success of secondary mortgage markets in the united states. 1 the stated intent of the congress is to use the housing - related gses to provide a well - established channel between housing credit and the capital markets and, through this channel, to promote homeownership, particularly among lower - income families. although prospectuses for gse debt are required by law to say that such instruments are not backed by the full faith and credit of the u. s. government, investors have concluded that the government will not allow gses to default, and as a consequence offer to purchase gse debt at substantially lower interest rates than required of comparably situated financial institutions without such direct ties to government. 2 given this advantage, which private competitors are not able to fully overcome, the housing - related gses have grown rapidly in recent years. the strong belief of investors in the implicit government backing of the gses does not by itself create safety and soundness problems for the gses, but it does create systemic risks for the u. s. financial system as the gses become very large. systemic risks are difficult to address through the normal course of financial institution regulation alone and, as i will stipulate shortly, can be effectively handled in the case of the gses by limiting their investment portfolios funded by implicitly subsidized debt. the government guarantee for gse debt inferred by investors enables fannie and freddie to profitably expand their portfolios of assets essentially without limit. 3 private investors have granted them a market subsidy in the form of lower borrowing rates. unlike subsidies explicitly mandated by the congress | 0 |
and transfer these into the bis central bankers ’ speeches different components of the programme. in other words, our existing agricultural financing and insurance scheme would be assessed, modified and integrated into nirsal. 25. all of our development initiatives at the cbn have been underpinned by a new engagement with the banking industry through the bankers ’ committee by adopting a more collaborative approach for financial services led national economic development and transformation. the bankers ’ committee has identified 3 key sectors : power, transportation and agriculture, as most critical to development of the real economy, as well as the change that will drive other sectors and contribute to economic development of nigeria. we work by identifying initiatives in each of the focus sectors that the financial system will support, determine requirements for success including funding and engage in advocacy to effect government policy changes. the bankers ’ committee also supports industry - wide capacitybuilding and work on the development of regulation and legislation to support lending to these three key sectors. 26. available data shows that the macroeconomic environment has improved considerably. inflation rate has moderated at a low double digit while the prime lending rate has gone down significantly. the exchange rate has been relatively stable. all these have impacted on the growth of the real economy. 27. from the recent experience it is discovered that the preponderance of toxic assets in bank portfolios have largely contributed to liquidity challenge facing some banks. however, the operation of amcon has started to strengthen the balance sheets of the deposit money banks. it is important that the banking system should learn to strictly to comply with the basel requirements in their operations in order to safeguard their stability. therefore, bank managers must be guided by professionalism and good corporate governance principles in their day to day activities so that our banks can remain safe, sound and competitive in the global market. 28. maintaining a safe and sound banking sector is essential, given the key role that banks play in facilitating economic growth and financing developmental projects, particularly key infrastructure, agriculture and industry. most emerging market economies have been known to use the domestic financial institutions to execute real sector big ticket projects and financial institutions in nigeria should not be an exception if we hope to achieve our developmental objectives. therefore, for our banks to be globally competitive, the current reforms in the banking will be sustained and strengthened. 29. finally, ladies and gentlemen, some schools of thought have questioned the rationale for any central bank to pursue the so called multiple objectives. let me emphasize the fact that in a developing economy such as ours | that we should move towards that direction. instead, what i believe should occur is a move towards greater accountability. thus, the bsp will sustain its reforms that would lead to improved disclosure practices, better risk management and higher standards of governance in the banking system. we will continue to pursue regulation that would make the markets work more efficiently and advance consumer protection. realizing that the current crisis has taken on a global nature, we will further strengthen engagements with our regional peers to share information, discuss emerging developments, and pool resources, if necessary even foreign exchange reserves. it ’ s interesting that the current financial turmoil took on a turn for the better once the major economies began to act in concert. confidence had been quickly eroding until then. the coordinated and cooperative policies that were put in place by the us and european central banks and finance ministries beginning october last year, have helped restore some traction in the markets and subsequently improved market confidence not only in the major economies, but also in emerging markets. ladies and gentlemen, 2009 will be a critical year for our economy. but we should look at this crisis as like the gift of fire of old. fire is important in all facets of our lives including the need for light, power and heat. yet fire is not without risks to life and property. what is important is to be able to master it and harness it to serve human needs. thus, this crisis should pose a challenge to us to put together and implement policies this year and beyond that would enhance the resilience and the flexibility of our economy. without a doubt, this crisis shall test our resiliency and character, and it shall determine whether our buffers would keep us afloat amidst troubled waters. the philippines is not a newbie in terms of facing crises, for we have hurdled quite a number of these in the past. each crisis we encountered was unique in its roots and causes. but we have learned from each, every time. it ’ s too early to make prescriptions and judgments, given that much is still to unfold. i trust that the audience could share my vision in seeing a glass half - filled with water as “ half - full ” rather than “ half - empty ”. let us also remain vigilant and prepared for any circumstances that could come our way. let me end my remarks this morning with a quote from john d. rockefeller. he said " these are days when many are discouraged. in the years of my life, depressions have | 0 |
financial institutions would strengthen the ability to leverage on the industry's expertise. the introduction of innovative islamic financial products in a specific jurisdictions can be expanded to other jurisdictions, which in turn, will contribute to broaden and deepen islamic financial markets and thus strengthen the overall development of the islamic financial industry. in addition, collaboration between academic researchers and the practitioners will enable the practical application of such research findings. in the area of education and training in islamic finance, there is now a critical shortage of talent in the islamic financial industry. collaboration between training institutions is vital to developing the pool of expertise in islamic finance that subscribes to common standards. establishing a network of mutual co - operation and collaboration would strengthen the efforts among the institutions of higher learning across regions in the areas of curriculum development, research, training, exchange of ideas and information, and resources in islamic finance. such partnerships in connecting the knowledge communities between regions would facilitate this process. in the area of shariah, the progressive convergence of shariah views and rulings, the mutual recognition of financial standards and products across jurisdictions would be major driver towards greater international financial integration. such a convergence and harmonisation can only happen with greater engagement among the regulators, practitioners and scholars in islamic finance in the international community. finally this integration process also requires greater cooperation among the regulators to ensure that the islamic financial system is not subject to vulnerabilities and abuses and thus ensuring its soundness and stability. in this respect, the sharing of information among the regulators including across borders is important especially in a more globalised and liberalised environment where financial transactions and activities have become more complex and globalised. in this regard, there is a greater need for regulators to be continuously connected to share information on key issues and developments faced in their own financial jurisdictions. in this respect, the islamic financial services board has an important role to facilitate this process. closer financial linkages among islamic financial institutions from different jurisdictions is essential to contribute towards accelerating the process and towards serving as a bridge to strengthen the relationship of the international islamic financial markets as well as the investment and trade ties between regions. such linkages within the industry could also lead to new product offerings and to co - arranging financing. there could also be mutual development of it systems and other technologies including other research and development endeavours. finally, let me touch on the development of the socio - economic aspects of islamic finance. while " profit motivated " islamic financial institutions will continue to evolve and gain greater significance, this | develop further on its own paths and merits so as to maximize the potential benefits of islamic financial system. key to this is having an appropriate pricing benchmark to be an indicator for islamic securities to be efficiently priced and credible. in addition, the role of shariah scholars who have the full understanding of the mechanics of islamic financial products and services, are key to ensuring its continued development. at the same time, shariah decisions, when made, needs to be disclosed. this will allow others to appreciate the juristic reasoning, which in turn would lead to a wider acceptance of shariah decisions, particularly if they have implications on cross - border transactions. as the islamic financial system becomes increasingly more internationally - integrated, it is important to recognize the different regional and institutional strengths and complementarities and the need to maximize synergies. collaboration among regional centres and key players in islamic finance will be an important part of the process that will contribute towards greater international financial integration. constructive engagement in the form of strategic partnerships and collaboration, as well as in market access needs to be enhanced. allowing greater market access among players in islamic financial centres can be a catalyst for enhanced integration and innovative elements in the islamic financial industry. malaysia's experience in strengthening the international dimension of the islamic financial system has shown positive results. this has commenced in 2002 with the inaugural issuance of a global sukuk to the liberalizing to allow for greater market access in islamic banking and takaful initiatives by permitting entry of foreign players. the third area of international integration is the liberalization of our financial markets to allow for greater foreign participation. in particular, in the sukuk market, foreign corporations, multinationals and multilateral agencies may raise ringgit and foreign currency denominated instruments in our market. our private debt securities market is the largest in south east asia. malaysia also has highly liberalized exchange administration system that allows for the free inflow and outflow of funds. there is also no restriction on the utilization of the funds raised in our market. the funds may be utilized for investments outside the country. finally, our own financial institutions have ventured beyond our domestic borders. these cumulative developments have strengthened our linkages with other islamic financial centres. another area important for islamic finance is the investment in research and development ( r & d ). the promotion of international strategic alliances through smart partnerships can create greater synergy that will bring about new approaches, new technologies and new areas of specialization. such collaborative efforts amongst islamic | 1 |
yields in advanced economies, including the uk, over the past month. the main common driver is speculation that the us federal reserve will soon reduce the pace of its asset purchases. that has – not surprisingly – affected yields in other countries because safe, liquid sovereign bonds of the world ’ s largest economies are close substitutes for each other. in the uk, these movements have been reinforced by growing expectations of recovery. as we explained at the time of the forward guidance announcement, a rise in the yields on long term bonds is consistent with our commitment to price stability and supporting the recovery. market interest rates at terms of 2 – 5 years have also risen recently. the date at which the markets expect the first increase in bank rate has moved in from the end of 2015 to mid2015. one possible explanation is that markets think that unemployment will come down to 7 % more quickly than we do. since the aim of our policy is to secure recovery as quickly as possible, that would be welcome. but policy is built not on hope, but on expectation. and we estimate there is only a 1 in 3 chance of unemployment coming down that quickly ( chart 1 ). 4 furthermore, thinking unemployment will come down faster than we expect isn ’ t enough to believe interest rates will rise soon. as i said earlier, the 7 % threshold is a staging post to assess the economy. nobody should assume that it is a trigger for raising rates. another possible explanation is that the increase in shorter - term yields, like the move in long yields, reflects changing expectations of us monetary policy. but the us recovery is much further advanced than that in the uk. while much has been made of the special relationship between the us and uk, it is not so special that the possibility of a reduction in the pace of additional stimulus in the us warrants a current reduction in the degree of monetary stimulus in the uk. we are not alone in that belief – other major independent forecasters such as the obr and niesr share our view that unemployment will be above 7 % in 3 years ’ time. the mpc ’ s assessment of the outlook for unemployment and likelihood of hitting the threshold is described in the august inflation report, available on the bank ’ s website at http : / / www. bankofengland. co. uk / publications / pages / inflationreport / 2013 / ir1303. aspx. bis central bankers ’ speeches movements in longer - term market interest rates are certainly relevant, but | ##cyclicality in the financial system, and that provides momentum for reform to strengthen financial infrastructure and governance. thailand, like most emerging markets, has also been struggling with this issue. and i want share with you some of the policies that we have pursued in response to the challenge. it is a long journey, and it is the journey that we are making. on the issue of reducing risk from procyclicality of the financial sector, prevent excessive lending, and ensure adequate capital. in our view, the key issue here is to reduce a possible large swing in the availability and the price of credit stemming from the tendency of banks to underestimate risks in good times, and then to overestimate them in bad times. on this, our approach has been to ensure that banks ’ capital and riskmanagement policy is forward - looking by using a combination of three instruments. the first is stress testing to ensure that bank ’ s own internal process for assessing the adequacy of capital and overall risk management is alert to possible key risks. thai banks have begun conducting stress tests as part of the supervisory process since early last year when we first underwent the fsap assessment. from our experience, we find stress testing to be a useful and effective instrument for helping banks in formulating strategy for capital and risk management in a forward - looking manner. also importantly, it provides a formal process for a two - way dialogue between banks and supervisors on risk management and on other financial stability issues. the second instrument is the fair value accounting rules or ias 39, which we have adopted for non - performing loans and for structured products. in our view, these rules can help strengthen market discipline over bank lending and investment. and because fair valuation involves marking to market, its adoption also helps make provisioning for asset impairment more forward - looking. the third instrument is prudential policy to limit excessive procyclicality. in the past five years, when capital inflows were strong, we have put in place prudential measures to stem the build - up of excessive credit growth on consumer spending and on speculative housing demand. these include measures on credit card approval and maximum loan - to - value ratio for luxury housing. as i noted earlier, in the context of monetary policy framework, combining inflation targeting with macroprudential measure offers a pragmatic approach to deal with concerns on financial stability and asset prices without compromising the discipline of monetary policy with respect to its primary inflation | 0 |
being largely repaired, are expected to support real income and consumption looking ahead. in my view, the degree to which the u. s. economy continues on this path of solid employment creation as well as the normalisation of its monetary policy, will be key in determining how global economic developments unfold in the period ahead. equally important for the shaping of the global economic outlook are developments in china. the chinese economy has been experiencing a gradual transition to a new growth model. in this context, growth is undergoing a gradual slowdown which is in line with the new growth target range, yet it continues to be underpinned by policy support as well as by a rapid credit expansion. the greater stability in financial markets and the renminbi exchange rate have helped in alleviating some of the uncertainty, which was particularly high at the start of the year. across other emerging markets, growth momentum remains relatively weak and heterogeneous. activity has by and large remained resilient in commodity - importing countries and very weak in commodity exporting countries, particularly russia and brazil. in sum, while i expect the recovery in the global economy to gather momentum as the headwinds eventually dissipate, there are many factors which could potentially derail it. and from the euro area ’ s perspective, i expect support from external demand to be considerably lower in the future when compared to the pre - crisis years, even if none of the downside risks materialise. longer - term growth trends these cyclical developments have been accompanied by unfavourable long - term global trends affecting economies ’ growth potential. indeed, there is a growing chorus among ecb staff estimates suggest that, had there been no asset purchase programme ( including the recalibration of december 2015 but not including the march 2016 package as it is currently assessed by staff in the context of the projection exercise that will become available in june ), inflation would have been negative in 2015. ecb assessments also suggest that the asset purchase programme ( including the recalibration of december 2015, but not including the march 2016 package as it is currently assessed by staff in the context of the projection exercise that will become available in june ) will contribute to raising the gdp of the euro area by around 1. 6 % in the period 2015 – 18. bis central bankers ’ speeches commentators and academics postulating that even when all the impediments from the crisis are surmounted, there may be unrelated secular forces at play which have shifted | twelve agencies, in general staffed by long - serving bank of england people, constantly collecting information at the grass - roots level from their many business contacts. and the information, which they provide direct to the mpc on a monthly basis, can often prove helpful : either in helping us unravel inconsistencies in the data ; or, as was the case in the summer and autumn of 1998, alerting us to problems in the economy before they show up in the official data. notwithstanding the help of the agents, problems with interpretation of the data abound. some of these will be discussed in our quarterly inflation report, due to be published on thursday this week. i hope you will have the opportunity to read it. financial stability perhaps i could now turn from monetary policy matters to financial stability ; and to the second part of my job as the deputy governor responsible for this part of the bank ’ s work. go back a little over three years and the bank had a large department with four hundred and fifty staff supervising banks. hard on the heels of the decision to grant the bank independence, the government decided in may 1997 to establish the financial services authority bringing together existing uk financial regulators and supervisors under one roof. the decision was intended to streamline the uk regulatory framework and, recognising that the distinction between different types of financial firms had begun to blur, to bring together financial regulation in a single organisation and under a single piece of legislation, the financial services and markets act. in a world crowded with acronyms, this gave an opportunity for something of a cull, consigning the numerous self - regulatory organisations or sros - like sfa, imro and pia to history! however, while you may be able to take financial supervisors ( quite literally ) out of a central bank, you cannot remove all responsibility from a central bank for the safe - running of the financial 7 system. the bank stands at the heart of the financial system not only in the implementation of monetary policy, monitoring the financial intermediaries that make up the transmission mechanism for policy changes, but also operationally, as a market participant : on a daily basis carrying out open market operations or providing final settlement for payment systems across accounts at the bank ; or, in more extreme circumstances, intervening in the market to support the currency or to provide liquidity to a bank in difficulty. thus, while responsibility for supervision of individual banks has moved to canary wharf, the bank has retained responsibility for maintaining the | 0 |
the wealth effect has been real and significant. thus, all else equal, a flattening of stock prices would likely slow the growth of spending, and a decline in equity values, especially a severe one, could lead to a considerable weakening of consumer demand. some moderation in economic growth, however, might be required to sustain the expansion. through the end of 1998, the economy continued to grow more rapidly than can be currently accommodated on an ongoing basis, even with higher, technology - driven productivity growth. growth has continued to shrink the pool of workers willing to work but without jobs. while higher productivity has helped to keep labor cost increases in check, it cannot be expected to do so indefinitely in ever tighter labor markets. despite brisk demand and improved productivity growth, corporate profits have sagged over recent quarters. this is attributable in part to some acceleration in labor compensation, but other factors have also been pressing, especially intensified competition and lower prices facing our exporters and those industries competing with imports. in these circumstances, businesses will feel under considerable pressure to preserve profit margins should labor costs accelerate further, or should the falling prices of commodity inputs, like oil, turn around. but, to date, businesses ’ evident pricing power has been scant. either that would change and inflation could begin to mount or, if costs could not be recouped, capital outlays might well be cut back. the recent behavior of profits also underlines the unusual nature of the rebound in equity prices and the possibility that the recent performance of the equity markets will have difficulty in being sustained. the level of equity prices would appear to envision substantially greater growth of profits than has been experienced of late. moreover, the impressive capital gains of recent years would seem also to rest on a perception of relatively low risk in corporate ownership. risk aversion and uncertainty rose sharply over the late summer and fall of 1998 following the russian default in mid - august, as evidenced by widening spreads among yields on debt of differing credit qualities and liquidity. the rise in uncertainty increased the discounting of claims on future incomes, and that reduced stock market prices even as the long - term earnings growth expectations of security analysts continued to rise. as risk aversion subsided after mid - october, stock prices returned to record levels. markets have doubtless stabilized significantly after the turbulence of last fall but they remain fragile, as the repercussions of the recent brazilian devaluation attest. moreover, our chronic current account deficit | labor and standards of living by impeding the adjustment of the capital stock to its most productive uses. not so well understood, in my judgment, is the impact that fear of growing protectionism would have on profit expectations, and hence on the current values of capital assets. protectionism was a threat to standards of living when capital asset values were low relative to income. it becomes particularly pernicious in an environment, such as today ’ s, when that is no longer the case. in sum, it has been the ability of our flexible and innovative businesses and workforce that has enabled the united states to take full advantage of emerging technologies to produce greater growth and higher asset values. policy has facilitated this process by containing inflation and by promoting competitiveness through deregulation and an open global trading system. our task going forward – at the federal reserve as well as in the congress and administration – is to sustain and strengthen these policies, which in turn have sustained and strengthened our now record peacetime economic expansion. * * * | 1 |
institutions, a resilient economy, and a first - class financial sector. my first chart shows the interest rates of german and swiss ten - year government bonds. the orange area indicates the interest rate differential. as central banks around the world fought to mitigate the worst effects of the global financial crisis, short - term interest rates in many advanced economies fell towards zero. importantly, foreign interest rates, including those in germany, have fallen more sharply than those in switzerland. as a result, switzerland ’ s interest rate differential had practically disappeared, making swiss franc investments more attractive than comparable investments in other currencies. by lowering the interest rate on sight deposits into negative territory, the snb restored the traditional interest rate differential to more normal levels, as illustrated by the orange area in the chart. the snb ’ s willingness to intervene in foreign exchange markets a higher interest rate differential reduces the relative attractiveness of the swiss franc. however, financial markets may be exposed to a sudden increase in volatility, which could lead to a sharp rise in the demand for swiss francs. this is where our willingness to intervene in the foreign exchange market plays a crucial role in stabilising the markets. for example, this summer, when the greek government announced a referendum on the international bailout programme, we intervened in the forex market at a time of great market volatility and global uncertainty. this willingness to intervene in the forex market as required is a key pillar of our monetary policy. the size of the snb ’ s balance sheet reflects our monetary policy measures. one consequence of a larger balance sheet is larger fluctuations in the financial results. in the first three quarters of this year, the snb incurred a provisional loss of chf 34 billion, predominantly reflecting valuation effects following the discontinuation of the minimum exchange rate. this is shown in chart 2. it is still too early to draw conclusions for the 2015 year - end result, particularly in the current volatile international environment. let me be clear, however : it is not the purpose of the snb to generate and distribute profits. instead, the snb ’ s main concern is to conduct a monetary policy that serves the interests of the country as a whole. our monetary policy operations have a direct impact on the snb ’ s balance sheet, meaning that substantial losses may occur in individual years. significantly, bis central bankers ’ speeches however, in the long term, our financial results should be positive, thanks to our | monopoly on creating banknotes and sight deposits, which ensures low funding costs. the swiss franc since the discontinuation of the minimum exchange rate our two - pronged monetary policy is proving effective in reducing the relative attractiveness of the swiss franc. after the sharp appreciation immediately following the discontinuation of the minimum exchange rate, the franc has weakened steadily against the euro, despite intermittent bouts of heightened financial market volatility during the summer. however, the swiss franc remains significantly overvalued. for example, the real effective exchange rate – the swiss franc ’ s exchange rate against a basket of currencies of our main trading partners – is still around 15 % above its long - term average, compared to less than 10 % at the end of 2014. the situation on the foreign exchange market has not yet normalised. chart 3 shows that private capital outflows, which have traditionally balanced switzerland ’ s structural current account surpluses, have turned into net inflows since the global financial crisis. changing investor preferences are behind this reversal of capital flows. while global economic conditions have improved, substantial uncertainty remains, causing some investors to seek the relative safety of the swiss franc. this also applies to domestic investors, including large institutional investors, which have partly repatriated their assets and investment returns. until investor preferences normalise, the franc is likely to remain under pressure. the second quarter of 2015 suggests a return to net capital outflows – a development undoubtedly supported by the negative interest rate. however, it is too early to say whether this is the beginning of a new trend. transmission of the negative interest rate to financial markets this brings me to the question of how the negative interest rate has been transmitted to the different segments of the swiss financial market. with regard to money and capital markets, our experience so far shows that the negative interest rate has worked remarkably well. the entire term structure of interest rates has shifted downwards without generating market disruptions. this is illustrated in chart 4. after an initial undershooting, the swiss franc three - month libor levelled off in the middle of the snb ’ s target range of – 1. 25 % to – 0. 25 %. other money market rates followed suit, leaving spreads between the different money market rates more or less unchanged. from the money market, the negative interest rate worked its way to the capital markets. government bond yields fell across the entire yield curve, with short | 1 |
ben s bernanke : confirmation hearing testimony by mr ben s bernanke, chairman of the board of governors of the federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington dc, 3 december 2009. * * * chairman dodd, senator shelby, and members of the committee, i thank you for the opportunity to appear before you today. i would also like to express my gratitude to president obama for nominating me to a second term as chairman of the board of governors of the federal reserve system and for his support for a strong and independent federal reserve. finally, i thank my colleagues throughout the federal reserve system for the remarkable resourcefulness, dedication, and stamina they have demonstrated over the past two years under extremely trying conditions. they have never lost sight of the importance of the work of the federal reserve for the economic well - being of all americans. over the past two years, our nation, indeed the world, has endured the most severe financial crisis since the great depression, a crisis which in turn triggered a sharp contraction in global economic activity. today, most indicators suggest that financial markets are stabilizing and that the economy is emerging from the recession. yet our task is far from complete. far too many americans are without jobs, and unemployment could remain high for some time even if, as we anticipate, moderate economic growth continues. the federal reserve remains committed to its mission to help restore prosperity and to stimulate job creation while preserving price stability. if i am confirmed, i will work to the utmost of my abilities in the pursuit of those objectives. as severe as the effects of the crisis have been, however, the outcome could have been markedly worse without the strong actions taken by the congress, the treasury department, the federal reserve, the federal deposit insurance corporation, and other authorities both here and abroad. for our part, the federal reserve cut interest rates early and aggressively, reducing our target for the federal funds rate to nearly zero. we played a central role in efforts to quell the financial turmoil, for example, through our joint efforts with other agencies and foreign authorities to avert a collapse of the global banking system last fall ; by ensuring financial institutions adequate access to short - term funding when private funding sources dried up ; and through our leadership of the comprehensive assessment of large u. s. banks conducted this past spring, an exercise that significantly increased public confidence in the banking system. we also created targeted lending programs that have helped to | insight into industry practices and possible emerging risks. to complement on - site supervisory reviews, we are also creating an enhanced quantitative surveillance program that will make use of the skills not only of supervisors, but also of economists, specialists in financial markets, and other experts within the federal reserve. we are requiring large firms to provide supervisors with more detailed and timely information on risk positions, operating performance, and other key indicators, and we are strengthening consolidated supervision to better capture the firmwide risks faced by complex organizations. in sum, heeding the lessons of the crisis, we are committed to taking a more proactive and comprehensive approach to oversight to ensure that emerging problems are identified early and met with prompt and effective supervisory responses. we also have renewed and strengthened our longstanding commitment to transparency and accountability. in the making of monetary policy, the federal reserve is highly transparent, providing detailed minutes three weeks after each policy meeting, quarterly economic projections, regular testimonies to the congress, and much other information. our financial statements are public and audited by an outside accounting firm, we publish our balance sheet weekly, and we provide extensive information through monthly reports and on our website on all the temporary lending facilities developed during the crisis, including the collateral that we take. further, our financial activities are subject to review by an independent inspector general. and the congress, through the government accountability office, can and does audit all parts of operations, except for monetary policy and related areas explicitly exempted by a 1978 provision passed by the congress. the congress created that exemption to protect monetary policy from short - term political pressures and thereby to support our ability to effectively pursue our mandated objectives of maximum employment and price stability. in navigating through the crisis, the federal reserve has been greatly aided by the regional structure established by the congress when it created the federal reserve in 1913. the more than 270 business people, bankers, nonprofit executives, academics, and community, agricultural, and labor leaders who serve on the boards of the 12 reserve banks and their 24 branches provide valuable insights into current economic and financial conditions that statistics cannot. thus, the structure of the federal reserve ensures that our policymaking is informed not just by a washington perspective, or a wall street perspective, but also a main street perspective. if confirmed, i look forward to working closely with this committee and the congress to achieve fundamental reform of our system of financial regulation and stronger, more effective supervision. it would be a tragedy if, after all the hardships that americans have endured | 1 |
though of course factors like education and skills are important in determining how quickly and smoothly these gains come about. all speeches are available online at www. bankofengland. co. uk / speeches could this time be different? the fourth industrial revolution could differ from its three predecessors in terms of scope, scale and speed. scope thus far, each wave of technological change has increased the importance of cognitive tasks relative to noncognitive ones. in other words, machines have largely substituted for human hands not heads. workers have been able to improve their skills and take on newly created sets of cognitive, higher value tasks – tasks beyond the cognitive limits of machines. rapid improvements in computing power, the increased availability of big data and advances in artificial intelligence and machine learning mean smarter machines are already replacing a broader range of human activities than before, reaching well into the range of “ heads ”. new technologies may increasingly provide intelligence, sensory perception, and reasoning which previously only labour could provide. technological optimists believe future automation will move beyond substituting for the ‘ routine - manual ’ human tasks th technology performed in the late 20 century to almost the entire spectrum of work. it may be left to people to provide “ hearts ” – that is, tasks that require emotional intelligence, originality or social skills such as persuasion or caring for others. and if new forms of bespoke mass creativity are made possible by the new global economy, human “ hands ” may once again take over ( a form of cottage industry going full circle ). one thing that could be different is the effects of demographics. an ageing population will lead to greater demand for care and a straight decrease in labour supply. scale the greater scope of the fourth industrial revolution could mean its scale is larger too. unlike in previous episodes, the jobs most at risk of automation are likely to lie across the entire spectrum of wages. at one extreme, frey and osborne estimate that around half of us employment is at ‘ high risk ’ of automation, over an unspecified period of time. for example, brynjolfsson, e and mcafee, a ( 2014 ), ‘ the second machine age : work, progress, and prosperity in a time of brilliant technologies ’. the most extreme view of this is put forward by daniel susskind, who highlights the possibility that in the future machines can perform all tasks leading to technological unemployment ( susskind, d ( 2017 ), ‘ a model of technological unemployment ’, university of oxford, department | emergence of institutions too big to fail. and during the 21st century investor and managerial short - termism resulted in these waves reaching tsunami proportions. in 2007, this wave broke with devastating consequences still being felt today. this century - long evolution in banking occurred for understandable reasons ; it was no - one ’ s “ fault ”. but it has also unearthed a governance fault - line. ownership and control rights are exercised by shareholders. but for banks, equity is a vanishingly small fraction of their balance sheet. worse still, equity - holders often have risk - taking incentives out of line with the interests of other bank stakeholders, much less society. this fault - line lies at the heart of the imbalance between privatised returns and socialised risks. only in banking do control rights and incentive wrongs combine so uncomfortably. that calls for fundamental reform. post - crisis that has been recognised, as regulatory reform has come thick and fast. these reforms are unquestionably a step in the right direction. but if they are not to reappear, deep - rooted incentive problems in banking need to be tackled at us treasury ( 2011 ). bis central bankers ’ speeches source. i wish to argue there is unfinished business before these incentives are properly aligned with the public good. limited liability in the first half of the 19th century, the business and governance of banking was relatively simple. by the mid - 19th century, the united kingdom had around 500 banks and 700 building societies. most of the former operated as unlimited liability partnerships, the latter as mutually - owned co - operatives. 2 financial sector assets represented less than 50 % of annual gdp and the largest banks had assets of less than 5 % of gdp. bank balance sheets were heavily cushioned. equity capital often accounted for as much as a half of all liabilities, while cash and liquid securities frequently accounted for as much as 30 % of banks ’ assets. banking was a low - concentration, low - leverage, high - liquidity business. a broadly - similar pattern was evident across banking systems in the united states and in europe. this governance and balance sheet structure was mutually compatible. due to unlimited liability, control rights were exercised by investors whose personal wealth was literally on the line. that generated potent incentives to be prudent with depositors ’ money. nowhere was this better illustrated than in the asset and liability make - up of the balance sheet. the market, amorphously but effectively, exercised discipline. it was given a helping hand | 0.5 |
unions and the central bank are committed to supporting and promoting the credit union movement in solomon islands particularly through its support to the solomon islands credit union league ( sicul ). this is to assist the league perform its role in supporting the growth of credit unions in the country. the central bank has promoted micro - finance and recently taken the lead in promoting financial inclusion in solomon islands. our participation in this global event is a reflection of the strong commitment to the development of the credit union movement in the country. but the central bank cannot do this alone. it needs the support of all stakeholders and partners to work together to ensure that the credit union movement in solomon islands grow and prosper. in this connection, i am encouraged by the presence of all of you this morning. it is an indication of your support and commitment towards the growth of the credit union movement in this country. i am also encouraged by the pragmatic presentations and topics for group discussions later during the day. this assures me that we all have the interest of the movement at heart and that we are constantly discussing and exploring new ideas on how best we can develop and progress the movement forward. before i conclude, let me return to our theme for today. we are saying that “ credit unions can build a better world ”. is this possible? do we have the clout and capacity to build a better world? this may seem far - fetched but i think in our own unique way, credit unions can help build a better world. they can start by improving the livelihoods of their members, by helping then to save money for the future. or credit unions can assist their members borrow funds to start small income generating projects that help raise their standard of living. once this happens successfully, the family of members benefit, in turn their communities benefit and the country benefits or the world at large benefits. so yes, credit unions can help build a better world. in advanced countries, large credit unions have become fully fledged commercial banks providing financial services to more people and businesses in those countries. our credit unions in solomon islands may not yet be in a position to operate as commercial banks even in the medium term, but there is nothing stopping well managed credit unions from expanding in the future. this leads me to another area i want to highlight for our attention. our credit unions suffer from poor governance and weak management. if our credit unions are to build a better solomon islands in line with our theme for today, then we have to address our weaknesses | and shortcomings. some of these issues may seem trivial but it is important that they be addressed sooner than later. acknowledging the challenges and yes, there are challenges facing the credit union movement in this country. but as stakeholders and partners in promoting credit unions in the country, we all need to respond to these challenges. bis central bankers ’ speeches it is also important that we return to the original principle of credit unions – the idea that established credit unions in the country, that is, to harness and build a brighter future for our people and the economy. credit unions have a lot to offer for their members and the nation, if the right legal and institutional frameworks are in place. conclusion in concluding, let me re - iterate that given the important role that credit unions play in the economy, the central bank pledges its continued support to the credit union movement in the country. and our co - hosting of this event to commemorate the international credit union day today is a reflection of that support. thank you very much. bis central bankers ’ speeches | 1 |
of governors of the federal reserve system, november ), www. federalreserve. gov / pubs / ifdp / 2011 / 1037 / default. htm. these calculations are based on federal reserve board estimates of fiscal impetus, which measures the boost to aggregate demand from increased government purchases as well as the effects of changes in tax and entitlement policies on consumer and business spending. see glenn follette and byron lutz ( 2010 ), “ fiscal policy in the united states : automatic stabilizers, discretionary fiscal policy actions, and the economy ”, finance and economics discussion series 2010 – 43 ( washington : board of governors of the federal reserve system, june ), www. federalreserve. gov / pubs / feds / 2010 / 201043 / 201043abs. html. bis central bankers ’ speeches indicates. but instead of contributing to growth thereafter, discretionary fiscal policy this time has actually acted to restrain the recovery. state and local governments were cutting spending and, in some cases, raising taxes for much of this period to deal with revenue shortfalls. at the federal level, policymakers have reduced purchases of goods and services, allowed stimulus - related spending to decline, and have put in place further policy actions to reduce deficits. i was relieved that the congress and the administration were able to reach agreement on avoiding the full force of the “ fiscal cliff ” that was due to take effect on january 1. while a long - term plan is needed to reduce deficits and slow the growth of federal debt, the tax increases and spending cuts that would have occurred last month, absent action by the congress and the president, likely would have been a headwind strong enough to blow the united states back into recession. negotiations continue over the extent of spending cuts now due to take effect beginning in march, and i expect that discretionary fiscal policy will continue to be a headwind for the recovery for some time, instead of the tailwind it has been in the past. a second tailwind in most recoveries is housing. residential investment creates jobs in construction and related industries. before the great recession, housing investment added an average of 1 / 2 percentage point to real gdp growth in the two years after each of the previous four recessions, considerably more than its contribution to growth at other times. 5 during this recovery, in contrast, residential investment, on net, has contributed very little to growth since the recession ended. the reasons are easy to understand, given | . the prolonged proximity of interest rates to the elb was at the heart of the monetary policy review and the changes we made to our framework in 2020. we will begin our next five - year review in the latter half of 2024 and announce the results about a year later. among the questions we will consider is the degree to which the structural features of the economy that led to low interest rates in the pre - pandemic era will persist. with time, we will continue to learn from the experience of the past few years, and what implications it may hold for monetary policy. these are just three of the many questions raised by these challenging times, and we are far from a complete understanding of the answers. i appreciate the opportunity to discuss these issues with you today and look forward to our conversation. opening remarks jerome h. powell chair board of governors of the federal reserve system at “ monetary policy challenges in a global economy, ” a policy panel at the 24th jacques polak annual research conference, hosted by the international monetary fund november 9, 2023 | 0.5 |
financial system. i will walk through how potential near - term risks could interact with current conditions in the united states, based in part on the regular outreach survey the federal reserve bank of new york conducts to inform the discussion in the fsr. 6 in recent outreach, as summarized in this figure from the fsr, contacts were particularly focused on the persistent inflationary pressures leading to further monetary tightening, see the box “ survey of salient risks to financial stability ” in board of governors of the federal reserve system ( 2023 ), financial stability report ( washington : board of governors, october ), pp. 47 – 48, https : / / www. federalreserve. gov / publications / files / financial - stability - report - 20231020. pdf. - 8the potential for significant losses on cre and residential real estate, the reemergence of banking - sector stress, and market liquidity strains and volatility. market participants and others remain attentive to the possible effects of higher interest rates on the financial sector. an unexpected sharp increase in rates could lead to heightened volatility in financial markets, stresses to market liquidity, and downward pressures for asset prices. losses among financial intermediaries could lead to strains and a consequent reduction in credit supply. as i said earlier, the banking sector has stabilized since the period of acute stress earlier this year, and the system as a whole has ample capital and liquidity to withstand shocks. i continue to monitor the system for signs of renewed stresses. at the same time, vulnerabilities at certain nbfis could play a key role in amplifying stress associated with tightening financial conditions and slowing economic activity. i am closely monitoring nbfis with pronounced liquidity mismatches, such as certain money market funds and open - end funds, as well as those with significant leverage, such as hedge funds. for example, several indicators suggest that treasury cash - futures basis trades — trades that involve the sale of a treasury future and the purchase of a treasury security deliverable into the futures contract — likely gained in popularity recently. because the basis trade is often highly leveraged, a funding shock or heightened volatility in treasury markets could force hedge funds to abruptly unwind their positions at potentially distressed prices. i will keep an eye on how these leveraged trades might interact with treasury market liquidity. - 9last but not least, transparency is vital for financial stability risk monitoring. i | want to underscore some encouraging progress in improving data collection to enhance visibility into hedge fund activities. 7 in addition to their ongoing work on emerging risks, the financial stability oversight council ( fsoc ), the office of financial research ( ofr ), and individual fsoc agencies should continue to work together to ensure regulators have appropriate information to assess the financial stability risks posed by nonbank activities and their interconnectedness with banks. in conclusion, the financial system is substantially more resilient than it was in the mid - 2000s. however, vulnerabilities have risen somewhat in recent years, as highlighted by fragilities at nbfis, in the treasury market, and — most notably this year — at some banks. our framework and assessment of financial stability vulnerabilities help us understand these issues, but i am cognizant of the limitations. we cannot — and do not expect to — foresee all potential risks. the financial system is too complex and evolves too rapidly for that to be possible. what we can do is remain vigilant to emerging vulnerabilities and build resilience to a variety of potential shocks. i think it is particularly important to enhance resilience at large banks, and i support seeking public comment on federal banking agencies ’ basel iii endgame proposal on bank capital requirements. i will also focus on monitoring vulnerabilities at nbfis and the functioning of treasury markets. i strongly support continued efforts across the regulatory agencies to share more information and to boost resilience of the entire financial system. for example, the sec ’ s improved form pf reporting and the ofr ’ s bilateral repo data collection. - 10 looking forward, an area that i think deserves more attention is the financial stability implications of artificial intelligence ( ai ), especially its applications in financial services. i can imagine many of you, especially graduate students, are using or exploring the use of machine learning and other forms of ai in your research in economics. on the one hand, ai innovations could expand credit access for consumers and small businesses and bring greater efficiency to broader financial markets. on the other hand, the potential widespread adoption of powerful new ai, especially generative - ai applications, inevitably raises questions about potential benefits and risks to the stability of the financial system as a whole. academics, regulators, and financial market participants are all looking carefully at ai, and more research is welcome as we move ahead in exploring the policy and regulatory | 1 |
rate. later, they declined in reaction and recorded a level somewhat below 1. 5 million starts in both march and april 1997. regarding public - sector investment, the amount of public works contracted has recently picked up somewhat, owing to orders included in the supplementary budget for fiscal 1996. however, public - sector investment has followed a declining trend since spring 1996 when orders from the large economic stimulus package peaked. real exports are increasing, reflecting steady overseas demand and the yen ’ s depreciation to date. real imports have also continued to increase, owing to such elements as the rise in domestic demand. however, the pace of growth has been moderate against the background of significantly narrowing price differentials between japan and abroad. mirroring these developments in exports and imports, the real trade surplus has been rising since the second half of 1996. the nominal current - account surplus is also increasing, but the increase has remained moderate because of the rise in crude oil prices until early 1997 and also movements in the income account. industrial production posted high growth in the fourth quarter 1996 and the first quarter 1997, and, in the second quarter 1997 is expected to decrease in reaction to the surge in final demand prior to the consumption tax hike. supported by stimulative factors, however, such as the rebuilding of inventories which had declined at the end of march 1997 and the increase in exports, production has been firm and the decline so far has been small. labor market conditions have continued to improve moderately on the whole. although the unemployment rate remains at a high level and employment growth has been moderate, the growth in nominal wages has been on an increasing trend, reflecting the rise in production and corporate profits. prices rose in april 1997 reflecting the hike in the consumption tax. excluding this factor, however, they remained virtually unchanged on the whole. although downward pressure remains strong, including that from technological innovation in electrical machinery, domestic wholesale prices ( adjusted for seasonal electricity rates ) have remained virtually unchanged. this reflects the moderate improvement in domestic supply and demand conditions. the year - to - year declines in corporate service prices are narrowing steadily on the whole, partly owing to the improvement in supply and demand conditions, particularly in real estate and information service industries, although leasing charges continue to decline. consumer prices ( nationwide, excluding perishables ) overall are marginally above the previous year ’ s level mainly because year - to - year declines in goods prices have slowed. the growth in monetary aggregates, measured in terms of the year - to | - year growth of m2 + cds average outstanding, has slowed somewhat compared to summer 1996, reflecting a shift of assets to those outside m2 + cds. recently, m2 + cds average outstanding has been growing at around 3 per cent on the whole. regarding money market rates, the overnight call rate ( uncollateralized ) has moved at a level slightly below the official discount rate with some fluctuations. the 3 - month cd rate has stayed at around 0. 6 per cent. meanwhile, the long - term government bond yield declined in early april to a record low of below 2. 1 per cent, but began to rise in late april in line with the recovery in stock prices and reached 2. 65 - 2. 70 per cent in late may. it has recently declined again and has moved at around 2. 4 per cent. with respect to bank lending rates, the short - term prime lending rate has remained at a record low level of 1. 625 per cent since september 1995. the long - term prime lending rate declined to a record low of 2. 5 per cent in december 1996. it was raised by 0. 6 percentage points in may, and then lowered by 0. 2 percentage points in june to 2. 9 per cent. in these circumstances, short - and long - term contracted interest rates on new loans and discounts ( up to april ) have moved at record low levels. on the stock exchange, the nikkei 225 stock average began to recover in the second half of april 1997, reflecting the fact that market uncertainties about the economic outlook and about the japanese financial system had gradually subsided. recently, it has been moving at over ¥20, 000. in the foreign exchange market, the yen depreciated in early may to ¥127 - 128 to the u. s. dollar. however, the yen ’ s depreciation reversed rapidly, particularly in the first half of may, as concern about the appreciation of the u. s. dollar strengthened, and as interest rate differentials between japan and the united states narrowed somewhat. the yen has recently moved at around ¥113 - 114 to the u. s. dollar. meanwhile, the yen has also been appreciating against the deutsche mark since may and has recently moved at around ¥65 - 66. | 1 |
interest rates and a depreciation of the canadian dollar. obviously, more targeted labour market policies lie beyond the bank ’ s purview. still, it makes sense for policymakers to address impediments that make it hard for workers to be matched up with those half - million job vacancies. there may be new ways of helping people deal with the risks involved in relocation, or overcome regional barriers to job matching. for example, there may be areas where we could make it easier for skilled workers and professionals to recertify to qualify for a job in a different province. we may also be able to learn from international experience in terms of improving our educational, training and retraining programs. i mentioned earlier that, despite low unemployment, people express a sense of dissatisfaction and unease about their future. it is possible that the distribution of income is contributing to this. total labour income as a share of the canadian economy began to trend downward nearly 30 years ago and has remained in a lower range for the past 10 – 15 years. opportunities for globalization of supply chains and the steady increase in automation technology have no doubt reduced employee bargaining power over time, not to mention declining union membership. 3 / 5 bis central bankers'speeches bearing in mind that globalization and automation also generate economic growth that benefits everyone, it is clear that there is no simple solution to this. however, it is a useful metric to track when considering alternative policy ideas. yesterday ’ s decision all that said, the canadian labour market has certainly been important to the economy ’ s resilience. its strength has helped support the growth in incomes and household consumption that we have seen. however, it is just one factor that the bank ’ s governing council looks at when we sit down to take our monetary policy decisions. let me turn now to yesterday ’ s announcement. it is important that we put recent developments into proper context. business investment has been falling short of expectations in canada for the past three years. six months ago, we were seeing signs that the us – china trade war was beginning to affect canadian exports and investment even further. in october, we pointed to canada ’ s two - track economy, where soft exports and investment were being offset by a recovering housing sector, a strong labour market and solid consumer spending. but we were concerned that the effects of the trade war could eventually tilt the balance of risks against us. with the economy operating very close to its potential, the unemployment rate near historic lows and inflation | ensures their views are not influenced by those of more senior members. the senior deputy governor speaks next, followed lastly by the governor. they express their views, which leads to further discussions. we then go around the table again, with members presenting their opinions on monetary policy and debating the rate decision. 4 / 7 bis - central bankers'speeches the process is not set in stone. the content and format of our discussions are adapted to the situation and vary depending on our thinking about the economic environment and risk landscape. for example, when i started at the bank in march 2023, a number of regional banks in the united states had just failed. questions about financial stability were at the forefront of our discussions. in recent months, an important focus of our discussions has been the stickiness of inflation in prices for certain services, including shelter. but how is the decision actually reached after all of these deliberations? unlike other central banks, such as the us federal reserve or the bank of england, where members vote, the bank of canada makes decisions by consensus. members must therefore all agree on the course of action, even if we had different points of view when we walked into the rasminsky room. and it might not come as a surprise that we do not always agree on everything. in fact, it's completely normal that members have differences of opinion. after all, each member of governing council has distinct expertise stemming from their past experiences and educational background. but the diversity of our expertise is exactly what makes it possible to have detailed and constructive discussions that lead to informed decision - making. so, how do we arrive at a consensus despite our differences of opinion? here, the organic nature of our deliberations plays a key role. at times, points raised by other members may lead us to fine - tune or rethink the way we've interpreted the data. or a colleague may raise a point or highlight issues that others had not originally considered. in my opinion, the need to arrive at a consensus strengthens our decision - making process. we must carefully consider the diversity of opinions within governing council and discuss among ourselves to arrive at a common position. i should also mention that reaching a consensus does not mean that all members of governing council share the same point of view on the economic outlook or the path for interest rates in the coming months. it means that members come to an agreement about the best decision to make at a particular moment in time. 2 and the truth is that | 0.5 |
emmanuel tumusiime - mutebile : the international financial crisis and its impact on uganda speech by mr emmanuel tumusiime - mutebile, governor of the bank of uganda, at the bank of uganda, kampala, 24 september 2008. * i. * * introduction the current global financial turmoil is rooted to the sub prime mortgage crisis. it is a recent economic problem that is characterized by contraction in liquidity in the global credit markets and banking system. an undervaluation of the real risk in the subprime market is cascading, rippling and ultimately severely affecting the world economy. the crisis began with the bursting of the united states ’ housing bubble and high default rates on " subprime " and adjustable rate mortgages ( arm ). loan incentives, such as easy initial terms, in conjunction with an acceleration in rising housing prices encouraged borrowers to assume difficult mortgages on the belief that these would be easy to refinance at more favorable terms. however, once housing prices started to drop moderately in 2006 – 2007 in many parts of the u. s., refinancing became more difficult. defaults and foreclosure activity increased dramatically, as easy initial terms expired. home prices failed to go up as originally anticipated, and arm interest rates reset higher. foreclosures accelerated in the united states in late 2006 and triggered a global financial crisis through 2007 and 2008. ii. effects of the crisis on uganda uganda ’ s macroeconomic conditions and the entire financial system are generally robust, healthy, and better able to weather the ongoing financial storm in the global economy. first, uganda ’ s financial institutions had not invested in derivatives that had exposure to these investment bankers. better supervisory oversight and risk management practices have strengthened bank balance sheets while bank asset quality, profitability, and capital adequacy have also improved remarkably over recent years. second, our real estate sector is also unlikely to be negatively affected since our relatively young real estate companies are not linked to the international organizations that have failed. our company valuations are therefore unlikely to be adversely affected. uganda ’ s economy resilience also stems from improved economic policies and institutional frameworks built over the last two decades. the banking and the entire financial system are stronger after years of restructuring. these have not only favored price stability and a firm base for sustained economic growth, but have also increased the country ’ s resilience to shocks generated by adjustments in international financial markets. for | example, since late 2007, as the subprime - generated financial turmoil gained momentum, uganda ’ s continued economic expansion has not been adversely affected. in fact, according to uganda bureau of statistics ( ubos ), real economic growth was registered at 9. 8 percent in 2007 / 08 and is projected at 8. 1 percent in 2008 / 09. although direct exposure to crisis - related debt is very limited, vulnerabilities in sub - saharan financial markets may become more exposed. as a result, perceived risks of a protracted us downturn, or even recession, and what that would mean for africa ’ s and in particular uganda ’ s growth momentum may be intensified. the economic slowdown in the us and europe could naturally affect demand for uganda ’ s exports. coupled with the pass - through effects of ongoing price hikes in oil and food - commodities, the harsher external environment today may inevitably place downward pressure on our growth prospects in the immediate period. there may be also an impact from reduced private transfers to uganda especially as industrialized economies take a hit in terms of reduced gdp growth and market liquidity. there is also the possibility of reduced aid flows from developed countries to low income countries. a prolonged poor performance in the industrial economies may also be reflected in reduced interest from offshore players in the ugandan market. however, given our strong and favourable macroeconomic fundamentals, it is expected that foreign direct investment to the ugandan economy will maintain a sustained upward trend. iii. conclusion bank of uganda will continue to closely monitor and assess the possible effects of the ongoing turmoil in the international financial market on uganda ’ s economy and will effect necessary policy actions to ensure overall macroeconomic stability. however, as the country continues to experience robust economic growth, the bank of uganda is always wary of the vagaries of our linkage to the global financial system. in addition, the economic cooperation and integration being pursued both regionally and globally will aid in addressing any effects of the exogenous shocks on the domestic economy. | 1 |
are completed, a critical factor determining the vibrancy of bond markets in the asian region, as in any region, will be the quality of countries ’ policies. this starts with macroeconomic policies aimed at fiscal sustainability and price stability - where asia generally has an exemplary record. it will include strong efforts at financial supervision - an area where a number of countries need ongoing development. it will also involve, in my view, the willingness of individual countries and their governments to allow markets to set prices and to play a major role in the allocation of funds - something some countries in the region have been less comfortable doing up to now. most likely, countries will need to allow foreign firms to participate actively in market trading activities in order for market making behaviour to flourish in key markets. australia ’ s experience is that the “ embrace of the market ” in this way can, on occasion, be uncomfortable. markets will routinely react, and on occasion over - react, to government policies and other things which occur in the economy. sometimes the market ’ s reaction is uninformed, unfair or just plain wrong. but over the longer run, vibrant, if on occasion volatile, financial sectors do confer worthwhile benefits on an economy. they are not in any sense a magic bullet to achieve prosperity, but the evidence is fairly clear that properly functioning financial sectors do contribute to better growth. that is a not inconsiderable benefit to the firms, governments and citizens of the countries concerned. executives ’ meeting of east asia - pacific central banks. details of this group ’ s composition, history and work can be found at http : / / www. emeap. org. see http : / / www. emeap. org / press / 02june03. htm. see http : / / www. emeap. org / press / 15apr04. htm. | ewald nowotny : the rebalancing challenge in europe – perspectives for central, eastern and southeastern europe opening remarks by prof dr ewald nowotny, governor of the central bank of the republic of austria, at the conference on european economic integration ( ceei ) 2014, vienna, 24 november 2014. * * * your excellences, dear governors, ladies and gentlemen, i am delighted to welcome you to the annual conference on european economic integration ( ceei ) hosted by the oesterreichische nationalbank. thank you for coming to vienna. many of you have traveled long distances to be with us today – a fact that highlights the importance of the topic we are going to discuss over the next two days : “ the rebalancing challenge in europe – perspectives for central, eastern and southeastern europe ( cesee ). ” what do we mean by “ rebalancing ”? obviously, the term signifies a readjustment from a state of imbalance – an economic imbalance in our case. typically, economists distinguish between external and internal imbalances. by external imbalances, they usually mean disequilibria ( mostly deficits ) in the current account which, if protracted, might lead to an unsustainable net international investment position. the underlying reason for a current account deficit can differ from case to case ; it can be trade - induced via export weaknesses, indicating a lack of competitiveness ; it could also reflect strong import demand due to unsustainably high growth. this leads us directly to internal imbalances, which comprise accumulated private and public debt, asset price bubbles, unemployment or excessive inflation ( or deflation ). one could also add sectoral or distributional imbalances contributing to uneven growth. internal and external imbalances are often interlinked, but their interrelation is not always clear - cut. this year ’ s ceei coincides with three anniversaries, which are crucially linked to our conference topic : 25 years since the fall of the berlin wall, 15 years since the creation of economic and monetary union ( emu ) and 10 years since the – so far – biggest round of eu enlargement. this is not only a reason for celebration but also an occasion for honest stocktaking and thoughtful reflection. i think that the developments that followed these events have been broadly successful. for an overwhelming majority of europeans, the last quarter of a century brought hugely improved living standards | 0 |
the private and public sector must act together by sharing vital data and information to guide macroeconomic monitoring and policy. it is therefore important to get your support in collecting more frequent, timely and accurate data on developments in the economy. i want to take this opportunity to appeal to private investors to continue to cooperate and provide timely and accurate data. i also wish to thank those who have responded to our previous surveys. | and rate of change of the exchange rate. the exchange rate is of crucial importance for low income economies for at least three reasons. first, these economies generally exhibit a strong and rapid pass through of exchange rate movements to domestic prices. volatility in the nominal exchange rate imparts volatility to domestic inflation. in mid 2011, a very sharp fall in the nominal exchange rate against the dollar, by 18 percent in three months, made a large contribution to the acceleration of inflation in the third quarter of that year ; this is not an experience we wish to repeat. secondly, exchange rate volatility is very disruptive for firms which have to transact in foreign exchange markets. thirdly, an overvalued real exchange rate is damaging for the competitiveness of traded goods industries and discourages private investment in these industries, which in turn retards long term economic growth and development, as a large volume of research, including research by imf staff, has demonstrated. the approach that we have adopted at the bou is to dampen short term volatility in the nominal exchange rate through sterilized intervention in the interbank foreign exchange market ; i. e. sales or purchases of foreign exchange accompanied by secondary market operations to keep the stance of monetary policy ( the interest rate ) unchanged. our experience shows that sterilized interventions can be effective in influencing the exchange rate. for example, when the exchange rate was depreciating very rapidly in the last few days of february following announcements by donors that they would suspend aid, the bou intervened and was able to stem the depreciation. the effectiveness of sterilized intervention most probably arises from portfolio balance effects in the context of imperfect capital mobility. we also attempt to lean against prolonged overvaluation of the real exchange rate, also using sterilized intervention. however, there are constraints on the extent to which this is practically feasible. sterilization to stem appreciation involves the issuance of domestic securities to mop up the liquidity created by foreign exchange purchases, which requires that the central bank must have a sufficient quantum of securities at its disposal for this purpose. it is also expensive for the central bank because of the large interest rate differential between domestic currency securities and the assets in which the central bank holds its foreign currency reserves. in uganda this differential is currently about 11 percentage points. the speed of transition to itl i would like to make a brief comment about our experience with regard to the speed of transition | 0.5 |
benjamin e diokno : fighting money laundering and terrorism financing speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the anti - money laundering council's 19th anniversary, 20 october 2020. * * * ladies and gentlemen of the amlc secretariat. good afternoon to everyone. i am delighted to be with you today on the occasion of the 19th anniversary of the amlc. this year, we celebrate under unprecedented circumstances. not only are we allies in fighting money laundering and terrorism financing, but, along with the rest of the world, we are fighting an invisible but deadly virus. the covid - 19 pandemic has caused us grief and fear, both as individuals and as a nation. but it has also compelled us to address our weaknesses and to shift our assumptions and biases toward fresh, if not better, possibilities. though the pandemic has brought the world to a slowdown and even to a halt, during the first few months, the amlc soldiered on against money laundering and terrorism financing. and we have the following milestones to show for it. first — as the pandemic has presented an opportunity for money launderers and other criminals — the amlc initiated and conducted an analysis of the financial crime landscape, covering a period of the pandemic and using suspicious transaction reports ( strs ) submitted by covered persons. the amlc ’ s “ covid - 19 financial crime trend analysis and typologies brief ” has since been disseminated to supervising agencies, appropriate government agencies, law enforcement agencies, several financial intelligence units, and public - private partnership program partners. the report has also been shared with the asia pacific group on money laundering and the financial action task force ( fatf ) ; and a redacted version has been made available online. an update of the study, which expands the data set, will soon be released as well. it is interesting to note that one of the top reasons for str filing, based on the study, are associated with violations of the anti - child pornography act of 2009. child exploitation - related strs increased in 2020 compared to the same period in 2019. this increase may be primarily due to the amlc ’ s 2019 study on online child sexual abuse and exploitation ( csae ). the amlc ’ s supplemental study on the online sexual exploitation of children observes that its 2019 study on csa | necessary liquidity so as to ensure the functioning of the greek banking system and the continuation of lending to businesses and households. this was in line with the principle by which the eurosystem may lend to banks which are solvent and have sufficient collateral. the authority competent in this matter, the european supervisor, deemed that the banks were solvent. but clearly their solvency, like the availability of sufficient collateral, depended crucially on the prospects for success of the programme negotiations that were underway : if they failed, the value of the greek government securities would have fallen, impairing the solvency of the banks and the quality of their collateral, excluding them from financing by the eurosystem. the governing council thus found itself having to judge the prospects of success of these negotiations. two extreme options were put forward. the governing council could immediately have considered a positive outcome as improbable, it could have objected to further extensions of ela or even, as some were demanding, asked for the liquidity granted to be reimbursed, thus causing the whole of the greek banking system to fail. or, as some have subsequently argued, the governing council could have allowed the supply of liquidity assistance, in unlimited amounts, even in the event of the talks with the greek government failing. as you will remember, our decision was controversial, but it was the right one. we granted ela for as long as it was deemed that there were conditions favourable for a positive outcome to the negotiations. its expansion was suspended when it appeared these conditions were no longer confirmed. ela was then resumed when it was clear that the prospects for a positive solution were restored. looking back at these months just past, we can see that it is not only the actual course of events that proved this to be the right decision. we chose the only path compatible with the statute and the treaty, the only path that would have preserved the integrity of the currency. other possible paths would have infringed the principle whereby the ecb must lend only to solvent banks, and only if the collateral is adequate – and those paths would probably have destroyed the integrity of the currency. similarly, the ending of ela would most likely have started a process that would have resulted in greece exiting the euro area, thereby negating the irrevocability of the euro envisaged by the treaty. and this would have happened not as a result of a new decision, reached democratically, by the signatory countries of the | 0 |
when it comes to the central bank, we propose that we do not have access to personal data. and it will be for you, as co - legislators, to decide on the balance between privacy and other important public policy objectives like anti - money laundering, countering terrorism financing, preventing tax evasion or guaranteeing sanctions compliance. on our side, we have been working on solutions that would preserve privacy by default and by design, thereby giving people control of their payment data. [ 16 ] to this end, we are also closely engaging with the european data protection supervisor and the european data protection board. using a digital euro easily and everywhere in the euro area as public money, a digital euro would be a european public good which all citizens and firms should be able to access and use without barriers. this should be the case regardless of who their intermediary is or which member state they are located in. offering universal accessibility and usability would be key for a digital euro to play its role as a monetary anchor and to fulfil people ’ s expectations. feedback from citizens [ 17 ] reflects the value of having a payment instrument which is always an option for the payer. citizens may not always pay with cash, but they like to always have the option to do so. the same logic applies to a digital euro. as co - legislators, you can adopt regulatory measures that would ensure widespread acceptance of the digital euro in payments while ensuring that citizens have broad access to the digital euro. but while these two factors are vital foundations for the digital euro, they alone are not sufficient. attractive functionalities and convenient user experience would be equally key for widespread adoption. we therefore want to design a digital euro with online and offline functionalities. these will allow it to serve different use cases [ 18 ] and offer users different benefits. for example, an offline functionality [ 19 ] would give payments a level of privacy that is close to that of cash. it would also increase resilience as it would work without internet access. we are also envisaging two options for conveniently using a digital euro. first, supervised intermediaries could integrate the digital euro into their own platforms. in this way, users could easily access the digital euro through the banking apps and interfaces they are already familiar with. second, the eurosystem is considering a new digital euro app [ 20 ], which would include only basic payment functionalities performed by intermediaries. the app would ensure that no matter where | moreover, a european deposit insurance scheme would avoid the risk of destabilising self - fulfilling prophecies in the form of bank runs. it would also reduce the risk of financial fragmentation and thus support the effectiveness of monetary policy throughout emu, contributing to economic stability. with the right policy framework, risk - sharing and risk reduction are thus mutually reinforcing1. a more resilient emu would also benefit from a bolstered crisis management framework. the commitment to strengthen the esm made at the recent euro summit is therefore very welcome. this should include an increase in its effectiveness and agility in terms of both governance and instruments, while fully respecting the mandates of the commission and the ecb. to absorb shocks and reduce the risk of full - blown crises, the euro area would also benefit from a common stabilisation function. such an instrument could provide macroeconomic support in the event of euro area - wide recessions, thereby preserving convergence, supporting stabilising national policies and allowing monetary policy to operate effectively. at the same time, this instrument should not undermine incentives for member states to pursue sound fiscal and economic policies. we therefore very much welcome the renewed impulse to this discussion. an ambitious agenda for the capital markets union ( cmu ) can further underpin and facilitate the priorities i have outlined. first, cmu would increase private sector risk - sharing, and thus help to cushion local shocks, reducing the need for using public stabilisation tools. second, a consistent framework is essential for deep and resilient financial integration. for instance, harmonising and improving insolvency frameworks would make it easier for banks to deal with non - performing assets, which would be beneficial to banks ’ health. a genuine capital markets union would also support deeper, integrated and more stable capital markets, improving access to funding for all. let me emphasise that none of the measures i have mentioned are possible without trust between member states, and that requires national governments to play their part in increasing the resilience of their economies and modernising economic structures. conclusion our monetary policy measures have been very effective. we estimate that the measures we have taken since mid - 2014 will have an overall cumulative impact of around 1. 9 percentage points on both euro area real gdp growth and inflation for the period between 2016 and 2020. our measures are playing a decisive role in bringing inflation back on track to reach a level that is below, but close to, 2 % over the medium term | 0.5 |
l wilson kamit : financial sector improvements in papua new guinea speech by mr l wilson kamit, cbe, governor of the bank of papua new guinea, at the official opening of the nambawan super ’ member services centre, port moresby, 11 july 2008. * * * distinguished guests, ladies and gentlemen. i am pleased to be able to address you this afternoon, on this special occasion for nambawan super. since the commencement of the financial sector reforms including the superannuation industry through the superannuation ( general provisions ) act 2000, we have seen many improvements in the financial sector and within the superannuation industry. some of the significant changes include : • the appointment of the bank of papua new guinea as the regulator of the superannuation industry, • the separation of functions of the authorised super funds ( asfs ) from the trustees, investment managers and fund administrators ; and • the introduction of fit and proper person ’ s test requirements for the board and senior management of the licence holders under these reforms the improved performance of the whole financial system has seen growth in assets of banks, finance companies, savings and loan societies and life insurance companies. the growth in the superannuation funds has been particularly remarkable, and this has translated to high rates of returns to the members over the last few years. for example, the industry ’ s total assets have more than doubled since 2002 from k1, 273 million in 2002 to k4, 086 million in 2007. total assets of the superannuation industry – k ’ million total 4, 087 2, 837 2, 584 1, 882 1, 577 1, 273 we have also seen significant improvements in governance, as well as operational effectiveness in the delivery of superannuation services for the benefit of the members. while making this remark, i should stress that there lies ahead a lot of challenges to further improve and enhance their operational capacities in order o provide the best superannuation service for all stakeholders. this reform process has however brought with it other challenges and responsibilities that the asfs will need to manage and address going forward. one challenge facing us in this reform process is the issue of financial inclusion and financial literacy ( financial education ). this is a subject many central bank governors and regulators have discussed in various forums. let me elaborate : the high rates of return on members ’ savings will have had the impact of raising members ’ expectations of receiving high return all the time and the asfs have a | in asset quality with nonperforming loans as a percent of total assets declining from 2. 3 percent in 2000 to 1. 1 percent in december 2005. return on assets of the banking system, which was negative 1. 1 percent in 2002 reversed sharply to over 4. 2 percent at the end of december 2005. as a result return on equity has improved significantly to 50. 5 percent in 2005, making it amongst the highest in the region. these indicators reflect that the banking system is financially sound and provides a strong foundation for sustained macroeconomic growth. in the superannuation industry, the reforms have improved the overall performance of the industry. the total assets of the industry, which increased by 6 percent to k992 million in 1999, grew significantly over the years to k2, 583 million in 2005. one of the major superannuation funds, nasfund, which suffered a contraction in total assets in 1999 to k169 million, from k209 million in 1998 reversed sharply to k753 million in 2005. the rapid growth in total assets over the last few years reflects prudent and good management. as a result profitability of the industry has also increased sharply over the years. similarly, improvements are continuing to be instilled in the life insurance industry, whose total assets have grown steadily from k108 million in 2000 to k126 million in 2004. in the savings and loans societies, the contributors have benefited from improved management and stringent supervision including the fit and proper person requirement by the bank of papua new guinea. this has enabled the industry to record improvement in its overall performance. between 2000 and december 2005 total assets increased by over 139 percent to k312 million. the number of societies contracted during this period from 121 to 20 as the bank de - licenced and liquidated dormant societies. consistent with ensuring stability of the financial system, the rapid growth of fast money scams is a concern to the bank of papua new guinea. in response, the bank took measures to close their operations, periodically place advertisements in the media about the dangers in investing in such scams. the bank and law enforcer ’ s actions are limited against fast money scheme operators but we continue to warn the public to take necessary precaution and refrain from taking unnecessary risks through expectations of abnormally high rates of return. the public is urged that if you have paid any money to a fast money scheme operator, go and demand the immediate return of your money. | 0.5 |
four themes that i have highlighted today - - the benefits of risk - focused supervision, the value of sound accounting and disclosure, the need for adequate capital, and the importance of international supervisory coordination. i appreciate having the opportunity to meet with you today to discuss key supervisory issues. i look forward to our continuing joint supervisory efforts toward coordinated international bank supervision. | a success. the starting point : the debt crisis and the emergence of financial fragmentation let me start by briefly reviewing the evolution of the crisis in the euro area. very broadly speaking, the crisis has had two main phases. the first phase began with the bankruptcy filing of lehman brothers in september 2008. here the euro area shared in a global liquidity crunch that was largely imported from abroad. the second phase began in may 2010 with a sovereign crisis that was localised in the euro area, and that was partially exported to the world economy. this second phase was arguably the more pernicious for monetary union. the re - pricing of sovereign risk in the euro area spread from greece to other vulnerable economies, and from sovereign to private debt and vice versa. in the process, the liquidity crunch morphed into a systemic crisis for the banking sectors of a number of member countries, and for the integrity of monetary union as a whole. the traditional exposure of banks in vulnerable countries to their own sovereign issuers became a quick carrier of bis central bankers ’ speeches financial contagion as their sovereign bond holdings depreciated and eroded their capital in the eyes of creditors. this adverse sovereign - bank feedback loop interacted with existing vulnerabilities. countries with persistent competitiveness losses and associated large current account deficits – as was the case of portugal – were particularly sensitive to a reversal in external financing. this was exacerbated by capital flight to core economies which started to deplete banks ’ deposits in the most vulnerable countries. concerns that systemic sovereign issuers may lose market access fed fears that they may be forced to redeem their liabilities in a currency different from the euro, and thus de facto leave the euro area. “ redenomination fears ” became a new source of market anxiety. there was a risk that such unwarranted concerns would become self - fulfilling and the spectre of destructive tail scenarios was looming. in this context, the process of financial integration, which had evolved at a rapid pace since the inception of the euro, was partially reversed, giving way to fragmentation. interbank financial fragmentation per se was not a new phenomenon in the post - lehman world. however, during the most severe stages of the sovereign crisis the fractures across the euro area were not idiosyncratic but systemic – that is, they ran along national borders. this reversal of the integration process risked undoing one of the key benefits of the common currency. fragmentation led to an impairment | 0 |
mark carney : summary of the latest monetary policy report opening statement by mr mark carney, governor of the bank of canada, at the press conference following the release of the monetary policy report, ottawa, 18 january 2012. * * * good morning. tiff and i are pleased to be here with you today to discuss the january monetary policy report, which the bank published this morning. the outlook for the global economy has deteriorated and uncertainty has increased since the bank released its october mpr. the sovereign debt crisis in europe has intensified, conditions in international financial markets have tightened, and risk aversion has risen. the recession in europe is now expected to be deeper and longer than previously anticipated. the bank continues to assume that european authorities will implement sufficient measures to contain the crisis, although this assumption is clearly subject to downside risks. in the united states, the rebound in real gdp during the second half of 2011 was stronger than anticipated. however, the bank expects the recovery will proceed at a more modest pace going forward, owing to ongoing household deleveraging, fiscal consolidation and the spillovers from europe. chinese growth is decelerating, as expected, toward a more sustainable pace. prices for most commodities are expected to remain relatively elevated, although at levels below those anticipated in october. the bank ’ s overall outlook for the canadian economy is little changed from october. while there was more momentum than anticipated in the second half of 2011, the pace of growth going forward is expected to be more modest than previously envisaged, largely due to the external environment. household spending is now projected to grow at a steady pace through 2013. reflecting an upwardly - revised profile for residential investment, household expenditures are now expected to remain high relative to gdp over the projection horizon and the ratio of household debt to income is projected to rise further. while dampened somewhat by the external environment, business investment is expected to grow at a solid pace. net exports are expected to contribute little to growth, reflecting moderate foreign demand and ongoing competitiveness challenges, including the persistent strength of the canadian dollar. the bank estimates that the canadian economy grew by 2. 4 per cent in 2011 and projects that it will grow by 2. 0 per cent in 2012 and 2. 8 per cent in 2013. while the economy appears to be operating with less slack than previously assumed, given the more modest growth profile, it is only anticipated to return to full capacity by the third quarter of 2013. the dynamics for inflation are similar to | implications of financial stability tasks on central bank governance, bis ( 2009 ) underlines the need for effective governance arrangements that should be designed to deliver sustainable conduct of monetary policy functions in combination with the additional mandate to contribute to financial stability. further, the report stresses the importance of clarity with respect to financial stability responsibilities, policy transparency as to promote accountability, full autonomy to safeguard against political pressures and undue influence from business and industry and close collaboration with other regulators in the country. another important aspect is the central bank balance sheet which should be sound enough with strengthened risk - bearing capacity to enable successful implementation of monetary policy and support financial stability in case of emergency. going back to banking supervision, besides the institutional setup, another important question raised by the crisis relates to the role of transparency and accountability in promoting more effective banking supervision. according to the literature, for supervision to be considered effective it should be able to effectively develop, implement, monitor and enforce supervisory policies under normal and stressed economic conditions. bis ( 2012 ) defines several preconditions for effective supervision in practice : 1 ) sound and sustainable macroeconomic policies as a core precondition for stable financial system ; 2 ) a well established framework for financial stability policy formulation i. e. clear framework for macro prudential surveillance and financial stability policy formulation ; 3 ) proper regulatory environment ; 4 ) a clear framework for crisis management, recovery and resolution ; 5 ) an appropriate level of systemic protection ( or public safety net ) such is a system of deposit insurance which contributes to public confidence in the system and thus limit contagion from banks in distress and 6 ) effective market discipline. transparency is another factor that gains growing importance in recent years. thus, in order to restore confidence and rebuild financial stability there was a strong push towards supervisors to increase their transparency to the markets and the public. one supporting argument for these trends is the role of transparency as prerequisite for accountability. higher transparency enhances the legitimacy of the supervisor, also safeguarding his independence. when transparent, the supervisory actions become more predictable thus helping to shape expectations and foster linkages across institutions and markets. finally, transparency sets the ground for careful and consistent decision - making, reducing the scope for arbitrary decisions. empirical research ( arnone et al., 2007 ), finds a positive correlation between the transparency of the supervisor and the effectiveness of banking supervision. they also report higher transparency of banking supervision ( based on adherence to the imf code ) in industrial countries than in emerging economies. | 0 |
that an aggressive taylor rule is not sufficient to determine inflation. the former authors suggest how price level determination can be achieved using a hybrid rule that augments an activist taylor rule with a commodity price peg. note though that their implementations implicitly require the cb to have the ability to buy back money from the public. if the cb can only hold assets issued by the fa, then the fa ’ s actions will influence the value of the cb ’ s portfolio and thereby influence the cb ’ s ability to implement a given price level path. in this sense, the cb does not have independent control of the price level. bis central bankers ’ speeches should the cb be required to never intervene in this sort of insolvency scenario? i ’ ve argued that a ban on these interventions will give the cb more independence in its control over the price level. for those who think of cb independence as being the foundational element of macroeconomic policy, that pretty much settles the question. but i see a couple of reasons for caution here. it is certainly conceivable that fa insolvency can be triggered by shocks that are well outside the control of the fa itself. and, empirically, fa insolvency is associated with large short - term and even medium - term declines in output. should the cb be prepared to drive the fa into insolvency given the possible adverse economic impact on the country? more subtly, regardless of the fa ’ s solvency, sovereign debt issues can fail simply through a coordination failure among investors. if i, as an investor, don ’ t anticipate that others will buy into the debt issue, i won ’ t either. in this sense, sovereign debt issues may be susceptible to suboptimal “ runs. ” the cb can eliminate this possibility by ensuring the nominal promises of the fa whenever the fa is threatened with default. thus, i see trade - offs. on the one hand, if the cb is known to be willing to intervene to keep the fa solvent, then inflation is necessarily shaped by fiscal considerations and by the shortrun incentives of elected officials. we know from many years of theoretical and empirical research that this effect is not a desirable one. on the other hand, if the cb is fully committed to allow the fa to default if necessary, then even optimal debt management by the fa may end up exposing the country to troubling risks, like sovereign debt runs. let me wrap up. i ’ ve argued that even | 1061 – 74, august 2012 ; greg kaplan and sam schulhofer - wohl, “ understanding the long - run decline in interstate migration, ” federal reserve bank of minneapolis working paper 697, revised december 2013. see ralph s. j. koijen and motohiro yogo, “ the cost of financial frictions for life insurers, ” april 2013 ; ralph s. j. koijen and motohiro yogo, “ shadow insurance, ” november 2013. see estimates of the future behavior of asset prices. bis central bankers ’ speeches i ’ ve talked a lot about monetary policy and the supervision of financial institutions. but these are only two of the many public policy roles of reserve banks. let me briefly mention a couple more : the payments system and community development. reserve banks have recently formulated an ambitious strategic plan regarding their responsibilities in the payments system – the variety of mechanisms by which people and businesses transfer funds to one another. this strategic plan was informed in part by contributions from a large number of economists around the system who specialize in payments systems. in terms of community development, reserve banks engage in a number of activities to encourage private - sector investment in low - and moderate - income communities. microeconomic analysis underpins these activities in important ways. for example, in minneapolis, over the past dozen years, our community development function has worked closely with tribal representatives on initiatives to help native american tribes select and build a sound legal infrastructure that can support private business development in indian country. we are engaged in efforts to buttress this work by using microeconometric techniques to measure the impact of these legal infrastructure improvements on economic outcomes. i have argued that reserve banks need a wide range of skills and perspectives to fulfill their public policy missions. these considerations have helped inform the evolution of our research department in minneapolis in the past four plus years since i became president. in that time, we ’ ve greatly expanded the group, by hiring folks from top universities like stanford, penn and princeton, as well as from elsewhere in the federal reserve system. these new economists have skills in financial economics, labor economics, international economics, econometric forecasting and monetary economics. the department ’ s expansion has helped make the minneapolis fed even more agile and effective with respect to its public policy contributions, while maintaining its historical excellence with respect to independent research. but the skill diversity that i ’ ve been emphasizing is valued throughout the federal reserve system, not just in minneapolis. to | 0.5 |
does not incorporate. the simulation does not fully take into account the rise in stock prices and household wealth - and hence, consumption - that would have been spurred by expectations of higher productivity growth. also, because the simulation does not fully account for the effect of enhanced perceptions of equity returns on exchange rates, it does not produce the rise in the dollar that, in all likelihood, resulted from the productivity surge. 4. slump in foreign domestic demand i would like to turn now to developments at the global level that may have helped to widen the u. s. current account deficit. domestic demand growth has slumped in many foreign economies because of varying combinations of an increase in saving rates and a decline in investment. this weakening of foreign spending has enhanced the supply of capital available to the united states, put downward pressure on u. s. interest rates, and put upward pressure on the dollar. as i said before, i like the u. s. productivity surge story and find it compelling. however, i also like the foreign demand slump story, and i find it compelling. some of the largest industrial economies in the world - japan and the euro area - have been running current account surpluses while experiencing very subdued growth. in the developing world, the east asian economies that went through financial crises in the late 1990s have seen a plunge in their investment rates even as their saving rates have remained extremely high ; the weakness in domestic demand has likely motivated the authorities in these countries to keep their exchange rates competitive to promote export - led growth, a strategy that has also contributed to the u. s. external deficit. 5 more generally, since 1999, the developing countries as a whole have been running current account surpluses - with the industrial countries, mainly the united states, necessarily running current account deficits - for the first time in many years. what does our macroeconomic simulation model say about the likely effect of a slump in foreign consumption and investment spending? the slump lowers the path of foreign gdp, which in turn limits u. s. export sales. additionally, by depressing perceived rates of return abroad, the weakness in foreign demand explains a considerable portion of the run - up in the dollar, as shown in figure 4. finally, weaker u. s. net exports reduce overall u. s. activity and depress interest rates a bit, thus raising domestic consumption and investment spending. taken together, these factors contribute importantly to the widening of the trade deficit since the mid - 1990s. 5. improvements in global financial | of experts had the option of interacting amongst themselves on matters of overlapping or common concerns to evolve a consensus approach. the advisory groups also had the option to include officials from regulatory and government organisations as special invitees to discuss and understand the prevailing position in the relevant standards and codes, for bringing improvements in the existing practices. they also had the benefit of deliberations with market participants, members from professional bodies as well academics. the arrangement afforded the advisory groups an independent or impartial status and prompted a critical evaluation of the relevance and compliance with each of the aforesaid standards and codes. the work of the advisory groups in some cases happened to continue alongside similar subjects addressed by groups constituted by the government or other regulatory bodies. in any case, the work of the advisory groups was considered unprejudiced and non - intrusive to any such official or non - official initiatives taken by others. the advisory groups were requested to take cognisance of these parallel efforts and to provide inputs, wherever necessary. all ten advisory groups have already submitted their reports to the standing committee. the standing committee has made efforts to disseminate these reports as widely as possible including their expeditious posting to the reserve bank website. the committee has also requested the advisory groups to organise seminars for creating awareness and concretising views on recommendations. the committee would also take up regular annual review of the status and progress regarding compliance with, and implementation of standards and codes and submit it to the ministry of finance. changes in legal and policy framework the implementation of the recommendations of advisory groups in relevant sectors would require a co - ordinated approach based on elements of consensus, incentives, technical support, resources and encouragement to concerned institutions and regulatory bodies. broadly speaking, the recommendations of advisory groups can be categorised into three levels, viz., requiring ( a ) constitutional, ( b ) legislative and ( c ) procedural and policy changes. quite a number of recommendations require new legislative enactments or amendments to existing laws, while several others could be implemented by making appropriate changes in the existing policy and procedures under the powers vested to relevant bodies under the law. a few recommendations could also require changes in the constitution of india. some of the issues pertaining to the financial system are also being addressed by the national commission to review the constitution. of these changes, amendments to the legal framework of the country assume utmost importance as they institutionalise changes as formal laws with parliamentary endorsement and, therefore, provide clear | 0 |
positive expectations may not immediately translate into higher loan growth. that is a process that takes time to materialise, not only owing to operational considerations but also because the reaction of loan demand to improved supply conditions involves lags. it is therefore probable that the first stage of rebalancing will affect mainly the liability side of banks ’ balance sheets – i. e. funding substitution – before banks move on to the deployment of asset expansion strategies to offload the reserves received. summing up, there is substantial evidence that our monetary policy measures are having the effects intended. but in a context of increasing downside risks to the inflation outlook, especially driven by continued declines in oil prices and a large output gap, and downside risks to the global economy and a still fragile domestic recovery, the governing council decided that the calibration of those measures needed to be adjusted. at its december 2015 meeting, the governing council therefore decided to lower the interest rate on the deposit facility by 10 basis points to – 0. 30 % and to extend the intentional enddate for app by 6 months to march 2017, although subject to an on - going verification of the prospects for inflation to normalise within a meaningful horizon. the monthly purchases of €60 billion under the app are now intended to run until the end of march 2017, or beyond, if necessary, and in any case until the governing council sees a sustained adjustment in the path of inflation consistent with its aim of achieving inflation rates below, but close to, 2 % over the medium term. importantly, the governing council also decided to reinvest the principal payments on the securities purchased under the app as they mature, for as long as necessary. this recalibration will have a sizeable impact on the ecb balance sheet and on excess liquidity. overall, the extension of the asset purchases to at least march 2017 and the decision to re - invest the principal payments on maturing securities for as long as necessary will inject an additional eur 680 billion – about 6. 5 % of the euro area gdp – in liquidity to the system by 2019. this will strengthen our forward guidance on interest rates, ensure accommodative financial conditions and further strengthen the substantial easing impact of the measures we have taken since june 2014. bis central bankers ’ speeches | , d. ( 2018 ), “ towards more resilient economies : the role of well - functioning economic structures ”, journal of policy modeling, vol. 40, no 1, pp. 97 - 117 ). productivity growth has also generally been lower in the euro area than in the united states for some time ( see chart 7 in masuch, k. et al. ( eds. ) ( 2018 ), “ structural policies in the euro area ”, occasional paper series, no 210, ecb, june ). these factors may limit the euro area ’ s relative capacity to bounce back from a recession. 22. esrb ( 2022 ), “ warning of the european systemic risk board ”, 22 september. 23. work stream on non - bank financial intermediation ( 2021 ), “ non - bank financial intermediation in the euro area : implications for monetary policy transmission and key vulnerabilities ”, occasional paper series, no 270, ecb, september ( revised december 2021 ) ; financial stability board ( 2021 ), “ global monitoring report on non - bank financial intermediation 2021 ”, december ; european systemic risk board ( 2022 ), “ eu non - bank financial intermediation risk monitor 2022 ”, july. 24. these financial spillovers work partly through the exchange rate. in particular, monetary policy tightening in the united states is seen as exporting inflation through the exchange rate and driving further tightening elsewhere. it is notable that this market reaction reflects the expectation that central banks are reacting to the short - term effects of exchange rates on inflation, since the empirical evidence suggests that these short - term effects are outweighed over time by the disinflationary spillovers of the federal reserve ’ s tightening. 25. ecb staff analysis, based on a sensitivity exercise of longer - term market - based measures of inflation compensation to larger versus smaller monetary policy shocks, suggests that, unlike in the united states, in the euro area larger monetary policy surprises do not significantly lower five - year forward five - year ahead inflation - linked swap ( ils ) rates compared with smaller policy surprises. 26. several episodes in the recent past – such as the “ taper tantrum ” of 2013, the developments in the us repo market in 2019 and the recent turmoil triggered in the uk bond market by liability - driven investors – have emphasised the importance of managing risks to market functioning. 27. as olivier blanchard recently observed in a twee | 0.5 |
to changing technology and globalization ; and the credible, low - inflation policy pursued by the u. s. central bank. the americans started adjusting in earnest in the 1980s to the new realities of heightened global competition and rapidly changing technology. as a result, they are ahead of most other industrial countries on that score. and, with improving productivity and highly competitive enterprises in a wide range of sectors, the u. s. economy has been able to expand rapidly and to support rising employment on a sustained basis. but taking full advantage of that improved potential for economic growth has required a climate of confidence in monetary policy. bringing inflation down in a credible manner has helped to create that climate. and because of this, the u. s. monetary authorities have been in a position to encourage the economy to test its full capacity to produce, to create jobs, and to support rising incomes. this would not have been possible in an environment of high inflation and high inflation expectations. in such an environment, businesses, workers, and investors respond swiftly to any signs of demand pressures by pushing up prices, wages, and interest rates. and this has the effect of undermining the sustainability of the economic expansion. what precisely did the u. s. federal reserve do? in the early 1990s, problems in the banking sector were restraining the economic recovery in that country by limiting access to financing and undermining confidence. to counter these “ headwinds ”, as alan greenspan called them, the fed responded by providing a high degree of monetary stimulus. then, in early 1994, when it became evident that the economy had started to pick up steam and move ahead on its own, the fed began withdrawing the excess monetary stimulus. this timely, pre - emptive action to moderate monetary stimulus accomplished two things. first, it sent a strong reassuring signal to investors, businesses, and consumers that the fed would not let inflation break out as the economy surged ahead. indeed, after short - term rates went up in 1994 - 95, long - term rates declined, as investors became more confident that the economic expansion would remain non - inflationary and, thus, sustainable. second, the pre - emptive action helped avoid the need for stronger, more disruptive, tightening later on. the less - accommodative monetary conditions that have prevailed since then certainly have not stopped the u. s. economic expansion dead in its tracks, as some had feared at the time. on the contrary, the expansion has continued at a | the conventional estimates of potential output, monetary policymakers must be on guard. in other words, we are at the point in the economic cycle where the bank of canada will have to be very alert to early warning signs of accumulating price and cost pressures. and we will have to respond promptly and firmly if any such signs emerge. the bank will deal with this risk by closely monitoring a wide range of indicators that can help it to assess the extent of present and future pressures on capacity and on inflation. these indicators include unanticipated movements in current inflation, changes in expectations of future inflation, the growth of money and credit, and information gathered from the bank ’ s regular contacts with businesses across canada. in conclusion, let me say that you can be assured that the bank is very sensitive to the increased risks of inflation that are coming from continued buoyant growth in the united states, improved economic prospects in europe and japan, and the increased momentum of domestic spending here in canada. in facing the various challenges that may arise over the next year, it will be crucial to ensure that the bank continues to deliver a trend of inflation that is inside our target range of 1 % to 3 %. it is only when canadians can count on inflation staying low and stable that our economy performs best. | 0.5 |
##licability may also vary with changes in the market. the bottom line for today ’ s banking institutions, particularly the largest and most complex ones, is that they must continue to monitor very carefully the embedded risks of their products and services, pay close attention to subtle changes in business practices that could affect the risks related to a given product, and fully understand how the risks in all their business lines intersect and combine to affect the risk profile of the consolidated entity. current perspective on risk - management challenges commercial real estate now that i have described in fairly broad terms the types of risk - management challenges institutions may encounter, i think it would be helpful to provide some concrete examples. as you are likely aware, the u. s. banking agencies recently issued for public comment supervisory guidance on commercial real estate ( cre ), which focused particularly on cre concentrations. regardless of its size, we believe an institution involved in cre lending would benefit from a review of the guidance. as you know, cre played a central role in the banking problems of the late 1980s and early 1990s and has historically been a highly volatile asset class. over the past dozen years, cre concentrations have been rising and are now at record levels at many banking organizations. for certain groups of banks - such as those between $ 1 billion and $ 10 billion - - average cre concentrations, which can include owner - occupied cre, are today above 300 percent. this compares to a previous peak of cre concentrations of 200 percent seen in the late 1980s and early 1990s. the agencies ’ cre concentration guidance, which excludes owner - occupied cre, is intended to reinforce existing risk - management guidelines on cre, and it offers institutions some suggestions for improving their risk - management practices. the agencies share a concern that some institutions ’ riskmanagement practices are not keeping up with the growth in their cre exposures. the guidance describes the key risk - management elements for an institution ’ s cre lending, because banks, in order to attract new business and sustain loan volume, may be inclined to occasionally make some compromises and concessions to borrowers. as supervisors, we want to ensure that loan - to - value standards and debt - service - coverage ratios are meeting the organization ’ s policies - - and that there is not an increasing number of exceptions to those standards and ratios. we also continue to monitor whether lenders routinely adjust covenants, lengthen maturities, or reduce collateral requirements. additionally, the guidance re | bureau of labor statistics has produced since 2000. using this measure lowers the prescribed funds rate by about 2 percentage points during 2003, bringing the rule prescriptions much closer to the actual path of policy. the reason for the improvement is evident from figure 2a, on the other side of the handout : even though the headline and core cpi measures were broadly similar in the mid - to late 1990s, these measures diverged substantially between 2003 and 2005. potential output the second limitation relates to the challenge of judging the level of potential output in real time. to illustrate this point, figure 2b plots three measures of the output gap. the solid line is the real - time estimate by the congressional budget office ( cbo ) that was used in the taylor rule prescriptions in figure 1b, while the dashed line depicts the cbo's ex post estimate of the output gap as of the third quarter of 2007. back in 2003, the cbo estimated that output at that time was below potential by only 1 percent. with the benefit of four more years of data, the cbo currently estimates that the output gap for the first half of 2003 was considerably wider – about 3 percent. in addition, the dotted line represents an alternative measure of resource utilization derived from the unemployment rate and an estimate of the natural rate of unemployment ( nairu ) taken from the board staff's frb / us model. in fact, the unemployment rate was rising through the middle of 2003, so the fomc had every reason to believe that the output gap was widening at that time. using this unemploymentbased measure rather than the real - time cbo measure would reduce the prescriptions of simple policy rules by roughly 1 / 2 percentage point in early 2003. other variables the third limitation in my list was that the small set of economic measures included in simple rules may not fully reflect the state of the economy. around 2003, financial market conditions may not have been adequately summarized by the assumed 2 percent equilibrium federal funds rate. accounting scandals caused economic agents to lose confidence in published financial statements and in bond ratings. the result was higher uncertainty about the financial health of firms, and credit spreads widened substantially. figure 2c shows that risk spreads on corporate bonds were elevated in this period. other things equal, such spreads would reduce the federal funds rate needed to achieve full employment, perhaps explaining a portion of the gap between the actual federal funds rate and the outcome from the policy rule during this period. risk management the last item on my list | 0.5 |
, and in which he said “ the issues are global and so interlocked, ” was a very useful reference to me, full of insight and wisdom, emphasizing the importance of a global perspective in establishing strategies and making policy decisions. it was also what directly motivated me to decide to deliver this farewell lecture. chairman bernanke ( 2014 ), in the annual meeting of the american economic association few weeks before his retirement, delivered a farewell lecture on “ the federal reserve : looking back, looking forward, ” while governors king ( 2013 ) and subbarao ( 2013 ) delivered theirs on “ a governor looks back – and forward, ” and “ five years of leading the reserve bank : looking ahead by looking back, ” respectively. as an economist, it seemed to me that delivering such speeches is a very desirable practice. this is another reason why i have decided to deliver a farewell lecture instead of just a speech, which has been the custom. considering that in academia it is a general practice to pass on one ’ s experience to students through a farewell lecture when retiring, i think that the central bank community also needs to build the same tradition. part of this lecture is an excerpt from my farewell speech delivered at the bis governors ’ meeting as the bis - acc chair on february 24, 2014, in sydney, australia. since my views on the current economic circumstances and policy challenges have already been circulated in the results of several meetings, including with director generals and general managers, those on my four years at the bok have been published in bank of korea news ( march 2014 edition ), and those on other policy reforms have been presented to bok staff on many occasions, i will not repeat them here. bis central bankers ’ speeches instrument, and had to newly develop non - conventional instruments since their interest rates had already hit the zero lower bound. emes, with their original sin, i. e. their inability to borrow abroad in their own currencies, have had to put priority on dealing with the negative spillovers from aes ’ qe policies. while trying to explore new ways of responding to unpredictable economic changes, they have at the same time had to overcome the difficulty of needing to avoid simply applying their experiences acquired under the unsuited past economic environment. aes and emes are under a global economy where they are interconnected with each other but have had to remain different in terms of their policy instruments. past financial crises that have impacted the overall global economy include the latin | the three - month swiss franc libor rate. the main goal has been, and will remain, price stability. price stability is considered to have been achieved if inflation, measured by the national consumer price index, is below 2 % in the medium term. in achieving this goal, the snb always takes account of the economic development. this is also stipulated in the draft of the revised national bank law. due to the strategy change from money supply targeting to inflation forecast - oriented interest rate steering, shifts in the demand for money have become less problematic, as they are being offset automatically. but although the money supply no longer serves as an intermediate target, its development is an important element duly considered – along with other indicators – in producing the inflation forecast. the centuries - old observation that sustained changes in the price level are linked to changes in the supply of money remains valid. 4. 2. the significance of the exchange rate another important variable in producing a medium - term inflation forecast is the exchange rate. the significance of the swiss franc exchange rate against the major currencies is due to the swiss economy being so small and open. the export share of the swiss gross national product ( gnp ) amounts to approximately 42 %, while the corresponding share is 29 % in germany and only 12 % in the united states. switzerland's major trading partners are the eu countries, which absorb 59 % of swiss exports. with regard to imports, the interdependence is even greater : 75 % of swiss imports come from the eu. via foreign trade, the exchange rate exerts an influence on aggregate demand and, therefore, also on the price level in switzerland. in addition, the exchange rate directly affects import prices. therefore, exchange rate movements have been, and will be, closely monitored by the snb. the rapid succession of interest rate cuts by the national bank since 11 september 2001 was also an expression of concern about an exchange rate - triggered threat to the economy. since price stability was not jeopardised, it was possible to considerably relax monetary policy. 4. 3. steering the exchange rate? although the snb takes account of the exchange rates when determining its monetary policy, it is sometimes called upon to do more than that. it is even requested to concentrate – at least temporarily – exclusively on the exchange rate. the underlying notion is that the national bank could aim at a lower swiss franc exchange rate and that exports would consequently pick up to the desired degree. | 0 |
one of the most interest rate – sensitive parts of the economy. we have seen that sensitivity in mortgage rates and mortgage originations. as shown in figure 4, 30 - year fixed - rate mortgage rates were close to 3 percent when the federal funds rate was near the zero lower bound in 2020 and 2021. rates surged in 2022 as the federal funds rate increased. consistent with the increase in mortgage rates, mortgage origination volume has fallen significantly. the current restrictive stance of monetary policy has weighed on the housing market. that is helping to bring supply and demand into better balance and put downward pressure on inflation. one aspect of inflation that has gotten a fair amount of attention is housing and rental costs. this is because housing costs make up such a large share of household budgets. to calculate housing services inflation, government statistics don ’ t use home prices because a home is partly an investment. instead, housing services inflation is computed using monthly rents that capture what tenants pay to rent a house or apartment and what homeowners would, in theory, pay to rent their own home. the way this calculation is derived means changes in market rents — or what a new tenant pays to rent — take a long time to pass through to pce housing services prices, as shown in figure 5. in this figure, notice that increases in market rents, the blue and red lines, peaked in 2022, and pce housing services inflation, the black line, lagged market rents and peaked in 2023. lags in housing services inflation the primary reason for this lag is that market rents adjust more quickly to economic conditions than what landlords charge their existing tenants. this lag suggests that the large increase in market rents during the pandemic is still being passed through to - 6existing rents and may keep housing services inflation elevated for a while longer. this observation is important because it is an example of one of the underlying sources of lags with which monetary policy affects inflation. another factor affecting pass - through of restrictive monetary policy is that fixedrate mortgages are common in the u. s. it is often argued that this loan structure dampens the effect of monetary policy. figure 6 shows that the 30 - year fixed mortgage rate is about 7 percent, while the average outstanding mortgage rate is about 4 percent. this lower outstanding mortgage rate is due to households who locked in rates during lowerinterest periods, including when the fed cut the target range for the federal funds rate to near zero shortly after | ##ncies are lost. there is a flight to safe - haven investments, many of which are in developed nations. perhaps, given the circumstances, it was inevitable that the impressive and rapid growth experienced by the economies in the asian region would encounter a temporary slowdown or pause. i say temporary because there is no reason that above - average growth in countries that are still in a position to gain from catching up with the prevailing technology cannot persist for a very long time, provided their markets are opened to the full force of competition. nonetheless, free - market, even partially free - market, economies do periodically run into difficulties because investment mistakes invariably occur. and, as i noted earlier, many of these mistakes arose from government - directed or influenced investments. when this happens, private capital flows may temporarily turn adverse. in these circumstances, individual companies should be allowed to default, private investors should take their losses, and government policies should be directed toward laying the macroeconomic and structural foundations for renewed expansion. new growth opportunities must be allowed to emerge. although the economies of the troubled asian countries were usually characterized by a combination of current account deficits, large net foreign currency exposures, and constraints on exchange rate fluctuations, one cannot generalize that these are always signs of impending difficulties. large current account deficits, per se, are not dangerous if they result from direct investment inflows that are not subject to rapid withdrawal and that generate an increase in income sufficient to compensate the investors. foreign currency exposures need not be a problem if positions are properly managed and the risks are recognized. fixed exchange rates, also, are not necessarily a problem. indeed, if they can be sustained, they yield extensive benefits in lower risk and lower costs for all international transactions. but a small open economy can maintain an exchange rate fixed to a hard currency only under certain conditions. both austria and the netherlands, for example, have been able to lock their currencies against the deutsche mark because their economies are tightly linked through trade with germany, they mirror the bundesbank ’ s monetary policies, and they are perceived to engage in prudent fiscal policies. were it not for issues of national identity and seignorage, they could just as readily embrace the dm as their domestic currency without any economic disruption. other economies, such as argentina and hong kong, have fixed their exchange rates essentially through currency boards. changes in dollar reserves directly affect the monetary base of those economies. but when exchange rates are fixed, with or | 0.5 |
participants in the face of unanticipated losses. financial leverage was also an amplifying factor in many of these events. in some instances, there were unexpected patterns of correlation in the movement of asset prices and in credit losses across borrowers. these experiences led to changes in risk management practices, in supervision, and in our capacity as a central bank to contain systemic risk. these responses have reduced the overall vulnerability of the system to the types of shocks we ’ ve experienced. moreover, because we ’ ve experienced such a variety of different types of stress, overall risk may be lower. but this recent history also suggests that we need to maintain a degree of humility and caution about our capacity to anticipate the nature and dynamics of future stresses to the financial system. how strong and resilient is the u. s. financial system today? our sense is that the system is quite strong and resilient relative to the recent past. the major financial institutions at the core of the system are profitable and well capitalized. the total risk - based capital ratio for the ten largest u. s. - owned bank holding companies has averaged more than 12 percent over the past two years, a slight increase relative to prevailing levels since the mid - 1990s. at year - end 2003, nearly every bank in the country met the regulatory standards to be considered “ well capitalized ”, with fewer than 100 - representing less than 1 percent of banking industry assets - failing to meet these standards. while risk - based capital ratios do not always provide an accurate picture of true capital strength, especially for the larger and more complex institutions, these statistics are nonetheless broadly indicative of a very strong underlying capital position of the industry. robust capitalization is important because capital, along with earnings, provides the first line of defense against losses. counterparties and customers are less likely to lose confidence and pull back from a well - capitalized institution in the wake of a large loss or other negative event. capital, in effect, helps protect firms against “ runs, ” both traditional “ runs ” where short - term funding and liquidity are at issue, and more gradual, but just as damaging “ runs ” on franchise value, where customers turn elsewhere for services because they question the long - term viability of a firm. consolidation has resulted in larger and more diverse financial institutions at the core of the u. s. financial system. deregulation has enabled firms to better optimize the scale, geographic spread, and | potential spillover effects of europe on the united states, we will continue to monitor the situation closely. thank you for your invitation to testify today, and i look forward to your questions. bis central bankers ’ speeches | 0.5 |
markets go through peaks and troughs. and like this marble hall – renovated, rehabilitated, now strong, beautiful and iconic... it is our taking action, our adoption of decisive policies and our welcoming of reforms through the years — that has helped strengthen our economies. our actions, our reforms, our regulations and our staunch commitment as policymakers, monetary authorities, central banks, regulators, public servants, have made them resilient. the ayuntamiento gives us a glimpse of the past. it also reminds us to continue to fortify our pillars and to build on the economic, financial and institutional reforms we initiated. it is when we gather together periodically and openly share our ideas, insights and experiences that we add to the strength and resilience we have. this is what today was about. our discussions will continue tomorrow. tonight, this dinner is about celebrating that collaboration. it is about fellowship. as your hosts, we are also proud to share our culture with you – to showcase our talents and also our cuisine which we arranged for you to enjoy tonight. 1 / 2 bis central bankers'speeches thank you very much and have a good evening. bon apetit. 2 / 2 bis central bankers'speeches | nestor a espenilla, jr : remarks at the gala dinner of emeap governors'meeting remarks by mr nestor a espenilla, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the gala dinner on the occasion of emeap governors ’ meeting and informal meeting of emeap governors and heads of supervisory authorities, manila, 4 august 2018. * * * good evening. after a productive day of deep and meaningful discussions on various financial and economic issues, it is wonderful to be able to sit back, enjoy dinner and world - class entertainment — showcasing traditional and modern philippine music, dances and other performances — here in the beautiful and historic ayuntamiento de manila. from the time it was built during the spanish colonial period in 1607, the ayuntamiento, has seen many transformations. it possesses a rich and interesting history. on this very site was the session hall of the first philippine congress. the building also served as manila ’ s first city hall. it has been, as it still is now, the venue of several historic events and has served as offices of various government agencies. today, it houses the offices of the bureau of the treasury. this ayuntamiento, the walled inner city of intramuros and surrounding districts are testaments of the trade linkages between our neighbors in asia and the other side of the pacific. this linkage was primarily represented by the round trip voyages that the galleon ships made between acapulco, mexico and manila ’ s ports, just about a kilometer away from where we stand right now. this so - called galleon trade ( from 1565 and on for the next 250 years consisted of exports coming from other asian countries like china and indonesia ) showed not only exchange of goods between countries. it also created a means for cultural exchanges, cross - country cooperation, and dialogue, similar to what we do today among ourselves and with the rest of the world. like most buildings here in the walled city of intramuros, the original ayuntamiento was destroyed in 1945 during the second world war. it has gone through a number of reconstructions after damages brought by fires and earthquakes. its rehabilitation began in 2009 and was completed in 2013. a long and tedious process. like ayuntamiento, our financial markets have seen numerous transformations through time. we have seen economies go through booms and busts. we have experienced financial | 1 |
. 3 since cdcs cannot clear a trade unless both counterparties are participants, it will not be able to materially increase the proportion of the repo market that it serves without capturing a broader set of participants. clearly, the challenge is getting more participants on board, but several issues must be addressed before some institutions can participate given the current cdcs model. for instance, smaller dealers may not be willing or able to meet daily operational demands or to actively participate in actions necessary to manage exposures in the event of a default. and large buy - side firms, in particular, pension funds, do not currently meet all the requirements for direct membership. 4 pension fund participation is especially important because these institutions are on one side of a large proportion of repo transactions. cdcc and its members are already working to find a way for both of these groups to participate. cdcc is considering how to set up a mechanism that would allow smaller firms to clear indirectly – that is, through a direct member that provides clearing services. this is a triedand - true approach, one that is well understood by financial institutions. in addition to fixed - income and repo transactions, cdcs centrally clears options and futures traded on the mx and over - the - counter ( otc ) equity options. p. chatterjee, l. embree and p. youngman, “ reducing systemic risk : canada ’ s new central counterparty for the fixed - income market, ” bank of canada financial system review ( june 2012 ) : 43 – 49. the current cdcs participants are : bank of montreal, cibc world markets inc., desjardins securities inc., merrill lynch canada inc., morgan stanley canada limited, national bank of canada, nbcn inc., rbc dominion securities inc., royal bank of canada, scotia capital inc., and toronto - dominion bank. cdcs participants must be either a member in good standing of an exchange recognized in a canadian province, or a bank to which the bank act ( canada ) applies. pension funds generally do not fall into either of these categories. bis central bankers ’ speeches current cdcs participants have a role to play in facilitating this initiative. they need to consider whether or not to provide clearing services to smaller institutions and, if they choose to do so, to develop the capacity to take on this business. they will also need to determine how to manage their exposure to their customers. for large pension funds, indirect membership may not be | track. • recent developments are in line with the bank ’ s expectation of a soft landing in the housing market and stabilizing debt - to - income ratios for households. still, household imbalances remain elevated and would pose a significant risk should economic conditions deteriorate. • in sum, the bank continues to see a gradual strengthening in the fundamental drivers of growth and inflation in canada. this view hinges critically on the projected upturn in exports and investment. with underlying inflation expected to remain below target for some time, the downside risks to inflation remain important. at the same time, the risks associated with household imbalances remain elevated. • the bank judges that the balance of these risks remains within the zone for which the current stance of monetary policy is appropriate and therefore has decided to maintain the target for the overnight rate at 1 per cent. the timing and direction of the next change to the policy rate will depend on how new information influences the balance of risks. with that, tiff and i would be pleased to take your questions. bis central bankers ’ speeches | 0.5 |
to the perception that my counterparty can fail because of lack of capital. we can do little about that. bis central bankers ’ speeches then there ’ s another dimension to this that has to do with the premia that are being charged on sovereign states borrowings. these premia have to, as i said, with default, with liquidity, but they also have to do more and more with convertibility, with the risk of convertibility. now to the extent that these premia do not have to do with factors inherent to my counterparty – they come into our mandate. they come within our remit. to the extent that the size of these sovereign premia hampers the functioning of the monetary policy transmission channel, they come within our mandate. so we have to cope with this financial fragmentation addressing these issues. i think i will stop here ; i think my assessment was candid and frank enough. thank you. bis central bankers ’ speeches | the economy improves again? 8 i therefore remain convinced that delaying the reform process would have been counterproductive. second, one can exaggerate the effect of the zero lower bound. the ecb has employed various standard and non - standard measures that have helped to smooth the adjustment process for stressed countries. the provision of liquidity to banks through fixed - rate tender procedures with full allotment, and against an expanded list of eligible collateral, has been crucial to prevent further catastrophic effects arising from the sudden stop that some countries experienced. 9 the expansionary monetary policy stance has ensured that inflation expectations remained well anchored over the medium term, thereby ensuring that short - run price adjustments do not translate into longer - term deflationary expectations. price stability has been also crucial in avoiding increases in the real values of nominal debts – increases which would be unwelcome throughout the euro area, but especially pernicious in countries under stress. there are monetary policy instruments that could be used in the event of downward risks to medium - term price stability, even if the nominal interest rate is constrained by the zero lower bound. third, besides monetary policy, we should also not forget the additional support for governments that came from external assistance, which also helped to offset the effects of a sudden stop. between 2010 and 2013 greece, ireland, portugal and cyprus requested financial assistance from the eu and the imf. in 2012, spain requested financial assistance from the eu for the recapitalisation of its banks. at the same time, a permanent solidarity framework – the european stability mechanism – was put in place, to provide financial assistance to member states in difficulty, thereby reducing threats to financial stability in the euro area. conclusions let me conclude. the crisis has been long and painful for many people in europe. nevertheless, and in spite of persistent challenges, much of the macroeconomic adjustment has now taken place. looking back, 2013 was certainly the year of the turnaround. since 2008, the current account deficits of stressed countries have narrowed substantially. greece, spain and portugal moved from double - digit deficits and in 2013 achieved slight current account surpluses. over the same period, the current account balance of ireland went from a deficit of around 5 % of gdp to a surplus of around 5 % of gdp. some of the adjustment certainly reflects a decline in imports due to the cyclical compression of domestic demand. but in spain, portugal and ireland, the larger part of the adjustment is attributable to robust | 0.5 |
##rofiling of the stock of official bilateral debt, ( b ) substituting concessional loans for non - concessional from international financial institutions, ( c ) pre - paying expensive loans and ( d ) liquidating short - term liabilities. debt ratio was thus reduced from 100 percent of gdp to 60 percent in five years time. trade policy in pakistan has been categorized by the world bank as one of the least restrictive in south asia along with sri lanka and this policy has gradually provided incentives to exporters to increase their market share in the global markets. exchange rate policy was pursued to maintain stability in the foreign exchange markets while at the same time keeping the competitiveness of pakistani exports intact. large accumulation of foreign reserves played an important role in stabilizing the exchange rate. 2. 2. structural reforms financial sector reforms financial sector has made the farthest progress by transforming itself into a market oriented, private sector dominated sector performing efficient intermediation. reforms that have been successfully implemented since 2000 spanned over a whole range of initiatives. prominent among them were ( a ) privatization of nationalized commercial banks and fostering competition, ( b ) strengthening regulatory supervisory and enforcement capacity of the sbp, ( c ) lowering the cost of capital by dealing with non performing loans, reducing corporate tax burden and bringing cost - income ratios down, ( d ) revising the legal structure particularly the foreclosure laws ( e ) broad basing access to the middle income and lower income groups by opening up provision of credit for agriculture, smes, consumer financing and micro credit ( f ) introducing and enforcing stringent corporate governance, internal controls, transparency and enhanced disclosure standards ( g ) liberalizing the foreign exchange regime and ( h ) promoting technological upgradation of the banking industry through ebanking, atms etc. a financial sector assessment carried out jointly by the world bank and the imf conclude that pakistan had been able to establish a sound, efficient financial system that can withstand exogenous shocks. the restructured financial system has responded well to the expansionary monetary policy that was pursued during the period 2001 / 02 – 2003 / 04 to stimulate aggregate demand and kick - start the economy. tax reforms tax reforms have attempted to widen the tax base, strengthen tax administration, promote self - assessment, eliminate whitener schemes, reduce multiplicity of taxes and tackle the culture of tax evasion and corruption. a new income tax ordinance has been introduced in 2001, which allows for universal self - assessment, uniform tax | announced by president musharraf in december 1999 consisted of four key elements : ( a ) restoration of macroeconomic stability and pakistan ’ s relationship with the international financial institutions. ( b ) structural reforms to remove distortions. ( c ) improving economic governance and reviving key institutions. ( d ) poverty alleviation through targeted interventions and social safety nets. the interconnection between economic growth, poverty reduction, structural reforms and improved governance is fairly strong in the case of pakistan. macroeconomic stability and the consequent rapid economic growth help reduce poverty in conjunction with investment in social sectors, targeted interventions and social safety nets. structural reforms are needed to strengthen the underpinning of macroeconomic policies and to remove microeconomic distortions affecting key sectors of the economy thus paving the way for accelerating economic growth. improved governance affects the quality of growth by allowing realization of higher returns on investment and is also conducive to poverty reduction through better delivery of social services to the poor. poverty reduction, as we know by now, can be achieved with rapid economic growth, structural reforms and improved governance. 2. 1. macroeconomic stability macroeconomic stability has been achieved through reduction in fiscal deficit, acquiring a surplus on the current account balance of payments, lowering of inflation, and a transformation of external debt profile. these have been brought about partially through the support of international financial institutions and the paris club bilateral creditors which significantly eased the external payments position that had been a major and consistent risk to the economy since 1998. fiscal deficit was reduced by pursuing a combination of four sets of policy measures ( i ) mobilizing additional tax revenues ( ii ) reducing subsidies to public enterprises and corporations and ( iii ) bringing about a significant decline in debt servicing payments and ( iv ) containing defence expenditures. monetary policy was kept reasonably tight during the first two years with money supply growth at about 9 percent. expansion in private sector credit, in the subsequent years, did not put much pressure as the government borrowing was limited to a manageable level. as the monetary conditions improved, the interest rate came down gradually to a single digit and demand for credit by private businesses picked up resulting in higher capacity utilization in manufacturing and increased industrial production. however, with the mounting of inflationary pressures in recent months, the state bank is taking measures to tighten its monetary policy ; the interest rates are expected to go up gradually in the coming months so as not to hurt the growth of the economy. external debt management focused on ( a ) rep | 1 |
not addressed, then problems stemming from structural deficiencies are bound to reappear. concluding remarks in a nutshell, the past global growth model proved unsustainable. the lessons from this and previous crises suggest that failure to address long overdue reform challenges promptly might result in a “ lost decade ” for the global economy. these reform challenges include : achieving a balanced global growth trajectory ; implementing stability - oriented macroeconomic policies ; carrying out structural reforms ; putting in place more flexible exchange rate arrangements ; appropriate financial sector regulation and oversight. only partial progress has been made so far, and the distortions that led to global imbalances are still present. if reform challenges are not met, there is a major risk that global economic activity will remain subdued, high public debt will become more persistent and unemployment will remain high. it is therefore crucial to make headway with our reform agenda, while taking care to ensure that our response to the crisis does not sow the seeds for renewed economic imbalances and financial excesses. thank you for your attention. | ; addressing cross - border regulation of systemically important financial institutions ; the need for a ‘ ‘ holistic ” approach to regulation, which should extend to the shadow banking system. to this end, a timely finalisation of the basel committee ’ s proposals on capital and liquidity regulations is critical to strengthen the resilience of the banking sector. initiatives to safeguard financial stability are being coordinated at the global level by the financial stability board ( fsb ). at the european level, a new body, the european systemic risk board, is expected to contribute to the global effort to enhance system - wide risk assessment and develop a consistent macro - prudential framework. the establishment of the european systemic risk board will give the ecb a more prominent role in macro - prudential supervision, quite separate from its monetary policy responsibilities. the initiatives undertaken at the global and european level should address the transparency and risk - taking behaviour of financial institutions, and thus be consistent with general principles such as : i ) correct risk - taking incentives and avoid moral hazard ; ii ) minimise distortion in the banking sector ; iii ) ensure a global level - playing field. we must ensure that governments remain vigilant on safeguarding financial stability and financial market participants accountable for their decisions. in this context, i believe we should avoid creating new incentives for moral hazard for instance by creating an “ emergency fund ” for banks financed or co - financed by taxpayers ’ money. is the global economy headed for a lost decade? given the challenging reform agenda and the possible obstacles to global growth that i have outlined earlier, what are the chances of the global economy heading for a lost decade? i feel that there is a widely shared view today that global activity and trade are unlikely to exhibit the same strength in the years ahead as in the past decade. indeed, returning to precrisis economic activity levels is likely to take time. on the one hand, some emerging economies, notably in asia, have not experienced declines in output, yet still remain dependent upon advanced economies for future growth. evidence of decoupling is at best mixed and export oriented strategies in those countries still prevail. on the other hand, advanced economies may be faced with the prospect of a protracted period of sluggish growth, given that the financial crisis is likely to have adversely affected their growth potential. according to a recent oecd study, financial crises in oecd countries are estimated to lower potential output by 1. 5 to 2. | 1 |
, financial products provided ; credit, savings, insurance, remittances, mobile banking and other financial products and services. the regional distribution ; rural versus urban and the awareness versus bis central bankers ’ speeches understanding and perceptions of access to finance, the constraints, opportunities for financial education, financial decision making process, and household dynamics that confront women. 2. understanding the types of financial products and services available in terms of ; – the types of providers, the services which are regularly or less frequently used, services which are paid for and for how much, and challenges in accessing the financial products and services. as bank of zambia, we believe that this study will also contribute to the documentation of information relating to financial inclusion. the information is important to aid in policy formulation by the government and potentially inform business strategy of financial service providers to reach out to the un - banked citizens. we encourage other stakeholders to contribute to this necessary body of knowledge in our financial sector. financial inclusion for the majority of our people, especially women, is a corner stone of our financial sector development. the honourable minister of finance in his 2014 national budget address, set the stage by emphasising the need to accelerate broad based growth, diversification of the economy and the entrenchment of social justice so that all zambians, rural or urban, male or female, young or old and including the differently abled, benefit from and contribute to national development. ladies and gentlemen, it has been reported at various fora that our women continue to face challenges in accessing financial products and services. these barriers range from cultural, legal, financial and sometimes religious discrimination among others. however, access to finance and financial services in general, has in the recent past been cited as a major challenge to the participation of women in economic development. as you are aware, finance can be looked at as the oil that lubricates smooth economic growth and therefore any impediments to accessing this important resource has an adverse impact on the country ’ s economic growth prospects. the study and this conference have come at an opportune time when we are focusing on enabling all zambians to be empowered financially and ultimately economically so that we reduce the high levels of poverty in the country. i have no doubt that the findings of the study, will stimulate profound discussions which will shape the efforts going forward on financial inclusion and promulgate the financial inclusion agenda to all zambians. distinguished guests, ladies and gentlemen, it will, however, | from the study. it is my hope and trust that you will take advantage of this forum to initiate dialogue between women entrepreneurs and women in general and the various other stakeholders to propose mechanisms to accelerate women ’ s access to finance. this is an opportunity also for women to discuss challenges faced in accessing various financial products and services. equally, it is an opportunity for other stakeholders, especially financial services providers to enlighten all of us on financial products and other services on offer to mitigate the challenges women face. may i take this opportunity to thank the partners who financed and supported the study and conference : financial sector deepening zambia germany cooperation / giz, new faces new voices, and making finance work for africa. the bank of zambia looks forward to continued cordial relations and partnership in fostering developments in the area of financial inclusion for women and other areas of cooperation. ladies and gentlemen, as i wish you all a successful conference, it is now my honour and privilege to declare the conference officially opened. i thank you. bis central bankers ’ speeches | 1 |
##able economic matrices. at this juncture, with the global crisis behind us and all the lessons learned, i think as policy makers we are more knowledgeable to reap the benefits of the eu entrance more wisely, and to better deal with the challenges ahead. at this point i must say, that macedonian economy is already well integrated both in terms of trade and finance with the eu. more than 70 % of the total trade is with eu countries, the foreign owned banks are mostly of eu origin, and the bulk of financial flows comes from eu. very importantly, these financial flows went in export – oriented and more productive segments, that fortified the fundaments of the economy, provided impetus to growth and did not add to inflationary pressures, or pressures on foreign reserves. and, this model should actually be the proper way to proceed after the eu entrance, as well. less reliance on short - term volatile financial flows, and import of longer term capital is the only way to enhance the productivity of the economy and improve its competitiveness. very often, the entrance on the large eu common market of goods, services, capital and labor, not only is connected to faster growth and real convergence, but also to convergence in price levels. as wages start to increase, and gradual shift towards consumption of more expensive services occurs, the price level might elevate as well, thus posing challenges for monetary policy. these price pressures can be avoided by boosting the 1 / 2 bis central bankers'speeches productivity, thus creating more favorable environment for the monetary policy, without pressures on the interest rates. the second angle that should be pinpointed is the implication that eu entrance does have on the further monetary integration, the adoption of the euro as a single currency and the role that the national central bank would have in this context. entering the eu, for the nbrm would automatically mean participation in the european system of central banks ( escb ). in this manner, we are getting much closer to europe in the field of central banking. the staff of the central bank becomes part of many committees, subcommittees and working groups of the escb, which is crucial ingredient for strengthening the institutional capacity for policy making. and this is vital for the future steps, as the eu membership, for small and open economy, with high level of euroization and fixed exchange rates would inevitable imply need for very serious preparations for the euro adoption. it requires passing the so - called test period, staying in the er | 08 / 09 / 2017 interest rate benchmarks | speeches | rba speech interest rate benchmarks guy debelle [ * ] deputy governor finsia signature event : the regulators sydney – 8 september 2017 today i am going to talk again about interest rate benchmarks, as recently there have been some important developments internationally and in australia. [ 1 ] these benchmarks are at the heart of the plumbing of the financial system. they are widely referenced in financial contracts. corporate borrowing rates are often priced as a spread to an interest rate benchmark. many derivative contracts are based on them, as are most asset - backed securities. in light of the issues around the london inter - bank offered rate ( libor ) and other benchmarks that have arisen over the past decade, there has been an ongoing global reform effort to improve the functioning of interest rate benchmarks. i will focus on the recent announcement by the uk financial conduct authority ( fca ) on the future of libor, and the implications of this for australian financial markets. i will then summarise the current state of play in australia, particularly for the major interest rate benchmark, the bank bill swap rate ( bbsw ). our aim is to ensure that bbsw remains a robust benchmark for the long term. i will also discuss the important role for ‘ risk - free ’ interest rates as an alternative to credit - based benchmarks such as bbsw and libor. the future of libor and the implications for australia libor is the key interest rate benchmark for several major currencies, including the us dollar and british pound. just over a month ago, andrew bailey, who heads the fca which regulates libor, raised some serious questions about the sustainability of libor. [ 2 ] the key problem he identified is that there are not enough transactions in the short - term wholesale funding market for banks to anchor the benchmark. the banks that make the submissions used to calculate libor are uncomfortable about continuing to do this, as they have to rely mainly on their ‘ expert judgment ’ in determining where libor should be rather than on actual transactions. to prevent libor from abruptly ceasing to exist, the fca has received assurances from the current banks on the libor panel that they will continue to submit their estimates to sustain libor until the end of 2021. but http : / / www. rba. gov. au / speeches / 2017 / sp - dg - 2017 - 09 - | 0 |
“ runs ” on bank and sovereign debt absent central bank support. 6 such adverse feedback loops turned recessions into depressions in several european countries in recent years. what makes a successful currency union? the success of a currency area hinges on whether its features mitigate the costs of losing the flexibility that comes from an independent monetary policy. these features generally promote the alignment of economic cycles, and the maintenance of price and financial stability within the union. the most obvious feature is the degree of similarity amongst members. similar economies won ’ t suffer from a “ one size fits all ” monetary policy. 7 surprisingly, a review of major currency areas suggests that similarity is neither necessary nor sufficient for success. for example, the industrial structures of the core and periphery of the euro area are more similar than those of the constituents of canada or the us ( table 1 ). yet few would argue that the euro area is the most effective currency union of the three. conversely, the canadian monetary union works well despite having substantially larger industrial variation than even the us. 8 the similarity of the industrial structure of scotland and the rest of the uk depends on how offshore oil is allocated. with oil split on a per capita basis scotland and the rest of the uk look about as similar as the core and periphery of the euro area ; but with oil split on a geographic basis they look about as diverse as the united states ( table 1 ). despite any differences, the close integration of the scottish and rest of uk economies has helped ensure that their economic performance has been very similar over a long period – output growth is highly correlated ( chart 1 ). 9 so theory notwithstanding, being similar doesn ’ t necessarily help and being different doesn ’ t necessarily hinder. this suggests we should look elsewhere for the ingredients of a successful union : to the mobility of labour, capital and goods ; to institutional structures promoting financial stability ; and to institutions that mutualise risks and pool fiscal resources. an economic union with free movement of labour, capital and goods the “ five tests ” formulated by the uk government to analyse the merits of joining the euro in 2003 were crafted in large part around the degree of integration of the uk and the euro area. 10 that is because greater openness and integration within a currency union not only enhances these dynamics were in operation in the recent euro area crisis, until the announcement of the ecb ’ s outright monetary transactions. members are similar when they experience similar shocks and respond to the same shock in similar ways. that reduces | also assists in diluting the effect of shocks by spreading them across the union. if one part of the union imports a large share of what it consumes from other parts, changes in demand will be quickly transmitted. this helps to align economic cycles and makes a common monetary policy more appropriate. 16, 17 the classic early contribution on this point was made by mckinnon ( 1963 ), who argued that the more open the economy, the more flexible would be domestic prices and wages so that movements in the exchange rate would have little impact on competitiveness, and would be less effective as a stabiliser. in that case moving to a fixed exchange rate would be less costly. mundell ( 1961 ). some, including bean ( 1992 ), have expressed scepticism that factors of production could in fact move over a shorter timescale than that over which prices and wages adjust. this is consistent with evidence that labour moves less in europe in response to regional shocks than is the case in the us – see blanchard and katz ( 1992 ) for the us, and decressin and fatas ( 1995 ) who apply the same methodology to europe. the latter find that participation reacts by more to a labour demand shock, and migration by less in europe than the us. office for national statistics, 2011 census. frankel and rose ( 1998 ) found that countries with closer trade links tend to have more tightly correlated business cycles. since joining a currency area promotes trade integration, it also is also likely to help align international business cycles. that means one of the key optimum currency area criteria is endogenous to the decision to join. rose ’ s ( 2009 ) more recent meta - analysis also finds a significant effect of trade on the synchronisation of business cycles. de grauwe ( 2000 ) provides a discussion of how closer integration may affect the likelihood that countries experience asymmetric shocks. on the one hand closer trade links could result in greater specialisation, leaving currency union members more prone to asymmetric shocks. on the other, it could result in more intra - industry trade, increasing the likelihood that countries will experience similar shocks, and thereby helping to align business cycles. a high degree of openness also means that the adjustment required to boost net exports is somewhat lower. a much weaker adjustment in prices and wages is necessary to raise net exports by a given share of gdp if both exports and imports are a large share of gdp than if they are a small share | 1 |
cases, the court can also draw on these comprehensive and transparent shariah standards as basis in arriving at a court ruling. the adoption of the standards by learning institutions will pave the way for greater understanding and acceptance of these standards as a global starting point of reference for the islamic finance community. as we launch the educator ’ s manual, which is the first of 14 series of manuals, i would like to share my thoughts on our approach in developing the shariah standards, and would also like to emphasise the importance of embracing diversity and mutual respect in shariah interpretations. i shall deliberate on two additional areas that stakeholders need to consider to maximise the benefits of having the manual ; reconfiguration of academic programmes and strategising talent deployment. the future growth of islamic finance, especially cross border, is very much dependent on the harmonisation and mutual recognition of shariah views and rulings across the globe. it is critical if cross border trades are to be strengthened. numerous efforts are being pursued to narrow the opinion gaps between scholars through symposiums, roundtables as well as bilateral dialogues. however, narrowing of shariah opinions is preferable but not critical. the fact is, differences in views and opinions among scholars are a historical fact, and an accepted facet in the area of shariah, particularly in matters relating to fiqh muamalat ( jurisprudence ). in fact, my own view is that great islamic civilisation of yesteryears was possible and the envy of many because of our diversity, tolerance and mutual respect of each other's view. in the context of the shariah standards, the dynamic process of its development involves the act of harmonising the differences and embracing diversity. we respect views of others which are different from ours by looking into the wisdom of earlier scholars from all recognised schools of thought ( mazhabs ). we are also willing to arrive at new rulings where it is appropriate. this broadens the reference scope for shariah scholars to have an enriching debate on the best application of shariah in contemporary finance, based on the customs, legal and operational framework of each market. this is an important principle, as it increases the depth of fiqh research that leads to greater understanding of practices in muamalat through the times while recognising the influence of local tradition, as well as domestic business practices. the act of balancing the authenticity and practicality of | muhammad bin ibrahim : enhancing the quality of malaysia ’ s islamic finance education speech by mr muhammad bin ibrahim, governor of the central bank of malaysia ( bank negara malaysia ), at the launch of the educator ’ s manual on shariah standard murabahah, kuala lumpur, 15 august 2016. * * * we are here today to witness the launch of the educator's manual on shariah standard murabahah. the manual is a pioneering effort. translating the shariah standard and operational requirements into a user - friendly format for adoption in the academic syllabus of our local universities will go a long way in enhancing the islamic finance syllabus by educational establishment. this is a great team effort. i would like to congratulate the panel of authors that have tirelessly contributed towards the production of this teaching guide. the shariah advisory council ( sac ) members, researchers from the international shari'ah research academy ( isra ), representatives from the islamic banking and finance institute malaysia ( ibfim ), the academic fraternity and the industry players. the dedication of the team has produced a manual that will make the overall learning experience more comprehensive, exciting and interactive. my congratulations and appreciation to universiti sains islam malaysia ( usim ) and the international islamic university malaysia ( iium ) for being visionary to participate in this pilot project. there is a wealth of benefits to be gained. it is our aspiration that other universities would be a part of this initiative that would contribute towards enhancing the quality of our islamic finance education. for the past three decades, islamic finance in malaysia has undergone a journey that is marked with various significant milestones. i would like to highlight three major achievements of the industry in term of its development since inception. firstly, islamic finance in the country has become a key segment in the financial system. what was once a novelty is now mainstream. this is a consequence of continuous initiatives to build a solid foundation, focusing on infrastructural, institutional and capacity building measures, as well as robust regulatory and supervisory framework. these measures are the cornerstones of islamic finance industry ’ s growth. from less than four islamic banks and takaful players before year 2000, there are now 27 players that offer over 100 financial products beyond the basic financial offerings. the industry is characterised by increasing competitiveness and innovation. the recently launched investment account platform ( iap ) is the latest initiative where the industry has cooperated to | 1 |
. it is, of course, difficult to determine which role this played in counteracting the development of the housing market. at any rate, prices undeniably rose rapidly. however, the fact that the riksbank clearly indicated that the development of household indebtedness and housing prices were not sustainable in the long term and that monetary policy considered this circumstance may have played an important role in curbing this development. in that case, this is exactly what is meant by leaning against the wind. the housing market today housing prices have recently started to rise again, which has aroused some attention, not without reason. it is undeniably remarkable that housing prices are rising and that the rate of increase of the banks ’ lending to households has started to grow again, at the same time as gdp is very weak and unemployment is rising. however, it seems reasonable to believe that this is because it is inexpensive to borrow money due to the low interest rates prevailing. rising stock market rates and steadily - growing consumer confidence are certainly also significant. household borrowing to invest in housing is also an effect we actually hoped to achieve by implementing a low interest rate. it is contributing to supporting demand and employment. even so, household saving has risen rapidly since 2007, from approximately eight to around 13 per cent of disposable income. over the short term, i do not consider the development of the housing market to be a problem. housing prices in sweden have certainly risen rather rapidly in real terms too, but there are good explanations for this. one such explanation is the low rate of housing construction in recent years, while another is provided by migration to metropolitan areas. the greatest price rises, without comparison, are found precisely in stockholm, goteborg and, above all, malmo. due to the taxation system and other regulations, we have not experienced the type of market in which households purchase homes as financial investments to then rent them out. it is easier for such markets to develop imbalances and become subject to rapid and heavy price adjustments. however, in the slightly longer term, there is reason to be vigilant. the increase in housing prices and in household debt in relation to income that we have seen over the most recent ten year period is not sustainable in the long term. there is thus a risk that an imbalance of the type i discussed previously will accumulate. at present, we cannot do much about this with monetary policy. we need to have a low interest rate for a longer period of time | 5 ), earnings have shifted back toward net interest income and have been more stable in the post - crisis period, which is consistent with the idea of more sustainable and less volatile earnings streams. finally, it is useful to compare the u. s. experience to other developed economies. as shown in ( figure 6 ), large u. s. bank outcomes compare favorably to their global peers from both a profitability and capital perspective. this is supportive of the conclusion that the suite of postcrisis official sector actions in the u. s. has made the u. s. financial system more resilient, while not eroding global competitiveness. provision of financial services i will now turn to the provision of financial services by looking at indicators of different types of banking activities such as lending or underwriting activities. 10 a more rigorous analysis would identify supply and demand factors in an attempt to understand not just what has changed, but why, and could allow an assessment of whether financial services are efficiently provided. nonetheless, this perspective provides a benchmark from the pre - crisis period to support some initial conclusions. in terms of traditional lending, ( figure 7 ) shows that the ratio of aggregate bank loans to gdp — a rough measure of credit intermediated through the banking sector — has recovered from the postcrisis low and is consistent with historical levels. in addition, aggregate net lending revenues, proxied by net interest income and scaled by gdp, are near historic norms despite compression of net interest margins in the low rate environment. survey evidence of credit availability also shows ongoing provision of credit. according to the national federation of independent business, the proportion of small businesses that report credit as hard to get has declined to pre - crisis levels. 11 this is consistent with the generally easing credit conditions across most loan classes over the last several years reported in the fed ’ s senior loan officer opinion survey, particularly in commercial and auto loans, but also expanding more recently into other types of household credit. 12 this evidence suggests banks continue to provide this core financial service. 4 / 7 bis central bankers'speeches turning to capital market activities, ( figure 8 ) plots non - interest revenues from core businesses — trading, investment banking, fiduciary activities, and securities brokerage. while trading revenue has declined, non - interest revenue of other types has generally grown in line with gdp, showing the compositional shift in revenue. the changes reflect the ongoing shift toward activities that generate more stable income streams such as fi | 0 |
##achma in the kingdoms of the hellenistic period, to the guilder during the heyday of the dutch trading empire, to sterling in the 19th century and the dollar over the past half century until today, trade and international currency use went hand in hand : the larger the importance of a country or currency area in world trade, the greater the international importance of its currency. given europe ’ s role as the world ’ s largest trader, it is not surprising that the share of the euro in the invoicing and settlement of the euro area ’ s trade with the rest of the world has increased significantly. the latest numbers collected by the eurosystem show that most euro area countries conduct more than half of their trade with partners outside the euro area in euro. what is more striking is that trade taking place entirely outside the euro area – for instance, between eu countries that have not yet adopted the euro as well as between countries seeking to accede to the eu – is also being invoiced and settled in euro. as these developments cannot be fully explained by increasing trade linkages of these countries with the euro area, it would appear that the euro has started to become a vehicle currency in international trade. that said, recent ecb research on this issue has also shown that the euro does not display one of the characteristics typically associated with vehicle currencies – namely their use in the trade of commodities. an international currency is not only used for trade purposes, but also for financing and investment purposes. and also in this respect, we observe wider use of the euro in international financial markets. for example, over the past seven years, the share of the euro in the stock of international debt if we include the countries of the cfa franc zone in western africa, this number rises to 40 countries which the imf classifies as having exchange rate regimes that either use the euro as sole reference currency or as part of a currency basket. securities gradually rose from 19 % to slightly below 32 %. other market segments – for example the spot foreign exchange market – are characterised by a high degree of stability, possibly reflecting the importance of network externalities. however, market data ( from the continuous linked settlement system ) show that the euro is the second most widely used currency, accounting on average for almost 22 % of all daily transactions. the increase in the use of the euro as a financing currency in international bond markets, has been a key feature of its international role. a geographical breakdown of the outstanding stock | made the situation worse was the fact that borrowers were not even aware of such high interest rate or charges before taking the loan as these were not disclosed upfront, there was no interface except the mobile app to raise their grievances and the recovery practices were harsh and unorthodox. we had also observed that right from credit underwriting to recovery, every activity was being outsourced with scant regard to customer privacy and protection. digital lending was operating on a'rent an re'model, where the fintech platform was undertaking all the lending activities on behalf of the regulated entity by posing itself as principal. in many cases, the customers were not even aware of the name of the bank or nbfc which had sanctioned the loan. to tackle this issue, the regulatory stance has converged on regulating the digital lending activity and the arrangements between regulated entities and fintechs providing specified services to res ( which were rechristened as lending service proivers or lsps ). rbi's digital lending regulations have laid down a broad regulatory framework under which fintechs can become enabling partners with regulated entities. these guidelines are a mix of reiteration of the extant guidelines like reporting to cics, 3 / 7 bis - central bankers'speeches conducting due diligence before engaging lsps, etc. and some fresh ones, with res being the fulcrum around which digital lending activities are required to operate with the regulatory compliance being made their responsibility. the social media transition social media has revolutionized the speed and scope of dissemination of information. information sharing has never been so quick and unhindered thus far. but this also means that unsubstantiated rumors and false news can also spread equally quickly and can adversely affect financial institutions, especially banks. the recent banking turmoil in usa has jolted some of the widely held views regarding principles of liquidity management and nature and speed of bank runs. the banking turmoil in the united states and europe in early march 2023 has had a significant impact on the global financial system. this episode has highlighted the need for a reassessment of global standards in financial sector regulations. this episode has offered two important lessons : first, the trust is vulnerable to perceptions of weaknesses and misinformed social media commentary. second, that in an age of social media and internet banking, the speed with which bank runs occur is unprecedented and therefore, the response time to handle any such crisis has telescoped to a | 0 |
nout wellink : supervisory arrangements – lessons from the crisis speech by dr nout wellink, president of the netherlands bank and chairman of the basel committee on banking supervision, at the 44th seacen governors ’ conference 2008 “ preserving monetary and financial stability in the new global environment ”, kuala lumpur, 6 february 2009. * * * when former us president bush welcomed g20 world leaders in washington last november to discuss the financial crisis, neither french president sarkozy nor german chancellor merkel had the honour of sitting next to him at the formal dinner. in fact, none of the western leaders had. as a clear display of the shifting balance of economic power, president hu jintao of china and president lula da silva of brazil sat either side of bush. evidently the world economic order is changing. emerging economies are catching up with the developed world at great speed. as a result, preserving monetary and financial stability – the theme of this conference – is an ever more global challenge that requires global cooperation. the financial turmoil has underlined the importance of better coordination among public authorities at the international level. from the start of the crisis in august 2007, central banks across the world have engaged in large - scale coordinated actions to support liquidity conditions in the global money markets. more recently, national governments have acted to shore up the capital base of individual financial institutions. regrettably, but understandably, they did so in a largely uncoordinated way. given the many cross - border externalities that are involved, increased coordination of national measures is clearly desirable, be they capital injections or state guarantees. in spite of authorities ’ efforts, uncertainty in the financial markets remains unusually high, and stabilizing financial systems is still our top priority. nonetheless, it is not too soon to think about how we can prevent and mitigate future financial crises. indeed, in light of weaknesses revealed by the financial crisis, the basel committee has developed a series of proposed enhancements to strengthen the basel ii framework. these enhancements will help ensure that banks ’ risks, whether on - or off - balance sheet, are better reflected in minimum capital requirements, risk management practices and disclosures to the public. another issue the committee is currently addressing is procyclicality, or the possibility that regulatory requirements amplify an economic cycle. this is a difficult issue as there are a variety of factors at play – such as loan loss provisioning – that influence procyclicality. and, we should | fout! onbekende naam voor documenteigenschap. progress on the resolvability of gsibs – the fsb perspective speech by klaas knot at the 2nd srm - ebf boardroom dialogue brussels, 5 july 2019 at the second srm - ebf boardroom dialogue, klaas knot gave a speech in which he described the efforts in making banks resolvable. he also mentioned areas of concern for the coming years : trends and priorities for achieving resolvability. fout! onbekende naam voor documenteigenschap. let me start by saying that i am here in two capacities, wearing two hats as it were. i am here both as vice - chair of the financial stability board, the fsb, and as president of the dutch central bank. for this speech i will be wearing my fsb - hat. as you may know, the fsb has actually been the instigator of many of the reforms and policy initiatives on bank resolution, including the topics being discussed today. with the development of the key attributes for effective resolution regimes in 2011, the fsb created the blueprint for the european resolution framework. this was followed by the tlac standard for setting loss absorbing capacity for g - sibs. so far, this is the only international standard developed by the fsb. other guidance developed by the fsb covers topics such as bail - in, funding in resolution and operational continuity. in this speech i will be taking the view of an fsb representative with a keen interest in making banks resolvable. this view should provide insight into the trends and priorities for achieving resolvability. hopefully it will also guide your own efforts, as you work together with the srb on topics such as : completing resolution plans, implementing tlac and modelling funding in resolution. and even though the fsb focuses on policy development for g - sibs, i think these topics are equally relevant for other banks. resolution planning and achieving resolvability i will start with resolution planning and achieving resolvability, the topic you discussed before lunch. in my view resolution planning has always been a means to an end. it is about getting a deep understanding of how a bank is organized and functions. it is about asking fundamental questions on what functions need to be continued and how to achieve this. resolution planning forces authorities to consider all these aspects and it focuses the mind | 0.5 |
it must include effective arrangements for cross - border resolution. that has been an architectural faultline in the imfs for decades. 3 third, across the world the operational independence of prudential supervisors4 from shortterm politics depends on credible and effective resolution regimes. unless we can handle the failure of banks and other financial firms in an orderly way, it is hard for governments to tie themselves to the mast of eschewing the temptations of ‘ bailout ’ using taxpayer ’ s money. that would give them an interest in the day - to - day operation of prudential supervision which, as experience in some countries shows, all too easily morphs into attempts to promote and protect ‘ national ’ champions ; and to operate supervisory policy for short - term gain rather than in the interests of medium - term stability. in any countries where that persists, we should expect higher government bond yields than otherwise, reflecting the state ’ s contingent liability for the banking sector. unless we deliver effective resolution regimes, public finances will be under more pressure. so, summing up why the resolution reforms are so important : if you believe in solving too big to fail, in an international financial system that is not only free but also safe, in shielding taxpayers from the risks in banking, and in shielding banking from politics, you will be committed to making a success of resolution. thankfully, the extent of progress since the 2008 / 09 bailouts, while still incomplete and needing continuous political impetus, is good. it has involved agreement on a global model for resolution regimes capable of handling the largest and most complicated firms ; legislation in some, but not yet enough, jurisdictions to embed that regime ; the development of high - level resolution strategies that can be applied to different types of global group ; concrete steps towards agreement between countries on how to apply those strategies across borders to specific institutions ; and plans for top - level reviews of the adequacy of the resolution plans for each global sifi. if that progress has not been faster, which is an understandable concern, it is for the good reason that the required reforms involve an agency of the state, the resolution authority, having powers that affect property rights. in democracies, that is rightly debated thoroughly to ensure that it has this serious faultline in the international financial system was highlighted to the international community by a 2001 g10 / financial stability forum report explaining that officials did not then have the tools to manage the orderly wind down of a large and complex | ailing countries. that ’ s why it ’ s all the more important that expectations are met and that further reforms are not just announced but actually put into practice. 4. germany as a role model germany is an important role model in this respect. what germany has accomplished offers a vivid demonstration for its partner countries in the euro area that structural reforms pay off. at the same time, i would like germany ’ s current economic and social policy to set more of an example. i ’ m thinking particularly of the option allowing individuals who have paid into the pension insurance system for a long period of time to draw a full pension at the age of 63. after all, the decision made just a few years ago to progressively raise the standard retirement age to 67 served as a model for countries in which the pension systems were likewise feeling the strain of an ageing population. logically, raising the retirement age was part of the agreed stabilisation programme in three of the four programme countries. so the signalling effect of retirement at 67 was blurred to a certain degree, and pension policy seems akin to the famous dancing procession of echternach – two steps forward, one step back. “ retirement at 63 ” offers a financial incentive to take early retirement – there is a financial upside of up to €40, 000 for an average wage or salary earner, while higher earners reap even greater benefits. “ retirement at 63 ” is something which favours age groups that are currently close to retirement and punishes younger generations. that reminds me of groucho marx, who once said : “ why should i care about posterity? what ’ s posterity ever done for me? ”. it ’ s true that the increase in pension payments will not directly raise contribution rates on account of the high level of reserves. but from a medium - term perspective, it will drive up non - wage labour costs as well. another outcome of “ retirement at 63 ” is that workers that are still needed in the labour market will cease to be available. according to our calculations, “ retirement at 63 ” will diminish the labour force potential by around 165, 000 people by 2016. germany does not have enough workers going forward. in 2020, the number of workers available to the labour market will probably have shrunk by 1½ million compared with today ’ s figures. in 2020, this demographic effect will have depressed economic output by nearly €70 billion. if germany is going to address this problem, it | 0 |
the interest - rate spread in relation to the euro interest rate, and this is now as low as 20 basis points. when capital flows are reversed at some point in the future, we are of course also prepared to sell currency. those who are familiar with our operations will be in no doubt that danmarks nationalbank's currency defence will be extremely resolute in terms of both intervention and widening of the interestrate differential. danmarks nationalbank must continually monitor the krone's position in the market, and the decision - making structure must be designed for decisions on intervention or adjustment of interest rates to be taken at any time. danmarks nationalbank has the flexibility required to be able to act immediately. in recent years, many central banks have introduced fixed published dates for monetary - policy decisions, but the fixed - exchange - rate policy is not compatible with such fixed decision - making dates. a central aspect is that measures can be taken immediately to halt any inappropriate exchange - rate movement in order to prevent a crisis from emerging. the situation in the currency market can quickly change. when conducting a fixed - exchange - rate policy, it is therefore not advisable to prepare the market for forthcoming changes in the interest - rate differential, as practised by many central banks with other monetary - policy objectives. furthermore, we take the view that all parties in the market must have access to the same information, at the same time, from danmarks nationalbank. danmarks nationalbank's monetary - policy announcements are thus published with great precision via several channels simultaneously. no hints are given to certain groups capable of interpreting such messages. danmarks nationalbank therefore never comments on forthcoming changes, even though we frequently are asked questions in this respect. at the more technical level, we have ensured that the market participants receive information on the expected development in liquidity. on a monthly basis, danmarks nationalbank publishes estimates of expected day - to - day movements in the banks'overall liquidity, and at the same time releases information on the expected dates of danmarks nationalbank's sale or purchase of certificates of deposit. additional information on the development in liquidity is published on a daily basis, giving market participants a good opportunity to prepare their positions, and to subsequently analyse developments. on this basis, there is normally no great uncertainty concerning the scale of danmarks nationalbank's interventions in the foreign - exchange market. openness and transparency are generally given high priority in our modern society. for | housing. ‘ soft ’ costs, including taxation, development fees, return on capital and land values, appear to make up nearly half the cost of each new dwelling. 30 these ‘ soft ’ costs are more complicated to unravel. they are affected by everything from international capital markets to land values, to government policy. in addition, vat, local government policy, approvals processes, mezzanine finance rates, property price expectations, vacancy taxes and development levies all play a role. some of these appear to be unintended consequences, others represent carefully considered trade - offs between policy goals. in order to understand the impact of these policies better, the central bank of ireland is engaging with a range of stakeholders from industry to civic society among others on an ongoing basis. all who play a role in any area that affects the housing market : the construction industry, the building and materials sector, planners and regulators, banks and other financial intermediaries, estate agents and yes, the central bank – need to be asking themselves how their actions are interacting with the housing market. role of the central bank which brings us back to the role that the mortgage measures play in housing markets. as i mentioned earlier, many countries are facing similar housing market pressures. policy responses, such as the mortgage measures, are used to build resilience of borrowers and lenders and such policy measures are in place in all eu countries. every country in the eu has a loan - to - value limit, and 17, including ireland, have a loan - to - income or debt - service - to - income limit. 31 in ireland, the objectives of the mortgage measures are to increase the resilience of banks and borrowers to negative economic and financial shocks, and to dampen the pro - cyclicality of credit and house prices so a damaging credit house price cycle does not emerge. in addition, the measures are designed to be flexible enough to take into account specific circumstances. a system of allowances, for example, is in place that allows banks to lend above the mortgage measure limits. to illustrate, in 2018, one in eight loans to first time buyers were above the loan - to - income limit of 3. 5 times income. 32 further, almost 50 per cent of these allowances were for loans issued with a loan - to - income ratio above 4. looking at both first and subsequent borrowers last year, one fifth of the value of total mortgage lending was issued with an allowance to the | 0 |
. in this regard, the contribution that mefmi makes in this region and the quality of training is an efficient responsiveness to demands for technical assistance rendered. one other aspect adding to the positive attributes of mefmi is the essence of mobilizing technical expertise within the region for delivery of the activities. this workshop can bear that testimony. i am informed that the resource persons who will facilitate the discussions are two experts in the area of human resources drawn from nairobi and dar es salaam. for the other capacity building programmes, a cadre of trained mefmi fellows is used as resource persons. i have been informed that some of the participants in this room attended the previous workshop held in kigali, rwanda in 2012. this provides excellent continuation to learning and implementation of best practices shared from these workshops. the executive director, distinguished participants, ladies and gentlemen : allow me now turn to the subject matter of this workshop. i note with satisfaction the approach of the mefmi secretariat in organizing this workshop. i am informed that the workshop will focus on the following objectives : bis central bankers ’ speeches • to share experiences on the key human resource management trends that are changing organizations ; • to expose participants to key strategic issues in human resource management ; • to discuss human resource management ’ s role and alignment as a strategic business partner ; • to learn about issues of ethics in human resource management ; • to strengthen networking amongst peers on the emerging human resource issues confronting the member states. looking at the above objectives, i can see the central theme being strategic human resource management and development. our organizations have not provided enough support for the human resource departments to carry out a strategic role. human resource is the driving force behind our organizations. strategic human resource management and development requires the recognition of heads of human resources as key partners in the management of the organization. there is therefore a need for hr to have a seat at the decision table in order to ensure alignment of hr strategy to the business strategy, this is key for business success and sustainability. judging from the volume of our capacity building activities, i am prompted to note that within the mefmi region, we tend to put a lot of emphasis on strengthening technical capacities in areas such as macroeconomic policy, bank supervision, debt management, among others and not much investment has been put in building capacity of the hr function. the missing link is the aspect of human resources role as a strategic business partner in engaging the rest of the business functions to drive value across | banking services reach especially to rural areas to help drive increased domestic savings. 5. in this regard, it is imperative for stakeholders to explore mechanisms to deliver financial services and push forward the financial inclusion frontiers in tandem with vision 2030. as a first step in pushing the initiative forward, the banking act was amended through the finance act 2009 permitting banks to use third parties ( agent banking ) to provide certain banking services on their behalf. i take this opportunity to urge banks to take advantage of the new provision. the agent banking model was designed to assist banks to lower their cost of offering banking services while at the same time improving their earnings as more kenyans are offered an opportunity to access financial services. 6. the kenyan banking sector continues to perform well despite the global financial turbulences and challenges on the domestic front. the sector ’ s total assets increased by 21 % from ksh. 1. 20 trillion in march 2009 to ksh. 1. 45 trillion in march 2010 whereas deposits increased by 23 % to ksh. 1. 14 trillion over the same period. profit before tax for the sector increased by 33 % from ksh. 12. 8 billion in the first quarter of 2009 to ksh. 17. 0 billion in the first quarter of 2010. this is remarkable, especially against the backdrop of domestic shocks and global financial crisis. 7. despite the impressive performance by banks, customers still have to contend with high borrowing costs. although many banks have responded to central bank ’ s plea of lowering interest rates, it is our expectation that all the banks should follow to support the economic growth via the support of expanded private sector credit at an affordable cost. on our part, we should now ask the real sector to access and negotiate credit in line with their potential investment. 8. finally, let me reiterate that central bank and indeed the government of kenya will continue to pursue policies that create a conducive environment for growth of the financial sector and encourage the provision of banking services to majority of the un - banked kenyan population at affordable cost. for us to be successful in this, we need to support strong institutional growth and remove underlying constraints that inhibit growth and financial reach. 9. with these few remarks ladies and gentlemen, it is now my honour and pleasure to declare the new brand of consolidated bank of kenya officially launched. thank you and god bless you all. | 0.5 |
minimum wage, the interest rate charged on a particular loan, or my bank balance. a somewhat less straightforward set of concepts are those that aren't quite directly observable, but are measurable, perhaps with some effort. often these are collective measures of related individual quantities that are not completely homogeneous. they include things like the unemployment rate or inflation. individual employment statuses and individual prices can in principle be directly observed. but you have to make choices about how to combine those individual states into an economy - wide statistic. harder still are the things that are unobservable but are inferable, because they can be detected indirectly. this might be because of the effect they have on something that is more easily observed. a good example here is the nairu – the rate of unemployment below which wages growth starts to pick up. you can't observe it directly, but you can guess that you are below it if wages growth is accelerating. another kind of inferable is the subjective view someone has about an observable or measurable quantity. expectations and forecasts fall into this category. you can't directly observe the expectation inside somebody's head, but you can ask about it. and because it's a belief about something more concrete, people should be able to elicit those beliefs. so the two unobservable things in our phillips curve are, at least in principle, inferable. but they aren't directly measurable and it is reasonable to expect that they might be estimated with considerable error. finally, though, there are important economic concepts for which measurement can only be regarded as impossible. sometimes this is because they are complete abstractions, where measurement depends entirely on an assertion that some observable thing is ‘ really ’ the abstract thing. think of things like ‘ social capital ’, ‘ ease of doing business ’, or ‘ animal spirits ’. what are they, and how would you know if they are changing? other impossible concepts include qualities of people's preferences or beliefs that they can't reasonably be expected to elucidate. these include time preference, risk preference, and elasticities of substitution. if a pollster called you tonight and asked you about your rate of time preference or the curvature of your utility function, could you tell them? now, maybe you could elicit somebody's time preference or risk appetite indirectly by watching people's behaviour as circumstances changed. this is what we mean by ‘ | trend lies is especially important for forecasting. our assessment of trend growth in productive capacity will affect our view of how quickly spare capacity might be absorbed. our assessments of trend growth in the population and in productivity both affect our view of trend growth in productive capacity. and so on. you can bring data to bear on these questions. in the end, though, you also have to make a call about how fast trends can change. again, that is complicated because the trend is invisible and has to be inferred. given that much of my talk has used the nairu as an illustration of the issues surrounding invisibles, it's worth noting that another important, yet invisible, trend is the trend in inflation expectations, the other invisible in the phillips curve. there are many different measures of expectations, capturing different horizons of the future and the views of different groups in society. there will inevitably be both measurement noise and a variety of biases in these individual measures. it is important to cut through that noise and estimate a sensible measure of the trend. again, both data and a judgement about the smoothness of that trend must be brought to bear on that assessment. when invisibles are consequential no matter what kind of invisible something is, there are clearly times when invisible things can be consequential. the nairu is the perfect example of this. the bank's estimate of the level of the nairu is important for our assessment of the state of the economy and the appropriate stance of monetary policy. the unemployment rate is currently around the lowest it has been in recent decades. only in the mid 2000s, in the midst of the mining boom, was unemployment lower than the 5 per cent rate that it reached late last year. in that previous episode, wages growth and inflation were picking up strongly and some parts of the economy showed signs of overheating. in contrast, wage and price pressures are low at present, even though unemployment is only a bit higher than during the mining boom. we infer from this that there is still spare capacity in the labour market. one might want to conclude that the reason wages growth has remained low is that some special factor is preventing it from increasing. there are all sorts of factors one might point to, including government wages caps, changes in competitive pressures or bargaining power, or increased feelings of job insecurity. and maybe they do matter separately from the level of the nairu. but a more comprehensive explanation – and in my view | 1 |
called for, in particular for reducing national options and discretions in eu directives. indeed, the inconsistent implementation as well as the “ gold plating ” of eu rules at the national level give rise to significant compliance costs for financial institutions operating across borders. second, we need to strengthen the basis and decision powers of the “ level 3 ” committees of supervisory authorities pursuing supervisory convergence and cooperation third, further improvements in the arrangements for the supervision of cross - border financial groups should be achieved. all authorities need to be adequately informed to effectively perform the ongoing supervision of cross - border institutions as well as to be fully prepared to address potential cross - border situations of financial distress. given the increased scope and intensity of the cross - border activities of eu banking groups, the need for effective information - sharing and cooperation in their supervision is now more important than ever. in this respect, the eurosystem underscores in particular the importance of strengthening information sharing also between supervisory authorities and central banks without supervisory responsibilities with respect to the major eu banking groups. next, i am turning to our role as catalyst for market activities fostering financial integration. the example i choose here is the single euro payments area, in short sepa initiative, led by the european payments council, which has started officially last month. it is a market - led initiative aiming at removing technical, legal and commercial barriers against smooth cashless cross - border payments in euro. the objective is to make cashless paying with euro as easy, efficient and safe as it is today within one country. this has genuine benefits for consumers, firms and public administrations having to conduct cross - border payments. the launch included both the roll - outs of the sepa credit transfer system and the sepa cards framework. the sepa direct debit system will follow before the end of 2009. the ecb has supported the european payments council in a variety of ways. for example, the ecb regularly organised meetings with stakeholders such as end - users, infrastructures providers and card schemes. we have also published a study of sepa ’ s potential economic impact, which highlighted, among other things, the room for cost reductions for banks. 6 the ecb is also very active in enhancing knowledge about financial integration. our research network on “ capital markets and financial integration in europe ” with the center for financial studies at the university of frankfurt and whose second symposium you are currently attending is one good example. a major task of the ecb in this area is also the “ report | in this way encourage more of this type of lending. the data also suggest that these types of transactions have not been a significant factor in the current crisis. specifically, less than 2 percent of the higher - priced and cra - credit - eligible mortgage originations sold by independent mortgage companies were purchased by cra - covered institutions. i now want to turn to the second question concerning how cra - related subprime lending performed relative to other types of lending. to address this issue, we looked at data on subprime and alt - a mortgage delinquencies in lower - income neighborhoods and compared them with those in middle - and higher - income neighborhoods to see how cra - related loans performed. 7 an overall comparison revealed that the rates for all subprime and alt - a loans delinquent 90 days or more is high regardless of neighborhood income. 8 this result casts loan origination data are from information reported pursuant to the home mortgage disclosure act ( hmda ). the hmda data do not identify subprime loans directly, in part because there is not a single definition of which loans fall into this category. rather, the hmda data indicate which loans are categorized as higher priced, including subprime loans and some alt - a loans. the analysis of data includes first - lien conventional loans for home purchase or refinance related to site - built homes. it excludes business - related loans to the extent they could be identified. for more information on hmda data and higher - priced lending, see robert b. avery, kenneth p. brevoort, and glenn b. canner ( 2007 ), " the 2006 hmda data, " federal reserve bulletin, vol. 93. about 17 percent of the higher - priced loan originations were made by cra - covered lenders or their affiliates to lower - income populations in areas outside the banking institutions'local communities. such lending is not the focus of the cra and is frequently not considered in cra performance evaluations. data are from first american loan performance ( lp ). for the analysis, zip code delinquency data were classified by relative income in two different ways. first, the data were classified using information published by the u. s. census bureau on income at the zip code tabulation area ( zcta ) level of geography. because the zcta data provide an income estimate for each zip code, delinquency rates can be calculated directly from the | 0 |
capital ) recognize that basel ii does not take into consideration some forms of unexpected losses, for example, higher charge - offs that occur when new products are introduced, information technology systems change, merger integrations occur, and internal control processes occasionally prove ineffective. implementation efforts in the united states the u. s. banking agencies'reaction to the results of the fourth quantitative impact study - known as qis4 - shows how seriously we are taking basel ii implementation. in a statement issued on april 29, the u. s. banking agencies indicated that the minimum regulatory capital changes resulting from qis4 were more variable across institutions and capital dropped more in the aggregate than the agencies had expected. this was the impetus for deciding to delay issuance of our next round of proposals for basel ii. these unexpected results show the continued benefit of conducting periodic quantitative impact studies. they serve as a milestone to help us calibrate the progress of the framework and the bankers as we move to basel ii. we now must determine the reasons for the unexpected results from qis4. do they reflect actual differences in risk among respondents when prior supervisory information suggested more similarity in credit quality? none of the participating banks has completed their databases and models for all of their risk areas. in some cases, this created results that would not be reliable for implementing basel ii. for example, for some portfolios, expected losses reflected only the last year or two of results. thus, the strong credit performance of recent experience was not balanced by higher losses at other points of the credit cycle. were there limits of the qis4 exercise itself? is there a possible need for adjustments to the basel framework itself? analyzing the data used in qis4 is vitally important, because ultimately the success of basel ii will depend on the quantity and quality of data that banks have to use as inputs to the framework. i am sure that those of you working on basel ii - particularly the advanced approaches - are facing the same types of issues in your own countries. for those of you who will be conducting qis5 or similar exercises, i strongly suggest that you include qualitative responses from the participants as well as quantitative data. we are finding this very useful as we review the results and have follow - on discussions with bankers. u. s. regulators expect to provide additional information on the lessons we learn from the qis4 review in the near future. the notice of proposed rulemaking for basel ii will incorporate what we learn from this exercise. | is temporary and that there is reason to expect lower inflation as early as the late spring and summer. although, as i said earlier, this assumes that those setting prices and wages do not attempt to compensate themselves for the temporary price rise. all in all, it is a question of balancing the risks of, for instance, a weaker growth in the economy, against the risk that the upturn in inflation will have contagion effects. this is what the executive board must do at its monetary policy meeting on 17 march. chart 1 und1x including and excluding energy und1x und1x excluding energy sources : statistics sweden and the riksbank | 0 |
the broader issue of stock price bubbles. if a change in margin requirements were taken by investors as a signal that the central bank would soon tighten monetary policy enough to burst a bubble, then there might be the appearance of a causal effect. but it is the prospect of monetary policy action, not the margin increase, that should be viewed as the trigger. in a similar manner, history tells us that “ jawboning ” asset markets will be ineffective unless backed by action. op. cit. some have argued that, as a consequence of the 1995 - 2000 speculative episode, long - term imbalances remain, having been only partly addressed since early 2001, the peak of the post - bubble business cycle. for example, large residues of household and external debt are perceived as barriers to future growth. but in the past, imbalances that led to business contractions were rarely fully reversed before the subsequent economic upturn began. presumably they were fully reversed in later periods, or they continued to fester, but not by enough to halt economic growth. even if imbalances still persist in our current environment, the business decline that began in march 2001 came to an end in november of that year, according to the national bureau of economic research. we experienced tepid recovery until the second half of last year, when gdp accelerated considerably. hence, when the next recession arrives, as it inevitably will, it will be a stretch to attribute it to speculative imbalances of many years earlier. risks when possible, and assessing the costs associated with each of the risks. in essence, the risk management approach to monetary policymaking is an application of bayesian decisionmaking. this framework also entails devising, in light of those risks, a strategy for policy directed at maximizing the probabilities of achieving over time our goals of price stability and the maximum sustainable economic growth that we associate with it. in designing strategies to meet our policy objectives, we have drawn on the work of analysts, both inside and outside the fed, who over the past half century have devoted much effort to improving our understanding of the economy and its monetary transmission mechanism. a critical result has been the identification of a relatively small set of key relationships that, taken together, provide a useful approximation of our economy ’ s dynamics. such an approximation underlies the statistical models that we at the federal reserve employ to assess the likely influence of our policy decisions. however, despite extensive efforts to capture and quantify what we perceive as the | from the fourth quarter of bis central bankers ’ speeches 2007 until now, rather than being reduced to its actual target range of 0 to 1 / 4 percent, 1 then the unemployment rate would be several percentage points higher than it is today. in other words, by following our actual policy of keeping the target funds rate at its effective lower bound since late 2008, the federal reserve saved millions of jobs that would otherwise have been lost. of course, substantial uncertainty surrounds various specific estimates, but there should be no doubt that the fomc ’ s forceful actions helped mitigate the consequences of the crisis and thereby spared american families and businesses from even greater pain. unconventional monetary policy actions given the magnitude of the global financial crisis and its aftermath, the federal reserve clearly needed to provide additional monetary accommodation beyond simply keeping shortterm interest rates close to zero. consequently, like a number of other major central banks around the world, the fomc has been deploying unconventional policy tools to promote the economic recovery. in particular, we have provided conditional forward guidance about the likely future path of the federal funds rate, and we have engaged in balance sheet operations that involve changes in the size and composition of our securities holdings. broadly speaking, these policy tools affect the economy through channels that are similar – though not identical – to those of conventional monetary policy. i ’ ll now spend a few minutes describing how each form of unconventional policy can be helpful in promoting a stronger economic recovery. monetary policy communication an essential element of good monetary policy is effective communication. in a democratic society, central banks have the responsibility to clearly and fully explain their policy decisions. good communication is also essential for strengthening the effectiveness of monetary policy. expectations about the future play a key role in the decision - making of households and firms : how much to spend, save, work, invest, or hire. moreover, when financial market participants understand how the central bank is likely to react to incoming information, asset prices can adjust in ways that reinforce the central bank ’ s expected policy actions and thereby support the central bank ’ s objectives. finally, clear communication can help anchor the public ’ s long - term inflation expectations and hence improve the extent to which the central bank can take forceful actions to promote job creation in a context of price stability. with the federal funds rate constrained by its effective lower bound, effective communications with the public have become more important than ever. since 2009, the federal reserve has published the committee participants ’ longer - run projections of the inflation rate, | 0.5 |
to the terms and conditions set out in the copyright and disclaimer notice. © reserve bank of australia, 2001 – 2023. all rights reserved. the reserve bank of australia acknowledges the aboriginal and torres strait islander peoples of australia as the traditional custodians of this land, and recognises their continuing connection to country. we pay our respects to their elders, past and present. | in practice, though, things are more difficult and the use of other tools would raise a new set of complexities and operational and governance challenges. it is also worth recalling that the task of controlling inflation has been assigned to central banks following years of experience with other arrangements that did not work out so well. we do not operate in a vacuum, though, and other policies affecting aggregate demand and supply also affect inflation outcomes. managing demand and expanding supply broadly speaking, inflation is determined by expectations of future inflation and the balance between demand and supply. if demand is strong relative to supply, prices will rise more quickly. when firms are operating close to capacity, production costs increase and there is less incentive to discount. and when there is strong demand for labour relative to supply, workers tend to seek, and can achieve, larger wage increases. so both the demand - side and the supply - side of the equation matter for inflation, and policies on both sides can affect inflation outcomes. at the central bank, we work primarily on the demand - side of this equation. our tool – interest rates – influences the level of aggregate demand in the economy. at any point in time, we take the supply - side of the economy as given, even though, in the long run, successful monetary policy can create conditions that promote investment and the expansion of supply. our job is to make sure that demand grows in line with supply. over recent times we have been working to slow the growth of demand to establish a better balance with supply, thereby shortening the period of high inflation and avoiding an unhelpful adjustment in longer term inflation expectations. notwithstanding our focus on managing aggregate demand and expectations, supply - side considerations feature heavily in the board ’ s deliberations as they influence inflation outcomes. we saw this very clearly during the pandemic with the problems in global supply chains. a good example is the price of shipping a container, which surged during the pandemic but has now normalised ( graph 9 ). over time, lower shipping costs should be reflected in the prices of goods in australia. graph 9 global container shipping rates 2017 – 2019 average = 100 index index sources : rba ; refinitiv with the pandemic now behind us, our attention has turned to a few other supply - side issues. the first is the balance of supply and demand in the housing market. as rents make up 6 per cent of the cpi, what happens here can have a significant influence on overall inflation. over | 1 |
now - although there are some encouaging signs - frankly no - one can know the answer to that question with any great confidence - we are not blessed with perfect foresight! as the imf says in one of its documents prepared for the recent meetings : “ striking the right balance for monetary policy in this environment is a difficult challenge. ” well you can say that again! it is hardly surprising against this background that there should be disagreement within the monetary policy committee as to whether or not a marginal further tightening of monetary policy is necessary - in fact i would normally expect there to be disagreement when we are close to where we need to be. but we are all unambiguously clear about where we need to get to in terms of inflation, and it is unrealistic in the circumstances - indeed in any circumstances - to expect us to say what will happen to interest rates in the future. mr. chairman, the overall prospect for the world economy - and indeed our own domestic economy - is for continuing growth with low inflation, and we do i think have a clear vision of where we want to go and the policies to take us there. but there are certainly a number of immediately painful blackspots - internationally and here at home - and there are some formidable rocks and potential whitewater further ahead. navigating through them will not be easy. i only hope that our snail is able to swim. | - third of the cpi basket and can be split into two broad categories. the first is what can be described as market services. these are services for which pricing tends to be market - based. this includes household services such as hairdressing, financial services, and meals out & takeaway. the prices of market services are generally driven by domestic factors such as wages, commercial rents and utility prices. there is little or no competition from imports and they are not affected by movements in the exchange rate. the second category is administered prices. these are the services for which prices are at least partly regulated, or for which the public sector is a significant provider. this includes services such as health, education and child care. it also includes utilities, which i will talk about separately. market services labour costs comprise about 40 per cent of final market services prices, which means that wages growth is a key determinant of the pace of market services inflation. market services inflation and wages growth were both growing strongly in the run - up to the terms of trade peak in 2011 ( graph 12 ). more recently, wages growth has been subdued, and this has been a significant factor contributing to the slower pace of market services inflation. http : / / www. rba. gov. au / speeches / 2018 / sp - dg - 2018 - 08 - 22. html 14 / 23 22 / 08 / 2018 low inflation | speeches | rba graph 12 there have also been a number of idiosyncratic developments that have weighed on market services inflation in recent quarters. this includes the removal of some atm withdrawal fees in september 2017, the introduction of a ctp green slip refund scheme in new south wales in december 2017, and the introduction of the active kids sports participation program in new south wales in january 2018. notwithstanding these one - off developments, the outlook for market services inflation is intrinsically related to the outlook for wages. the bank's forecast is that, as the labour market continues to tighten, wages growth should gradually pick up, and along with that we would expect market services inflation to also increase. however, as we have noted on a number of occasions, there is considerable uncertainty about the extent of unutilised capacity in the labour market and how quickly a reduction in spare capacity would translate into higher wage and price inflation. it is possible that the unemployment rate could fall faster than expected and wages growth could pick up more strongly as a result. alternatively, it is possible that the flow | 0 |
) budget balance ( rhs ) - 150 - 2 - 4 - 300 - 450 - 600 - 750 nbs transactions in the fx market, monthly ( rhs ) * eur / rsd, monthly average ( lhs ) * * - 900 - 1, 050 - 6 - 1, 200 source : nbs. * + net purchase ; - net sale. * * eur 1 in rsd. - 8 source : 2014 ministry of finance. - 10 2024 * 2026 * source : ministry of finance. * projection according to the fiscal strategy for 2024 w ith forecasts for 2025 and 2026. ladies and gentlemen, dear colleagues, over the past several years, our economy was exposed to shocks from the international environment unprecedented in the recent history. if we had not reacted duly with appropriate measures, in coordination with the serbian government, these shocks would have left immeasurable negative consequences on our country ’ s economy. the lesson we have learned in these 11 years with me at the head of the nbs is that the measures undertaken and the results achieved are indeed important, but perhaps even more so are the conditions in the country at the moment a crisis breaks out. therefore, it was critical that with appropriate reaction we not only preserved macroeconomic and financial stability, economic growth and the living standard of our citizens, but we also built up reserves to fortify serbia ’ s resilience to external challenges. i will name only two indicators – the country ’ s “ savings ” and the savings of our citizens. the country ’ s “ savings ” or fx reserves, which are a national resource of vital economic importance in hedging against external shocks, were doubled during these 8 of 10 11 years with me leading the nbs. in other words, the stock of reserves we had when i came to the bank is equal to the amount we additionally accumulated in these 11 years, therefore at end - july they measured eur 23. 1 bn. this is their highest level on record, and it exceeds all measures normally used to assess their adequacy ( import coverage, money supply and short - term foreign debt, the imf ’ s ara, etc. ) i need not emphasize how important this fact is in terms of hedging against risks from the international environment and securing overall macroeconomic stability going forward. chart 14 dinar savings chart 13 value and structure of nbs fx reserves ( in eur mn ) securities foreign cash and deposits abroad | ##sk optimum ( towards an economic optimum ) ”, in a series of reports by the committee on power and democracy. norway was among the countries that went particularly far in developing an economy with a high degree of centralised coordination and control. it may perhaps be said that this work culminated in the 1973 proposal to establish an incomes policy council. the social partners were to undertake a commitment to keep negotiated wage increases within specific limits. the proposal to establish an incomes policy council was logical. it was the last wall in the structure erected after the war. other elements were : fiscal policy – the management of public spending and revenues – was oriented towards full employment credit regulation within limits specified in a separate credit budget channelling of loans through state banks regulation of cross - border capital movements low nominal interest rates stipulated by the government authorities a fixed, though adjustable, krone exchange rate use of price regulation an active business policy through state ownership and state grants and subsidies. the proposal to establish an incomes policy council did not receive support. there was just too much state control and coordination. today, 40 years later, little remains of the management system that was built after the war. the structure was not sufficiently robust. detailed management and regulation of the economy was not able to deliver sustainable growth and welfare. on the contrary, the result was poor efficiency and wide fluctuations in the norwegian economy in the 1970s and 1980s. the wide fluctuations culminated in a credit boom in the mid - 1980s, which was followed by a banking crisis and a deep recession with high unemployment at the end of 1980s and the beginning of the 1990s. the way the economy is organised has changed considerably over the past 20 – 25 years. it would therefore be incorrect to say that one economic model has applied to norway through the postwar period. experience has shown that fiscal policy alone cannot ensure a high level of employment. the structure of the labour market and of wage formation is probably of greater importance. the direct regulation of credit, interest rates and capital movements broke down and was phased out in the 1980s. the krone no longer has a fixed value relative to other currencies. its value is determined from one minute to the next based on supply and demand. we say that the krone is floating. price regulation no longer plays a role as a macroeconomic instrument. the scope of business policy has become more general. at the same time, the tax system has become more efficient. tax rates are lower and the tax base broader. state ownership in the norwegian business | 0 |
in genuine european public goods – for instance energy grids and interconnections. we can and should learn from our experiences with existing instruments to design effective tools. but the bulk of the funding for the transition will have to come from private funding sources. in the euro area, banks will play an essential role in supporting investment and the adoption of green technologies by firms and households. however, a key eu policy objective is to further develop capital markets [ 43 ], which could provide specialised funding and support innovation. the market for green financial products has grown significantly in recent years, [ 45 ] but there is room for more progress. in a recent report on the future of the single market, enrico letta pointed to the need to better channel private savings into the green transition. he noted that there are approximately €33 trillion in private savings sitting in current accounts in the eu, which are therefore not being fully leveraged to meet investment needs. better channelling these private funds could provide a substantial boost to the eu ’ s green investment goals. to achieve this, it is essential to make further progress on completing the capital markets union. in this respect, the eu could also explore the scope for measures that target green segments of capital markets. conclusion in conclusion, the urgent need to combat climate change cannot be overstated. we should have acted yesterday, and we certainly cannot afford to wait until tomorrow. climate change is accelerating as we speak and it has important implications for central banks because it has an impact on inflation and the exposure to supply shocks, while lowering potential output and productivity growth. it also creates financial risks for the central bank ’ s balance sheet. so we face two mutually exclusive paths : either we choose inaction and find ourselves trapped in a vicious cycle of constantly responding to escalating crises or we proactively seek to prevent the emergence of new climate and energy crises through sound and coordinated policies. at the ecb, we are steadfast in our commitment to support the green transition within the scope of our mandate. however, this is not a task we can accomplish alone. it requires a collective effort by all stakeholders across europe. in turn, we as central banks can benefit from these efforts in the pursuit of our objectives. specifically, the eu will need to implement robust supply side policies to move away from fossil fuels, enhance energy efficiency and ensure the availability of key raw materials. to transform our ambitions into tangible outcomes, substantial investments are necessary. by pooling resources across europe and establishing | council ’ s view, subject to upside risks. these stem from the possibility of renewed oil price increases and additional increases in administered prices and indirect taxes beyond those announced and decided thus far. more fundamentally, stronger than currently expected wage developments would pose significant upward risks to price stability, particularly in view of the favourable momentum of real gdp growth. it is therefore crucial that the social partners continue to meet their responsibilities and that wage agreements take into account present relative price competitiveness positions, the still high level of unemployment in many countries as well as productivity developments. the governing council will monitor the upcoming wage negotiations in the euro area countries very carefully. turning to the monetary analysis, this confirms the prevailing upside risks to price stability at medium to longer horizons. annual m3 growth was unchanged at 9. 8 % in january, remaining at the highest rate observed since the introduction of the euro. at 10. 6 %, the annual growth rate of loans to the private sector also remained strong in january. this reflects the continuation of the upward trend in the growth of borrowing by non - financial corporations seen since mid - 2004. meanwhile, the growth of household borrowing has shown some further signs of moderation in recent months, albeit remaining at still high rates. taking the appropriate medium to longer - term perspective, the latest developments confirm the continuation of a persistent upward trend in the underlying rate of monetary expansion. furthermore, following several years of robust monetary growth, the liquidity situation in the euro area is ample by all plausible measures. the robust expansion of money and credit in an environment of ample liquidity points to upside risks to price stability over the medium to longer term. monetary developments therefore continue to require very careful monitoring, particularly against the background of a solid expansion in economic activity and continued strong property market developments in many parts of the euro area. to sum up, in assessing price trends it is important to look through any short term volatility in inflation rates. at the policy - relevant horizon of the medium term, risks to price stability remain on the upside, relating in particular to stronger than currently expected wage developments in a context of robust ongoing growth in employment and economic activity. given the vigorous monetary and credit growth in an environment of already ample liquidity, a cross - check of the outcome of the economic analysis with that of the monetary analysis supports the assessment that upside risks to price stability prevail over the medium to longer term. monetary policy transmission in the euro area and the us in my remarks today i would also like to | 0.5 |
efforts, and better coordination among key stakeholders, both domestically and internationally, to address this concern. strong governance among the stakeholders, however, remains the key and integral component within the national aml / cft framework, to prevent the escalation of ml / tf risks. more importantly, strong governance in financial institutions is and will remain a critical safeguard and is pertinent in the overall prevention of ml / tf activities. striving to enhance the level of governance in this area will not only result in lowering the overall threat of ml / tf in malaysia, but would also enable the financial institutions to derive greater value for themselves, and in the process, reduces the cost associated with the ml / tf prevention activities. i will briefly share my thoughts today on this issue by covering three key items ; firstly ( a ) the current emerging trends of ml / tf ; secondly ( b ) policy and strategic response by the authorities in malaysia on these emerging trends ; and finally ( c ) our expectations on the financial institutions in response to these trends. emerging ml / tf trends ml / tf is notable for the diversity of its forms, players, location and settings. while it is normally described in the sequential elements of placement, layering and integration, the real activities are very fluid. recent global ml / tf trends indicate that the criminals, especially the professional launderers, will exploit every possible gap in the formal and informal financial system to launder the illegal proceeds. they are known to misuse the payment and fund transfer system, including wire transfer and remittance services, internet payments, mobile payment and stored value card, to channel the illegal proceeds within and across borders. the traditional laundering methods of cash smuggling, via casino, investment and insurance policies are increasingly being used together with other methods such as through the banking facilities to avoid detection. in march 2010, the financial action task force ( or fatf ) issued a report on money laundering vulnerabilities of free trade zones, indicating the rising threats of trade based money laundering. apart from this report and the periodical typologies reports, the fatf has issued a number of reports relating to specific laundering methods ; such as through securities, football and gaming sectors in 2009 ; vulnerabilities of internet payment system and commercial websites in 2008 ; and the real estate sector, vat carousel fraud, and the misuse of corporate vehicles, such as trust and company service providers in the previous years. for | in order to address the challenges accompanying these processes of economic adjustment and structural reform will be discussed tomorrow. given that the policy panel will consist of high - calibre policy - makers from both old and new member states and from eu institutions, one does not have to be a follower of the rational expectations hypothesis to anticipate a lively debate, be that on labour and product market reform ; on financial sector policies ; on monetary and fiscal policies ; or on exchange rate policy and the merits of erm ii membership. ladies and gentlemen, as i said at the beginning, this is the third time - the third time the ecb is organising a central banking conference. and i hope there is not only good luck in odd numbers. i also hope that our third conference will again offer a valuable forum to have intellectually stimulating debates, exchange insights, generate new ideas, and enhance the good contacts between central bankers and academia. judging by the experiences of the first two conferences, i have every reason to be confident. thank you very much for your attention. | 0 |
amando m tetangco, jr : nurturing financially literate filipinos speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the moa signing on the “ deped - bsp - epra financial literacy project, manila, 12 april 2007. * * * secretary jesli lapus, dr. cielito habito, our partners from the department of education and epra, special guests from the bankers association of the philippines and the chamber of thrift banks, fellow central bankers. magandang umaga po sa inyong lahat! on behalf of the members of the monetary board, i thank our partners at the department of education and epra for sharing our goal to teach money management to our elementary students and to transform them into net savers. specifically, our program involves the incorporation into the elementary curriculum lessons in saving and money management, as well as the values of pagka - masinop ( prudence / avoiding waste ), pagkamatipid ( thrift ), and pag - iimpok ( saving ). a survey indicating that less than 5 % of our youth regularly save money lends urgency to our program. if we can turn the tide with our present crop of elementary pupils, this will have long - term benefits for them and, ultimately, our country. add to this the potential influence they can wield in their homes and in their communities as change agents. actually, there are other initiatives that are underway under our economic and financial literacy program. in particular, the bangko sentral is at the forefront of a money management program for ofws and their families ; microfinance for the entrepreneurial poor ; continuing economic and financial education for journalists ; and consumer protection for bank customers. we are also set to establish economic and financial literacy centers in bsp offices in the province. of course nurturing a new generation of savers and financially literate adults entails a lot of work and unflagging commitment from all of us. for this, we need all the help we can get. this is the reason why we at the bangko sentral are very pleased that no less than the heads of our principal partners are here with us this morning. ladies and gentlemen, let us give a big hand to the honorable secretary of education jesli lapus who is known for his ability to transform | , as well as capacity building and awareness programs of the bsp, we are seeing banks lean toward sustainable financing. finally, e is for excellence. excellence requires mastery and commitment in all aspects of professional practice. the very same tenet requires us, central bankers, to master our craft and continually improve our competencies. in the bsp, we capitalize on programs to attract, develop, and retain talent. we have relentlessly pursued excellence through competency trainings, scholarship programs, and mentoring arrangements. we also leverage on digital technologies and data analytics for decision making and continuing education of our employees. in the same way, the bsp endeavors to embed a culture of excellence and good governance among supervised financial institutions. cpas are a big part of this. cpas play an important role in promoting transparency in financial reporting and in reinforcing market discipline. thus, it is paramount to know the best practices in accounting and auditing, and the latest regulatory developments. 3 / 4 bis central bankers'speeches you must be abreast of the latest on philippine financial reporting standards, basel reforms, digital transformation, and sustainability, among other important topics. last july, members of the financial sector forum ( fsf ) — comprised of the bsp, the securities and exchange commission, the insurance commission, and the philippine deposit insurance corporation — entered into a memorandum of agreement with the professional regulatory board of accountancy on the establishment of a “ one - stop - shop ” framework for accreditation of external auditors. this goes to show how regulators value your role in the economy, and we expect all of you in picpa to be our partners in the pursuit of economic recovery and growth by consistently observing the highest level of professionalism. as cpas in your respective industries, being flexible in your action plans to surmount the current headwinds and work toward an inclusive, long - term growth will help you and your organization take full advantage of the possibilities awaiting at the close of this health crisis. rest assured, the bsp will always be a partner in pursuing advocacies that promote the development of the accountancy profession. we count on picpa and its members in helping safeguard the soundness of financial institutions and the financial system. again, congratulations on your 76th annual national convention and i wish everyone a productive discussion ahead. 4 / 4 bis central bankers'speeches | 0.5 |
, which are dominated by various investments goods. investments have remained weak in developed economies for the past 5 years. the problems in the electronics industry have been related to one large company, nokia, which lost its technological advantage in mobile phones. paper industry, in turn, suffers from the longer - term decline in demand for printing paper in europe. another major factor behind the decline in exports is the weakening of cost competitiveness. wages and unit labour costs have increased about 10 % since 1999 compared to the average of all trading partners and compared to euro area. bis central bankers ’ speeches how did cost competitiveness end up weakening so much? one part is misjudgment and bad luck regarding timing. just before the global financial crises escalated, a round of union - level wage agreements took place. amid rapid growth and with seemingly benign outlook, generous wage increases were agreed upon, and the contracts mostly extended for about two years. then the financial crisis struck, leading to slowdown in wages in many countries while finnish wages diverged. why was no correction made after the contracts had expired? the reason probably has a lot to do with the relatively muted increase in unemployment in finland. employment has been supported by growth in domestic demand, especially household consumption. domestic demand has also been supported by loose fiscal policies and low ecb interest rates. the low interest rates were transmitted to loan costs of the public by the strong and stable banking system and the system of variable - rate in most loans. the growth in domestic demand in recent years has been financed to an increasing extent by debt, as households and the public sector have run financial deficits. this has been possible due to the strengths of the economy. household and public sector indebtedness remained relatively low in finland in the years before the global financial crisis. however, the recent increases in debt gradually add to the vulnerabilities in the economy. competitiveness issues how much has finnish cost competitiveness weakened? i already mentioned the increases in wages and unit labour costs for the whole economy. developments in the open sector of the economy are obviously very significant as manufactured goods account for much of foreign trade. hence its cost competitiveness is important for the whole economy. manufacturing unit labour costs in finland are currently at about the same level as in 1999. however, manufacturing ulcs provide far too rosy a picture of cost competitiveness for finnish manufacturing. this misperception arises because of price developments. the price component of value added declined considerably in finnish manufacturing since 1999 | at least for another year. second, we confirmed the ongoing full reinvestment of the principal payments from the maturing securities purchased under the asset purchase programme for an extended period of time past the date when we start raising the key ecb interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. finally, we determined the modalities of the new series of quarterly targeted longer - term refinancing operations ( tltro iii ), which were announced in march. tltro iii operations will start in september 2019 and end in march 2021, each with a maturity of two years. we decided that the interest rate in each operation will be set at a level that is 10 basis points above the average rate applied in the eurosystem ’ s main refinancing operations over the life of the respective tltro. for banks whose eligible net lending exceeds a benchmark, the rate applied in tltro iii will be lower, and can be as low as the average interest rate on the deposit facility prevailing over the life of the operation plus 10 basis points. the schedule defining the borrowing costs under tltro iii is marginally less generous than that applied under the outstanding tltro ii, in line with our intent of not discouraging banks that can afford to fund themselves in the market on attractive terms from doing so at tltro ii maturity. at the same time, the pricing schedule incorporates features that can greatly enhance our accommodative monetary policy stance, as banks with strong lending performance will retain the opportunity to borrow at negative interest rates. the pricing remains sufficiently generous – especially when compared with alternative sources of funding – for banks to keep credit flowing to firms and households on a scale that can continue to support the economy and inflation. all in all, this set of decisions will provide the monetary accommodation necessary for inflation to remain on a sustained path towards levels that are below, but close to, 2 % over the medium term, while also preserving favourable bank lending conditions and supporting a smooth 2 / 3 bis central bankers'speeches transmission of our monetary policy. this being said, the governing council remains ready to act in case of adverse contingencies and to use its instruments – as appropriate – to ensure price stability. a reliable strategy is an anchor for credible monetary policy. erratic policy debates for the purpose of creating short - term stimulus risk undermining that credibility in the long run. | 0 |
all, if it becomes revealed to the market that a financial institution is to be treated as a sifi, this could in fact induce moral hazard. in addition, looking back at the experience of japan ’ s financial crisis, whether an institution is systemically important or not depends on the condition of the financial system, and also on the effectiveness of the existing resolution regime. furthermore, considering the essence of the moral hazard problem, the question of how to deal with sifis needs to be contemplated from various perspectives. for example, we need to take into account perspectives on containing the crisis as well as preventing it, and the balance between regulation and supervision. to be specific, capital surcharges should not be the only measure for dealing with sifis. there are many, not mutually exclusive, alternatives to capital surcharges, such as liquidity surcharges, strengthened supervision, and improvements in resolvability. i believe it would be appropriate for each country to choose the best practice from such measures or their combinations, depending on the environment surrounding its own financial system. balance in the size of financial safety nets among jurisdictions ; need for global coordination thirdly, balance in the size of financial safety nets is needed among jurisdictions. with the globalization of financial institutions ’ operations, they have become more interconnected. likewise, households now have more foreign assets such as foreign currency deposits and foreign bonds. these circumstances indicate the increasing importance of having a crossborder perspective when developing financial safety nets. for example, regarding deposit insurance, a large - scale deposit shift between countries in europe was observed in the fall of 2008 due to gaps in deposit insurance coverage. some asian countries raised their coverage limits in order to maintain the competitiveness of their banks. these examples demonstrate the importance of global coordination in the designing of deposit insurance. another issue revealed in the aftermath of the failure of lehman brothers is the need for a resolution regime that facilitates the orderly wind - down of failing financial institutions in a cross - border context. obviously, each country ’ s legal system depends substantially on its particular social framework, and convergence of resolution regimes is not easy. it is also not necessarily appropriate. however, it is becoming more important for authorities to have a good understanding of their respective resolution regimes and to communicate closely in the actual resolution process. in the aftermath of the recent crisis, the establishment of crisis management groups among supervisory authorities and central banks for internationally active financial institutions has been an important step forward in this regard | . it is necessary for the authorities concerned to continue coordinated work on this issue. iii. the role of central banks in maintaining financial stability the experience of the financial crisis has brought renewed attention to the role of central banks in financial safety nets, which in turn contribute to financial stability. this has led to the assignment of macro - prudential roles and financial regulatory authority to central banks in the united states and europe. in this respect, the bank of japan has had an important role in both micro - and macroprudential dimensions for maintaining financial stability. from a micro - prudential perspective, the bank conducts on - site examination and off - site monitoring of a wide range of financial institutions including securities firms, and urges improvement in risk and business management when necessary. from a macro - prudential perspective, the bank implements appropriate policy measures based on its analysis and assessment of the condition of the financial system as a whole by utilizing the information obtained from financial institutions as well as from the markets. measures taken by the bank from a macro - prudential perspective during the crisis include resumption of stock purchases held by banks, and provision of subordinated loans. in this way, the bank of japan plays a critical role in maintaining the stability of japan ’ s financial system. the bank will continue to make every effort, in both micro - and macroprudential dimensions, to ensure and maintain this financial stability. thank you very much for your attention. | 1 |
gabriel makhlouf : lessons from covid – a macroprudential framework for the market - based finance sector opening remarks by mr gabriel makhlouf, governor of the central bank of ireland, at the bank of france financial stability conference 2021 roundtable, 1 march 2021. * * * let me start by thanking the banque de france for the invitation to join today ’ s conference and contribute to your financial stability review. i support governor villeroy de galhau ’ s three areas for action that he has set out in his review article. i am in favour of strong and effective resilience frameworks that operate in individual countries, in the eu and across the globe. of course, as with so many things, we will need to consider carefully any proposals for reform to ensure they do not have any unintended consequences. for example, it may be too soon at this point to draw definitive conclusions from our experience with the pandemic. but i do think there are some clear lessons that we can already take from the past year. let us start by remembering that macroprudential frameworks are very new. arguably, they were still in their adolescence or teenage years when the shock from the pandemic hit. but benefits are now being already seen. why do i say this? our approach has been to build resilience over the last number of years, when times were good so that we could use it when we needed it. the pandemic is not over but, on the evidence so far, and despite the effects of the shock on our communities and busineses, the core of the financial system has remained resilient, both financially and operationally. we faced an unprecedented economic crisis but we did not see the banking system amplify the economic disruption. 1 so the first lesson is we must now focus on taking these frameworks from adolescence to maturity. another key lesson is the need to develop and operationalise a macroprudential framework for market - based finance. this would be beneficial for the stability of the financial system as a whole, and not just market - based finance. today ’ s financial system is now significantly different than before the financial crisis a decade ago. the banking system has seen a gradual decline in its share of total financial intermediation, a change accompanied by a corresponding increase in parts of the non - bank financial system. and in particular by market - based finance. for the avoidance of doubt, market | ##ntial perspective in the market - based finance sector. while some progress has been made in this area in recent years, further work is needed. indeed, compared to the banking sector where the tools are already in place, we are at an early stage of development. there are some key questions that will need to be considered in the development of a macroprudential policy framework for market - based finance, which i have discussed in greater detail in my written contribution to the financial stability review : 1. what is the appropriate toolkit to target excessive liquidity mismatches and excessive leverage in the market - based finance sector? 2. what is the appropriate balance between time - varying and structural interventions? 3. what is the most appropriate approach to international co - ordination in this area? 4. how to consider the appropriate balance between costs and benefits of additional resilience in the market - based sector? finally, aside from developing and operationalising the overall macroprudential framework for the market based finance sector as a whole, it is also clear that reform of the regulatory framework for mmfs is required. specific reforms will need to be targeted on the appropriate areas, whether, for example, it be on the liability side to align mmfs ’ liabilities with the nature of liquidity on the asset side, or on the asset side, to address the lack of liquidity in certain money market instruments. potential reforms will need to be carefully assessed to ensure that balance can be achieved between maintaining the benefits of this sector and increasing its resilience. 2 / 3 bis central bankers'speeches the challenges we face to address the gaps in the current framework for market - based finance so as to make it fully operational are similar to those faced when developing and operationalising tools for the banking sector. we at the central bank of ireland are committed to working with our colleagues in europe and beyond to develop and operationalise a more comprehensive macroprudential framework to safeguard financial stability, for the benefit of all our citizens. 1 see www. centralbank. ie / news / article / speech - deputy - governor - sharon - donnery - macroprudential - policy - lessons - in - the - pandemic - era - 19 - feb - 2021 3 / 3 bis central bankers'speeches | 1 |
as ours, public institutions function to serve the interest of the citizens, whereby public funds are spent or invested for the “ common good ”. the 2 / 6 bis central bankers'speeches comptroller and auditor general ( cag ) of india as the supreme audit institution of the country, serves as the critical link between the citizens and the parliament on the one hand and the public institutions / departments on the other. it subjects the practical conduct and operations of the public sector to regular and independent examination as well as review. with such immense responsibilities, the audit processes of the cag through financial, compliance and performance audits of public institutions, do enhance the accountability and legitimacy levels for the use of public funds which are sourced primarily from the taxpayers in the country. based on the feedback given by the cag, future decisions on allocation of public funds are taken through timely identification of implementation gaps for course correction or for replication if the outcomes are successful. financial sector experience and importance of auditors 14. i am sure you would be picking up the ropes of public finance and audit of government and public accounts in your regular induction curriculum. i would, therefore, like to give certain perspectives of the reserve bank as a financial sector regulator and supervisor on the audit function in banks, non - banking financial companies ( nbfcs ) and other financial entities. 15. stability and growth of an economy and financial markets are dependent upon trust among stakeholders. one cannot take trust for granted. with greater openness of the economy and faster transmission of information flows, thanks to the advent of technology, it has become paramount to ensure credibility and confidence in the system. statutory auditors play a vital role in maintaining market confidence on audited financial statements. in banking industry, this public role is particularly relevant for financial stability, given that banks hold public deposits. audit quality is key to the effectiveness of such public role. in addition, the statutory auditor has a duty to report directly to the supervisor ( rbi ) on matters of material significance arising from the audit of banks and other regulated entities. for these reasons, rbi as the supervisor of banks and nbfcs has a keen interest in the manner with which statutory auditors perform audits in the regulated entities. 16. the reserve bank ’ s supervision, therefore, specifically focuses on audit quality relating to identification of gaps, assessment of asset quality and the so - called innovative accounting practices, if any, which could have a major impact on the capital base of regulated entities and their viability | bis central bankers ’ speeches | 0.5 |
regional financial centres will continue to play a complementary role. competition among financial centres will not be a zero - sum game of winner takes all. smaller centres can coexist with the mega centres, focusing on different niches and serving different regions. there are thus collective gains to be shared through co - operation. linkages between key financial centres, both across and within time zones, can help the centres to reap the benefits of integration while at the same time preserving close access to local communities. similarly, there is an important role for closer regulatory co - operation and, where appropriate, harmonisation of standards, particularly in cross - border listing requirements, ongoing supervision, and accounting and disclosure. for the regions they serve, international financial centres make good economic sense. they provide easy access to funding and hedging opportunities, links to other key centres, and markets with liquidity and reach, especially for emerging economies. financial centres tend to prosper when their hinterlands are buoyant. when the hinterland is in difficulty, the financial centre will be adversely affected, but it still plays an important role in facilitating the process of recovery. as confidence recovers and investor interest returns, the financial centre will be an important conduit for the funds required for rehabilitation and growth. thus as asian economies make progress in putting themselves in order, they will need access to global capital for corporate restructuring and new investments. singapore's financial centre will be ready to play that role, whether the capital is to be raised through loan syndication, debt securitisation, private equity, or bond issuance. financial centres in asia looking ahead, the trend towards concentration of financial institutions and activities in fewer major centres is likely to persist. however, it is not easy to predict which specific cities will emerge as leading centres. this will depend not only on the static comparative advantage of the different cities, but also on the dynamic competitive advantages created by their policies and strategies. incumbents will always have an advantage, but no lead is totally unassailable, as london found to its dismay in 1998 when within a few months frankfurt snatched away the trading of german bund futures. london and new york will continue to be key global players. in asia, while tokyo will always be big and significant, the role of the other centres is still unclear. hong kong, singapore, sydney, and in the longer term shanghai are in play. each has its advantages and limitations, stemming from differences in their geographic and | political situations, and their regulatory and corporate environments. they will surely compete amongst themselves to gain market share and critical mass, and anchor in asia some of business which presently goes to london and new york. but in my view they also have considerable scope for co - operation, as each will occupy a distinct market niche and none can dominate in all aspects of finance. singapore will never have the advantage of tokyo's large economic base. nor do we have hong kong's physical proximity to china. but we seek to provide a world - class regulatory environment that responds to the needs of global markets and global institutions, and the most efficient infrastructure for businesses to use as a platform for all of asia. singapore plays host to some 6, 000 multinational corporations and the financial institutions that are their global advisers, many of which use singapore as their regional headquarters. and our strategic location at the heart of southeast asia and within 7 hours of key markets in northeast asia, south asia, and australia positions us well to serve as a financial centre for all of asia. singapore while the external environment is not within singapore's control, our strategies and policies are. we believe that the right strategies and policies will help us to capitalise on opportunities and overcome disadvantages arising from our size. there are no secrets to the strategies, because the factors for success are not unique to singapore. the challenge is in their execution and implementation. here are five things that we have set out to do in order to excel as a financial centre in the new economy. enhance business environment first, we are seeking to further enhance our conducive pro - business environment. economic and political stability, an efficient and impartial legal system, comprehensive and up - to - date market infrastructure, and fiscal discipline that allows low taxes are key preconditions, more important than special incentives for the financial sector. singapore has established a reputation for delivering these preconditions, which we will maintain and improve upon in future. build talent pool second, we are building up our talent pool. in a knowledge - intensive industry like financial services, singapore will not get anywhere without world - class talent. we are making a concerted effort to attract foreign talent who can make a contribution to singapore, and to integrate them into our economy and society. we are also nurturing home talent to its full potential through a good education system for the young and ongoing training opportunities for those in the workforce. as asian companies begin to use more complex strategies and products | 1 |
notably in the markets for over - the - counter ( otc ) derivatives and in short - term funding markets. the federal reserve, together with other regulators and the private sector, is engaged in a broad effort to strengthen the financial infrastructure. for example, since september 2005, the federal reserve bank of new york has been leading a major joint initiative by both the public and private sectors to improve arrangements for clearing and settling credit default swaps and other otc derivatives. the federal reserve and other authorities also are focusing on enhancing the resilience of the markets for tri - party repurchase agreements, in which the primary dealers and other large banks and broker - dealers obtain very large amounts of secured financing from money funds and other short - term, risk - averse investors. in these efforts, we aim not only to make the financial system better able to withstand future shocks but also to mitigate moral hazard and the problem of " too big to fail, " by reducing the range of circumstances in which systemic stability concerns might prompt government intervention. more generally, the stability of the broader financial system requires key payment and settlement systems to operate smoothly under stress and to effectively manage counterparty risk. currently, the federal reserve relies on a patchwork of authorities, largely derived from under the memorandum of understanding, the sec and the fed will freely share information and analyses pertaining to the financial conditions of primary dealers. the two agencies have also agreed to work jointly with the firms to support their continued efforts to strengthen their balance sheets, their liquidity, and their riskmanagement practices. see : board of governors of the federal reserve system and securities and exchange commission ( 2008 ), " federal reserve and sec issue memorandum of understanding to deepen information sharing and cooperation ", press release, july 7. bank - affiliated primary dealers are already subject to mandatory consolidated supervision, but the focus of that supervision has been on limiting risks to the banks and other insured depository institutions within the holding company. existing provisions may need to be modified to provide regulatory authority to assess and limit risks to all functionally regulated entities, including securities subsidiaries. our role as a banking supervisor, as well as on moral suasion to help ensure that the various payment and settlement systems have the necessary procedures and controls in place to manage the risks they face. by contrast, many major central banks around the world have an explicit statutory basis for their oversight of payment and settlement systems. because robust payment and settlement systems are vital for financial stability, the congress | philipp hildebrand : thoughts on asset management in switzerland summary of a speech by mr philipp hildebrand, member of the governing board of the swiss national bank, at the swiss funds association, berne, 28 march 2006. the complete speech can be found in german on the swiss national banka€™s website ( www. snb. ch ) * * * summary asset management is an important source of earnings for banks in switzerland. the financial industry, in turn, is the largest sector in the swiss economy and of crucial importance for economic development. assuming that the world economy stays on its expansionary course, global assets will continue to grow strongly. moreover, the rapid increase in the volume of accessible information means that clients are often better informed. it is also giving rise to a broader product range and generating tougher competition and cost pressure amongst providers. these trends will bring about far - reaching changes in asset management over the medium term. money market, equity and bond investments managed on a moderately active basis often fail to pay the consistently above - average yield that would warrant their costs. they will probably lose ground to passively managed, inexpensive products. substantially better performance will be essential for the traditional products that remain. alternative investments, too, will benefit from the structural changes. however, this area will continue to be affected by the limited supply of exceptional portfolio management expertise. asset management in switzerland compares fairly well on an international scale in terms of performance and operational efficiency. however, the industry must lose no time in tackling the restructuring that is needed, particularly in the traditional segments. in the area of alternative products, switzerland has admittedly been successful in the fund of funds business. it is to be hoped that its financial industry will build on this success and become even more of a centre of excellence for alternative investments too. | 0 |
these reductions out. the purpose is to promote a more efficient and level financial system which is less biased against 3 / 5 bis central bankers'speeches deposit - taking financial institutions. the purpose is to lessen market distortions which create inefficiencies. the purpose is to shift to market - based monetary instruments for more effective monetary policy transmission. we have heavily relied on reserve requirements for a long time in a situation of underdeveloped banking and financial markets and limited open market operation tools. this is no longer the case for the philippines. our financial system is more sophisticated, disciplined, and resilient ; our economy is much stronger today. further, the bsp has attained sufficient progress since the adoption of the interest rate corridor ( irc ) framework in 2016 which provides us ample space to mitigate potential liquidity impact of a phased reduction in reserve requirement via off - setting auction - based monetary operations. there is misconception that these phased reductions in the reserve requirement signal easing of the monetary policy stance. this is certainly not the case — and i cannot emphasize this enough — this is an operational adjustment that is part of innovative financial sector reforms that we are currently implementing. any ensuing excess liquidity is to be siphoned off by bsp ’ s dynamic open market operations and transactions with the national government. further, the flexibility of the exchange rate provides additional adjustment mechanism.... therefore, analysts ’ fears that this will fuel more inflation is based on an incomplete analysis of the impact of this operational adjustment. moreover, to the extent that speculators use rrr reduction as a pretext for peso depreciation, bsp participates in the market to manage excessive volatility. we believe this can effectively drain peso liquidity from the system. there will be self - correction, which is how efficient markets work. ultimately, the bsp has many options to maintain firm monetary control. shifts in monetary policy stance will continue to be signalled through changes in the policy rates. thus, analyst concerns of ensuing looser monetary policy is really unfounded. second - regulators like the bsp must foster an enabling ecosystem where competition and responsible innovations are encouraged to thrive. we believe that regulations should not stand in the way of market developments. at the bsp, we have strategically opened up the banking system to competition. for instance, since the enactment of the foreign banks liberalization law in 2014, the monetary board has approved 12 foreign bank applications and 5 representative offices | . at the same time, inflation for transport, restaurant, and miscellaneous goods and services also went up. the year - to - date average of 4. 2 percent using the 2006 - based basket was slightly above the government ’ s announced inflation target range of 3. 0 percent ± 1. 0 percentage point for 2018 while the year - to - date average of 3. 7 percent using the 2012 - based basket remain within the government ’ s announced inflation target range. the first round price effects of train are evolving more or less as expected. we continue to see the upward inflationary effects as transitory. however, we are carefully assessing next round effects and how inflation expectations could be affected. the various social safety nets 1 / 5 bis central bankers'speeches complementing the train are expected to temper these second round effects. moreover, the resulting improvement in productivity will likely moderate inflation pressures over the medium term. nevertheless, the bsp will remain watchful against signs of higher inflation becoming more broad - based and persistent to ensure that inflation expectations remain consistent with the target. domestic liquidity and credit dynamics remain accommodating to our expanding economy. credit expansion is accompanied by solid demand for loans across key economic sectors. further, the philippine banking system capped 2017 with sustained growth in assets, deposits, and capital. this was accompanied by improved asset quality, firm liquidity position, and strong capitalization. overall, the philippine banking system remains sound and stable. we expect these improvements to continue. the philippines ’ external position also continues to be manageable amid global headwinds. the bop deficit is a reflection of an economy that is growing rapidly in a way that is sustainable. the current account balance also mirrors the saving and investment behaviour of the economy. our savings investment gap has stayed positive since 2003 ( hence the ca surpluses during this period ) but has started to converge in 2015 due mainly to the rise in investments and increase in infrastructure spending. over time, these investment led economic activities will result in the expansion of the economy ’ s potential capacity. the robustness of the country ’ s external position is anchored by our large gir and secondary buffers such as sustained foreign direct investments, remittances and bpo receipts, along with investment grade - rating that guarantees ready market access for any equity and debt financing requirement. meanwhile, the peso continues to flexibly reflect the day - to - day market operations. exchange rates act as automatic stabilizer if they move in a way that damp | 1 |
g padmanabhan : evolving regulations and emerging market challenges – the indian context keynote address by mr g padmanabhan, executive director of the reserve bank of india, at the 8th annual conference of the foreign exchange dealers ’ association of india, singapore, 24 may 2013. * * * assistance provided by s / shri g mahalingam, rakesh tripathy, anand prakash and sirin kumar is gratefully acknowledged. 1. it is a pleasure to once again address the practitioners of foreign exchange at this seminar organized by the foreign exchange dealers association of india in the beautiful city state of singapore. let us hope that the events that follow in the indian forex market would be largely different from the events that followed after my last address in this city. the issues that you have flagged for discussion are very topical and therefore i shall comment on each of them. a. global regulatory changes affecting forex markets 2. in the aftermath of the 2007 - 2008 global financial crisis, the regulatory landscape of the financial markets around the world is going through significant changes. the repeal of the glass - steagall act that separated investment banking from commercial banking in the usa in 1999 is considered by many as a major reason that precipitated the global financial crisis. accordingly, several jurisdictions around the world including the us have either already taken or have proposed to initiate steps to construct a firewall between consumer and investment banking. the important initiatives in this direction are the volker rule under the dodd - frank act of the usa ( section 619 of the act ), the independent commission on banking ( icb ) in the uk, headed by sir john vickers and the high - level expert group ( hleg ) on reforming the structure of the eu banking sector, chaired by erkki liikanen. all three models recommend separation between deposit - taking activities and trading / investment bank functions. whilst each regime advocates a ring - fence model, they offer slightly different approaches. let me amplify. 3. volcker rule restricts deposit - taking banks from engaging in proprietary trading, prohibiting them from engaging in more complex activities that are prone to conflicts of interest, in order to safeguard the core of the banking system, i. e. commercial or traditional banking ( deposit taking and lending ). the rule prohibits any banking entity from engaging as principal in short - term trading in securities, derivatives, or commodity futures, i. e. activities that may not be compatible with the risk profile of the banking entities | this broader measure of slack also appears to be less sensitive to gdp growth than traditional measures : it has declined rather less than the reductions in the unemployment rate over the course of the recovery – a broader version of okun ’ s, law if you will. and our analysis suggests that this might help explain why underlying inflation has been so sluggish recently. rerunning our phillips curve models using this broader measure of slack, or equivalently, a measure of “ core ” employment only, leads to the prediction errors for inflation becoming measurably smaller. look at how the gap between actual and predicted inflation largely disappears on slide 5, in particular for the recent history. all this essentially means that it may take longer for inflation to gain steam and wage pressure might only start to rise meaningfully once adjustments in the “ intensive margin ” take hold – that is, once those who want to work more hours also succeed in doing so and once those who are still willing to work, but not currently counted as unemployed, are reabsorbed. indeed, hours worked per employee have not recovered since the double - dip recession. so what is the link between these developments and hysteresis? to be sure, the increasing prevalence of part - time and temporary work reflects several factors – including, in part, important structural reforms in many euro area economies that have helped strengthen the resilience of the euro area. 4 / 9 bis central bankers'speeches yet, the compositional effects we are seeing in the labour market may also reflect more crisisrelated factors, in particular uncertainty about the strength and durability of the recovery and pessimism about the long - term impact of the downturn on growth. as blanchard and co - authors have recently postulated, a revision to future potential growth prospects may cause firms to cut back on investment plans, causing muted growth expectations to become self - fulfilling. 11 on the right - hand side of slide 5 you can see blanchard and co. ’ s analysis replicated for the euro area. and we see signs that such effects might have also been at play in the euro area : there is a positive correlation between potential growth revisions and investment error forecasts. this might suggest that investment, and therefore demand, is influenced by long - term animal spirits – changes in expectations concerning the steady - state path of the economy. but the logic may also run in reverse and create a vicious feedback loop : this would be the case if the pessimism - induced | 0 |
again with price stability. there is simply no alternative to this today. the only potential margin for manoeuvre is in the composition of the policy mix, that is, the balance of monetary and fiscal policy. in fact, those advocating a lesser role for monetary policy or a shorter period of monetary expansion necessarily imply a larger role for fiscal policy to raise demand and close the output gap faster. conclusion let me sum up. the global low interest rate environment is a symptom of challenges in the world economy, not its cause. if interest rates are to rise again to sustainably higher levels, it is those bis central bankers ’ speeches underlying causes that need to be addressed. this is true at a global level, and it is true in the euro area. in the euro area, we need expansionary macroeconomic stabilisation policy to support demand, starting of course with monetary policy. that will allow inflation to return to our objective and, in time, for policy interest rates to rise back to their long - term levels. but monetary policy cannot raise long - term real rates. that can only be achieved by structural reforms that elicit a structural rebalancing of saving and investment. higher real returns on savings must come through decisive action on the supply side. in this context, there is also a third type of policy that would support both demand in the short - term and supply in the medium - term, and which is unique to europe. that is committed reform of euro area governance that can remove lingering doubts about its future. there is little doubt that question marks over the future of the euro area, and the european union in general, are contributing to uncertainty for individuals and firms, and that this can hold back consumption and investment. removing this uncertainty will help boost consumption and unleash investment across the continent. there is therefore no doubt in my mind that institutional reform in the european union and of the euro area has genuine economic benefits. for all those who want to see a return to more normal levels of interest rates, this is an essential part of the solution. bis central bankers ’ speeches | cards framework ”, extensive changes await the european cards market. the ecb expects a new european card scheme to emerge, harmonising card payments across europe. that said, efficient national card schemes should not vanish, leaving the cards market entirely to international card schemes. let ’ s work together and use the experience of the national schemes to devise a new european card scheme. together, these three payment instruments make up sepa, our key to a door behind which many opportunities lie. once the door is open we will still have a mountain to climb. but if we are willing to take up the challenge and use sepa with innovative thinking, we can reap the full benefit. let me stress : we do not envision opening the door only to sit back and admire the great many opportunities on the other side. let ’ s climb the mountain, discover the opportunities and progress onwards and upwards. let ’ s complement the sepa instruments with innovative services, such as online and mobile payment initiation, e - invoicing and e - reconciliation. by combining these services with sepa instruments, we eliminate paper and the payment process becomes fully electronic. end - users will spend less time on payments – and, as we all know, time means money. but how will you benefit from sepa? corporates – make fast european transactions, simplify your payment handling and consolidate your liquidity management. sepa ’ s harmonised services can optimise your payment process. so, request these services from your banks and service providers. public administrations – you will experience the same benefits as corporates. but that ’ s not all. sepa can help drive e - government and e - procurement, thereby promoting efficient public services. by adopting sepa at an early stage, you will extend its benefits to society at large. consumers – one bank account and one set of payment instruments is all you need. as with euro notes and coins, there will finally be no difference between payments across europe – all euro payments will be ” domestic ”. and banks – you have developed and will form the basis of sepa. and sepa can help you expand your business, as integration and harmonisation will encourage competition. it is now up to you to use the opportunities sepa brings. the launch of sepa today is a major step in creating the single market and represents a significant contribution to the lisbon agenda and a more competitive europe. it has not been easy to arrive at where we are today – sepa | 0.5 |
address some of the major supervisory weaknesses. these included the lack of a common definition of quality of capital, no limits on leveraging, no common standards for liquidity and a failure to recognize the excessive market risks embedded in trading and derivative transactions that had risen very sharply among the major banks. therefore, basel ii would have not done the job it was required to do. this brings me to the basel iii which not only addresses the shortcomings of basel ii but goes far beyond by introducing a variety of new concepts which have raised the bar in terms of global supervisory standards. some of these concepts emerged from the various lessons learned exercises that were carried out following 2007, while others are a product of serious research and reflection by the global banking supervisors. basel iii has introduced some fundamental reforms such as elevating the status of common equity capital as the key component of core capital. it also has introduced the concept of a conservation capital buffer and even more importantly an additional countercyclical buffer on top of the minimum capital bis central bankers ’ speeches requirements. also basel iii has recognized that liquidity is as important if not even more important than capital for safety and viability of banking institutions. it has recognized that there must be limits on leveraging by financial institutions so that bankers are restrained from excessive risk taking. basel iii also has taken a serious and perhaps a much needed closer look at risks in trading and investment activities and particularly for derivatives and off balance sheet transactions. in july 2009, as an interim measure, basel committee had issued a document addressing the market and trading book weaknesses in basel ii for immediate implementation. this document is known as basel ii. 5. basel iii goes much further with refinements in areas such as counterparty credit risk, credit value adjustments, etc. these measures should enhance the risk management, governance and supervision of such activities as securitizations, resecuritizations and credit derivatives. also at the conceptual level there is far greater emphasis on stress testing by banking institutions for various risks. banks are required to develop stress scenarios and demonstrate their ability to cope and survive under stressful situations. basel iii also requires supervisors to use stress testing at the systemic level. one related area of major concern that has kept basel committee very busy is the enhanced supervisory regime for global systemically important financial institutions ( g - sifis ). these institutions will be subject to a more stringent, sensitive and effective supervisory regime and will also face a higher capital charge in form of | abdulrahman a al - hamidy : risk strategies for basel iii compliance and beyond – extracting business value from regulatory change speech by his excellency dr abdulrahman a al - hamidy, vice governor of the saudi arabian monetary agency ( sama ), at the institute of banking / moody ’ s analytics symposium, riyadh, 30 november 2011. * * * distinguished participants, i am pleased to be here today to share my thoughts on “ risk strategies for basel iii compliance and beyond ”. given the lingering global financial crisis with ongoing impact on a number of economies and financial markets, this is a relevant and timely subject to deliberate upon. i appreciate the efforts of the institute of banking and the moody ’ s analytics to organize this symposium for the benefit of the bankers and supervisors in the kingdom. i have seen the list of topics to be covered today and the impressive list of speakers and i am confident that all of you would greatly benefit from the discussions. the world today has not yet recovered from the global financial crisis that started in 2007. while the governments, central banks, supervisory authorities and international organizations have been working hard to revive and revitalize financial markets and financial institutions in many advanced markets, the recovery has been slow. following the financial crisis the lessons learned exercise had attributed the main causes to include a long period of easy monetary policy that fueled accelerated economic growth accompanied by lax and light supervision in a number of advanced markets. consequently, one of the key response from the authorities was to develop the basel iii reforms package that aims to strengthen global supervision of international banks and banking systems. while the global banking supervisors have been working hard to improve banking supervision, the financial crisis has mutated into a fiscal crisis in some markets in europe, once again threatening the viability of some global banks and causing the risk of contagion to other financial institutions and markets. consequently this drives home the lessons that strengthening banking supervision alone is not sufficient and that prudent fiscal and monetary policies are essential for a sound and resilient banking system. before i talk about basel iii, i would like to revisit the evolution of the basel ii framework which was published by the basel committee in june 2004 with a tentative full implementation date of 1st january 2007. consequently in 2007 a pertinent question was that why did basel ii fail to prevent the financial crisis. the response was that apart from its slow and uneven implementation in the advanced markets, basel ii was a flawed standard that had failed to | 1 |
is not necessarily the case. there are long - term trends that have resulted in very low real interest rates. among other things, these trends reflect demographic ageing and declining productivity gains. a central bank cannot counter that. the banks are also a cause for concern. do they have enough capital to survive this crisis? it is imperative to prevent the crisis from spreading to the banking sector. that ’ s why measures targeting liquidity bottlenecks in firms are especially effective ; they work by warding off high levels of loan defaults at banks. we should be glad that the banks ’ capital requirements were significantly increased over the past few years. all in all, the banks are currently much better prepared for a crisis than they were before the financial crisis of 2008. but is that enough in the face of the current shock? we are indeed living through a scenario that no one could have imagined. it was therefore never assessed in a stress test – we are unfortunately experiencing it now in real time. if widespread insolvencies occured among borrowers, the banking sector would also be affected. but in many cases, the issue in the first instance is a liquidity bottleneck. that ’ s something politicians can deal with. the decisive factor is how long the crisis persists. how long can the economy withstand such a situation? 2 / 3 bis central bankers'speeches it depends on how severe the restrictions are and on how well - placed firms are to adjust to them. in some sectors, this is relatively unproblematic ; in others, for example catering, it ’ s hardly feasible. at some point, this situation will presumably become unsustainable, prompting the question as to what role the state intends to play in supporting firms. would the ecb then be able to do even more? or has it completely exhausted its scope for action? the ecb is in the comfortable position of having a large set of tools, none of which has been used to its full extent. we stand ready to take further measures if needed to fulfil our mandate. this was decided by the ecb ’ s governing council. so you really want to buy even more bonds? what effects do you envisage? we have a wide range of instruments : we have the key interest rates, we have instruments for providing liquidity to the banks and we have the asset purchase programmes. all of these instruments can be used to improve financing conditions. that is immensely important during such a crisis. the | changes in other areas damaging to the irish economy. ” unfair issue linkage was certainly a danger for the irish side in the negotiations. in the end, though, the danger was headed off, and the lenders did not attempt to force beggar - thy - neighbour policy changes in unrelated areas. with debt restructuring clearly off the table, the needed path of fiscal adjustment was pretty much a arithmetical calculation. getting the debt path back into clearly sustainable territory left little scope for discretion. the size of the government ’ s remaining cash balances at the outset of the programme helped ensure that the speed of fiscal adjustment was not excessively fast – given the accumulation of debt. interestingly, the fiscal multipliers used in the programme design held up quite well : ireland ’ s growth evolution relative to projection did not underperform that of the rest of the eu even in the first couple of years. and by mid - 2012 a growth dynamic had reasserted itself. myth 5 : “ it was the euro that did in for ireland. ” to be sure, the euro contributed some fuel to the fire in the form of low interest rates ( that encouraged borrowing ) and the removal of exchange risk on cross - border borrowing by irish banks. but the euro was not an essential ingredient in the bubble : several other non - euro countries also relied on the period of financial liberalisation and global savings glut to finance bubbles ( iceland and latvia the most conspicuous ). nothing in the euro regime prevented irish regulatory and fiscal policy from moderating this boom. when the crash came, the decision to guarantee the banks ( flawed though it was in its design – blanket coverage and in the lack of prior consultation with partners ) was underpinned by ecb liquidity support which prevented the chaotic currency depreciation which would surely have been the inevitable consequence had ireland been outside the euro area. ( of course, some depreciation of a domestic currency could have helped boost the country ’ s international competitiveness more quickly. ) partly true 2 : “ the european institutions pushed ireland into the eu - imf programme. ” an unequivocal public indication by europe that it would continue to underpin the liquidity needs of the irish banking system might well have avoided the need for a programme – but it would not have avoided the need for austerity. such an assurance was not forthcoming in the period september - november 2010. indeed, as is now well known, the ecb indicated privately in november 2010 | 0 |
impact of investment expenditure, both in the short and long term. completion of public works while the available data do not enable us to make systematic and detailed comparisons, there is evidence that the average completion times and costs for public works are relatively high in our country. according to the audit performed in 2018 by the european court of auditors, italy has the highest constructions costs of any eu country for completed high - speed rail lines ( €28 million per kilometre, compared with €12 million for spain, €13 million for germany and €15 million see the european spatial planning observation network, espon atlas mapping european territorial structures and dynamics, 2014. see the world economic forum, the global competitiveness report 2017 - 18, geneva, 2018. see the european investment bank, relazione sugli investimenti 2017 / 2018, luxembourg, 2018. see also the chapter ‘ the infrastructural endowment ’, banca d ’ italia, annual report for 2010 ( abridged ), rome, 31 may 2011. for france ). if we add up the costs of projects already completed with those in progress, we find that italy ’ s cost per kilometre rises to €33 million, as against €14 million for spain and €15 million each for germany and france. our country also falls far behind in terms of completion times. 12 surveys conducted over the last decade have shown that, in italy, the average costs per kilometre and completion times for high - speed rail lines have been about three times those of france and spain ; the average costs per kilometre for roads were more than double those of spain. as for major projects co - financed by the european regional development fund, these studies indicated time and cost overruns in italy equal, respectively, to more than triple and double the eu average. 13 it does not seem that the extent of these differences can be explained merely by the distinctive orographic features of each country. the various phases of construction have differing impacts. the length of ‘ transition ’ periods, that is, the time between the end of one procedural phase and the start of the next ( for example, the planning and awarding of contracts ) or between sub - phases ( for example, preliminary, final and executive planning ), has a considerable impact on project timelines. these periods, which are at least in part absorbed by administrative activities and inefficiencies, account for on average around 54 per cent of a project ’ s total duration ( rising to 60 per cent if | , the higher the weight. the figure for risk - weighted assets ( rwa ) represents the sum of these risk - weighted positions. required capital, in turn, is defined as a percentage of rwa. there are two different approaches for setting risk weights. under the standardised approach, risk weights are prescribed for broad asset classes. under the model - based approach, by contrast, banks can use their own internal models to determine the risk weights for different assets. the credibility of rwa based on banks ’ internal models is increasingly being called into question by market participants, analysts and authorities worldwide. it is widely accepted that a bank ’ s risks can, in principle, be more accurately quantified using the model - based approach than using the standardised approach. yet banks ’ internal models are extremely complex and can vary widely between banks, owing to the use of different model choices and model parameters. this can result in different capital requirements for banks with a similar asset structure. this makes it difficult to accurately assess a bank ’ s resilience, and to compare one bank with another. bis central bankers ’ speeches to increase the usefulness and credibility of the model - based approach, in - depth analyses need to be carried out to determine whether and to what extent the model - based approach and the standardised approach lead to differences in rwa. the standardised approach does have shortcomings. yet, since it is independent of bank - specific modelling assumptions, it provides market participants with an additional point of reference for assessing both the level of and changes in model - based rwa. differences between the two approaches must be well explained and have a sound economic rationale. if the analysis does not reveal any substantial inexplicable differences, this will strengthen market confidence in the modelbased approach. otherwise, appropriate measures should be considered. this could, for instance, entail setting a floor for some model - based rwa, such as that recently introduced for banks in the us. another option would be to introduce a multiplier on model - based risk weights for specific positions, as already imposed by finma for some mortgage loans. efforts are underway at finma, supported by the snb, to analyse potential differences between the two approaches. in this context, the snb recommends that the big banks increase transparency with regard to their risks. this includes, among other things, publishing their internal measures of total risk. disclosing rwa according to the standardised approach | 0 |
. and while countries are preoccupied with the rollout of vaccine programs and recovery efforts, i am pretty sure many investors are in search of business opportunities and destinations that will provide great value for shareholders over the long haul. 1 / 5 bis central bankers'speeches the philippines is a smart investment destination. let me explain why. first, amid a sea of credit - rating downgrades and negative rating outlooks, the philippines has maintained its investment grade credit ratings, all of which are assigned a “ stable ” outlook. debt watchers are one in saying that the philippines has strong pre - crisis fundamentals, has robust medium - term growth prospects, and is inclined to return to its fiscal - consolidation path post covid. second, we have encouraging macroeconomic prospects ahead. for 2021, we expect : • the economy to grow by 6. 5 to 7. 5 percent ; • exports and imports to rebound to a growth of 5. 0 and 8. 0 percent, respectively ; • remittances from overseas filipinos to grow by 4. 0 percent. worth noting is that the 0. 8 percent drop in remittances last year — vs. third - party projections of a double - digit drop — shows resilience of this vital foreign exchange source for the philippines ; • net inflow of foreign direct investments to rise to usd 7. 5 billion from last year ’ s usd 6. 5 billion ; and • external accounts to remain healthy, with hefty gross international reserves and surpluses in the current account and the balance of payments ( bop ). and third, despite the pandemic, the philippines has been able to sustain the reform momentum. for instance, congress has passed, and the president has signed into law, the corporate recovery and tax incentives for enterprises ( create ) bill. this law will slash corporate income tax from 30 to 20 percent and rationalize the fiscal incentives system, making the system performance - based, transparent, and time - bound. on the infrastructure front, the national government continues to ramp up the “ build, build, build ” program, the country ’ s most ambitious infrastructure development agenda. for this year, the government has allotted a record php1. 17 trillion ( us $ 23 billion ) for infrastructure projects, equivalent to 5. 9 percent of gdp. and, as far as the bsp is concerned, we continue to implement measures that enhance the philippines ’ competitiveness as an investment destination. these measures may be classified into three themes | bsp is pushing for legislative measures that will help catapult the philippines toward its next stage of economic development. these measures seek to : • expand the list of sectors that banks can lend to, in compliance with the mandated lending for agriculture development ; • lift secrecy of bank deposits, which will help efforts against tax evasion and money laundering ; • enhance access of micro, small, and medium enterprises to credit through a comprehensive credit database ; • improve the protection of consumers of financial products and services ; and • strengthen the capacity of government financial institutions to provide assistance to micro, small, and medium enterprises and other strategically important companies. the bsp likewise supports national government efforts to push for laws that will further enable foreign investments to the philippines. these bills include : 3 / 5 bis central bankers'speeches ( i ) amendments to the foreign investment act ; ( ii ) amendments to retail trade liberalization law ; and ( iii ) amendments to public service act. finally, on the bsp ’ s monetary and financial sector reforms … amid an ever - changing landscape, bsp constantly looks for ways to improve our conduct of monetary policy and financial sector supervision. on the monetary front, for instance, the bsp started issuing its own debt securities last september. this increases bsp ’ s set of tools to manage liquidity in the economy, consistent with our price stability mandate. latest estimates by the bsp showed that inflation will average 4. 0 percent this year and 2. 7 percent next year — both within the official target range of 2. 0 to 4. 0 percent. on financial supervision … we issued circulars that keep our regulatory framework attuned to the times. circular 1108 enhances the know - your - customer rules for virtual asset providers. this is in line with our efforts to improve cyber security as we promote financial digitalization. circular 1109 scraps the p1 - million minimum balance requirement for investment management accounts. with this, investment products become accessible to more filipinos, consistent with our financial inclusion objectives. circular 1111 relaxes the implementing guidelines of the agri - agra law. with this, banks may extend loans to more types of enterprises, in compliance with the mandated lending for agriculture development. amid a dynamic regulatory environment, our banking system has been resilient to shocks. banks remain well capitalized. their assets continue to grow. banks are also able to keep their bad debts manageable — far from levels seen in the aftermath of the asian financial crisis. | 1 |
charles i plosser : systematic policy and forward guidance remarks by mr charles i plosser, president and chief executive officer of the federal reserve bank of philadelphia, at the money marketeers of new york university, inc., down town association, new york, 25 march 2014. * * * the views expressed are my own and not necessarily those of the federal reserve system or the fomc. highlights • president plosser highlights the relationship between systematic monetary policy and forward guidance. his goal is to help underscore how a systematic approach to monetary policy can improve the effectiveness of monetary policy in both normal times and in more unusual or extreme circumstances, such as when policy is constrained by the zero lower bound on nominal interest rates. • president plosser ’ s preference for dealing with forward guidance is for the fomc to articulate a reaction function as best it can. this entails describing a systematic approach to policymaking, where policy decisions are based on available information in a consistent and predictable way. • president plosser believes the most recent fomc statement took a step in this direction when it moved to a qualitative form of forward guidance by stating that the committee will be assessing progress – both realized and expected – toward its policy objectives. introduction i want to thank william kanto and the money marketeers for inviting me to speak again this evening. your series of guest speakers over the years has been quite illustrious, and it has included many federal reserve governors and presidents, not to mention distinguished economists and a wide array of others. so, before i share some thoughts on monetary policy with you tonight, i will begin with the usual disclaimer that my views are my own and do not necessarily reflect those of the federal reserve system or my colleagues on the federal open market committee ( fomc ). of course, that disclaimer is a two - way street, and you should not necessarily associate the views of my colleagues with my views. i believe that this diversity of views among fomc participants does more than assure variety among your guest speakers. it is one of the great strengths of our decentralized central bank. open dialogue and diversity of views leads to better policy decisions and is the primary means by which new ideas are gradually incorporated into our monetary policy framework. thus, i believe diversity of thought is a sign of thoughtful progress. as i noted in 2009 when i last spoke to you, the famous american journalist walter lippmann once said, | conclusion in summary, the u. s. economy is continuing to grow at a moderate pace. i expect annual growth of around 3 percent in 2012 and 2013. prospects for labor markets will continue to improve, with job growth strengthening and the unemployment rate falling gradually over time. i believe inflation expectations will be relatively stable and inflation will moderate in the near term. however, with the very accommodative stance of monetary policy, we must guard against the medium - and longerterm risks of inflation and the potential for distortions such accommodation can create. finally, i believe we must also guard against an accelerationist approach to policy – one that calls for monetary policy to do more and more in an attempt to get to our objectives that much faster. the risks to economic stability of such an approach over the medium term could be quite high and could jeopardize our ability to achieve our longer - terms goals. bis central bankers ’ speeches | 0.5 |
through the payment and settlement systems act of 2005. the act empowered the central bank to be the authority responsible for the national payment system, which requires oversight and continuous surveillance of all payment systems to ensure its efficiency and effectiveness. the systemically important payment systems will be reviewed periodically to ensure that the design and operation meet with international standards and best practice. some of you may be aware that a couple of months ago, the central bank established a national payments council which is the highest decision making body with regard to payment systems. this committee represented by all stakeholders provides a forum for constant dialogue on payment issues to take place within the industry. the national payments council is responsible for developing the payment and settlements infrastructure in collaboration with all the relevant authorities and stakeholders. currently, it is in the process of finalizing a road map for the development of the national payment system in the next five years, which will be in line with the vision of the financial sector. in implementing the road map, it is vital that all stakeholders in the payment system understands the significance of payment systems, their impact on financial stability and take ownership and leadership. most central banks at some point or other have been owners, operators, catalysts, overseers and users of the payment system. over the years, central banks have given up their ownership and operator ’ s role and, in some cases, even the catalyst role. banks and financial institutions and even the corporates should play an important role in shaping the national payment system in sri lanka. let me conclude now by giving an important message. payment reforms help to adopt best practices by all stakeholders. with or without payment system reforms, banks and financial institutions should be able to meet their payment obligations. some of the benefits enjoyed by banks and customers over the years will no longer be there under the cit system. the public too has to make adjustments in their payment practices and ensure that there are funds in their accounts when cheques are issued. all stakeholders should change their past practices and fall in line with reforms which are aimed at improving facilities. once again, i thank the royal bankers club for inviting me and extend my good wishes for all its future activities. | ranee jayamaha : saarc payments initiative and policy responses speech by dr ranee jayamaha, deputy governor of the central bank of sri lanka, at the inauguration of " saarc payments initiative ", central bank of sri lanka, colombo, 28 march 2008. * * * 1. it is with great pleasure that i thank all of you for attending the inaugural session of the saarc payments initiative. it is indeed a historic event and a landmark in the development of payment systems in the saarc region, because this is the first time the member central banks, as a group, have decided to pay focused attention to this area of activity. it is also an important achievement for the central bank of sri lanka to be able to pioneer the efforts in establishing the saarc payments initiative. 2. the saarc payments initiative, which is launched today, intends to • assist individual saarc countries to prepare a domestic payment strategy and a forward looking development plan ; • design a coordinated regional approach to cross - border payments, taking into consideration the implications for trade, investment, central bank policy, foreign exchange positions and their management ; and • clear any impediments experienced by the members in the areas of policy, operations and communications, legal and regulatory aspects, technical and institutional infrastructure, and engage in research and statistical analysis. 3. during the course of the saarc payments initiative, member countries will be able to learn from the efforts and experiences of developments of payments within the region, as well as outside. some of our member countries may have to acquire modern communication infrastructure and advanced payment systems to support the delivery of the payment and settlement services required, not only by their own markets, but also by the regional market. in effect, the saarc payments initiative will be able to : ( a ) guide the efforts of member countries in modernizing their national payment systems ; ( b ) assist in establishing appropriate technological links with others in the region ; and ( c ) bring their payment systems to appropriate standards compatible with international standards. 4. the importance of payment systems 4. 1 the broader term “ payment systems ” includes not only payments, but also clearing and settlement systems. payment systems represent a basic infrastructure for the functioning of market economies and in developing more inclusive financial systems, including enhancement of access to finance. the soundness and efficiency of payment systems are fundamental to the stability of the currency, as well as the financial system and, therefore, to sustaining | 0.5 |
of india ’ s imports, as well as a slowdown in exports reflecting falling global demands. the current account deficit ( cad ) significantly widened during fy 2012 – 13 to touch the high of 4 % of gdp. the widening of cad in the backdrop of large decline in capital flows exerted severe downward pressure on rupee with consequent volatility. 3. in this context, it has to be appreciated that the volatility regime has undergone a significant shift and volatility in most of the asset classes as well as segments of financial markets has risen significantly since the onset of the global financial crisis in august 2007. the forex, equity, bond, and commodity markets have been extremely volatile during the period as global economic outlook remains “ unusually uncertain ” making it difficult for economic agents to make optimal and informed decisions. in the foreign exchange market, the direction of rupee ’ s movement has remained largely in sync with that of several emerging market currencies and more so with some of the major currencies but the magnitude of depreciation has been far more pronounced. bis central bankers ’ speeches 4. the so called “ new normal ” in the dynamics of inr - usd exchange rate also reflects greater influence of the global financial markets on the domestic foreign exchange market mainly due to india ’ s growing trade and financial integration with the rest of the world. india ’ s two way trade ( merchandize exports plus imports ), as a proportion of gdp, was 40. 7 per cent in 2008 – 09, the crisis year, up from 19. 6 per cent in 1998 – 99. the ratio of total external transactions ( gross current account flows plus gross capital account flows ) to gdp – an indicator of both trade and financial integration – was 112 per cent in 2008 – 09 up from 44 per cent in 1998 – 99. 5. there is another fundamental aspect that we cannot lose sight of. indian rupee has to adjust its value vis - a - vis other major foreign currencies to reflect inflation and growth differentials. in a market ruled by multiplicity of pressures, it is too optimistic to expect this adjustment to always happen in a smooth and secular manner spread across the time horizon. the experience of the recent past should carry an important and valuable lesson for all of us. any stability over an extended period of time could be a harbinger of volatility. if so, too much stability, instead of breeding complacency among corporates | fair trade practices " and " reasonable charges " ). regulators seem to be aware of the need to consciously connect the common person with bank services and equip him to manage the new reality of transaction - based but multifaceted banking. regulators all over the world have recognised some market failures in savings and credit markets and that banks ’ sophisticated customer - segmentation strategy has unintended consequences. thus, globally, financial inclusion is now a priority. initiatives range from the financial inclusion task force in the uk, which has noted that better customer - segmentation technology has led to certain sections of the population being financially excluded, to the community reinvestment act in the us, which imposes an affirmative and continuing obligation on banks to serve the credit and banking needs of all the communities in which they are chartered, to the initiatives of the indian government and the reserve bank. regulatory sea change banks are special. they have special privileges and unique obligations. they are licensed to take uncollateralised deposits from the public but have a high degree of leverage. their services are necessary. however, recent developments indicate a rebalancing of the focus of regulators and the awareness of bank customers. the regulators ’ thrust, of late, on financial inclusion, financial education, credit counselling, fair trade practices, reasonable charges and avoidance of unequal contracts is the right way forward to ensure an efficient, inclusive and equitable banking system. | 0.5 |
the cbm constitutes an optimal communication mix to ensure a good reach of the public. this means research, advertising, direct marketing, public relations ( like this event today ) or addressing the vulnerable population. overall, around 500, 000 copies of publications will be distributed by the cbm or via multipliers – so more than the actual population. i am pleased to see that the recent euro barometer showed a steady progression in the satisfaction of the maltese with the adoption of the euro ( from 40 % in september 2005 to 64 % in june 2007 ). let me hand over the euro star to governor bonello to symbolically flag that the central bank of malta will join the eurosystem on 1 january 2008. we look forward to welcoming you wholeheartedly into the euro area. thank you very much for your attention. | jean claude trichet : welcome malta! speech by mr jean claude trichet, president of the european central bank, at the event for launching the joint communication campaign for the euro changeover at the central bank of malta, valletta, 30 september 2007. * * * ladies and gentlemen, it is a great honour and pleasure for me to be here at this festive moment. this is to mark the launching of the joint communication campaign for the euro changeover in close co - operation with the central bank of malta and with our friend, michael bonello, just 92 days before malta adopts the euro on 1 january 2008. this will signify a great milestone in malta ’ s history, especially since malta only joined the european union ( eu ) almost four years ago, on 1 may 2004. let me first offer my warm congratulations to all of those who have helped bring malta to this point. in 2002 for the countries that were in the euro area at the time, as well as for slovenia this year, it was a memorable moment and a positive step. so i can well imagine how the maltese feel at the moment. you can be proud of malta ’ s successful convergence process. in fact, we are very pleased about the fruitful cooperation between the european central bank ( ecb ) and the central bank of malta in the preparations for the changeover, be it at the technical level or through the participation of governor bonello as observer in the governing council since last july. preparations for eu membership and the adoption of the euro have spurred a broad - based reform process. the adoption of the euro should not mark the end of this structural reform process. in order to reap the full benefits of euro adoption and to ensure sustainable convergence, this process should continue. as you know, economic and monetary integration between countries with somewhat different characteristics and levels of development requires careful preparation. however, you have already reached this stage and your planning for the introduction of the euro is almost complete. looking ahead the adoption of the euro will enhance your integration with all eu partners. today practical preparations towards the public are remarkably advanced and the euro campaign has been outstanding in malta. indeed, the central bank, and also the national euro changeover committee can be praised for their excellent work paving the way for a smooth changeover. the ecb has contributed to this euro campaign by making the public acquainted with the visual appearance of the euro banknotes and coins and the security features. the framework used by the ecb and | 1 |
pre - pandemic levels both in spain and the euro area. figures from the banco de espana's central balance sheet data office also point to a slight reduction in firms ’ profit margin ( defined as the ratio of the gross operating profit to sales ) between 2021 h1 and 2022 h1. 8 however, this change belies very high heterogeneity across sectors and firms. 9. the available supply and demand - side factor breakdowns reveal that in the euro area and spain the former are predominantly behind the rise in, and persistence of, inflation. 10. the observed stylised facts reveal some important differences compared with the united states, where inflation is currently somewhat lower. food is making a similar contribution, but that of the energy component is considerably smaller ( around 20 % ). by contrast, the contribution of the core component is larger. indeed, in august underlying inflation stood at 6. 3 %, with wage growth and the weight of demand - side factors being significantly higher. a key determinant of the economic outlook is the course of the war in ukraine and its impact on energy markets europe is particularly exposed to the economic effects of russia ’ s invasion of ukraine, given its geographical proximity, its close trade and financial ties to russia and, above all, its high dependence on fossil fuel imports from russia, with limited capacity to replace them in the short term. at the outbreak of the war, gas imports from russia accounted for approximately 40 % of european gas consumption and 10 % of its total energy consumption. the invasion of ukraine was a wake - up call for us about this vulnerability, which has materialised through the reduction of almost 85 % in the natural gas supplied via pipelines from russia. in may, this realisation led to repowereu, a plan that set two fundamental goals : to reduce, by the end of 2022, dependence on russian energy to one - third of its pre - war level ( as a prior step towards becoming fully independent by 2030 ) and to raise gas storage levels to 80 % of total capacity by 1 october. in addition, in july the european commission presented a plan to reduce europe's gas consumption by 15 % next winter. the degree of compliance with the two plans is relatively high. first, europe has partially replaced gas with other sources of energy. second, it has increased the geographical diversification of its gas imports, with more gas coming from qatar, the united states and norway. it should be borne | ensure the close involvement of all members of the board of directors and board of auditors www. bportugal. pt of bes, as well as external auditors, in fulfilment of the determinations issued as a result of the supervisory exercise. i would like to re - emphasise that the board of directors of bes comprised 25 members, the large majority of which had vast experience in the banking sector, and included representatives of other major shareholders in addition to grupo espirito santo. among these actions, i would like to point out the various interactions with credit agricole – bes ’ s key shareholder – requiring a succession plan for the board of directors, with the appointment of an independent board. this process led to the presentation by mr. ricardo salgado, in mid - april 2014, of a schedule for his succession, and a plan based on the departure of the family members from the executive body of bes. this was all clearly documented in information provided to the parliamentary committee of inquiry. second question : was the document delivered by bpi to banco de portugal on ges ’ s financial situation followed up? on 1 august 2013, bpi delivered to banco de portugal an economic assessment of ges, with special focus on espirito santo international ( esi ). the claim that banco de portugal ignored this document and shelved it is false. in fact, the information contained in bpi ’ s document was incorporated : – in the scope of supervisory investigations undertaken on grupo esfg ; and – in the context of etricc2 – the review of the major economic groups that are the banking system ’ s debtors – which was under preparation by banco de portugal in early august 2013. i would also like to remind members of parliament that, as a result of the conclusions of the three horizontal supervisory initiatives undertaken since 2011, banco de portugal decided to deepen the evaluation of the business plans of major economic www. bportugal. pt groups that were the banking system ’ s debtors, with a view to confirming that they were based on solid assumptions – the so - called etricc2. i must add that this exercise – which may now seem common or trivial – was, at the time, unprecedented in europe, in terms of its breadth and depth in the field of supervision. the non - financial arm of grupo espirito santo was among the 12 economic groups selected. at the end of november 2013, this | 0 |
increasing the automation of this product. however, these same institutions must also make selective investments in the newer and more visionary retail payment mechanisms. i am not in a position to determine for each private - sector firm how to balance these two goals. managers and directors of these businesses are closer to these decisions and bear greater direct responsibility for the success of the institutions they guide. however, all firms interested in participating in the payment system will have to recognize explicitly the challenge of maintaining the existing system while building the new one. lessons for public policy what are some of the lessons for public policy that we have learned from our experience with electronic payments since the 1960s? our general goals of fostering a safe, efficient and accessible payments system have not changed. however, one broad lesson is that in a dynamic economy, markets need to play a key role in guiding the development of infrastructure, including mechanisms like payments systems. this means that innovation and competition will be central to the future development of the payments system - as they are in other areas of the economy. of course, questions of interoperability between different systems will probably need to be addressed by payments providers. policymakers for their part should aim to remove barriers to innovation that do not conflict with important public policies and should resist calls to limit competition. a second and related point is that successes and failures are bound to occur as the ultimate users of payments systems choose among competing options for making payments. the lesson for public policy is that it should not be built on a single product, system or vision of the future, no matter how compelling at the time. instead, policy should be flexible in a way that allows experimentation and change to take place, particularly in the rapidly changing world of electronic payments. a third lesson is that public policy should exercise restraint and resist calls for premature regulation. users face important trade - offs as they make choices about the use of new payment technologies among key attributes such as cost, convenience, safety and complexity. these trade - offs may even shift depending on the specific parties to a payment or its purpose. regulations typically make implicit assumptions about these important trade - offs, which may pre - empt adjustments by users and providers of the new technologies. even well - intentioned regulations can end up addressing the wrong problem or short - circuiting creative innovations. on the other hand, public policy will have to confront genuine and significant problems, when these become clear and are not self - correcting. a final lesson should temper the thinking of both policymakers and | for the fed. in each case, there is ongoing discussion about what value the previous shareholders can reasonably expect to get from the resolution. the prospect of legal action is, of course, a potential further complication. all this illustrates that the role of lender of last resort is actually quite challenging in the modern world. thankfully, observations in the time series of large financial near failures are few, and recent ones have been in other countries. but when they do occur, it is important to learn as much as we can from them. central banks and supervisory authorities around the world are seeking to do just that. no doubt very thorough evaluations and recommendations will appear in due course. at this point, i would summarise the general lessons from the recent events as follows. first, well designed regular facilities that allow adequate access to central bank liquidity in times of pressure – either generalised or firm specific – are helpful in avoiding the authorities finding themselves in the position of needing to contemplate the extension of a loan of last resort. second, if firm specific assistance beyond the normal channels is required, the central bank has to have very quickly a clear idea of the solvency of the entity concerned, and of the quality of collateral available in order for the terms of any assistance to be set. a good deal of that information has to come from the prudential supervisor. where that is not the central bank itself, this means that an effective relationship between the central bank and the supervisor is essential. third, the government needs to be involved early on, for several reasons. apart from the fact that it owns the central bank and would therefore ultimately carry any risk the central bank might take on in these transactions, there is a need for clear and consistent communication by all the authorities at an early stage. further, any decision to extend support to an insolvent institution on systemic or national interest grounds would be one properly taken by a government under advice, not a central bank itself. fourth, if support for an institution in difficulty were to turn out to be more than just temporary, the public sector would face difficult issues of how to structure that support. any such support should, however, come at considerable cost to the private owners and managers of the troubled entity. public sector support should not be used to “ bail out ” private shareholders or those who were responsible for running the troubled institution. conclusion australians have been observing the major financial events of the past year mainly from the sidelines. while there have | 0 |
to their listing - authority function. the rules for collective - investment schemes matter too. a good example, highlighted recently by the g20 financial stability board, is the development of the exchange - traded fund markets to include synthetic structures, leveraged funds, less liquid underlyings, and all three combined. 13 remind you of how securitisations ended up in cdo² and cpdos? in the eu, etfs are subject to the ucits rules for what are in effect mutual funds available to retail investors. securities regulators need to think about how to avoid mechanically applying a regime for vanilla investment schemes to the structuring and distribution of much more complex and sophisticated products. in the same spirit, recent etfs innovations underline the need for securities regulators to work closely with bank supervisors and macroprudential authorities on shadow banking and what i earlier called “ financing markets ”. for both physical and synthetic funds, the underlying collateral pools are being swapped to provide financing for dealers and banks. it is not clear whether bank supervisors have caught up with this, or whether the risk of the collateral swaps being called is treated appropriately in regulatory maturity - mismatch ladders. who would have guessed that vanilla collective investment schemes, could be turned to this purpose? the truth is that any pool of assets can be. while the fsb has already called for authorities to act to keep the evolution of etfs on a sustainable path, the broader lesson is that securities regulators need to be alive to the need securities and exchange commission, release no. 33 - 9117, asset - backed securities ( april 7, 2010 ). the fsb took a small step towards addressing this issue in its march 2011 publication, “ thematic review on risk disclosures practices : peer review report ”. this did not get much traction at the time, but the fsb ’ s vulnerabilities group, chaired by jaime caruana and on which i sit, plans to draw on that review in its own work programme. in the us, as noted, the sec has begun to grapple with this set of issues. its april 2010 notice proposed enhanced disclosures requirements for asset - backed securities sold privately as well as via the public ( registered ) transactions. “ potential financial stability issues arising from recent trends in exchange - traded funds ( etfs ) ”, published by the financial stability board, 12 april 2011. the bank of england covered similar issues in its june 2010 financial stability report, pages 40 – 41. | the stability and growth of the korean economy. thank you. | 0 |
to review our forecasts. conclusion so, in summary there is no shortage of interesting issues to ponder over as we think about the future. the world economy is undergoing fundamental change as the weight of economic activity moves from the north atlantic economies to asia, and as the household sectors of many countries re - think their attitudes to spending and borrowing. these are important structural changes that are likely to shape the australian and the global economies over coming years. i wish you luck in incorporating these changes into your central forecasts and into the risks around those forecasts! thank you for your attention this evening and i wish you all the best for 2011. | philip lowe : forecasting in an uncertain world address by mr philip lowe, assistant governor ( economic ) of the reserve bank of australia, at the australian business economists annual forecasting conference dinner, sydney, 8 december 2010. * * * thank you for the invitation to join the australian business economists ( abe ) this evening. it is both an honour and pleasure to be able to speak at the abe ’ s annual dinner. this evening, i would like to talk about an issue that i know is close to the hearts of many of you. it is also one that you have been discussing all afternoon. and that is economic forecasting. as economists, forecasting is something we are required to do on a regular basis. as a policy adviser, as a business person or as an investor, one has no choice but to be forward looking. so for many of us, some form of forecasting – with all its difficulties and pitfalls – is the bread and butter of our professional lives. tonight, i would like to talk about three aspects of forecasting from the perspective of a central banker. the first is the general role that forecasts play in the setting of monetary policy. the second is the approach to forecasting that we use at the reserve bank. 1 and the third is some of the issues that we have been grappling with as we have put our current forecasts together. monetary policy and forecasting australia ’ s monetary policy framework is best described as a medium - term inflation target. over time, we want to ensure that inflation averages somewhere between 2 and 3 per cent. and this is exactly what has happened since this framework was put in place. since 1993, cpi inflation, excluding the effects of the introduction of the gst, has averaged exactly 2. 5 per cent. 2 this is in contrast to average inflation of 8. 7 per cent over the previous two decades ( graph 1 ). an important feature of inflation - targeting frameworks is that they are forward looking. we know that it takes time for changes in monetary policy to have their full effect on the economy, just as it takes time for changes in other variables – like the terms of trade or government spending – to have their full effects. this means that if we are to achieve our medium - term objective, and to avoid unnecessary swings in the economy, we need to be thinking about what might happen in the future. when inflation - targeting regimes were first established around the world, many observers characterised the appropriate policy | 1 |
other services in the public interest. what caused the recent wave of banking reforms, what issues regulators still need to consider, and how are banks expected to respond on a global or national level? such questions will be discussed during the first panel of our conference by our renowned key speaker professor martin hellwig, director of the max planck institute for research on collective goods and vice - chair of the esrb advisory scientific committee, and by his distinguished discussant professor marek belka, president of the national bank of poland. later this morning we will focus on how the redesign of the regulatory framework impacts the central banks. the honourable general manager of the bank for international settlements, mr. jaime caruana, is our key speaker for the second panel. his presentation will be discussed by our highly respected colleague and long - time governor of the central bank of luxembourg, currently member of the executive board of the ecb, mr. yves mersch. they will talk about the new challenges in the governance and accountability of central banks, the compatibility of traditional and recently assumed goals, as well as about newly emerging reputational, communication or related issues. i also hope that mr. mersch will share with us bis central bankers ’ speeches some fresh observations on the single supervisory mechanism in the euro area, from an insider ’ s point of view. the discussions today will also be facilitated by our well - known colleagues professor boris vujcic, governor of the croatian national bank, and mr. kalin hristov, deputy governor of the bnb. dear colleagues, • before proceeding with the presentations and discussions today, let me share a few words on the experience of the bnb which provides examples, relevant for the topic of today ’ s conference. • we have seen that the compatibility of monetary, micro - and macro - prudential policies is possible in reality, and not only in theory. the bnb has successfully implemented such a policy mix for many years, during all stages of the economic cycles, before and during the recent global crisis. • we have also seen that it may take years and perhaps at least one serious financial or banking crisis, to design and then enforce central banking policies which are optimal for a country. in bulgaria the policymakers, legislators and the public at large came to the consensus of introducing the currency board regime and the very strict banking supervision and regulations. this happened only after our own deep financial and banking crisis which took place in the mid - 1990s. our experience has convinced us that | micro, small and medium sized enterprises. at this point, we have allowed banks to exceed their credit ceiling by over $ 185 million. as you know, the credit ceiling only applies to commercial banks. earlier in the year, we had discussed with the credit institutions like ccfl the possibility of imposing a similar credit ceiling on them if the need arose. credit growth of credit institutions has also slowed considerably and the need for a credit ceiling has largely dissipated. in modernising fiji ’ s financial system, we were very pleased to launch fiji ’ s real time automated payments system or fijiclear on 16 october. fiji is the first country in the south pacific to have such a state of the art payments system. fijiclear will improve efficiency in making and receiving payments as well as help safeguard financial stability. payments using fijiclear will deliver funds the same day compared with 3 to 6 days required to clear cheques. i take this opportunity to encourage you to use fijiclear for speed, certainty, reliability and convenience. i would like to thank ross and the finance companies association for their support and guidance as we embarked on this project. the fiji economy let me say a few words about the economy. an economic contraction is expected for 2007. in 2008, a mild economic recovery of 2 percent is expected led mainly by the tourism industry contributing to growth in the wholesale & retail trade and hotels & restaurants and transport & communication sectors. based on latest information, we expect better outcomes for the agriculture, forestry and fishing and manufacturing sectors. with the reopening of the vatukoula gold mine, we expect a positive contribution to the mining and quarrying sector. we have revised these economic figures. the new economic projections will be announced on budget day this friday. fiji ’ s balance of payments still remains a concern due to the poor performance of our traditional exports. the increase in oil prices will only further widen fiji ’ s trade deficit. the policies towards dampening import demand seem to be effective. but we must work together to grow our exports. at the bank, we recently announced changes to the export finance facility which will assist the export sector access credit at a relatively low interest rate. we have also removed the local content requirement. we hope that these changes will make the facility more attractive to the commercial banks and exporters. with the recent stability in the level of our foreign reserves, we have relaxed the limits on payment for credit cards for expenditure abroad, cash drawings and delegated limits on import payments | 0 |
zeti akhtar aziz : developing a robust competency framework for the malaysian banking industry opening speech by dr zeti akhtar aziz, governor of the central bank of malaysia, at the industry competency framework study focus group discussion, kuala lumpur, 6 december 2005. * * * saya berasa amat bangga kerana diberi peluang untuk menyampaikan sepatah dua kata dan seterusnya merasmikan sesi wacana institut bank - bank malaysia. saya ingin mengucapkan terima kasih atas penyertaan anda dalam temu ramah eksekutif yang merupakan input yang amat bernilai dalam pembentukan rangka kerja kompetensi industri yang akan dibincangkan hari ini. the banking sector will remain the pillar of our financial system, as it evolves to offer more innovative financial solutions to meet the changing needs of the economy. the industry however, needs to be well positioned in a financial landscape that is continuously being redefined. while new opportunities have emerged, there are also new challenges on the horizon. foremost amongst these is intensified competitive pressures, spurred by financial liberalisation and technological revolution. other challenges include the growing demands of customers for differentiated product offerings and valueadded services at more competitive prices, excellent service quality, and superior level of efficiency. strategic opportunities also arise from new growth areas and a larger marketplace as economic integration regionally and globally gather pace, driven by increasing regional and global trades and investment flows. banking institutions must be ready for the challenges and be well equipped with distinct capabilities to take advantage of the opportunities that the new environment accords. banking is a knowledge - intensive, skills - based and relationship - rich industry. in an increasingly complex and a more liberalised environment, the competitiveness of banking institutions will depend critically on the quality of human intellectual capital and the extent to which the industry is able to leverage on these talents. to compete effectively, banking institutions need professionals with the requisite skills and expertise not only at the strategic and management level, but also at the technical and operational level. successful institutions will be the ones which accord high priority to effective placements, rewards, retention and most importantly, lifelong learning and the continuous enhancement of human capital. lifelong learning is becoming increasingly important in this knowledge - based economy where knowledge and skills need to be | to antoine martin, who will address the global economic outlook. global economic outlook global economic growth was moderate in the third quarter of 2024. economic activity remained solid in the us, while in the euro area it improved only slightly. growth in the chinese economy was rather modest by longer - term comparison. the services sector continued to contribute positively to economic activity worldwide. by contrast, momentum in large parts of manufacturing remained subdued. recently, inflation in many countries was again close to central banks ’ targets. this was due, among other things, to lower energy prices. however, core inflation remained elevated. in page 2 / 4 anticipation of a continued decline in inflation, various central banks cut their policy rates further this quarter. underlying inflationary pressure abroad is likely to carry on easing gradually over the next quarters. at the same time, the pace of global growth should remain moderate. household purchasing power should continue to recover and, together with the monetary policy easing, support growth. uncertainty about the economic outlook has increased in recent months. in particular, the future course of economic policy in the us is still uncertain, and political uncertainty has also risen in europe. in addition, geopolitical tensions could result in weaker development of global economic activity. equally, it cannot be ruled out that inflation could remain higher than expected in some countries. this brings us to the situation in switzerland, which petra tschudin will present. swiss economic outlook as expected, gdp growth in switzerland was only modest in the third quarter of 2024. growth in the services sector was again somewhat stronger, while value added in manufacturing declined. there was a further slight increase in unemployment, and employment growth was only subdued. the utilisation of overall production capacity was normal. we anticipate gdp growth of around 1 % for the current year. thanks also to the easing of monetary policy in recent quarters, growth should pick up somewhat next year, albeit only slightly due to the moderate global economic activity. we currently expect growth of between 1 % and 1. 5 % for 2025. in this environment, unemployment should continue to rise slightly, while the utilisation of production capacity is likely to decline somewhat. our forecast for switzerland, as for the global economy, is subject to significant uncertainty. developments abroad represent the main risk. i will now hand back to martin schlegel. monetary policy outlook ladies and gentlemen, allow me to return to our monetary policy. at our september assessment, we had already indicated that further monetary policy easing | 0 |
gses, both companies were large and complex and deeply embedded in our financial system. in both cases, as the firms approached default, the treasury and the federal reserve sought private - sector solutions, but none was forthcoming. attempts to organize a consortium of private firms to purchase or recapitalize lehman were unsuccessful. with respect to publicsector solutions, we determined that either facilitating a sale of lehman or maintaining the company as a free - standing entity would have required a very sizable injection of public funds – much larger than in the case of bear stearns – and would have involved the assumption by taxpayers of billions of dollars of expected losses. even if assuming these costs could be justified on public policy grounds, neither the treasury nor the federal reserve had the authority to commit public money in that way ; in particular, the federal reserve's loans must be sufficiently secured to provide reasonable assurance that the loan will be fully repaid. such collateral was not available in this case. recognizing that lehman's potential failure posed risks to market functioning, the federal reserve sought to cushion the effects by implementing a number of measures, including substantially broadening the collateral accepted by the fed's primary dealer credit facility ( pdcf ) and term securities lending facility ( tslf ) to ensure that the remaining primary dealers would have uninterrupted access to funding. in the case of aig, the federal reserve and the treasury judged that a disorderly failure of aig would have severely threatened global financial stability and the performance of the u. s. economy. that judgment reflected our assessment of prevailing market conditions, aig's central role in a number of markets other firms use to manage risks, and the size and composition of aig's balance sheet. to avoid the default of aig, the federal reserve was able to provide emergency credit that was judged to be adequately secured by the assets of the company. to protect u. s. taxpayers and to mitigate the possibility that lending to aig would encourage inappropriate risk - taking by financial firms in the future, the federal reserve further ensured that the terms of the credit extended to aig imposed significant costs and constraints on the firm's owners, managers, and creditors. aig's difficulties and lehman's failure, along with growing concerns about the u. s. housing sector and economy, contributed to extraordinarily turbulent conditions in global financial markets in recent weeks. equity prices have fallen sharply, the cost of short - term credit | ##s demand, assuming that the economy is growing moderately ( at its potential ) and unemployment is roughly where it is now. however, my base case for july depends on incoming data. we have important data releases on retail sales and housing coming in before the july meeting. if that data come in materially stronger than expected it would make me lean towards a larger hike at the july meeting to the extent it shows demand is not slowing down fast enough to get inflation down. based on what we know about inflation today, i expect that further increases in the target range will be needed to make monetary policy restrictive, but that will depend on economic data in the coming weeks and months. between the end of july and the fomc ’ s september meeting, we will get two employment and cpi reports with data for july and august. i will be looking for signs that inflation has started its move down toward our 2 percent target on a sustained basis. i anticipate a decline in inflation will come as actual and anticipated hikes by the fomc cool demand for products and labor, which will help demand and supply come into a better balance. the decline in the rate of inflation will also be assisted by continued improvement in goods supply bottlenecks, which is occurring in some sectors, and an increase in labor force participation, which is still significantly lower than it was before the pandemic. i hope these supply recoveries happen, but my expectations for - 9policy don ’ t rely on it. i expect rate increases will continue after july at a pace that is dependent on the incoming data. after the july meeting, further increases will be restricting demand. looking further in the future, i will need to see how the tightening this year is affecting the economy and bringing inflation down toward our 2 percent target. based on my forecast for the economy, i expect monetary policy to be restrictive until there has been a sustained reduction in core personal consumption expenditure ( pce ) inflation, which excludes food and energy. food and energy prices tend to be volatile, so focusing on core pce inflation is a good guide to inflation pressures in the near and medium term. importantly, as futures prices for commodities — food, energy, raw materials — have declined recently, i am expecting total pce inflation to decline in coming months. but until i see a significant moderation in core prices, i support further rate hikes. in talking about where monetary policy is headed, it is helpful to get a fix on | 0.5 |
##s we made in august. for sweden, the majority of indicators point to an upturn in economic activity in the autumn. in accordance with our forecast during the summer, there are currently some unutilised resources ( see chart 2 ). this has mainly been due to a weakening in demand over the past two years. in addition to the relatively favourable capacity level, productivity growth has also been unexpectedly fast given the current economic climate. in the near future, demand is expected to mount due to both solid consumption growth and a small rise in investment. while gdp growth this year is forecast to be moderate, around 1. 5 per cent, growth in both 2004 and 2005 is expected to be appreciably higher, approximately 2. 5 per cent. so growth in coming years is anticipated to be somewhat higher than the potential growth we had forecast for sweden in recent years. if swedish economic activity is to rise as forecast, there will need to be a pick - up in investment. this began to fall as early as 2001 in manufacturing, and the following year it declined in the whole economy. like many other forecasters we viewed the decline in investment as more transitory than it later proved to be. a year ago, our forecasts pointed to a turnaround at the beginning of 2003 ( see chart 3 ). in the june inflation report, it was forecast that investment would be delayed and begin to rise at the beginning of 2004. during the second quarter this year, gross capital formation fell by approximately 2 per cent according to the national accounts. and in its latest forecast from august, the national institute for economic research expects an increase in investment to be delayed further. the situation is clearly uncertain, even if the fundamental conditions for a rise in investment are good, with low interest rates, stable equity market growth and expectations of a recovery in the international economy. another source of concern is connected with swedish household consumption. this has increased at the same time as we have witnessed a relatively substantial decline in the value of household net wealth. in recent years, household indebtedness has risen sharply and is now approaching the levels seen shortly before the banking crisis at the beginning of the 1990s. the interest ratio, i. e. post - tax interest expenses in relation to disposable income, is however at a relatively low level historically. so far the riksbank has not judged these developments to be a problem for financial stability, at least not as long as any future rise in interest rates is | it has appreciated substantially against both the dollar and the euro. it is likely that these recent developments have been due to market assessments of the relative strength of the swedish economy compared with the euro area in the near future, but also to a revaluation of the dollar against the euro following comments from the g7 meeting in dubai. all in all, developments in the krona have largely been in line with our forecast in the june inflation report. so the appreciation of the krona so far is in line with previous forecasts. should the krona continue to strengthen - and particularly if there is also reason to believe that the appreciation will last - it will of course have implications for our forecast. however, it is currently too soon to come to any real conclusions for inflation in the near future from the perspective that is significant for monetary policy. what these developments have mainly illustrated so far is perhaps how greatly exchange rates can fluctuate and how unexpectedly quick changes in sentiment can be. developments in the fixed income market have been less dramatic. however, the long - term yield spread on germany widened slightly in connection with the referendum. in all probability, the current yield spread is partly due to recently better growth prospects in sweden than in the euro area. it is also reasonable to expect that we will have to pay a certain premium in the form of a differential between swedish and german long yields for remaining outside the single currency. we can illustrate this by comparing the yield spread in, for instance, sweden, finland and italy ( see chart 1 ). swedish long yields are higher than finland's, whose situation in terms of growth and government finances has been roughly in line with our own. our yields are also higher compared with italy, despite their markedly weaker public finances. the salient features of the economic outlook world economic activity has been broadly in line with our forecast in the june inflation report. if anything, current tendencies are somewhat better, as concluded by the executive board at its monetary policy meeting in august. signs of a recovery in the us economy have become increasingly evident, which is pleasing of course. the outlook is different, however, for the euro area. perhaps there is reason to expect a slightly longer delay in the european revival, even if we have recently seen a number of positive signals of a forward - looking nature. on the other hand, it appears that economic activity in japan will be stronger than expected. on balance, it currently seems likely that international activity will be roughly in line with the forecast | 1 |
the problems in risk management have made it clear that the modelling of bank risks will always remain imperfect. in interpreting capital adequacy requirements which are based on such risk models, we must therefore proceed with appropriate caution. this is particularly relevant in view of the new capital adequacy requirements that will also be introduced in switzerland next year. the main change under these requirements, known as basel ii, is that capital adequacy requirements will rely more heavily on banks'own risk assessments. bearing this in mind, the lesson learned last summer may well have come at the right time. this now begs the question as to whether – in addition to the complex, riskweighted capital adequacy requirements – other criteria, such as volume limits or the simple debt - equity ratio should not also be considered. the reason for this is that the higher this ratio, the greater the leverage effect of losses on the soundness of a bank. it is not that i intend to question the concept of risk - weighted requirements in any way. rather, it is my wish to possibly strengthen these requirements by introducing supporting measures. for example, compared with risk - weighted requirements, volume limits or the debt - equity ratio have the advantage that such key figures are basically very transparent and are not based on complex models. moreover, they calculate the only element that is relevant in a crisis, and that is the size of the buffer that a bank needs to absorb losses. third, it is a striking fact that, to date, hedge funds have not been a focus of the current crisis. to a considerable extent, this is attributable to a much improved management of counterparty risk in recent years. it is my view that banks should strengthen their risk management as regards their own refinancing decisions and risk allocation and not just with respect to external customers such as hedge funds. the kind of internal subsidising of refinancing costs for individual business areas observed in some cases creates false incentives. in future, the refinancing costs that a bank charges its internal risk centres should constitute an integral element of its risk management approach. to sum up, i would like to state that it is certainly true that the current situation in the credit markets is very serious. at the same time, i want to stress that, fundamentally, the earnings capacity of our international banks is high, thanks to their diversified business model, and this increases their resilience. in this respect, the measures | as the reserve - issuing country has the privilege of not being under much pressure to adjust to current account deficits, at least over the short and medium term. it is worth noting that part of keynes ’ goal in setting up the imf was to try to create symmetry between the need to adjust for both deficit and surplus countries. more recently, the question appeared under the perspective of global imbalances. this discussion highlights that current account surplus countries can forego, at least temporarily, the required adjustment by accumulating international reserves instead. the sustainability of these imbalances, and the extent to which they have contributed to the recent global financial crisis, is still under discussion. the question of the reserve asset has often been at the center of the debate. but as mark carney has recently argued, the adjustment mechanism may be more important than the choice of reserve assets. if adjustment were rapid, symmetric, and global, and if adjustment costs were fairly distributed amongst countries, we probably would not need to gather here today. unfortunately, this is not the world we live in now. historically, exchange rate flexibility has often been the answer. while it is not a silver bullet, it remains true that adjustment through the exchange rate is usually faster, and in the end less costly than adjustment through prices and wages. at the same time, of course, discontent with what is often perceived as excessive exchange rate volatility has been an important source of dissatisfaction with the present international monetary system. what constitutes excessive exchange rate volatility, and whether domestic policies or the international monetary system are at the root of it, is a matter of legitimate debate. iii. the conference nearly twenty years ago, jacob frenkel made the following observation about the international monetary system : “ academics and policymakers have made numerous proposals for reform while, at the same time, the monetary system itself has been in a constant state of change ”. this points to another problem that any attempt to reform the international monetary system faces : the world economy and financial markets, and therefore the international monetary system never cease to evolve. today ’ s conference is organized around four panel discussions. they will focus on issues that are at the forefront of the current debate on shortcomings of the international monetary system. the first panel, chaired by axel weber, will discuss the predominant concerns about the present system. large global imbalances, volatile capital flows, and rapid reserve accumulation give rise to concerns about vulnerabilities. are they possible sources | 0.5 |
). such a programme must entail conditionality that ensures fiscal discipline. with fiscal discipline, monetary policy cannot become captured by fiscal dominance. and therefore, the central bank can continue its pursuit of safeguarding price stability in full independence. and there is one more important lesson from 2012 that we must keep in mind : measures to stabilise the euro area, particularly the omts, are not only essential for price stability. they also reduce target2 balances and, because they foster the cohesion of the euro area, they reduce possible risks for german taxpayers. to sum up, the facts support an ultimately more confident review of 2012. prospects for 2013 as regards the coming year, i would like to suggest three things we need to focus on in 2013 : first of all, we need perseverance. despite the good progress so far showing that adjustment is happening, reform efforts need to be sustained. adjustment is inherently difficult and will remain with us for some time to come. politicians and their populations will need to persevere, especially on structural reforms that improve competitiveness. countries need competitiveness to sustain growth. they must move away from debt - financing. there is no possibility of sustained growth based on permanent debt accumulation ; and by the way, there is no social fairness based on permanent debt accumulation. second, we need continued ambition. relative calm in financial markets should not lead to a lowering of our ambitions to fix the structural flaws in the governance framework of the euro area. after the many advances that have been made in creating new rules and institutions, this coming year should focus on implementation. third, we need patience. i am very well aware that for many people in the countries under adjustment, the personal economic situation can be very difficult. but there is simply no alternative to the path of reform. the crisis has several facets that are of different importance in different countries : there is a debt crisis that needs fiscal consolidation ; there is a competitiveness crisis that needs bis central bankers ’ speeches structural reforms ; there is a banking crisis that needs a strong financial union ; and there is a confidence crisis that needs strong commitment by all policy - makers, including by the central bank expressed through our programme of omts. the social consensus behind the reforms will need to be maintained. these reforms are not undertaken to please brussels or frankfurt or washington but for the deep self - interest of the economies concerned and of the whole euro area. they will make the economies function better, more efficiently and, yes, | a sizeable allocation of credit to highly - leveraged corporates. 5 / 11 bis central bankers'speeches i n china, the total leverage in the system is about 300 % of gdp, with high levels of indebtedness among local governments, state - owned enterprises, and households. in asia, there has been a surge in the issuance of foreign currency bonds, denominated mainly in us dollars and concentrated in the real estate sector. high leverage in itself does not suggest an impending financial crisis but, if coupled with a sudden shift in investor sentiment, can lead to financial instability. the potential triggers for such a sudden shift in investor sentiment are not hard to find – escalation of trade tensions, disorderly brexit, sharp slowdown in china, or unexpected tightening of financial conditions. in asia, the key risk is an abrupt reversal of portfolio flows and consequent stresses on indebted corporates with large foreign currency liabilities. singapore ’ s financial system, corporate and household fundamentals remain sound. mas ’ most recent stress tests indicate that our financial system is resilient to an adverse scenario of a severe global downturn as a fallout from rising trade tensions. that said, continued vigilance is warranted. some households and corporates could face pressures on their cash flows and hence debt servicing ability if the economy slows more than expected. property market and macroprudential policy last july, the government took macroprudential measures to cool a property market that was showing early signs of potential over - heating. in less than one year, between q3 2017 and q2 2018, private residential prices had surged by 9 %, offsetting most of the gradual decline of 12 % over the preceding four years since q3 2013. there was a real possibility that property price increases would once again run ahead of economic fundamentals – as they did in the lead - up to 2013. if a renewed property bubble were to form, it would risk a destabilising correction later that would hurt households, businesses, and the banks. this risk was especially pertinent, given the strong pipeline of private housing supply coming on stream over the next few years. this is why, mnd, mof and mas decided to act early and decisively to restrain the property market. we have learnt from experience that preventing a bubble from forming is less painful than deflating one that has fully formed. the measures implemented last year have helped to moderate the property | 0 |
##uous circle. i am impressed by the extensive work carried out by the world bank in its flagship study, and i once again thank them for their contribution to the economic development in the region through this work. ladies and gentlemen, with these brief opening remarks i hope i have conveyed how important i believe the topic of our conference is, and how pleased i am to see you all here to participate in the event. i wish all participants productive discussion in the coming two days. thank you. | mr. carse speaks on banking supervision in hong kong and the lessons learned from the financial crisis in asia speech by the deputy chief executive of the hong kong monetary authority, mr. david carse, at the asian investment conference “ asia : meeting the challenge ” held in hong kong on 27 / 3 / 98. 1. i am pleased to be here this morning to speak to you on the topic of the supervisory lessons which hong kong can learn from the region and specifically from the crisis which has engulfed asia since july of last year. this is a drama that is still being played out and we have not yet reached the final act. but i do not think that it is too early to make some kind of judgment about what went wrong and the lessons that can be drawn for the future. the asian crisis 2. i think that it is fair to say that the asian crisis has surprised almost everyone by its speed and intensity and the ease with which it spread from country to country. even those who were sceptical about the asian miracle did not really expect anything like this. of course, there were warning signs such as the current account deficits in a number of countries such as thailand. but these could be regarded as the natural consequence of the heavy demand for investment in growing economies. the asian economies were certainly not fault - free, but in general they not exhibit the classic signs of gross macroeconomic weakness that normally lead to a balance of payments crisis. governments ran fairly prudent fiscal policies, savings were high and inflation rates reasonably low. even if policy mistakes were made, the punishment does not really seem to fit the crime. 3. why then have exchange rates fallen by as much as they have and why have economies in the region been so severely crippled? it is generally agreed that a large part of the answer lies in the weakness of financial and banking systems in the region, which have amplified the initial effects of external shocks and economic downturn. in essence, banking systems that were already in weak health before the crisis broke were not up to the task of intermediating large inflows of capital. they have been part of a vicious circle whereby loss of confidence in the currency leads to loss of confidence in the banking system that further undermines the currency. this is the “ run on the country ” syndrome. it therefore follows that strengthening of the banking system must be part of the cure of the asian disease and the means of preventing a recurrence. banking supervision has an important part | 0.5 |
is illustrated in chart 2. the chart shows that using strong instruments to achieve an inflation target or exchange rate target in the short term results in more pronounced fluctuations in the real economy. by allowing greater flexibility with regard to the short - term achievement of goals, it is possible to achieve more stable developments in the real economy. but confidence in the nominal anchor must not be undermined. this may lead to a less favourable trade - off, as illustrated in the chart by the broken line. if there is insufficient confidence in monetary policy, economic agents may expect higher price and cost inflation to persist. this will be taken into account when setting wages and prices. the result will be a wage and price spiral. experience shows that this in turn leads to slower growth and lower employment. a lack of confidence therefore entails a risk of higher unemployment. in consequence, monetary policy must also focus on movements in nominal variables when the economy is subjected to supply - side shocks in order to prevent the economy from entering a vicious circle. the building of confidence in nominal developments must be given sufficient priority. if there is confidence in monetary policy, economic agents will expect the rise in price and cost inflation to be of short duration. higher prices will then not feed through to prices for other goods and to wages to the same extent, and there will be less risk of a recession. confidence in monetary policy therefore results in a better trade - off between nominal fluctuations and fluctuations in production and employment. i have been talking about supply - side shocks to the economy. however, there are many types of shock where there is no conflict between stable nominal developments and stable developments in the real economy. for example, a sharp decline in overall demand may give rise to a deflationary recession. in such a situation, an expansionary monetary policy may contribute to both nominal and real economic stability. whether disturbances arise on the supply side or the demand side, it should be possible to use the interest rate to influence economic developments. the interest rate is an instrument, rather than a target variable. a passive monetary policy will lead to both price and exchange rate instability and to greater fluctuations in production and employment. however, an active monetary policy does not imply attempting to fine - tune economic developments. we must be mindful of the uncertainty associated with economic developments and the effects of monetary policy. normally, interest rate changes should be made gradually to allow us to acquire more information, for example about the effects of previous interest rate changes. uncertainty and credibility according to nor | there has, for example, been a rapid growth of the euro - denominated private bond market. the euro did not cause this trend, but it has given it a major impetus. the process of monetary policy - making and its implementation has functioned efficiently. the evolution both of external inflation forecasts and of inflation expectations derived from the analysis of long - term interest rates ( in particular, index - linked bonds ) indicates that the financial markets and economists widely expect medium - term price developments that are in line with the ecb ’ s definition of price stability. obviously, bond yields and many external forecasts incorporate expectations of future policy changes and therefore offer a judgement on prospective monetary policy decisions, as well as on decisions taken in 1999 and 2000. as such, they provide a positive assessment of the overall monetary framework. actual inflation in 1999 stood at 1. 1 %, compatible with price stability. although inflation has increased this year, it is still relatively low, both historically and compared with the united states, for instance. above all, as indicated earlier, monetary union has proven to be a catalyst for major improvements in the structural economic environment. in this respect, there is thus also reason to expect that the euro area could benefit over time from the advances in the new technologies, as the united states has apparently been doing already. europe is thus changing and much has already been achieved. the advances are noteworthy, although they are not always appreciated, not even by europeans themselves. there remains a great deal to be done in order to further upgrade the structural environment. however, this in itself creates opportunities for the future as there is a large potential to be exploited. 3. outlook for euro area economy let me now turn to the conjunctural side of the economic environment. where economic growth is concerned, the euro area economy has impressively overcome the negative mood prevailing in early 1999, recovering to reach a state of affairs not seen for more than a decade. real gdp growth in the euro area has shown a strong performance since mid - 1999, with four consecutive quarters of 0. 9 % growth, quarter - on - quarter, and the forces underlying sound growth in the medium term remain in place. the external environment remains favourable. domestic demand is expected to continue to be strong as well. consumption is benefiting from high consumer confidence and further increases in employment, and investment is being stimulated by higher corporate profitability and increasing rates of capacity utilisation. domestic financing conditions are also good. this positive outlook | 0 |
channels as well as new methods of delivering payment services more efficiently at lower costs to a wider spectrum of society and consumers. however, these have also brought on new risks. regulators, providers and issuers have taken into consideration the risks that each of these various payment modes may have on the safety of the payment systems as a whole. safeguards have to be put in place to instill public confidence in the usage of these innovative payment services or channels. in this regard, it is vital for regulators to impose prudential requirements on the providers and issuers of the electronic payment systems and instruments. the need for sound regulation and supervision is further exacerbated by the fact that criminals are constantly on the lookout to exploit the weakest link or point in the financial system. the risk of the new and increasingly popular payment mechanisms being used as conduits for money laundering and combatting the financing of terrorism ( aml / cft ) activities is also a growing concern for central banks and financial intelligence units around the world. the increasing use of electronic payment systems, particularly electronic money, for making cross - border payments makes them vulnerable to exploitation for criminal purposes. therefore, all parties involved in the payment value chain have to be vigilant to ensure that they are not exploited for such purposes. adherence to international standards on aml / cft, including the ability to trace funds back to the source and to positively identify the beneficiaries of the funds, are indeed vital. in malaysia, electronic money is prescribed as a designated payment instrument in the payment systems act 2003 ( psa ) and the act is under the purview of the bank. as such, any person who wishes to issue electronic money would be required to obtain the prior approval of bank negara malaysia and is subjected to the prudential requirements imposed by the bank. in 2005, in line with the objective of reducing the use of cash in the domestic economy, we liberalised our policy by allowing non - banking institutions to issue electronic money. in 2008, the bank issued the guidelines on electronic money, which outlined the broad principles and minimum standards to be observed by electronic money issuers. as at end - march 2010, 26 issuers have been approved to issue electronic money comprising both card - based and network - based schemes. during the past five years, the use of electronic money recorded encouraging average annual growth of 21. 5 % and 24. 9 % in terms of volume and value respectively. with regard to the | oversight of electronic money issuers, in particular the non - banking institutions, our objective is to ensure the safety and reliability of the issuers ’ systems and operations. we acknowledge, nevertheless, that in this rapidly changing commercial and technological environment, it is becoming increasingly challenging for regulators to develop policies that are effective and appropriate to address the regulatory concerns while at the same time, promote innovation. digital convergence of telecommunications, computers, and the media is fast conjoining many new products and services to replace the old ones. for these reasons, inflexible and highly prescriptive regulations and rules may be inhibitive to innovation. in addition, with the entrance of more non - bank players in the payments industry, overseeing these players could be more challenging as a different regulatory approach may have to be adopted. regulators would need to be conversant with the business dynamics and operational arrangements of these new players while, at the same time, these players have to adapt quickly to the regulators ’ supervisory approach and requirements. the regulators ’ dilemma in achieving a proportionate regulatory framework, in particular to promote the growth of electronic money, remains a challenge. this give rise to the need to balance trade - offs between impacting public confidence and promoting innovation and competition. let ’ s take the example of the provision of a more lenient regulatory regime. while this would promote the entry of new players in the market, it may also lead to the payment systems being used for illicit purposes. regulators may as well get the major stakeholders to understand this dilemma. by doing this, hopefully the regulators will be able to apply a more stringent regulatory regime to protect public interest, but at the same time do not unduly affect the viability and growth of electronic payments. concluding remarks regulators play an important role in ensuring that effective regulations are in place to maintain the integrity of the payment system as well as to promote user confidence, particularly for new payment services. at the same time, it is also recognised that migration to electronic payment brings immense benefits to the country. hence, a regulatory environment that would allow innovation to thrive has to be balanced against the objective of safeguarding public interest and confidence in the payments infrastructure. this balancing is required to ensure continued acceptance and usage of the various payment systems and instruments. the emergence of payments processors, such as spare change, boku, paymo, to facilitate payments for virtual goods and services over online social networks, such as facebook, bebo and myspace, as well as person - 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yutaka yamaguchi : the current state of the japanese economy remarks by mr yutaka yamaguchi, deputy governor of the bank of japan, at the jcif international finance seminar, bank of japan, 17 october 2001. * * * it is my great honor to be here at this jcif seminar. taking this opportunity, i would like to explain the state of japan's economy and the nature of confronting problems. i would also like to share my thoughts on how to address the current difficult situation and, in particular, how the bank of japan could contribute in such a process. 1. global economic developments i would like to start with the state of the global economy, in particular that of the united states, which forms the basis of my assessment of japan's economy. currently, discussion about the prospect for the us economy focuses on two issues. the first is the duration of the ongoing economic adjustment process, which started in the it - related areas, as well as the pace of the subsequent recovery. the second is the economic impact of the tragic terrorist attacks in september. the impact of the terrorist attacks in the us regarding the impact of the terrorist attacks, given great multi - faceted uncertainties, it is premature to make informed judgement even if we narrowly focus on the economic areas. it is however safe to say that we have succeeded in dealing with the most immediate challenge after the attacks, which was to avoid market disruption and to maintain the well - functioning of financial markets with respect to liquidity and settlements. soon after the attacks, central banks including the bank of japan, finance ministries, and financial regulatory bodies in the world made a swift move while maintaining a close contact among each other. in the area of central banking, central banks in major countries swiftly provided significant amount of liquidity to money markets and declared their determination to secure the well - functioning of financial markets and settlement systems. i think that these central bank actions exactly followed a textbook of crisis management. at the same time, participants of financial markets also made their best efforts to preserve the functioning of markets and to execute transactions smoothly. as such, thanks to the coordinated efforts by the financial authorities, both at home and abroad, and market participants, we successfully avoided disruption in financial markets, which could have extended subsequent negative effects to the economy as a whole. currently, our focus has shifted to how the attacks and the subsequent developments will affect the global economy especially that of the united states. on this point, as stated by | however, the information we have been able to piece together, suggest, that the current economic situation is also taking its toll on credit unions as more members face lay - offs and find it more difficult to pay their loans on time. in fact, sample data for credit unions ( and i should clarify that it is a relatively small sample ) suggest that delinquency ratios went up significantly in 2010. what ’ s more, it appears that many credit unions have not been vigorously addressing delinquency, for example, through adequate provisions or by writing off bad debts. i am also advised that some credit unions ( and not only the small credit unions ) may still not have recognized the importance of “ provisions ” or know how to provision. in some cases, it is not clear whether the boards of the credit unions are fully aware of the extent of the problem and thus, in fact, what may be happening is that dividend payouts are coming out of reserves. if that is so, this is certainly not good financial management. the other “ contextual ” development that i would like to refer to has to do with the credit unions ’ exposure in the unfolding clico situation. the information which is in the public domain indicates that 65 credit unions had investments amounting to close to $ 700 million in clico. that, in itself, is not my issue. what is the issue? it is that for some credit unions, bis central bankers ’ speeches the impairment of these investments would threaten their very viability. this suggests that, the management of these credit unions may not have properly assessed credit and investment risks and, through insufficient portfolio diversification, almost compromised the viability of their organizations. fortunately, it appears that satisfactory arrangements have been made to contain any systemic damage to the credit union sector. these two situations point to chronic challenges being faced by the credit union sector. you add to these the medium term outlook, in which economic recovery is expected to depend heavily on small business development, and you mix in the enhanced requirements of the new regulatory framework that is being proposed, and the prescription is for more and more diversified capacity enhancement, at both the individual and organizational level. permit me to expand on this theme. as you know better than i, what makes the credit union movement different from the banking sector is your founding principle – not for profit, not for charity but for service. the philosophy of “ people helping people ” is the cornerstone of your movement. this philosophy imposes on each | 0 |
moved to streamline the examination process to make it more focused on risk - management. our financial regulation strategy now emphasizes : • active oversight by management and the board of directors ; • clearly defined policies, procedures and authority ; • comprehensive risk measurement and risk mitigation ; and • adequate systems of internal controls. unlike in the past when the focus was mainly on capital and operating results, the new regulatory strategy requires the central bank to take a far greater interest in the corporate governance of financial institutions. understanding how institutions are managed is now the key. the hallmark of our regulatory approach is to identify problems early – well before they manifest themselves in the financial statements when it is usually too late to act effectively. early intervention allows us to work with management and boards to effect remedial actions. early identification of problems essentially involves a qualitative assessment of an institution ’ s risk management processes and methodology, its internal control environment and its compliance mechanisms. as regulators we cannot do this alone. this is where you, as internal auditors, have a critical role to play. this is where the work of the internal audit and the supervisory function are closely aligned, specifically in the identification, management and mitigation of risk, and ensuring that the institution ’ s operations are conducted effectively, efficiently and in compliance with applicable laws and regulations. increasingly over the last decade operations risk has taken on greater prominence within the context of enterprise risk management systems. as you know, operations risk arises from inadequate or failed internal processes, people or systems or from external events. operations risk has always been a part of banking but it has become a greater threat to the safety of financial institutions in the contemporary financial environment. this is because the institutions themselves have become more complex and their products and services have become more numerous and varied. in addition, advances in information technology have greatly increased the speed at which vulnerabilities in one institution can escalate into serious problems in other institutions. consequently, there has been an increasing incidence of failure linked to operations risk. in 2003, the basel committee on banking supervision, the main international standardssetting body for bank supervision, identified as a cardinal principle the responsibility of the board of directors “ to ensure that the bank ’ s operational and risk management framework is subject to effective and comprehensive internal audit by operationally independent, appropriately trained and competent staff ”. that ’ s the mandate that all banks face and that ’ s the challenge for all of you internal auditors. what this implies is that internal | 2012, scientists at the cern laboratory discovered the latest subatomic particle – the higgs boson – named after the nobel prize winner in physics peter higgs, and known by its nickname the “ god particle ” in popular media outside the scientific community. the higgs boson is thought to give everything else in the universe mass and to keep the universe from destruction. it is part of shiva ’ s tandava dance. is it a coincidence that the statue in front of the cern complex is none other than shiva nataraja – the dancing shiva? for many modern physicists, shiva ’ s tandava dance is seen as the dance of subatomic matter. the tandava thus unifies ancient mythology, religious art and modern physics. here at the central bank, some would say that our monetary policy is similar to the tandava dance, as we move our policy interest rate to destroy inflation, create the conditions for growth in the non - energy sector, and protect the foreign exchange market. or they might even say that the clico crisis has been a process of creative destruction, with the pain of thousands of policyholders making way for new and stronger insurance regulation and supervision. two weeks ago, professor angus deaton won the 2015 nobel prize in economics. professor deaton has changed our thinking about world progress. his popular book the great escape : health, wealth and the origins of inequality, traces the ways the world has gotten better over the last 250 years, as billions of people have become healthier and happier as gdp has grown. but he notes crises can interrupt progress, and he worries about the millions of people who are being left behind by this progress, especially in developed countries where inequality is growing and economic growth is slowing. professor deaton ’ s works reminds us that pain and gain are inextricably linked to creative destruction. hopefully, you will leave here tonight with a greater appreciation of the message of divali. remember the act of lighting a deya is creative destruction, destroying evil and darkness and creating a new opportunity for the satyam, shivam, sundaram ( truth, goodness and beauty ) of the universe to unfold. i wish you and your family shubh divali 2015. may your paths always be lit ; may your minds always be illuminated. i hope you enjoy lord shiva : creative destruction. bis central bankers ’ speeches | 0.5 |
central bankers'speeches priority. we have come a long way, but there ’ s no doubt we still have far to go. and this is a journey without a final destination. when someone tells me “ we ’ re done, ” is when i know we have the furthest to go. it ’ s also a journey that is so much easier when we do not walk alone. partners like open finance are crucial to our progress. once again, i ’ d like to thank you for inviting me to open today ’ s forum. i know it ’ s going to be a productive and insightful day, and one full of the conversations we all need to be having more frequently. lgbt demographic data interactive. los angeles, ca : the williams institute, ucla school of law, january 2019. 2 james, sandy e., jody l. herman, susan rankin, mara keisling, lisa mottet, and ma ’ ayan anafi. the report of the 2015 u. s. transgender survey. washington, dc : national center for transgender equality, chap. 9, 2016. 3 human rights campaign foundation, a workplace divided : understanding the climate for lgbtq workers nationwide, june 2018. 4 see for example : hewlett, sylvia ann, and karen sumberg, for lgbt workers, being ‘ out ’ brings advantages, harvard business review, july - august, 2011 ; and hunt, vivian, and lareina yee, sara prince, and sundiatu dixon - fyle, delivering through diversity, mckinsey & company, january 2018. 3 / 3 bis central bankers'speeches | to raise awareness around the use of pronouns. on its own, it may seem like a small change, but it sends a loud message that part of respecting one another is using the correct pronouns. this effort has been well received, and a big part of that is because it ’ s created spaces for conversations that just weren ’ t happening before. but policies can only go so far. in fact, we can have world - class policies, but if we don ’ t have a culture where people feel comfortable bringing their whole selves to work, rules alone won ’ t get us to where we need to be. this is true of every element of diversity and inclusion. in a culture where taking extended leave damages your career prospects, a generous parental leave policy won ’ t make up for that. in a culture where people don ’ t feel that their voices are welcome, few will speak up. in a culture that fails to embrace differences, we won ’ t reap the benefits of diversity. 1 / 3 bis central bankers'speeches the data are clear. nearly half of lgbt people are closeted at work, and the top reason lgbt workers don ’ t report negative comments they hear about lgbt employees is they don ’ t believe that anything will be done about it. 3 this gets to the heart of why the “ inclusion ” piece of diversity and inclusion is essential, and a personal priority. obviously, there ’ s a moral imperative for diversity, and numerous studies have shown the benefits to both productivity and the bottom line. 4 but for me, it ’ s my experiences as both an academic and a policymaker that have made inclusion so important. economics is a profession that has a glaring diversity issue. as economists, we have not done enough to create a diverse profession or an inclusive culture. when i ’ m sitting in a room and see a bunch of people who look and sound the same, i know it ’ s a problem. when everyone has an identical view, it ’ s easy to assume it ’ s because that view is the right one. but for me it raises questions : who isn ’ t in the room? who ’ s missing, and why aren ’ t they here? i ’ m always on the hunt for different perspectives on how to interpret the data, new takes on old problems, and innovative approaches to tackle the challenges that lie ahead. if i have a bunch of cookie - cutter theories and explanations that look like my own, i know it ’ s highly probable we | 1 |
savers, beginning with those who have been hit hardest by the crisis. it nevertheless implies changes at both national and european levels. at national level, we need to prioritise public spending towards productivity - enhancing investment, ensure that labour and goods market are flexible, cultivate a supportive regulatory, judicial and educational environment, and open our economies to spur competition and encourage the emergence of new actors. opaqueness and vested interests17 are not only defining features of developing economies. successful reform in european economies hinges on efforts to curb rent - seeking behaviours. for example, doesn ’ t the single supervisory mechanism have the objective of freeing bank supervision from national politics? see european commission ( 2013 ). long term financing of the european economy, green paper, march. i refer here to the concept of “ limited access social orders ”, see north, d., j. wallis and b. weingast ( 2009 ). violence and social orders : a conceptual framework for interpreting recorded human history, cambridge university press. bis central bankers ’ speeches at european level, we need to provide a framework that supports and incentivises the introduction of such national policies. this is the role of economic union in the euro area, the “ e ” of emu. i would stress, however, that economic union does not mean defining a single economic model across all countries. on the contrary, its purpose is to create the conditions for each country to identify and develop its comparative advantage. paradoxically, it is only by encouraging difference – comparative advantage – that the euro area can achieve convergence – that is, a more even distribution of economic outcomes. avoiding re - nationalisation and protectionism let me finally address the third lesson learnt from east asia. europe needs to avoid protectionist temptations and calls for re - nationalisation. protectionism and beggar - thyneighbour policies would lead to further losses of welfare at both european and global level. fortunately, there has been no significant surge in barriers to global trade in recent years – unlike during the great depression – thanks to global and regional policy coordination. these efforts remain important. barriers to trade in goods and services cannot be raised within europe thanks to our single market and competition rules which are enshrined in european laws, but the single market can be further enhanced. savings have been partly re - nationalised as a consequence of financial fragmentation. this is a trend that, if left unchecked, can be fatal to the single market. completing the banking | green paper which focuses see article 105 ( 1 ) of the treaty. london economics ( 2002 ), “ quantification of the macro - economic impact of integration of eu financial markets ”, report to the european commission. see article 105 ( 1 ) of the treaty. see under http : / / www. ecb. int / pub / pdf / other / target2progressreport200510en. pdf ( second progress report on target2, ecb press release dated 21 october 2005 ). see http : / / www. ecb. int / pub / pdf / other / ecgreenpaperfinancialservicespolicy2005en. pdf 2 / 6 on the consolidation and consistent implementation of the legislative framework for financial services to be achieved by exploiting the potential of the existing institutional set - up and by a profound assessment – both ex ante and ex post – of new legislative initiatives. the eurosystem also supports the strands of action suggested by the commission in the area of financial regulation and supervision, in particular the importance attached to the objective of rationalising the existing regulatory framework and the pursuit of supervisory convergence. third, we try to enhance knowledge and raise awareness of the state of and need for european financial integration, and we measure the progress made towards its achievement. and fourth, we can act as a catalyst for private - sector activities by facilitating collective action and assisting with possible coordination problems. i would like to concentrate more particularly on these last two kinds of activity, namely measuring the state of financial integration and acting as a catalyst for private - sector activities. 4. the integration of european financial markets and selected examples of fostering it the basic starting point for any possible action is to first assess the state of affairs in order to gather the evidence upon which the decision to undertake a certain activity can be based. for a financial instrument or financial service, a price normally exists, so one can use quantitative indicators, based on the law of one price, to measure the degree of integration. in this respect, let me draw your attention to the ecb ’ s report on “ indicators of financial integration in the euro area ” that was published at the end of last month. 8 this report provides an assessment of the degree of financial integration in the main segments of the euro area financial market, covering the money market, the government and corporate bond markets, the equity market and banking markets. i should also like to point out that while this first | 0 |
for the appointment and re - appointment of shariah committee members. this applies as well for key shariah personnel in islamic financial institutions, including islamic windows. the aim is to ensure shariah advisors and personnel are equipped with the necessary knowledge that 2 / 3 bis central bankers'speeches transcends across various disciplines including legal, finance and taxation matters. the timeline for compliance will be decided later. my final point is to engage the world more openly. issues of shariah are complex and sometimes difficult to discern. but they are important, and matter very much to a wide range of stakeholders. as imam ash - shafi ’ i reportedly said, “ knowledge is that which benefits, not that which is memorised ” 3. hence, in keeping with the changing landscape of the industry, engaging more openly and transparently about views and decisions will enhance understanding and acceptance. views and opinions are man - made and should be challenged, questioned and debated through civil and intellectual discourse. during the islamic golden age, such discourses and challenging of ideas were commonplace to assess the veracity of knowledge. al haytham, who wrote the influential ‘ book of optics ’, once said : “ the duty of the man who investigates the writings of scientists, if learning the truth is his goal, is to make himself an enemy of all that he reads.... he should also suspect himself as he performs his critical examination of it.. ” the goal for us today should be to forge greater understanding and acceptance. contentious differences in shariah opinion is a given but it must not hold us back, but rather be resolved through debate and discussion with a view to find truth and justice. in setting an example to inspire such exchanges, beginning january 2018, bank negara malaysia ’ s website will feature an enhanced version of the sac microsite, starting with the bahasa version to provide more detailed disclosure of the sac ’ s works. over the years, the sac has accumulated a treasure trove of knowledge which has been shared through various publications. in this digital age, it is high time that this be made even more accessible to the whole world. this new microsite will among others, serve as a repository for key discussions on fiqh matters and underlying reasoning of shariah rulings. this is expected to promote greater understanding and appreciation of the thought process and rationale in arriving at a ruling by our learned scholars. i trust that this repository of knowledge will encourage | an exogenous impulse or a shock to the interest rate. this means that the interest rate is raised in response to factors other than those that can be explained historically by the other variables in the model. thereafter the model takes over, and the interest rate moves in line with the model ’ s estimated reaction pattern. the effect of an interest rate shock will depend on the variables included in the model, the model ’ s structure and estimation period. the result can be more robust if we use a long time - series in the estimation. on the other hand, changes in monetary policy regimes can influence the results. it may therefore be of greater interest to confine the estimation period to, for instance, the period of inflation targeting. first, i would like to look at the implications of the choice of estimation period for the results. i will then compare the var model with a corresponding interest rate shock in nemo. chart : isolated effect on gdp of an interest rate increase in two different var models in order to further explore the extent to which the estimation period has a bearing on the results, we have estimated var models with successive starting points from 1986 to 19968. each model is quantified on quarterly data up to 2009. in the analysis, the interest rate increases by 1 percentage point and then gradually falls back. the increase in the interest rate will result in a temporary decline in gdp growth. the chart shows the effect in two of the models, one that is estimated from the mid - 1980s and the other where the estimation period starts ten years later. the impact on gdp occurs somewhat earlier, but is a little smaller when we start the estimation period later. this may reflect the change in monetary policy regime during the period or structural changes in the norwegian economy. chart : maximum impact of a 1 percentage point interest rate increase, different estimation periods if we only look at the maximum impact of an interest rate increase in each of the models, we obtain a picture of how this has changed over time. each point in the chart represents the impact on the level of gdp and inflation when the effect of an interest rate increase is strongest in each model ( estimation period ). the charts show that an unexpected change in the key policy rate of 1 percentage point results in a maximum downward shift in gdp of 0. 4 – 0. 7 per cent and a maximum decline in inflation of 0. 2 – 0. 3 percentage point. chart : number of quarters to maximum effect of interest rate change, different estimation periods | 0 |
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