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2000, bringing its share to 14 % of the country β s total exports ( right - hand side of slide 2 ). asian countries have made substantial progress in developing their financial markets since the asian crisis at the end of the 1990s. most financial markets in the region have become significantly more liquid and diversified than they were 15 years ago thanks to gradual liberalisation of capital flows, better financial market infrastructure and an expanding domestic investor base. hong kong and singapore now rank among the world β s most important financial centres. between 2003 and 2013, asian stock markets β contribution to global market capitalisation increased from approximately 20 % to over 30 %. 1 bond issues denominated in local currencies have also gained steadily in importance. this market quadrupled in size between 2005 and 2014 and now totals some usd 8, 000 billion. 2 equally, asian financial centres have made substantial inroads into global foreign exchange markets in recent years ( left - hand side of slide 3 ). in 2013, almost one - fifth of global foreign exchange transactions took place in singapore, japan, hong kong and australia. while these centres have not yet reached the uk level, they are now almost on a par with the us. singapore last year supplanted japan as the world β s third - largest foreign exchange trading centre ( righthand side of slide 3 ). 3 against this backdrop, these markets have understandably gained in significance for the snb, too, which explains why we decided to open a branch office with eight staff in singapore in mid - 2013. this office is primarily significant from the point of view of investment policy, and to date our expectations on this score have been met in full. our presence on the ground in singapore enables us to manage our asia - pacific portfolio much more effectively. the importance of being able to operate on the asian bond and stock markets during local trading hours, for instance, has been confirmed. our office there also allows us to manage a host of on - site relationships, which deepens our understanding of asian financial markets β and economies in general. moreover, having a local presence makes it easier for us to monitor and enforce the minimum exchange rate round the clock, thereby contributing to the implementation of monetary policy. the growing importance of asia is also reflected in our foreign exchange reserves. as i mentioned earlier, given the enormous increase in our foreign exchange reserves, the world federation of exchanges. www. world - exchanges. org, statistics / annual query tool. asian development bank | philipp hildebrand : ( the ) productivity ( imperative ) summary of a speech by mr philipp hildebrand, vice - chairman of the governing board of the swiss national bank, at avenir suisse, zurich, 24 september 2007. the complete speech can be found in german on the swiss national bankaβ¬β’s website ( www. snb. ch ). * * * just a few years ago, the weak growth of the swiss economy was a dominant topic in public debate. for four years now, the economy has been advancing strongly. is this merely a cyclical boom? or has structural change taken place, affecting both productivity and the associated potential growth path? this would have far - reaching implications, not least for monetary policy. a number of factors indicate that structural change is indeed occurring and that this could ultimately result in an increase in the underlying productivity trend. however, time lags and cyclical distortions make it difficult to identify such changes. | 0.5 |
( chart 7 ). in the jargon, the output gap remains negative. on the other hand, while actual inflation has been declining, medium - to long - term inflation expectations in these economies appear to have remained more or less anchored at about 2 percent ( chart 8 ). given this economic and inflation situation, the challenge for monetary policy is how to stimulate the economy and lower the unemployment rate while keeping inflation expectations unchanged. by contrast, in japan, the unemployment rate has declined to 3. 5 percent, which is below the trough prior to the global financial crisis, and there is limited slack in the economy. on the other hand as i have explained, under 15 years of deflation, deflationary expectations became entrenched and medium - to long - term inflation expectations drifted down to a very low level. in such a situation, the policy challenge for us is how to raise inflation expectations. taking this challenge into account, qqe focuses on directly working on inflation expectations. meanwhile, switzerland has been facing a challenge that differs from that in the united states, the united kingdom, the euro area, and even japan. switzerland has seen a decline in inflation as a result of a decline in import prices due to the appreciation of the swiss franc. therefore, the swiss national bank ( snb ) set a ceiling for the swiss franc against the euro, stating that it would enforce the ceiling with unlimited interventions. the fact that the ratio of the snb β s balance sheet to nominal gdp is higher than that of the bank of japan β s reflects the increase in its holdings of foreign currency denominated assets under this policy. iii. achievements under one year of qqe developments in the past year more than one year has passed since the bank introduced qqe. during this time, qqe has produced its intended effects, with japan β s economy on track to achieving the 2 percent price stability target. under the bank β s large - scale purchases of government bonds, long - term interest rates have been stable at a low level and have recently been below 0. 6 percent ( chart 9 ). inflation expectations judged from break - even inflation rates calculated from the yield of inflation - indexed bonds and various surveys have been rising ( chart 10 ). as a result, real interest rates have declined, thereby stimulating private demand. against this backdrop, the virtuous cycle among production, income, and expenditure has kept the growth momentum intact and japan β s economy has continued | , it is likely that the growth potential of japan β s economy has recently been structurally weakening. the reasons for the weakening growth potential are complicated. broadly speaking, it seems that the system and the business practice which were formed in the past higher growth period as well as firms β behavioral principle could not sufficiently adapt to two large changes going on since the 1990s. the two changes in the business environment were the intensification of global competition and the domestic demographic vortex. the first change, global competition, accelerated in the 1990s. globalization enabled various and quick combinations of advanced economies β capital and technology and emerging economies β labor force, and opened the door to emerging economies to high growth. potential business opportunities expanded beyond borders, and, in that regard, globalization was a change that brought new growth opportunities for japanese firms and, eventually, japan β s economy. at the same time, globalization ushered in a β mega competition β era. japanese firms were strongly required to gain strength to promote differentiation from many overseas rivals and become among the first to tap potential demand. while it is a fact that japanese firms have been going in that direction, the speed has not necessarily fast enough, compared with the speed of changes in the business environment. the second change, the demographic vortex has also progressed markedly since the 1990s. the population of workers, namely, the working - age population, defined as the population between 15 and 65 years old, started to decline since the mid - 1990s and the pace of decline has been accelerating. bis central bankers β speeches such change in the demographic composition could induce a shortage of labor and becomes a factor in reducing growth potential from the supply side. at the same time, on the demand side, the change will prompt structural changes of the demand content because necessary goods and services will differ, according to each stage of life. mass consumption markets, including housing and consumer durables, will shrink, while demand for various goods and services that raise the quality of life, such as medical and nursing care services, will increase, at least potentially. if changes on the supply side cannot catch up with the substantial changes in the demand structure, potential needs will not lead to actual spending and remain untapped, while excess supply will continue in markets for existing goods and services and economic activity will be under downward pressure. in japan β s economy since the 1990s, it is likely that a supply and demand mismatch has chronically remained and continued to act as one of the reasons for inducing low economic growth. background | 0.5 |
to hold a stock of high quality liquid assets that can be used to meet unexpected deposit outflows. these instruments include highly rated paper issued by sovereigns and by corporates. the regulators of the conventional industry have focused on the issue of liquidity because, pre - crisis, conventional banks increasingly relied on their access to short - term interbank markets to fund relatively long - term assets. borrowing short to lend long is, of course, fundamental to the business of banking. even so, there comes a point of which the degree of maturity mismatching is no longer prudent, and we saw with conventional financial institutions that the boundary between prudent and imprudent business conduct had been crossed. bis central bankers β speeches if we look at the trends in islamic banking in the years prior to the crisis, we can see that there are important similarities between the practices of islamic financial institutions and those of conventional ones. just like conventional institutions, islamic financial institutions increasingly funded long - term assets with short - term funding. although the assets and liabilities were structured in a sharia - compliant manner, the degree of maturity mismatching was just as great as was practiced by conventional institutions. in some cases where the asset involved a long - term development project, the degree of maturity mismatching was significantly greater than that practiced by conventional financial institutions. the conventional financial industry received a wake - up call during the crisis concerning the importance of understanding, monitoring and controlling liquidity risks. the islamic financial industry must recognise that it also needs good liquidity risk management. however, islamic financial institutions find it difficult to manage their liquidity risk given the relative lack of short - term money market instruments in which they can invest. the cbb has been at the forefront of innovation in assisting islamic financial institutions to manage their liquidity, but more still needs to be done both by regulators and the industry. so, does basel iii offer a solution? obviously, islamic financial institutions cannot invest in interest - based products. this makes the specific liquidity requirements of basel iii difficult to apply to them. there is also the complication that the outstanding stock of sukuk is not sufficiently large to enable all islamic financial institutions to meet a liquidity ratio comparable to that mandated under basel iii. finally, the markets for sukuk are not always as liquid as those for conventional government bonds and therefore even if an islamic financial institution invests in them it might not always be able to find a ready buyer when the need | that should have ensured there were proper risk management and control systems within each bank. it was the board of directors that should have ensured that the senior management of the bank had properly taken into account the possibility of experiencing extreme stress scenarios. finally, it was the board of directors that should have ensured the remuneration structures were in line with the long - run interest of the bank itself rather than rewarding short - term risk - taking. the need for high standards of corporate governance is, therefore, one of the main lessons to be drawn from the global financial crisis. it is in this context that the cbb views the new code as a significant development in strengthening bahrain β s reputation as a well regulated financial centre. the new code builds on current international best practice for corporate governance. for example, it reflects the corporate governance principles developed by the organisation for economic cooperation and development which have become the benchmark for international standards in the field. of course, the special responsibilities of the board of directors of a financial institution which i mentioned earlier means that the cbb will need to continue to apply its own corporate governance requirements on such matters as internal high level controls, the avoidance of conflicts of interest, and various public disclosure and reporting requirements. these will need to remain more detailed than those in the new code, for example setting the public disclosure requirements for financial institutions. the cbb β s detailed requirements on corporate governance will therefore continue to exist in parallel to the new code. it is important that public companies in bahrain, both financial and non - financial, enter fully into the spirit of the new code. it should not be seen as a matter of complying with just another set of regulations, but as something that should influence the corporate culture of companies in bahrain. greater transparency and more effective governance structures will in the long - run only serve to increase the attractiveness of bahrain for foreign investors seeking to establish or expand operations in the mena region. in conclusion i would like to take this opportunity to thanks dr. hassan fakhro, minister of industry and commerce, for his support and cooperation in the introduction of the new corporate governance code, and to the steering committee for the excellent work it has achieved. thank you for your attention. | 0.5 |
linked to the average annual change in the economy - wide wage level. from today β s perspective, this is undoubtedly the right solution, which is to be viewed as a precondition for a more consistent and sustainable pension system, dissociated from political cycles. or rather β as one of the necessary preconditions. and clearly not sufficient. after carrying out comprehensive research, we came to the conclusion that changes which ( should we commit to implementing them ) would increase transparency of the pension system, boost motivation to participate in the social security net and reduce incentives for acting in the shadow, are both necessary and possible. people need clarity. if, on our virtual personal account, we could see how much we would accumulate for our future pension given our official wage β on paper β, everyone would think twice before agreeing to take payments β under the table β. this would not cost much and would not require particular expenses or long - term investments. yet, it would bring us closer to a few of our basic goals. it would improve the situation of sodra. more importantly β it would enhance the financial situation of each future pensioner. and, most importantly, it would change our understanding of what social security is and whom β the authorities or the insurance policy holder as well β it is necessary for. one more thing that we need to keep in mind when discussing this reform β we must see the pension system as an integral whole. this implies not making artificial divisions between its elements ( pillars ). i mentioned education. i am not going to argue for what is obvious. income possibilities are directly linked to the possibilities for achieving quality education. meanwhile, insufficient utilisation of the human capital potential increases the risk of getting stuck in the β average income trap β without having caught up with the wealthier western economies. this is why i hope that in our today β s discussions on the causes of income inequality and the possible solutions, we will also focus on this, i dare say, essential pillar. we have been hearing about the necessity of reforming the education system nearly as long as we can remember. however, today we really are at the β either β or β point, when we must undertake essential reforms. with these reforms, we must make sure that the bulk of money allocated to the sector is used to ensure high quality education in the whole country rather than just maintaining the existing infrastructure. this is the piece of advice that we constantly receive from various international organisations. 3 / 4 bis central | amse | aix - marseille school of economics marseille, 11 december 2018 speech by denis beau first deputy governor β trends in financial intermediation and implications for the regulation and supervision of the european financial sector β 1 / 9 ladies and gentlemen, dear students, it β s a pleasure to be at the aix - marseille school of economics today to discuss the trends affecting a key channel of the financing of the real economy : financial intermediation. this topic is well chosen the year of the tenth anniversary of both lehman bankruptcy and nakamoto β s paper underlying the bitcoin. this is not just a coincidence. for crypto - assets β proponents, the β old world β of bank - centric financial intermediation failed in 2008 and had to be replaced by disintermediated peer - to - peer systems like bitcoin. where do we stand now? central bankers, regulators and supervisors have worked to strengthen the traditional bank centric model of intermediation, and the highly intensive finalisation of basel iii has concluded ten years of regulatory efforts in that field. banks are stronger and more resilient than before 2008. at the same time, quite ironically, the bitcoin itself has generated the biggest bubble ever, which is now bursting. so, in 2018, are there new developments in financial intermediation? yes, indeed. a number of factors contribute to push the european bank - centric model towards a more diversified, unbundled financial intermediation model. hence, i will focus the first part of my presentation on those drivers and their impact on financial intermediation ( i ). i will then highlight the financial risks that go hand - in - hand with the changes underway ( ii ). finally, i would like to emphasise that a safe move towards a more diversified intermediation model as we see it developing cannot be achieved without further financial integration at european level. to that end, advancing the european regulatory agenda is of prime importance ( iii ). 1. from bank - centric financial intermediation towards unbundled financial intermediation in the digital era to date, in europe, we have been accustomed to a bank - centric intermediation model. however, this model is being increasingly challenged by new players emerging in the digital era, the so - called fintechs and bigtechs, as well as by the growing weight of the asset management industry. we thus need to prepare to new intermediation models, | 0 |
alan greenspan : evolving challenges for bankers and supervisors remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, before the national association of urban bankers, urban financial services coalition, san francisco, ( via videoconference ), on 25 may 2000. * * * it is a pleasure to discuss with you the evolving challenges for bankers and supervisors posed by financial reform and continuing technological and financial innovation. today the nation is enjoying the longest - running economic expansion in its history. the expansion has not only been unprecedented in its duration, but also in its strength. clearly the rapid technological innovation of the past decade has played a strong role in the expansion β s endurance by improving labor productivity and opportunities for businesses to efficiently expand their output of goods and services. economic growth has also been supported by the strength and stability of our banking system, which recently recorded its eighth consecutive year of record earnings. the agility with which our banking system recovered from the severe difficulties of the late 1980s and early 1990s to fulfill a critical intermediary role is a testament to its resilience. however, as our economy continues to evolve rapidly, banking organizations will need to continue to adapt to the changing needs of businesses and consumers. in particular, with the passage of the gramm - leach - bliley act, our financial services industry will be better able to meet those demands in the decades to come through prudent innovation. as an example of innovation and adaptation, i note that your own organization is widening its scope to invite membership from the entire financial services industry. broadening your reach to include insurance, brokerage and other financial services not only reflects market realities but should also assist in your endeavors to improve the economic development of underserved communities and promote the professional growth of your members. while innovations and adaptations in our economy have helped create and prolong the prosperity we are now enjoying, they also bring to bear new challenges. today i would like to provide a brief overview of what i think are the key challenges, risks, and opportunities faced by bankers and their supervisors. to start, i would like to shift your attention from the vibrant economy and exceptional banking conditions to some of the risks that are always present. for example, the lax standards, excesses and fraud present in the recent few recent bank failures show that even as most banks post record profits, the deposit insurance fund can still experience disproportionate losses from undisciplined institutions. the high | potential for technology to bridge the urban - rural divide in access to health care, and the critical importance of preparing workers for the digital economy. 4 third and last, community development staff at the federal reserve board and several reserve banks have conducted research to better understand housing affordability challenges affecting rural communities nationwide, recognizing the importance of sufficient affordable housing to a community β s economic vitality. researchers found that, as in many urban areas nationwide, a large portion of renters in rural communities housing assistance council ( 2018 ), β creating connections : what broadband means for rural america, β rural voices, vol. 22 ( 2 ), available at http : / / www. ruralhome. org. for example, see federal reserve bank of dallas ( 2016 ), closing the digital divide : a framework for meeting cra obligations ( dallas : frb dallas, july, rev. december 2016 ), https : / / www. dallasfed. org / ~ / media / documents / cd / pubs / digitaldivide. pdf ; jordana barton ( 2018 ), β telehealth along the texas - mexico border, β rural health quarterly, june, http : / / ruralhealthquarterly. com / home / 2018 / 06 / 23 / telehealth - along - the - texas - mexico - border ; and jordana barton ( 2018 ). β preparing workers for the expanding digital economy, β investing in america β s workforce : improving outcomes for workers and employers, august, available at https : / / www. dallasfed. org / cd / digital. - 4struggle to afford their rent - - a finding that will not come as a surprise in this room. fortunately, our staff also highlighted promising policy and practice solutions that have been implemented in some communities to try to address these challenges, including the establishment of dedicated funding for affordable housing and the elimination of exclusionary land use and zoning policies. 5 while this type of research and community engagement work is a central component of our efforts to support rural areas, we also know that communities need resources and dedicated local partners to help implement many of the strategies involved. cra has been an important tool for strengthening local community and economic development infrastructure since it was enacted in 1977. we also recognize that significant changes in the financial services industry since then have hindered the law β s effectiveness, especially in rural communities, and that an update of the implementing regulations is appropriate. as my colleague governor brainard has noted | 0.5 |
will be in full compliance with basel iii capital standards which include a countercyclical capital buffer that varies with credit cycles and a leverage ratio that limits excessive buildups of leverage. the liquidity part is new and aims to strengthen banks β management of liquidity risk. a stress - test - based liquidity coverage ratio and a longer - term net stable funding ratio will be mandated in 2015 and 2018, respectively. the final part of basel iii deals with supervision of global banks whose failure could trigger the meltdown of the global financial system. identified global systemically important banks will be subject to an additional capital surcharge above basel iii capital requirement. this extra loss absorption capacity is to be met with common equity and will be phased - in between 2016 and 2018. as another example, many of you have probably heard of the recently passed volcker rule, named after another former fed chairman paul volcker. the volcker rule can be seen as a watered down version of the glass - steagall act. recognizing that it is difficult to separate investment banks and commercial banks entirely, the volcker rule prohibits commercial banks from short - term proprietary trading of securities, derivatives, futures, and options on these instruments. the goal is that eliminating these risky practices will make banks safer and at the same time force them to refocus on core banking businesses which in turn should benefit consumers. basel iii and the volcker rule are just two examples of re - regulation. there are several others, notably the u. s. dodd - frank act, the otc derivatives markets reform, and the proposed oversight and regulation of shadow banking. taken all together, these make a comprehensive set of regulatory reforms that will busy both regulators and financial institutions over the next several years. i would like to stress however that, for financial institutions, the compliance with the new regulations is not a one - way process, but a two - way one that you can help shape through industry consultation and collaboration with regulators. the challenges for country regulators are whether and when to adopt certain parts of international standards that may be irrelevant, too stringent, or lead to new risks for the domestic industry. by working together, we can ensure not only the smooth adoption of international standards, but also that our financial system will not be burdened by unnecessary rules and unintended consequences. bis central bankers β speeches the third direction is the emerging role of macroprudential regulation. the global financial crisis has shown that traditional or microprudential regulation | imbalances when making monetary policy decisions, represented only a small minority before the crisis. the global financial crisis has prompted a fundamental rethinking of central banks β monetary policy conduct. now it is recognized that price stability alone does not guarantee economic and financial stability and that there exists an intricate relationship between monetary policy stance and financial stability. maintaining β too low for too long β interest rate policy leads to excessive risk taking that can sink the economy. this risk - taking channel of monetary policy now features prominently in the mainstream economic literature. today, virtually all central banks are taking financial stability considerations seriously in their monetary policy deliberation. talk of risks to financial stability has now been mentioned frequently in several central banks β monetary policy statements. the takeaway from this is bis central bankers β speeches that once their economies get back to normal, central banks in developed economies will consciously avoid keeping the policy rate too low for too long. financial institutions must therefore prepare for a higher interest rate environment as well as volatility during the transition period. the recent emerging markets turmoil provides a fresh example of the latter, even though the current stage of qe tapering is just the tip of an iceberg of what is coming. let me move on to re - regulation. the pre - crisis mantra was to let deregulated financial markets take care of themselves. alan greenspan, the former fed chairman who pushed to have derivatives remain unregulated, expressed that he was in β shocked disbelief β to see what happened. in addition, a number of observers, including nobel prize winning economist joseph stiglitz, believe that the repeal of the glass - steagall act in 1999, which allowed commercial banks to engage in investment banking activities, was among the major factors behind the crisis. by re - regulation, i don β t mean the return to tight control by regulators, but rather β smarter β regulation that focuses on systemic risks. let me show my point with some examples. as a regulator, i would not be doing my job if i did not talk about basel iii. to avoid going overboard on its massive details, i will highlight just a few of its key features. in a nutshell, there are three parts to basel iii : capital requirement, liquidity risk management, and supervision of global systemically important financial institutions. of the three, the capital part is in the most advanced stage with national implementation started last year in many countries including thailand. it is expected that by 2019, most countries | 1 |
is that money creation is not a privilege through which commercial banks can feather their own nests. a bank can grant loans when there is customer demand and it has central bank money at its disposal. to this end it is important that other customers are prepared to hold sight deposits at the bank. here the bank is in competition with other banks. if the bank is not competitive, customers will be unwilling to apply for loans or hold sight deposits there. in granting loans, the bank also takes a business risk. thus, banks do not β create money out of thin air β. rather, their money creation is the product of intermediation between savers and borrowers, and is made possible by the fact that customer sight deposits do not have to be fully covered by central bank money. 1 sovereign money would radically change our current system. in a sovereign money system, a bank is no longer permitted to use its customers β sight deposits to finance loans. instead, it is obliged to call solely on investors who provide it with money for loans on a more long - term basis. these may be customers with savings deposits, investors on the capital market, other commercial banks, or even the snb, which can grant the bank a loan. because sovereign money impairs the useful intermediary function played by banks in the monetary system today, lending would become more difficult and complicated β to the detriment of customers, be they savers or borrowers. for more on maturity transformation as a traditional bank function and its importance to the economy, cf. jordan, thomas j., how money is created by the central bank and the banking system, speech held at the zurcher volkswirtschaftlichen gesellschaft, zurich, 16 january 2018. page 3 / 8 the initiative β s undeliverable promises financial stability so, what benefits do the initiative β s authors see in sovereign money? they want to separate the creation of money from the granting of loans because they believe this will enhance financial stability. to achieve this goal, they call for customers β sight deposits to be held in so - called sovereign money accounts as off - balance sheet items, just like securities custody accounts are today. this offers security in as far as this money is not at risk should the bank fail. however, barring the banking system from creating money is the wrong approach to take. in financial crises, savers and investors lose money for two reasons : first and foremost, because their pension funds and direct investments such | as stocks, bonds and real estate lose value, and also second, because taxpayer money has to be used to rescue banks. financial crises occur when risks are underestimated and price expectations of investments are exaggerated. this can lead to credit and asset price bubbles which sooner or later burst. when banks do not hold enough equity capital to absorb the losses they incur, they fail. sovereign money would do nothing to change this situation. risks can be underestimated and future returns overestimated in a sovereign money system too. even without recourse to sight deposits, banks can grant loans which are too risky, hold too few provisions for times of crisis and become insolvent if a bubble bursts. moreover, a key problem in the financial crisis was banks β heavy reliance on short - term financing from the money market. these interbank loans proved to be a less stable source of financing than private customers β sight deposits ; in fact they dried up at the very start of the financial crisis in 2008. sovereign money would not help to eliminate this risk of instability either. there are other, far more effective approaches to stave off credit and asset price bubbles than sovereign money. the significant increase in the capital and liquidity requirements for banks in the aftermath of the financial crisis is one such approach. macroprudential tools such as the countercyclical capital buffer are an additional means of strengthening our financial system. but a liberal economic system entirely devoid of crises is an illusion. to prevent crises altogether would ultimately mean to constrain the economy to such an extent that our prosperity would be significantly impaired in the longer term. however, it is possible to limit macroeconomic risks to an acceptable level using appropriate regulatory measures. this is where we have directed our efforts since the financial crisis and we are continuing to work closely on this with other parties at national and international level. β debt - free β payments to the confederation, cantons or citizens the initiative is likewise not able to deliver on its second promise to reduce the burden on citizens through β debt - free β payments by the snb to the confederation, the cantons or the people. although β debt - free β payments seem attractive at first glance, they will not bring any financial benefit to the people in the long term, despite what the initiative β s authors would have us believe. a sovereign money system will not turn the snb into a cash cow. page 4 / 8 switzerland β s prosperity is determined not by the way money is created | 1 |
. this spills over into consumption and investment, and finally into economic growth. this mechanism is also known as the β financial accelerator β a final monetary policy transmission channel involving banks i wish to allude to is the risktaking channel. low interest rates and abundant liquidity may decrease risk aversion and encourage risky investments, as well as leading to laxer credit standards. this raises the supply of bank loans and can have a significant impact on credit growth. the evolution of credit volumes so much for the theoretical background. let me now move on to how corporate credit volumes have actually evolved in luxembourg, and how those developments tie in with those at the euro area level. my intention is not to identify the workings of the different monetary policy transmission channels in luxembourg β this would be a herculean undertaking! however, it is helpful to keep the theoretical underpinnings in mind when looking at the actual credit developments and the potential underlying explanatory factors. as you can see in the chart, the underlying trend developments in luxembourg and at the euro area level coincide, despite the higher volatility in the luxembourg data. most notably, corporate credit dynamics rose continuously up until 2008, when they began to unwind rather rapidly, first in the euro area at large and shortly thereafter also in luxembourg. the pace and magnitude of the decline in the loan dynamics are particularly worrying, with below or near zero growth rates in the third quarter 2009. it is worth emphasising that roughly one year ago, in september 2008, the annual progression of corporate loan volumes in luxembourg peaked at 54 %! as for credit to households, the annual progression of mortgage lending has been on a downward trend since 2006, long before the crisis. however, this downward trend accelerated considerably and the annual growth rate recently stabilised just under 6 %. consumer credit has been progressing steadily since 2008, which represents a trend inversion compared to the preceding years. all in all, household loan dynamics have been much more benign than corporate credit developments. this raises the question as to how and why the corporate credit cycle could take such a rapid u - turn. while the obvious answer is that banks refuse to grant loans in the wake of the financial crisis, this is but one side of the coin. disentangling demand and supply indeed, the bank lending survey or bls β a euro area - wide bank survey on quarterly credit developments β strongly indicates that the sharp slowdown in corporate credit expansion is owing to both supply - and demand - | stability and growth pact are not incompatible with the free play of automatic stabilisers. as i told you earlier, automatic stabilisers are especially important, because they help counteract asymmetric shocks at the national level in a situation where monetary policy is conducted at the euro area level. provided that member states are able to reach a close to balance or in surplus position, they could indeed let automatic stabilisers operate in full, without incurring the risk of breaching the 3 % reference value. a close to balance or in surplus position indeed means that the cyclically adjusted fiscal balance should be in equilibrium. in such a situation, it would require a very negative output gap, equal to about 6 % of gdp, to reach a nominal deficit in excess of 3 % because of the free play of automatic stabilisers. this underlines the overriding importance of the attainment of a close to balance or in surplus position. let me also highlight that such a position would requires a nominal surplus under favorable economic circumstances. in other words, it is essential to apply a strict fiscal discipline also during economic upturns. - third, the attainment of a sound fiscal position compatible with the treaty and the stability and growth pact would facilitate to a considerable extent the conduct of monetary policy. the absence of clear and binding fiscal rules could have resulted in a non - cooperative equilibrium, characterised by higher long - term interest rates. this can be illustrated by the example of an individual member state willing to tolerate higher deficits and to issue more debt securities in order to finance the resulting gap. this additional debt issuance would in all likelihood give way to a crowding out effect - namely to an upward pressure on interest rates due to the drain on private savings. the key point is that in emu - where there exists a single currency and a high degree of integration between national financial markets - this additional burden would be borne by the euro area as a whole, and not just by the individual member state responsible for the additional debt issuance. this kind of spillover effects could encourage each member state to issue excessive amounts of debts. as a result, the euro area - wide interest rates would tend to be higher than required by economic fundamentals. such a situation could complicate to a considerable extent the conduct of monetary policy, which underlines the need to resort to commonly shared rules of fiscal restraints. conclusion let me conclude with the statement that the relationship between monetary and fiscal policy runs both ways. | 0.5 |
proposal. to propel the recovery forwards, europe has a strong engine at its disposal : the single market, the eu β s greatest achievement for its citizens. as recognised by this parliament just a few weeks ago, the single market is the source of our collective prosperity and well - being. so it is crucial that we repair, strengthen and deepen it in the coming months. and this is even truer for the financial sector. a genuinely integrated and resilient market is essential to ensure financial stability and the financing of our economy. so progress on the capital markets union agenda is crucial. priority should be given to initiatives and proposals aimed at mobilising private savings and improving transparency and information for investors at the european level. given the urgency of the situation, we should be open to any new and innovative ideas which can accelerate progress on the capital markets union. as members of the european parliament and the committee on economic and monetary affairs, you have an important role to play in bringing forward the legislative work on these dossiers. thank you, and i look forward to your questions. 4 / 4 bis central bankers'speeches | use of our credit operations, ensuring that our monetary policy tools remain effective even in times of severe financial market stress and against the backdrop of looming rating downgrades. of course, as the economic situation is evolving rapidly, we are constantly monitoring the situation. we remain more determined than ever to ensure supportive financial conditions across all sectors and countries to allow this unprecedented shock to be absorbed. we continue to stand ready to make further adjustments to our monetary policy measures should we see that the scale of the stimulus is falling short of what is needed. the impact of the coronavirus emergency on the european financial sector the pandemic hit the financial sector with an economic shock of unprecedented speed, scale and global scope. unlike in 2008, the current crisis did not start in the financial system. but the spread of the virus triggered a market reaction that at times rivalled the 2008 financial crisis in terms of the magnitude of price falls and volatility. the tightening of market conditions was abrupt, broad - based and, at times, disorderly. markets calmed following the announcement of forceful responses by monetary authorities around the globe. in particular, the ecb β s announcement of private and public asset purchases has helped to restore market functioning in many asset classes. in this challenging environment, banks β resilient balance sheets shielded them from the initial 2 / 4 bis central bankers'speeches cash - flow shock. recent efforts to build a stronger banking union allowed the banks to enter this crisis with healthier starting capital and liquidity positions than they had in 2008. at the end of 2019, the cet1 ratios of significant banks in the euro area stood at around 15 percent. the creation of a solid institutional set - up enabled us to take swift action to ensure that the euro area financial system continues to play its role in mobilising savings and directing funds into the real economy. in addition to the monetary policy measures i already mentioned, the ecb also took a number of supervisory measures. i will not elaborate on them now because the chair of the ecb β s supervisory board discussed them before this committee two days ago. these measures will release some of the buffers that were built up during the good times and help banks to continue providing financial support to households and businesses hit by the economic fallout of the pandemic. moreover, they will bring clear benefits in terms of maintaining a level playing field within the european banking sector. these microprudential measures were complemented by a range of macroprudential actions | 1 |
andreas dombret : five theses on the future of europe speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the esmt open lecture, european school for management and technology ( esmt ), berlin, 14 february 2018. * * * dear jorg rocholl ladies and gentlemen thank you for inviting me to speak at the esmt open lecture. during my last visit to this university, i had the gratifying opportunity to moderate a speech delivered by christine lagarde. my talk today will be about the future of europe, and of the euro area in particular. currently, the euro area is witnessing a fully - fledged economic upswing. at year - end 2017, gdp had climbed by 2. 4 % overall. and the outlook is looking positive as well. many have upgraded their growth expectations β eurosystem staff projections for 2018 are at 2. 3 % for 2018. sentiment levels are at long - term highs. all these indicators suggest that momentum is strong in the euro area economy. what seems equally important is that the upswing is broadly based, meaning it has reached many countries and many regions. but of course, we cannot speak of synchronous developments, as countries still differ in terms of infrastructure, institutions, and political and economic philosophies β and for that matter, economic developments, too. apart from that, the current upswing should not distract from existing issues. banks in several member states are still saddled with huge volumes of non - performing loans. across the european union, they amount to about β¬ 950 bn. at the same time, some member states are still vulnerable due to high levels of public debt. furthermore, indicators such as banks β holdings of sovereign debt issued by their domestic government suggest that the strong connection between a country β s government and banks domiciled there β the β sovereign - bank nexus ", as it is known and which had played an important role during the euro crisis β continues to exist. finally, less than a year ago, populist movements which strongly opposed the euro area and the eu were perceived as a significant threat. while their political influence turned out to be rather low, risks do remain. all in all, there are a number of good reasons to reflect on the future of europe. i would like to use this esmt open lecture to discuss the following five theses. 1. first things first for the euro area financial architecture the | inflation. this effect, however, does not suggest the maastricht criteria to be revised. the inflation criterion already allows for inflation to diverge by 1. 5 percentage points from the three best performing members of the currency union. nor does the balassa - samuelson effect suggest to loosen the two percent ceiling for price - stability in the euro area, which leaves enough room for price increases due to catching up. sustainable convergence in inflation rates is crucial. inflation rates can be kept at a sufficiently low level only if other policies comply with the stability orientation. prudent wage policies will contribute to containing overall price developments. structural policy also has a role to play. currently, 25 percent of prices in accession countries are still administrated. microeconomic reforms and further price deregulation have to be carried out. only then can the price mechanism fully work through to the economy - a defining feature of a fully functioning market economy. fiscal policy is of special importance in this respect. excessive deficits are to be avoided. the public sector deficit is the decisive measure of a government β s demands on the financial markets. it is the benchmark for its stability orientation. last year general government deficits among the accession countries ranged from 0. 4 percent of gdp ( in estonia ) to 7. 1 percent of gdp ( in malta ). eight of the accession countries had not yet met the maastricht budgetary criterion. however, the debt criterion - public debt less than 60 percent of gdp - was met by a broad majority of the accession countries. there are still a few years in which to pursue convergence and to prove its sustainability. nominal convergence is not a goal to be reached at a certain point in time ; it is, rather, the natural and sustainable state of a stable currency union. apart from nominal convergence, real convergence is of importance in a monetary union. i use the term here in the sense of synchronicity of business cycles. the governing council of the european central bank designs monetary policy appropriate to the euro area as a whole. a country whose business cycle gets grossly out of step might suffer if it is subject to a monetary policy that is inappropriate to its national economy. however, marching in absolute lockstep is not necessary, as can be seen in the usa, where certain regions grow faster than others. growth rates of states and regions within a currency union may differ to some degree. it is the size of the gap between actual and potential growth rates | 0.5 |
of which during this period amounted to eur 3. 2 billion, which represents an annual growth of 6. 9 %. interest rates on loans continued to decline which decreased to 6. 6 % from 6. 8 % in the same period last year, indicating the continued ease of access to bank financing. financial health indicators continued to show a high level of sustainability of this sector in all respects. in particular, it is worth mentioning the very good quality of the loan portfolio with a non - performing loans ratio of only 2. 7 % in october 2018, which, compared to last year when it was 3. 6 %, marked a further decrease. * * * page 2 of 6 other sectors of the financial system were also characterized by favourable developments. the value of assets of the pension sector in september 2018 amounted to eur 1. 76 billion, marking an annual growth of 11. 2 %. return on pension fund investments continued to be positive, indicating an increase in the value of pension savings of citizens. * * * the insurance sector continued to increase its insurance activity as well as compensate the insured against damages. the total written premium value of insurance companies in september 2018 was eur 69. 1 million, which represents an annual growth of 4. 8 %. on the other hand, the value of the damages paid amounted to eur 31. 5 million, marking an annual growth of 8. 2 %. increased damages paid, in addition to increasing the number of insurance policies, also reflect the more responsible behaviour of insurance companies against insured persons. the insurance sector has continued to have positive financial performance for the second consecutive year, which represents a very important development for the sustainability of this sector. * * * another important sector of the financial system is the microfinance institutions sector, which is continuing to accelerate the lending rate, becoming a sector that is increasingly contributing to the growth of competition in the credit market. the total value of this sector's loans in october 2018 amounted to eur 177. 7 million, marking an annual growth of 29. 1 %. however, a falling interest rate from the current average level of 23. 1 % would make this sector even more competitive and with greater role in supporting the domestic economy. page 3 of 6 * * * the central bank of the republic of kosovo with all its capacities has continued to supporti the sustainable development of the financial system, providing all the necessary infrastructure to support the development of financial institutions and at the same time ensuring that | dear journalists and media representatives, i feel honoured to meet you today to jointly mark the end of a successful year for the central bank of the republic of kosovo and the country's financial system, which with its activity has continued to be a very important contributor to the support of development and stability of the country's economy. effective communication with the media on a continuous basis has, without a doubt, been part of this success. cbk has continuously paid special attention to public transparency, by being open to media regarding all public interest issues. in order to further advance our cooperation, during this year, we have also organized a workshop with journalists where we had the opportunity to talk closely about important topics related to the work of cbk and the financial system of kosovo. in addition, in order to facilitate access to information for journalists, we have appointed a cbk spokesman who greatly facilitated communication between the cbk and the media. these all indicate that we are continuing to advance our transparency towards the public and we remain committed to continue this in the future. * * * now, please allow me present to you a summary of the developments that characterized the country's economy and the financial system during 2018, taking into account the latest available data. * * * preliminary estimates suggest that the country's economy during 2018 recorded a real growth rate of about 4 %, mainly supported by the increase in domestic demand, while the deepening of trade deficit had a negative impact on the growth page 1 of 6 rate. the factors with the most significant impact on the financing of economic growth included the acceleration of credit growth for the private sector, the increase of public expenditures and the increase of remittances, which by september amounted to euro 587, 9 million, which is 6. 1 % higher compared to the same period last year. kosovo's economy, as estimated by cbk, is expected to have the similar economic growth rate next year, when the real growth rate is expected to be around 4. 2 %. as regards developments at the general price level, the average inflation rate by the end of 2018 is expected to be around 1 %. * * * banking activity during this year was characterized by credit growth, improved conditions for private sector access to loans, and further strengthening of the sustainability situation. banking sector loans amounted to eur 2. 7 billion in october 2018, recording an annual growth of 11. 6 %. the main source of financing of banking sector activity remains deposits, the value | 1 |
peter pang : policies adopted by authorities in different jurisdictions with respect to international reserves welcoming remarks by mr peter pang, deputy chief executive of the hong kong monetary authority, at the international monetary fund independent evaluation office ( ieo ) / hong kong institute for monetary research ( hkimr ) workshop, hong kong, 24 march 2011. * * * it is a pleasure to welcome all of you to this event co - hosted by the hong kong institute for monetary research ( hkimr ) and the independent evaluation office of the imf. the hkimr, as some of you already know, is a subsidiary of the hong kong monetary authority. its objectives are to promote research on longer - term and wider policy issues of relevance to the monetary and financial development of hong kong and the asia region ; and to foster cooperation and cross - fertilisation of research efforts between academics, international financial institutions and the hkma research activities. for this reason we are particularly pleased to co - sponsor this workshop which deals with the important topic of policies adopted by authorities in different jurisdictions with respect to international reserves and with the advice the imf gives in this regard in its consultations with policy authorities. the accumulation of international reserves has become one of the issues at the center of debates about the functioning of the current international monetary system as well as about reforms of this system. one lesson that authorities in this part of the world drew from the financial crisis in the late 1990s was that strong policy fundamentals are not always enough to guard against the vagaries of international capital flows. a sizable cushion of international reserves is important as a buffer to guard against sudden changes in market sentiments that can lead to capital outflows and pressures on the currency. starting shortly after the asian financial crisis reserves were thus accumulated in the region to build up such buffers. but holding large amounts of reserves is of course costly as they are typically invested in highly liquid assets with relatively low yields compared with some alternative uses of the funds. it is partly for this reason that authorities in the region have taken steps to create a mechanism for pooling some of their reserves in the form of the chiang mai initiative which started in year 2000 and its multilateral extension which was agreed on in 2010. while the size of the pool of reserves under the chiang mai agreement is relatively modest compared to the potential needs for some of the larger economies in the region, the importance of the agreement goes far beyond the aggregate amount of reserves involves. it reflects a desire by authorities in | the region to foster financial cooperation in the region while at the same time creating arrangements which will help safe - guard financial stability. but the accumulation of reserves in the region in recent years is not only the result of a desire to build buffers against future shocks. it is also the consequence of large capital inflows into asia in the wake of the financial crisis in the united states and europe. loose monetary polices in response to the subdued economic prospects in these regions as well as the strong growth performance in asia have led to large - scale capital inflows into many economies in asia. the reversal of such inflows could put domestic monetary and financial stability in jeopardy if they lead to overshooting of interest rates and asset prices. the recent experience of the region at the height of the global financial crisis in 2008 raised the concern that even reserves considered of very high levels in normal times may not be sufficient to cushion the bis central bankers β speeches forces of abrupt outflows. this has led to discussions about the need to reform the international monetary system, including the creation of a global financial safety net. while i understand that the evaluation the ieo is undertaking on imf advice and country perspectives on international reserves will not deal with all the questions related to reform of the international monetary system, i am sure it will provide very useful inputs into this process. i am therefore very pleased that the hkimr and the ieo has brought together such a distinguished group for this workshop, and i look forward to very interesting and fruitful discussions. with these words of welcome i now turn the floor over to mr. moises schwartz, the director of the ieo to set the scene for the discussion of the workshop. bis central bankers β speeches | 1 |
the differences in long - run growth performance we observe. savings, investment and average interest rate patterns reflect the long - running fact that new zealanders remain willing to borrow and spend at much higher interest rates than those prevailing in other countries. conducive policy frameworks, including sound monetary policy, help maximise long run growth performance and prosperity β however, what is also needed is savings and investment behaviour geared towards growth. despite spending time looking, we have found no clearly superior alternatives to the flexible inflation targeting approach to maintaining price stability. such things as monetary targeting and fixed exchange rates have been tried before in new zealand, as in other countries that are now inflation targeters. both monetary and exchange rate targeting regimes tend to be very inflexible. they require the burden of many types of shocks to be forced through output, rather than absorbed by the policy instrument itself, and tend to be most suitable for situations where inflation expectations are poorly anchored and the commitment of the central bank to price stability is doubted by the public. another alternative that could appear superficially attractive is to require monetary policy to target multiple objectives such as growth, employment, export and the balance of payments. this was the approach taken in new zealand and many other countries in the post - war period up to the early 1980s. it inevitably had a short - term focus, and resulted in stop - go policies and high inflation. we now know that one instrument cannot succeed in achieving multiple objectives over the cycle. the move to inflation targeting, with its single, clear objective, resulted from the lessons learned in that period. we do not want to re - learn those lessons. conclusions monetary policy β day to day, month to month and year to year β is about balancing judgements in an uncertain world. it is not a precise tool. times like the present are particularly challenging, when there are large and persistent shocks on both the demand and the supply sides of the economy. nevertheless, we believe the inflation targeting framework provides us sufficient flexibility to deal with the short - term consequences of shocks, without losing sight of the essential medium - term inflation objective. the new zealand framework and approach is very much like that used in other economies. the next few years will not be easy, but i believe that the framework is the best available, and that the reserve bank is up to the challenge of applying it flexibly. overall, the framework has been relatively successful. despite the current shocks we are going through, we expect inflation and inflation expectations | u. s. treasury and the recent proposals from the commodity futures trading commission and the sec will be important in deepening our understanding. while acknowledging the role of regulation as a possible contributor, it is important to recognize that this regulation was designed to reduce the concentration of liquidity risk on the balance sheets of the large, interconnected banking organizations that proved to be a major amplifier of financial instability at the height of the crisis. resilience and resolvability this brings me to the last item on my agenda : an update on efforts to strengthen the resilience and resolvability of these systemic banking organizations. with recent and upcoming proposals, much of the new regulatory architecture will be in the process of implementation or in train. even so, i would expect the rules and their application to continue to be strengthened and modified as financial risks evolve, just as i would expect these rules to be increasingly tailored over time to better reflect risk profiles. as a result of the capital and liquidity regulations already in place as well as the associated stress tests, the eight most systemic u. s. banking organizations are now holding $ 800 billion more in high - quality liquid assets than they were in 2011 and $ 500 billion more in common equity capital than they were in 2008. these liquidity and capital buffers are designed to strengthen the going - concern resilience of systemic banking organizations during periods of market volatility and financial stress. in addition, we recently released our proposed framework for determining the application of an additional countercyclical buffer to our large banking firms and made the first determination under the rule. on top of this, the capital surcharge we have proposed, which is designed to ensure the largest, most systemic banking organizations internalize the risk they pose to the system, is estimated to range from 1. 0 to 4. 5 percent of risk - weighted assets, based on 2013 data, over and above the 7 percent minimum and capital conservation buffers under basel iii. indeed, it appears that some institutions may have already reduced their systemic footprint in anticipation of these additional charges. of course, the crisis starkly illustrated that what seem like thick capital cushions in good times can become uncomfortably thin in the face of financial stress. our comprehensive capital analysis and review ( ccar ) stress - testing framework is arguably our most powerful tool for see adrian, fleming, stackman, and vogt ( 2015 ). bis central bankers β speeches ensuring that these capital buffers remain robust to a variety | 0 |
michelle w bowman : brief remarks - fed listens event on transitioning to the post - pandemic economy brief remarks by ms michelle w bowman, member of the board of governors of the federal reserve system, at the fed listens event on transitioning to the postpandemic economy, boston, massachusetts, 31 may 2023. * * * it is very good to be here, and to be part of this fed listens event and discussion about the effects of the pandemic experience on the u. s. economy, highlighting challenges in the labor and housing markets. while there are many ways to think about the impact of these effects, i find it helpful to consider both the cyclical or temporary factors and those that are structural and longer term. as monetary policymakers, we are primarily focused on the cyclical mattersmeaning how the pandemic and the measures taken to address it complicated accomplishing our dual - mandate objectives of maximum employment and stable prices. making the best monetary policy decisions over the business cycle requires distinguishing between temporary effects and lasting, structural changes. today's agenda includes the employment recovery following the high unemployment during the spring of 2020 leading to the current tight labor market. today's labor market strength reflects policy decisions taken in light of the pandemic experience, including the widespread lockdowns, reliance upon remote work, and other factors that may have structurally altered the labor market. i am very much looking forward to the discussion. i also look forward to learning from the perspectives of today's participants from around new england about the issues that will be discussed today. i find it especially helpful to participate in regional discussions to broaden my understanding of economic conditions throughout the country. this local perspective is one of the great advantages of the federal reserve system's regional structure, and of the fed listens initiative, which complements the board's efforts to understand national economic conditions. in 2019, the board launched fed listens with a year of listening sessions with the public focused on monetary policy and, specifically, on how the federal open market committee uses interest rates and other tools to promote a healthy economy. while data can tell us a lot, learning about the experiences behind those data helps bring economic data to life for me and for my colleagues. through fed listens and other engagements with the public, we hear about how americans are faring in the economy and about how our policy decisions affect individuals, businesses, and communities. so our efforts to enhance | , we can see a strong dispersion of npl ratios across countries. the highest npl ratios are present in those member states that were hit hardest by the economic crisis that followed the financial crisis after 2007. the high stock of npls ties up operational capacity of the affected banks, it involves legal as well as administrative costs, and it weighs on the capacity of those banks to extend new loans to realise profits and to support economic recovery. 4. how to cope ladies and gentleman, the financial world is clearly confronted with significant change and uncertainty. and many in the financial world perceive this to be a change for the worse. there are no easy solutions. the brexit negotiations will take time and uncertainty will be with us just as long. turning back regulatory achievements to provide relief from a perceived burden is not an option. as for the challenges posed by digitalisation, sticking to business as usual will not suffice. the same is true for the low - interest - rate environment : hoping for relief from a change in monetary policy won β t be enough. clearly, banks need to adapt, and indeed they have already begun. any long - term strategy for profitable banking needs to be built on its value added for customers, business partners and society. in times like these, supervisors need to be especially vigilant in monitoring financial institutions and ensuring that they do not take on excessive risks. what supervisors will not do is attempt to be management consultants for banks. difficult though the times may be, and however numerous and complex the problems may seem, it β s important to keep a clear mind and a steady hand. having a holistic and encompassing understanding of the current challenges does not mean that there are broad encompassing solutions available. we will succeed only if we refrain from falling for sweeping answers that promise to solve all the issues at once. that β s why it β s so important to have institutes like the iepe that enable us to get together and thoroughly discuss both the 4 / 5 bis central bankers'speeches challenges and the strategies needed to overcome them. and i am looking forward to having this conversation with you now. if we approach and tackle our current problems one by one, we will see that any change is manageable β both in the financial and in the real world. thank you for your attention. 5 / 5 bis central bankers'speeches | 0 |
among other crucial policy issues, we now need to reexamine, with open minds, whether conventional monetary policy should be used in the future to address developing financial imbalances as well as the traditional medium - term macroeconomic goals of full employment and price stability. the key question is whether we are likely to know enough about asset price misalignments and the likely effects of policy adjustments to give us the confidence to deliberately tack away for a time from exclusive pursuit of fostering aggregate price stability and high employment. obviously preventing situations like the current one would be very beneficial. but against this important objective we need to balance the potential costs and uncertainties associated with using monetary policy for that purpose, especially in light of the difficulty in judging the appropriateness of asset valuations. one type of cost arises because monetary policy is a blunt instrument. increases in interest rates damp activity across a wide variety of sectors, many of which may not be experiencing speculative activity. moreover, monetary policy generally operates with one instrument β a short - term interest rate β and using it to damp asset price movements implies more mediumterm variability in output and inflation around their objectives. among other things, inflation expectations could become less well anchored, diminishing the ability of the central bank to counter economic fluctuations. in the current situation, with output expected to be well below its potential for some time and inflation likely to be under the 2 percent level that many fomc participants see as desirable over the long run, tightening policy to head off a perceived threat of asset price misalignment could be expensive in terms of medium - term economic stability. furthermore, small policy adjustments may not be very effective in reining in speculative excesses. our experience in 1999 and 2005 was that even substantial increases in interest rates did not seem to have an effect on dot. com stock speculation in the first instance, and housing price increases in the second. and larger adjustments would incur greater incremental costs. policy adjustments need to damp speculation ; if higher rates just weaken output and inflation without damping speculation, the economy could be even more vulnerable when the speculative bubble bursts. we do not have good theories or empirical evidence to guide policymakers in their efforts to use short - term interest rates to limit financial speculation. for all these reasons, my strong preference would be to use regulation and supervision to strengthen the financial system and lean against developing problems. given our current state of knowledge, monetary policy would be used only if imbalances were building | securities helped to lower long - term interest rates and increase the availability of mortgages to households and bond financing to businesses. in addition, our near - zero policy rate and the improving economic outlook have induced shifts by private investors into longer - term and riskier assets, helping to reverse a portion of the previous spike in spreads that occurred as the economy and financial markets deteriorated. with markets improving and the economy expanding, the fomc has also indicated that it is tapering down its purchases of treasury, mbs, and agency securities. but the cost of credit remains relatively high and its availability relatively limited for many borrowers. although many long - term interest rates are fairly low, spreads in bond markets are somewhat elevated β not surprising, perhaps, as many borrowers are still under stress with the unemployment rate quite high and utilization of the capital stock still very low. some securitization markets continue to be effectively closed or severely impaired, including those for larger home mortgages and commercial real estate loans. under these circumstances, some borrowers will be more dependent than in the past on banks for credit, but banks are still reluctant and very cautious lenders. banks have been reducing their book of loans for about a year ; in part, this drop reflects weaker demand as businesses have cut back on inventories and households have been rebuilding their balance sheets by increasing saving. but the weakness in bank lending also results from cutbacks in supply. our surveys show that through late 2009, banks continued to tighten terms and standards for lending and to raise the rates they charge relative to benchmark rates. i expect bank credit to turn around only slowly as banks rebuild capital and become less uncertain about economic prospects. lingering credit constraints are a key reason why i expect the strengthening in economic activity to be gradual and the drop in the unemployment rate to be slow. even as the impetus from fiscal policy and the inventory cycle wanes later in 2010, however, private final demand should be bolstered by further improvements in securities markets and the gradual pickup in credit availability from banks. in addition, spending on houses, consumer durables, and business capital equipment should rebound from what appear to be exceptionally low levels. we have already seen some hints of this increase in private demand in recent months. but, understandably, households and businesses and bank lenders remain very cautious, and the odds are that the pickup in spending will not be very sharp. in an environment of considerable persisting slack in labor and product markets, and with productivity | 1 |
the integration and coordination of financial supervision. of these three areas, i will next briefly focus on securities trade. a problem in the securities markets is their current lack of depth and integration. an important challenge is the fragmentation of clearing and settlement systems. it is an important factor behind the high price of securities transactions in europe. this applies particularly to trade in equities. the cost of an equity transaction across national borders but within the eu can be as much as four times the cost of a similar transaction in the u. s. it is exactly these costs that prevent the integration of equity markets. they hurt the issuer of a stock via reducing its price. the provider of financial services, in turn, faces higher costs. the infrastructure of the markets has too strong an effect on the location of transactions and businesses. in this situation, current national features of the clearing and settlement systems should be evaluated from the point of view of their future in the integrating european market. | fiscal balance and created an environment in which consumers and businesses can plan for a longer term. sound monetary policies have also been instrumental in supporting growth. β’ strong and transparent institutional framework. an institutional environment in which contracts can be enforced and property rights can be established promotes economic growth. increasingly, all european countries share such an institutional environment. however, the transparency international rates the nordic countries in the top ten at to the transparency and integrity of their public sector. 6 5. the importance of education and research and development so, good policies, sound institutions and some luck go far in explaining the strong performance of the nordic countries. however, by digging a bit deeper, we can see also the for a more comprehensive assessment of the strengths and weaknesses of the " scandinavian model ", see e. g. chapter 4 in the eeag report on the european economy 2007, prepared by the european economic advisory group at cesifo. for instance, denmark and finland shared the top ranking, and all the nordic model countries were in the top ten, in transparency international's 2007 corruption perception index that looks at perceptions of public sector corruption in 180 countries and territories. see : http : / / www. transparency. org / policy _ research / surveys _ indices / cpi / 2007 crucial role of education and investments in r & d. the nordic countries share a long - tradition of emphasising the importance of education. nordic countries, particularly sweden and finland have high public and private spending on research and development, comparable with that of the united states. the particular character here is a close partnership between public and private sector. this has also fostered innovation in the environment of an open economy. oecd has recently publicized a third so called pisa - study. finland has performed well in all three studies. it was emphasized in the study that good performance in finland did not differ between the regions and correlated less with family background than in most countries. in a small country it is important to get all the talent resources in efficient use. the education is here the main tool. nowadays, the share of the working age population with upper - secondary education, as well as tertiary education, is considerably higher in the nordic countries than in the other eu countries on average. moreover, the participation rates for non - formal job - related continuing education and training are exceptionally high in the nordic countries. 7 the nordic economies have benefited from a well - educated labour force. the skilled labour force has contributed to a rapid diffusion of information and communication technologies, | 0.5 |
late 1980s that preceded the 2 / 5 bis central bankers'speeches relatively mild recession of 1990 β 91, and this appears at least in part related to the size of the affected institutions. in fact, empirical research done at the federal reserve shows that stress among larger banks does more significant harm to the economy than stress at smaller banks, even after controlling for the aggregate size of bank failures. 2 we also know that larger banks are more operationally complex β even when not engaged in complex business lines β with a broader geographic scope and more layers of management than smaller banks. therefore, it seems appropriate to me that a path forward for tailoring supervision and regulation of large banks should not ignore size, but consider it as one factor β although only one factor β along with other factors. before the enactment of the recent legislation, we had begun work on considering additional factors that capture large firms β degree of complexity and interconnectedness that in conjunction with size may provide a better basis for tailoring supervision and regulation than size alone. the systemic effect of a bank β s failure or distress is positively correlated with that organization β s business, operational, and structural complexity. generally, the more complex a banking organization is, the greater the expense and time necessary to resolve it. similarly, financial institutions may be interconnected in many ways, as large banks commonly engage in transactions with other financial institutions that give rise to a wide range of contractual obligations. financial distress at a large bank may materially raise the likelihood of distress at other firms given the network of contractual obligations throughout the financial system. so how do we gauge the degree of complexity and interconnectedness of large firms? rather than formulating new and untested measures of these factors, i believe we would be well served to begin by looking to our body of post - crisis regulation as a source. i will highlight a few factors that already reside in various areas of our regulatory framework that i am considering. the g - sib surcharge indicators are likely to be a helpful source in this effort. for example, one factor from that framework that we might consider for purposes of tailoring is cross - border activity. this would measure assets and liabilities related to transactions with foreign banks, individuals, and companies, among others. this factor measures both a firm β s complexity and resolvability, as foreign operations add operational complexity in normal times and complicate the ability of the firm to undergo an orderly resolution in times of stress. another factor from the | implementation responsibilities. the federal reserve is committed to its long - standing practice of ensuring that all its rulemakings be conducted in a fair, open, and transparent manner. accordingly, we are disclosing on our public website summaries of all communications with members of the public β including banks, trade associations, consumer groups, and academics β regarding matters subject to a proposed or potential future rulemaking under the act. in addition to our own rulemakings and studies, we have been providing technical and policy advice to the treasury department as it works to establish the oversight council and the related office of financial research. we are working with the treasury to develop the council β s organizational documents and structure. we are also assisting the council with the construction of its framework for identifying systemically important nonbank financial firms and financial market utilities, as well as with its required studies on the proprietary trading and private fund activities of banking firms and on financial - sector concentration limits. additionally, work is well under way to transfer the federal reserve β s consumer protection responsibilities specified in the act to the new bureau of consumer financial protection. a transition team at the board, headed by governor duke, is working closely with treasury staff responsible for setting up the new agency. we have established the operating accounts and initial funding for the bureau, and we have provided the treasury detailed information about our programs and staffing in the areas of rulemaking, compliance examinations, policy analysis, complaint handling, and consumer education. we are also providing advice and information about supporting infrastructure that the bureau will need to carry out its responsibilities, such as human resource systems and information technology. well before the enactment of the dodd - frank act, the federal reserve was working with other regulatory agencies here and abroad to design and implement a stronger set of prudential requirements for internationally active banking firms. the governing body for the basel committee on banking supervision reached an agreement a few weeks ago on the major elements of a new financial regulatory architecture, commonly known as basel iii. by increasing the quantity and quality of capital that banking firms must hold and by strengthening liquidity requirements, basel iii aims to constrain bank risk - taking, reduce the incidence and severity of future financial crises, and produce a more resilient financial system. the key elements of this framework are due to be finalized by the end of this year. in concordance with the letter and the spirit of the act, the federal reserve is also continuing its work to strengthen its supervision of the largest, most | 0.5 |
s adjustment of the federal funds rate in normal times. after all, adjustments to the balance sheet are in many respects a substitute for changes in the federal funds rate. both instruments attempt to influence broader financial conditions in order to achieve a desired economic outcome. however, the way in which the fomc implemented asset purchases differed in important ways from the manner in which it has historically adjusted the federal funds rate. with this contrast in mind, i raise a set of policy questions that could be considered in designing a purchase program. first, should the balance sheet be adjusted in relatively continuous but smaller steps, or in infrequent but large increments? the earlier round of asset purchases involved the latter approach, which caused the market response to be concentrated in several days on which significant announcements were made. that might have been appropriate in circumstances when substantial and front - loaded policy surprises had benefits, but different approaches may be warranted in other circumstances. indeed, it contrasts with the manner in which the fomc has historically adjusted the federal funds rate, which has typically involved incremental changes to the policy instrument. second, how responsive should the balance sheet be to economic conditions? historically, the fomc has determined the federal funds target rate based on the committee β s assessment of the outlook for economic growth and inflation. if changes in the balance sheet are now acting as a substitute for changes in the federal funds rate, then one might expect balance sheet decisions to also be governed to a large extent by the evolution of the fomc β s economic forecasts. the earlier purchase program, in contrast, did not demonstrate much responsiveness to changes in economic or financial conditions. indeed, the execution of the program largely involved confirming the expectations that were put in place by the two early announcements. third, how persistent should movements in the balance sheet be? an important feature of traditional monetary policy is that movements in the federal funds rate are not quickly reversed, which makes them more influential on broader financial conditions. a change that was expected to be transitory would instead move conditions very little. for similar reasons, one could argue that movements in the balance sheet should have some persistence in order to be more effective. fourth, to what extent should the fomc communicate about the likely path of the balance sheet? the fomc often communicates about the path of the federal funds rate or provides other forward - looking information that allows market participants to anticipate that path. this anticipation of policy actions is | federal reserve bank of new york staff report no. 441, march 2010. several private - sector firms have estimated yield effects of similar magnitude. in addition, a working paper by james hamilton and jing wu, β the effectiveness of alternative monetary policy tools in a zero lower bound environment, β finds that changes in the federal reserve β s asset holdings produce considerable yield effects. under this view, the fomc β s influence on financial conditions is associated with the size and composition of its securities portfolio. this perspective provides a clear rationale for the reinvestment decision made at the august fomc meeting. the decline in the size of the federal reserve β s portfolio that would have occurred in the absence of the reinvestment program would have amounted to a passive tightening in the stance of monetary policy, as the portfolio balance effect would have gradually reversed. moreover, the extent of this tightening was increasing in response to the weakening of the economy, as lower longerterm yields were leading to more rapid repayment of mbs. this perverse effect was seen by the fomc as working against its efforts to reach its dual mandate. in effect, the policy approach that was implemented before the august meeting acted to mute the amplitude of movements in longer - term interest rates. as rates declined in response to a weakening of the economy, the federal reserve β s mbs holdings would decline more rapidly, effectively adding to the supply of duration held by the market. 4 this increase in the duration held by the market would tend to damp the decline in yields. with the change in strategy at its august meeting, the fomc no longer lets its aggregate duration holdings flow back into the market. this approach allows long - term interest rates to adjust fully to a weakening of the economy, which should act to better stabilize the economy. implementing the reinvestment policy so far, i have focused on the fomc β s august policy decision ; however, you may also be interested in the details of how the desk has actually implemented the reinvestment policy. the instructions from the fomc to the desk, from both the august fomc statement and the directive that was adopted at that meeting, were to keep the total face value of domestic securities held in the soma portfolio near their level at that time. the published size of the securities portfolio just ahead of the august meeting was $ 2. 054 trillion, so the desk adopted this level as the target for the portfolio. this is a notable | 1 |
fire sales of assets and reassures financial institutions and their counterparties that those institutions will have access to liquidity as needed. to be sure, the provision of liquidity alone cannot address solvency problems or erase the large losses that financial institutions have suffered during this crisis. yet both our internal analysis and market reports suggest that the fed's ample supply of liquidity, along with liquidity provided by other major central banks, has significantly reduced funding pressures for financial institutions, helped to reduce rates in bank funding markets, and increased overall financial stability. for example, despite ongoing financial stresses, funding pressures around year - end 2008 and the most recent quarter - end appear to have moderated significantly. before leaving this category of assets, i should mention briefly the fed's actions to ensure liquidity to another category of financial institution, money market mutual funds. in september, a prominent money market mutual fund " broke the buck " β that is, was unable to maintain a net asset value of $ 1 per share. this event led to a run on the other funds, which saw very sharp withdrawals. these withdrawals in turn threatened the stability of the commercial paper market, which depends heavily on money market mutual funds as investors. following the long - standing principle that the central bank should lend into a panic, the federal reserve established two programs to backstop money market mutual funds and to help those funds avoid fire sales of their assets to meet withdrawals. together with an insurance program offered by the treasury, the fed's programs helped end the run ; the sharp withdrawals from the funds have been replaced by moderate inflows. although credit extended to support money funds was high during the intense phase of the crisis in the fall, borrowings have since declined substantially, to about $ 6 billion. direct lending to borrowers and investors a second set of programs initiated by the federal reserve β including the commercial paper funding facility ( cpff ) and the term asset - backed securities loan facility ( talf ) β aims to improve the functioning of key credit markets by lending directly to market participants, including ultimate borrowers and major investors. the lending associated with these facilities is currently about $ 255 billion, corresponding to roughly one - eighth of the assets on the fed's balance sheet. the sizes of these programs, notably the talf, are expected to grow in the months ahead. the commercial paper market is a key source of the short - term credit that american businesses use to meet payrolls and finance inventor | david dodge : summary of the latest monetary policy report opening statement by mr david dodge, governor of the bank of canada, at a press conference following the release of the monetary policy report update, ottawa, 27 january 2005. * * * today, we released the update to our october monetary policy report. the update reviews economic and financial trends in the context of canadaaβ¬β’s inflation - control strategy. the outlook for the canadian economy continues to be shaped by global developments, including the realignment of world currencies. the near - term outlook for the global economy is a touch weaker than projected in the october report, but more solidly based because of somewhat lower oil prices and greater confidence in the momentum of the u. s. economy. we expect the canadian economy to operate a little further below its full production capacity in 2005 than was anticipated at the time of the last report, largely reflecting the dampening effects on aggregate demand of the recent appreciation of the canadian dollar. for 2006, we project growth to pick up to slightly more than 3 per cent, consistent with returning the economy to its production capacity in the second half of the year, and returning core inflation to 2 per cent around the end of 2006. in line with this revised outlook, the pace of reduction in monetary stimulus is likely to be slower than that envisioned in the october report. there are both upside and downside risks around the outlook, which continue to relate to the adjustment to global developments. as circumstances change, we always need to be ready to re - assess the policy implications. | 0 |
as i mentioned earlier though, the picture is not uniform across the industry and some parts of the farming sector have experienced very difficult conditions over the past year. but overall, the current picture is better than it has been for some years. graph 9 of course, agriculture remains an industry whose fortunes can change quickly from year to year. and it is one in which very significant structural change has occurred over many decades. given its importance to the overall australian economy, it is also an industry that the reserve bank has paid close attention to over the years, and it continues to do so. looking forward, no doubt the fortunes of the industry will continue to wax and wane. and like many other parts of the australian economy, the farming sector will need to continue the process of structural change. as i have talked about, this process is being driven, in part, by a fundamental realignment of global relative prices due to the re - emergence onto the global stage of the populous countries of asia. this realignment of relative prices is creating new opportunities for australian agriculture. i wish you success in finding those opportunities and in taking advantage of them over the years ahead. thank you. bis central bankers β speeches | philip lowe : world prices and the australian farm sector speech by mr philip lowe, assistant governor ( economic ) of the reserve bank of australia, at the australian farm institute agriculture roundtable conference 2011, melbourne, 10 november 2011. * * * i would like to thank troy gill, ewan rankin and trent wiltshire for assistance in the preparation of this talk. good morning. thank you for the opportunity to speak today about some of the challenges and opportunities facing the farming sector in australia. perhaps more than any other parts of the australian economy, farmers understand uncertainty. they live with uncertainty about rainfall and growing conditions. they live with uncertainty about the costs of their key inputs. and, of course, they live with uncertainty about the world prices for their outputs. it is this ability to deal with uncertainty that is one of the strong and enduring characteristics of the australian farming sector. this morning, i would like to begin by talking a little about some of the uncertainties facing the global economy. i would then like to discuss why it is that, despite these uncertainties, the medium - term global environment facing the australian farming sector is quite favourable. and then finally, i would like to briefly touch on current conditions in the farming sector in australia. global uncertainties it is clearly a difficult time for the world economy. financial markets remain captivated by the unfolding events in europe. the authorities there are dealing with a very difficult combination of excess government debt and weak banking systems. the problems are compounded by the weak growth prospects in the region and increasing fear of widespread contagion. this situation is, in part, a legacy of many years in which a number of governments spent much more than they raised in taxes, with bondholders being more than willing to finance the difference at low interest rates. it is being compounded by the fact that the policy options facing the members of a currency union are more restricted than those that would face a country with its own currency. in preparing the reserve bank β s latest forecasts of the world economy, we have assumed that the european authorities do enough to avert a real disaster but are not able to avoid periodic bouts of considerable market volatility and uncertainty. there are, of course, a range of other scenarios, many of which, unfortunately, are on the downside. this inevitably means that there is likely to be considerable uncertainty about the global economy for some time. but amongst the gloom emanating from europe, it is important not to lose sight of | 1 |
andreas dombret : the marathon has only just begun β what will come after the stress test? opening statement by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the press conference following publication of the comprehensive assessment results, frankfurt am main, 26 october 2014. * 1. * * introduction β the marathon has only just begun ladies and gentlemen what we have just completed β a comprehensive balance sheet assessment and a tough stress test for the 130 largest banks in the euro area β can only be described as a tour de force. dr elke konig has just presented the results of the exercise. i will now look ahead to the future. i will use the same metaphor which dr konig has already used, and which appears entirely appropriate here in frankfurt today. while we are sitting here in this room, a couple of thousand people are still outside running the frankfurt marathon. a marathon is, without a doubt, an enormous challenge. and anyone who intends to run a marathon should first undergo a rigorous health check to find out whether he or she will even be physically up to the task. the comprehensive assessment was an extremely thorough check - up, including a demanding β cardiac stress test β. you now know the outcome : germany β s large banks are robust enough to withstand even severe stress. this is certainly an encouraging result, as for the banks, the marathon is only just beginning. competition is becoming tougher and more international ; regulation is becoming stricter, and supervision more european ; in addition, the economic setting is challenging β think β lowinterest - rate environment β β and technology is continuously evolving. surviving and prevailing under these conditions is akin to a marathon. in addition, theoretically being able to withstand even severe stress will not automatically guarantee that the runner will finish the race. even though he or she may be in very good shape at the starting line, the runner can still make many mistakes during the race. and, in future, there will be no more β sovereign paramedics β at the side of the road to help stumbling banks back on their feet. 2. profitability β competition is tough and international what the exercise conducted over the past 12 months has shown is that germany β s largest banks are able to withstand even severe stress. that will certainly help them to finish the marathon β but will not be enough to enable them to win it. that aim will require not only resilience but also the ability to outrun the competition β | , europe and around the world. yet politicians must also play their part. the crisis has shown how dangerous an unstable banking system can be for the real economy. the most important step to address this issue is, of course, to improve regulation and supervision. that has been achieved. but especially in europe it would be worthwhile to take measures to ease the real economy β s access to alternative sources of funding. some initial ideas on a european capital markets union are already being discussed ; let β s seize the opportunity to make these ideas a reality. so i should actually correct what i said at the beginning of my remarks. it isn β t just the banks which are now standing at the starting line of a marathon β so are politicians. and it is in everyone β s interest to arrive safely and swiftly at the finishing line together. thank you very much. bis central bankers β speeches | 1 |
finance. the idea is to leverage public money to rebalance risks and instil confidence so as to draw in private capital. this should enlarge the pool of available 1 / 2 bis - central bankers'speeches capital while allowing projects to tap the innovation, risk management expertise, entrepreneurship, and market development capabilities of the private sector. as asia's leading international financial centre and green finance hub, hong kong is very well positioned to channel the needed investment to sustainable projects in asia and the belt and road countries. we have one of the world's most active equity markets and asia's largest international bond market. in particular, hong kong captured more than one - third of the asian green and sustainable bond issuance last year. nearly 200 esg funds are authorised with the sfc, an increase of 55 % just within a year. meanwhile, we are taking steps to support the further growth of our sustainable finance ecosystem through a mix of regulation and financial incentives and leading by example in terms of the exchange fund's investments. policy initiatives aside, we recognise that communication and in - person contact are equally important. we set up the infrastructure financing facilitation office ( iffo ) back in 2016, with close to 100 partners now, to provide a platform for practitioners and investors to share experience and best practices. recently, we hosted two roundtables with leaders from various financial institutions to discuss ways to bolster climate financing. more events will be planned for the rest of this year. in addition to those events, we have organised delegations to visit the belt and road countries, including saudi arabia and the united arab emirates, to promote dialogue and cooperation, especially in the area of green and sustainability development. notwithstanding the effort that we have put in, a lot more still needs to be done to support the climate transition. i look forward to hearing the insights and ideas from our speakers and panellists at our upcoming discussion. thank you. 2 / 2 bis - central bankers'speeches | peter pang : asia treasury trailblazer summit 2015 speech by mr peter pang, deputy chief executive of the hong kong monetary authority, at the asia treasury trailblazer summit 2015, hong kong, 30 april 2015. * * * distinguished guests, ladies and gentlemen, 1. i am delighted to join you this morning to take part in the asset β s inaugural asia treasury trailblazer summit. i like the buzz word β trailblazer β in the banner and the chosen theme of this event : β taking treasury to the next level β. 2. β trailblazer β quite rightly describes the role and requisite mentality of corporate treasurers now operating in asia. the region is in unchartered waters awash with groundbreaking opportunities and, at the same time, unprecedented challenges. if we can rise up to the challenges and capitalise on the opportunities, multinational companies ( mncs ), leveraging on strategic application of their treasury capabilities, can certainly raise their business to the next level. 3. let β s take a closer look at these opportunities and challenges and give some thoughts on how the public and private sectors can work together to engineer a win - win solution. 4. after three decades of high speed growth, propelled by china β s rise to become the second largest economy and the largest trading nation, all global mncs are expanding their presence in asia, and the share of global revenues generated in asia continue to rise at a staggering speed. according to the asia business outlook survey by the economist, β in 2011, western firms said that asia contributed 19 % of their global revenues. in 2012, that figure rose to 22 %. by 2017, western firms expect asia to contribute 32 %. however, this will still be below asia β s estimated 35 % share of the global economy in 2017. β 5. the use of rmb is now catching up with china β s rising economic clout. starting from scratch in 2009, the portion of china β s trade settled in the rmb quickly surged to 20 % in 2014, amounting to 6. 6 trillian yuan, equivalent to more than us $ 1 trillion. and, in the same year, over 30 % and 16 % of china β s inward and outward direct investment respectively were denominated in the rmb. increasingly, mncs will find it advantageous and necessary to trade with their asian counterparts, and to conduct the related financing, investment and hedging activities in the rmb. | 0.5 |
industry has taken active steps to promote robust controls to strengthen its resilience and prepare for increased transparency on beneficial ownership information and enhanced tax transparency. the private banking industry in singapore introduced a set of industry sound practices last year to provide guidance to private banks on the development and implementation of robust controls to detect and deter the proceeds of tax crimes. as most of you would know, the singapore trustees association has also issued similar guidelines for trust companies. we commend such industry initiatives and look forward to continue working in meaningful partnership with the industry. 26. competency building is also imperative in raising aml / cft standards amongst industry professionals. an effective aml / cft system cannot be solely the responsibility of compliance professionals or experts, but must be an integral part of the firm β s culture. besides the institute of banking and finance ( β ibf β ), certification providers like the international compliance training academy and the association of certified anti - money laundering specialists ( β acams β ) offer a suite of aml / cft courses and training programmes. such courses, where they are accredited by the ibf, are available for funding from the mas β financial sector development fund. so i would strongly encourage industry professionals to tap on the many resources and training avenues in order to increase knowledge and awareness of risks. bis central bankers β speeches conclusion 27. returning to the history of the origins of trusts. such arrangements could well have been phased out at that time if the law did not recognise them. when the crusaders returned, they often faced refusal for the return of their estate. such disputes had to be brought before the lord chancellor, who found in favour of the returning crusaders, and recognised such claims. 28. fortunately, trusts today are built on stronger foundations than the changeable favours of lord chancellors. the trust industry is based on and built on reliability and professionalism. mas partners with the industry, and will continue to do so, to further strengthen its reliability and resilience, by building a robust regime that is well - regulated, stable and trusted. this will continue to instil confidence in clients, and in our financial system. and this will keep us on the path of sustainable growth. 29. on this note, i wish all of you an engaging session and fruitful conference. thank you. bis central bankers β speeches | manuel sanchez : the european union ten years after the euro zone crisis remarks by mr manuel sanchez, deputy governor of the bank of mexico, at the national bank of poland conference on β the future of the european economy β, warsaw, 18 october 2012. * * * i am pleased to be with you today in the culturally vibrant city of warsaw, and to be a participant in this conference on the timely and important topic of the future of the european economy. i would like to thank president marek belka and the national bank of poland for the invitation to share my thoughts with you. the process of integration in europe has been long and quite remarkable, reflecting strong leadership and social consensus in favor of unity and cooperation. the process can also be considered an economic success on the basis of the expansion of trade, investment, and growth resulting from the reduction of barriers to international transactions. furthermore, the current stage of economic and monetary union in the eu shows additional economic benefits accruing to its members as a result of the elimination of transaction costs related to currency exchange in the area, the efforts by member countries to comply with the convergence criteria, and the price stability attained. notwithstanding this progress, the ongoing crisis has revealed crucial deficiencies in the design and operation of the emu, engendering prolonged financial instability and casting doubts on its viability. the identified weaknesses have called for policy measures whose effectiveness will, to a large extent, determine the future of the monetary union. given the importance of the emu to the eu, in what follows, i will focus my comments on what i believe are the key policy issues in the euro zone, the opportunities for the central and eastern european countries, and the impact on the world economy. as always, my comments are my own responsibility and do not necessarily reflect the views of the bank of mexico or its governing board. policy challenges and the future of the emu one of the most urgent policy tasks in the emu is the end of the negative feedback loop between unsustainable public - debt paths and the weak conditions in the banking system prevailing in many countries. to this end, fragile banks must be recapitalized by the private sector which, exceptionally, may imply supplementary backing by corresponding national governments. such a step requires an assessment of the β true value β of public - sector debt on the banks β balance sheets. efforts towards fiscal consolidation demand, in many instances, substantial corrections of primary deficits that have resulted from previous stimulus measures, automatic stabilization | 0 |
. the fed was established with a substantial degree of formal, legal independence at a time when that was relatively rare. the initial mandate was very broad. our predecessors were charged with the responsibility of furnishing an β elastic currency... β and affording β the means of discounting commercial paper. β decision - making authority was vested in an institution structured to bring a diversity of largely independent perspectives to the table, for many of the same reasons that most governments vest monetary policy authority today with committees rather than individuals. the federal reserve was set up with a balance of public and private perspectives, drawn from across the country β a structure designed to avoid concentrating too much power in washington, and also to provide a counterweight to new york. this body was comprised of a group of seven governors appointed by the president and confirmed by the senate β five governors and the secretary of the treasury, the comptroller of the currency β and the heads ( then called governors ) of 12 reserve banks. the terms of the washington - based β board of governors β were long and staggered, giving them an extended horizon for policy making more consistent with the time frame in which monetary policy works and with the long - term interests of the nation than might be shaped by the electoral calendar. reserve bank presidents were appointed by their boards of directors. the reserve banks, spread across the country, were established as individual corporate entities, owned by banks, with individual boards of directors, a majority of which were elected by the bank shareholders. in the early years, the principal substance of monetary policy making was not centralized around a table in washington, but was conducted by the individual reserve banks, which set the discount rate for their member banks and conducted open market operations. at inception, the fed was set up with financial independence and not reliant on annual appropriations by the congress. its capital was provided by the member banks and its resources were to come principally from earnings on its assets and the services it provided its member banks. in formal structure, therefore, and to a considerable extent in fact, the fed was established with a substantial degree of both β goal independence β and β instrument independence. β the very general framing of the initial mandate β β to furnish an elastic currency β β gave it considerable scope to decide what objectives should guide monetary policy. it had full authority to decide how to pursue those objectives. it had broad independence both to formulate and to execute monetary policy. that independence was qualified for substantial parts of the early history | most countries the stock market capitalization relative to gdp is decidedly lower than in the united states, resulting in generally much more modest effects on aggregate demand for given percentage declines in wealth. the exceptions to this rule are canada and the united kingdom. one recurring theme has been the expectation that the euro area will be relatively insulated from the effects of country - specific and common shocks. the euro area, for example, has only modest trade links to the united states ( minimizing the direct trade spillover from the united states ), has benefited from a depreciation of the euro ( further mitigating any trade effect ), has a relatively modest market capitalization to gdp ( minimizing either the spillover from the u. s. equity market correction or the effect of the global equity correction ), and has a relatively modest share of high - tech production to gdp ( minimizing the effect from the global retrenchment in high - tech investment ). nevertheless, while these channels have muted the slowdown in the euro area, they have not eliminated it. now let me turn to the risks. the greatest risk, in my view, would arise from a sharper - than - expected slowdown in the united states β either an outright recession or a more persistent period of very low growth. a second risk β and this might well be part of the story behind the first β would be an aggravation of the current slowdown in the united states and globally as slower growth triggered an abrupt unwinding of pre - existing financial and other imbalances. this is the story that typically lies behind more severe downturns. one important possible imbalance is a capital stock " overhang " in the information technology sector, especially in the united states, but to a lesser degree in a few other countries as well. in this case, the continuing retrenchment in high - tech investment could suppress economic growth for a longer period. another possible imbalance that continues to receive a lot of attention around the world is the large and still rising u. s. current account deficit. that deficit is, of course, simply the other side of the massive capital flows to the united states to take advantage of the higher perceived return there. the most benign adjustment would be for the euro area and other countries to benefit from an acceleration in productivity, much as the united sates has enjoyed. this would lead to a reversal of capital flows and depreciation of the dollar, with | 0 |
, which is undoubtedly an inspiring responsibility. what counts is to have a good team spirit, a solid institution and all the wisdom of collegial decision - making. question : is the president of the ecb more of an academic / technocrat or a diplomat / politician? should the president of the ecb be a career central banker with impeccable academic credentials, such as athanasios orphanides of the central bank of cyprus? or should the president of the ecb have a background in high - level national and european politics and multinational institutions with extensive personal networks, such as erkki liikanen of the bank of finland? i have no comment on the decision which will be taken by the heads of state and government. i will only say that, of course, all members of the governing council have a solid academic background. that being said, all kinds of experience can be important and useful. and again : what is decisive is the team spirit. question : based on your experience, is central banking more art than science? central banks need formidable analytical capacities and skills. you need both state - of - the - art analytical work, as deep and robust as possible, and you need judgement, based on experience and a solid capacity to synthesise all pertinent analyses. that is true in absolutely all circumstances, and particularly in times of crisis. question : professor barry eichengreen of the university of california, berkeley, recently published a book about the us dollar entitled exorbitant privilege. in the book prof. eichengreen makes the following assessment when he analyses the strengths and weaknesses of the major currencies. bis central bankers β speeches β if a first - class international currency needs a first - class central bank, then this, too, is something the euro possesses. the ecb has shown itself to be extraordinarily serious about the maintenance of price stability. although it was roundly criticized for its exceptional purchases of government bonds in the spring of 2010, it continues to take its price - stability mandate seriously. it shows absolutely no inclination to embark on reckless inflationary policies. β first of all, do you agree with this assessment? secondly, is the perception that the ecb is extraordinarily serious about the maintenance of price stability something that you would like to see as your personal legacy as a central banker? i did not know that you would quote barry eichengreen. but yes, you can see that we consider price | , namely the interest rate decisions, which are designed to deliver price stability, and the non - standard measures, which are designed to help restore a better transmission of our monetary policy, taking into account the abnormal functioning of some markets. question : how is the ecb β s room for manoeuvre influenced by the poor condition of public finances in euro zone countries, and especially in the countries with acute crisis? as i said, we are not compromising on our primary goal of maintaining price stability, and our interest rate decisions are designed to fulfil that aim. any other approach would be unthinkable. and one should never forget that price stability is a precondition for sustainable growth and job creation. question : there are some heavily indebted nations within the euro area, most prominently greece. yesterday ( tuesday, 19 april ) the news agency reuters reported that clemens fuest, who chairs the german finance ministry β s technical advisory committee, said greece β s extremely weak balance sheet meant a restructuring of the greek sovereign debt was inevitable. he said that : β one must recognise the realities β i am expecting a haircut β. do you agree with mr fuest and other prominent economists and policy - makers who have expressed similar views? there is an important adjustment plan which has been adopted by the greek government to reform its fiscal and structural policies. this plan has been approved by the imf, by the international community and by the european commission in liaison with the ecb. this plan is being applied. question : how worried should we be about credit rating agency s & p β s negative outlook for the aaa rating of us debt? is there a rising risk of higher long - term interest rates worldwide? the ecb has always thought and said that it was important for all advanced economies, without exception, in europe and the rest of the world, to be very keen on the sustainability of their long - term fiscal policies. it is extremely important that the authority of the signatures of the advanced economies is unchallengeable. i personally have full trust in the united states for preserving its creditworthiness and the authority of its signature. question : the ecb has postponed its exit from the non - standard measures on several occasions. can the non - standard measures de facto co - exist with any level of interest rates? yes, indeed, the β separation principle β that we apply permits us always to have the right level of interest rates, even when markets are still not | 1 |
##ion to foreign exchange reserves after financing the cad. the macroeconomic outlook is, however, subject to risks from both global and domestic uncertainties. adverse global developments such as a slowdown in the pace of global recovery, financial market turbulence due to a faster than expected withdrawal of accommodative monetary policy in the advanced economies, hardening of commodity prices on geo - political tensions and / or weather - related supply disruptions, could have deleterious consequences for all emerging market economies. growth - inflation debate 5. estimates of threshold inflation for india currently vary from 4 per cent to 6 per cent based on methodology used and time span of the study. some estimates carried out in the reserve bank 1 using multivariate methods on quarterly data indicate that the level of β why persistent high inflation impedes growth? an empirical assessment of threshold level of inflation for india β ( rbi working paper series no. 17 for september 2011 ). bis central bankers β speeches cpi - combined inflation ( all india back - casted using the cpi - iw ) above which it is harmful to growth is around 6 per cent. 6. growth - inflation trade - off in india is complex, particularly when inflation is above the threshold level. hence, our belief in rbi is that monetary policy possibly cannot spur growth by tolerating higher inflation. in turn, when inflation returns to below the threshold level on a durable basis, risks to inflation from addressing growth concerns may not be significant. thus, we feel that it is important for india to ensure price stability as a necessary means to promote sustainable growth. external sector 7. net foreign assets of the reserve bank have expanded by nearly rs. 1. 2 trillion during the year so far. all categories of capital flows have been buoyant, particularly under fdi, fii, ecb and non - resident deposits. notwithstanding these flows, in the absence of a strong demand for liquidity from the market, drivers of reserve money are compensating each other with the increase in net foreign assets largely offset by a reduction in net domestic assets. 8. an overall improved macroeconomic condition reflected in lower cad, fiscal consolidation, upbeat market sentiment and an accretion to the foreign exchange reserves have enhanced the capacity of the country to manage external spillovers better. the recent surge of interest in india reflects the revived assessment about the country β s underlying potential. rbi remains prepared to manage external spillover and india has the experience of managing phases of surges in capital | elson gaskin : data protection in the financial sector and why it matters speech by mr elson gaskin, governor of the central bank of barbados, at the data protection conference " compliance beyond borders β insights from financial regulators ", bridgetown, 20 march 2024. * * * like our sister regulator the financial services commission, the central bank of barbados is proud to be associated with this data protection conference, under the theme " compliance beyond borders β insights from financial regulators. " in fact, had we not been legitimately invited we would have engaged in our own version of a data breach and crashed the party anyway. i am pleased however that proper etiquette and decorum prevailed, and it did not come to that. so, thanks very much warrick and alicia! one of the major objectives of the central bank of barbados is to promote financial stability that is conducive of the orderly and sustained economic development of barbados. we all know that financial stability is inextricably linked to the confidence which the users of a financial system have in its operational resilience. every day, banks, credit unions, insurance providers, and investment firms deal with vast amounts of personal data ; some of it being sensitive in nature. this data may consist of names, email and physical addresses, telephone numbers, and government - issued identification documents. categories of sensitive information include financial status, race, religion, sexual orientation, political opinions, religion, criminal records, and involvement in legal proceedings. there is also now in some jurisdictions the question of health data. due to the possible harm that will otherwise result to an individual, customers'financial and personal information needs to be protected from theft, unauthorised access, and misuse. if then financial consumers come to believe that our system is porous relative to the way that their data is stored and maintained, such a belief could affect financial stability, as in the event of a breach, persons could move their funds away from a particular institution or institutions. it is for this reason that the central bank has a vested interest in ensuring that all institutions under its remit, properly comply with the requirements of the data protection act 2019 - 29 of barbados and the data protection pillars that underpin it. these pillars indicate that personal data must be processed lawfully, fairly, and in a transparent manner ; is collected for specified, explicit, and legitimate purposes ; is adequate, relevant, and limited to what is necessary ; is accurate and kept up to | 0 |
john hurley : comments on the financial crisis address by mr john hurley, governor of the central bank & financial services authority of ireland, at a lunch meeting of eu ambassadors to ireland, dublin, 27 april 2009. * * * among governor hurley β s comments at the event were : the global economy is currently experiencing the deepest and most synchronised downturn for many decades. in its latest economic outlook, the international monetary fund has forecast a contraction in global activity of around 1Β½ per cent this year. we have seen a small improvement in some economic indicators internationally in recent weeks, but i have to say that, at this stage, these remain more consistent with further contractions in output β albeit at a slower pace β rather than actual growth. while the fund has forecast very modest positive growth at the global level for next year, the recovery may be rather gradual. on the other hand, global inflationary pressures have moderated significantly since the middle of last year. the euro area headline rate was 4 per cent as recently as last july but has now fallen to below 1 per cent. this easing initially reflected a sharp decline in commodity prices β oil prices fell by over $ 100 per barrel in the second half of last year β but the impact of the downturn on prices is increasingly playing a role. reflecting these developments, headline inflation could turn negative in a number of advanced economies this year. this is a development that is likely to last for a number of months in the case of the euro area, before there is a return to moderate rates of positive inflation. policymakers have taken unprecedented steps to limit the impact of the current downturn. these have included financial sector intervention, as well as monetary and fiscal policies. a very wide range of measures has been taken to support financial institutions. these include recapitalisations, deposit guarantee extensions, debt guarantees, extensive provision of credit and liquidity, and acquisition or ring fencing of bad assets. as the global outlook has continued to deteriorate, many countries have also introduced significant wider fiscal measures to support the economy. as far as monetary policy is concerned, central banks have cut policy rates significantly β in many cases to unprecedented levels β and have taken a range of unconventional measures. this has led to a sizeable expansion of central banks β balance sheets, including the ecb β s. in particular, it is worth noting that euro area banks have been permitted to borrow an unlimited amount at the relevant policy rate against eligible collateral for some time now | two building blocks. not only does this piece of legislation introduce the β european covered bond β seal of approval, it also ο¬ags a premium segment to which the pfandbrief of course belongs. the harmonised deο¬nition aims to promote the stronger use of covered bonds as long - term sources of funding across europe, enabling investors to reap the beneο¬ts of these debt securities on a larger scale. because the markets for covered bonds are not all as well developed as they are here. all this may well provide the german pfandbrief with a further impulse of internationalisation, following the initial surge when the jumbo pfandbrief was introduced in 1995. https : / / www. bundesbank. de / en / press / speeches / consistency - as - a - mandate - 816296 7 / 9 11 / 29 / 2019 consistency as a mandate | deutsche bundesbank at this point, i would like to add the following remark : the fact that the pfandbrief became β in dr hagen β s words β an β export hit β is not solely attributable to the product itself. it is also a great achievement of the association of german pfandbrief banks, or vdp, and its sustained efforts at the national and international level. the eu framework for covered bonds and the aforementioned taxonomy for sustainability are two steps towards a real capital markets union. however, it appears that europe still has obstacles to overcome on its way to better access to funding and a wider dispersion of risk in the private sector. in my view, the area of insolvency proceedings could be key to a deeper integration of the european capital market. this area still lacks a harmonised approach β not least because it is often closely intertwined with other aspects of national law. a complete harmonisation of insolvency proceedings is therefore rather unrealistic. however, maybe that is not necessarily what is called for. much the same as the covered bond framework, minimum requirements across europe would be a pragmatic ο¬rst step. a clear and sound legal basis for securities, in particular, is important if we want to protect issuers and investors. this has also stood the pfandbrief in good stead. time and again, the pfandbrief has been able to adapt to new circumstances and overcome challenges over the years. but amidst all the change, it was essential that the | 0 |
be even faster through an end - to - end digitalised trade process along the ilstc. harnessing green finance for sustainable development 2 / 4 bis central bankers'speeches the second area where chongqing and singapore can work closer together is green finance. covid - 19 has made us all more aware of the value of protecting the environment. china has committed to ambitious green policy goals including carbon neutrality by 2060. chongqing has the important task of leading sustainable development in the western region and along the yangtze river economic belt. green finance will be a powerful tool to help achieve this. green finance is also a key area of focus in singapore. mas has worked with the financial industry to launch a green finance action plan. it has four key strategies : strengthen the financial sector β s resilience to environmental risks ; develop green financing solutions and markets for a sustainable economy ; harness technology to enable trusted and efficient sustainable finance flows ; and build knowledge and capabilities in sustainable finance. asean too has prioritised green finance. green finance volumes in asean doubled last year and remained robust in 1h 2020, despite covid - 19. as asia continues to urbanise, its demand for affordable and sustainable energy will only grow. there is great opportunity for the western region and asean to collaborate on initiatives to support the large scale of green financing that is needed. last year, chinese and singapore banks jointly issued over usd 2 billion in green bonds and loans in singapore to finance belt and road projects. in may this year, icbc partnered dbs bank and ocbc bank to issue its first green loan in singapore, to the value of sgd 730 million. more can be done to mobilise private sector capital to support the green agenda in asia. strengthening disaster risk insurance the third area for co - operation is insuring against disaster risks, like pandemics, natural catastrophes, and climate change. this is critical as the western region continues to invest in infrastructure development including along the ilstc. the western region is highly exposed to natural catastrophes, and the yangtze river floods this year were the worst seen in decades. understanding risk exposures and strengthening financial risk management helps protect lives, livelihoods and public assets. insurance players and academic experts in chongqing and singapore can work together to better assess and model the western region β s risks. they can develop together climate and disaster risk financing solutions such as : traditional insurance and reinsurance ; regional catastrophe risk pools ; and catastrophe bonds. | study on the impact of automation and data analytics over the next 3 - 5 years on job tasks and skills needs across 121 job roles in the financial sector. this study helped prioritise our [UNK] in working with fis to reskill and redeploy 5, 300 employees in consumer banking, insurance, and operations, whose jobs were identified as likely to change significantly. to - date, 1, 700 workers have completed their training and have been successfully redeployed into new jobs, probably avoiding retrenchments that might otherwise have taken place. next, mas and ibf worked with skillsfuture singapore to develop a skills framework for financial services, building on ibf β s competency standards for the skills required in financial sector jobs. this framework has become the reference standard for jobs and skills in the financial services sector. what does this mean? first, the job functions and roles in mas β annual manpower survey and the new employment outlook survey are mapped to those in the skills framework, so that we not only know what jobs are in demand, but also what skills to build to help move people into these jobs. second, ibf β s accreditation of training programmes and certification of professionals are based on the skills framework, and so are its training pathways for reskilling and upskilling. https : / / www. mas. gov. sg / news / speeches / 2020 / gearing - up - for - new - and - evolving - jobs - in - financial - services 16 / 18 04 / 12 / 2020 " gearing up for new and evolving jobs in financial services " - remarks by mr ravi menon, managing director, monetary authorit β¦ third, employers in the financial sector have started to adopt the skills framework in their training roadmaps. this is important. as an industry, we must move towards skills - based rather than qualification - based hiring and career development. fast forward to 2020, and the restrictions imposed by the covid - 19 pandemic have accelerated upskilling [UNK]. training participation has increased 65 % to reach close to 31, 000 during the april to september 2020 period, compared to the same period last year. besides training to deepen your skills, i encourage you to seek ibf certification, an industry endorsed mark of quality for finance professionals in singapore. https : / / www. mas. gov. sg / news / speeches / 2020 / gearing - up - for - new - and - evolving - jobs - in - financial | 0.5 |
stephen s poloz : 25 years of inflation targets β certainty for uncertain times remarks by mr stephen s poloz, governor of the bank of canada, to the business council of british columbia, vancouver, british columbia, 1 november 2016. * * * introduction these are uncertain times in the global economy, and anything that can be done to lessen uncertainty is welcome. last week, the bank of canada and the federal government took an important step to provide some certainty, to both companies and consumers, by signing a fiveyear renewal of our inflation - targeting agreement. this year marks the 25th anniversary of inflation targeting in canada. that is a long time β so long that a whole generation of business leaders and consumers has not had to deal with the uncertainty associated with high and variable inflation. it is human nature to take for granted things that have been around for a while. the bank of canada will never take for granted the benefits of inflation targeting, and last week β s renewal makes it timely to remind people of the benefits that inflation targeting has delivered, as well as the difficult journey we took to get here. finding an anchor twenty - five years is the silver anniversary, but inflation targeting has truly been golden. as an approach to monetary policy, inflation targeting has proven its worth repeatedly, both in good economic times as well as turbulent ones. canada was just the second country to adopt this approach. now, inflation targeting β narrowly defined β is being practised by 36 central banks representing 37 per cent of the world β s economy. when you add the us federal reserve, which has inflation control as one of its mandates, and the european central bank, which has a mandate to keep inflation below 2 per cent, 64 per cent of the world economy is following some form of inflation targeting. but to understand how important an advance this system represents, you need to look back to the bad old days of the 1970s and 1980s. inflation was not only much higher than today, but it was also much more variable. annual inflation reached more than 12 per cent in 1974, dropped to less than 6 per cent two years later, then jumped back to over 12 per cent in 1981. it was impossible to predict with confidence what the inflation rate would be from one year to the next. from an employer β s point of view, high and variable inflation made it extremely difficult to do the hard math required to run a business. high inflation meant companies constantly faced β menu costs β associated with having to regularly adjust prices. those costs | . so, the bank focused its efforts on refining its understanding of the linkages between interest rates, economic growth and, ultimately, inflation β in short, a macroeconomic model. in 1988, then - governor john crow announced that monetary policy should aim at β achieving and maintaining stable prices. β although the precise definition of price stability was left open, the anchor for monetary policy would be inflation itself, not an intermediate variable such as money. it is fair to say that the concept of directly targeting inflation was met with a fair degree of skepticism, including from the government. after all, a central bank does not control how prices are set. what made us think we could achieve an inflation target? well, we had done the research and improved our ability to use economic models, so we knew the logic was sound. in the end, the federal government was persuaded β we reached a formal agreement that said our monetary policy would be directed at controlling inflation and that gave us the operational independence to carry out policy as we saw fit. and so, in 1991, canada became an inflation - targeting pioneer. over time, the broad parameters of our approach have not changed. for the first three years, we had inflation - reduction targets, with a goal of bringing inflation down to 2 per cent. we succeeded. since 1995, we have aimed to keep inflation at the 2 per cent midpoint of a 1 to 3 per cent range. importantly, we approach the target symmetrically. given the experiences of countries who have struggled with deflation, we are just as concerned about inflation below our target as above it. we want businesses and consumers to be able to make long - term plans with certainty. reaping the rewards as it turned out, the framework worked better than we could have reasonably hoped. check the numbers. inflation averaged about 7 per cent between 1975 and 1991, including the 1983 to 1990 period when it stabilized around 4 to 5 per cent. since then, inflation has averaged almost exactly 2 per cent and become much more stable, and expectations have become solidly anchored on the target. inflation targeting has also provided economic benefits that went beyond those we were expecting. canadian businesses and households have reaped the rewards of reduced uncertainty, helping them make spending and investment decisions with more confidence. it has 2 / 5 bis central bankers'speeches also led to improved economic performance across a number of dimensions β both in terms of higher levels of activity and lower variability. the agreement, which has been renewed every five | 1 |
spending and the economic and social pains that the de - leveraging process generates. ( e ) while the government should step in to help if the financial system or the whole economy gets into trouble, this is feasible only if the government has the fiscal headroom to foot the bill. if the government itself is already heavily indebted or has incurred a huge amount of debts after bailing out the private sector or introducing measures to stimulate the economy, the market may start to doubt the sustainability of its fiscal position. a case in point is ireland, where the government incurred a huge amount of liabilities by bailing out the banking system, calling into question the government β s fiscal sustainability and triggering the sovereign debt crisis. ( f ) the crises unfolding in the us and europe are not new to asia. this region had its share of suffering during the asian financial crisis of 1997 / 1998. in hong kong we went through almost seven years of painful economic adjustment after the burst of the property bubble in late 1997. our economy shrank by 8. 7 % in five quarters. unemployment increased fourfold from 2. 1 % to 8. 5 %. property prices dropped by 70 % in six years while the general price level fell by 15 % in five years. the hard lesson we learned from our experience is to face the reality, take the pain in stride and do whatever it takes to restructure the economy, to increase productivity and improve competitiveness. if this can be done, it should be possible to return to the track of sustainable economic growth. bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches | sheets are repaired. i believe that us households still have some way to go in repairing their balance sheets through de - leveraging, before they regain confidence in consumption and investment. at the same time, the us fiscal conditions have deteriorated since 2008 and this has restricted the headroom for the government to launch further fiscal packages to stimulate growth and create jobs. the situation in europe is in no better than the us. the sovereign debt problems of the eurozone have already spread to spain and italy, and have even threatened the stability of the debt markets in the core countries of the eurozone. it now appears that the rescue package announced by the european union in late october is no longer sufficient, and hence the market is expecting the european union summit tonight to introduce stronger and more effective solutions to resolve the european debt problems. the situation remains highly unstable and the market is showing little confidence in the european leaders β resolve and ability to bring an end to the debt crisis. the situation is very worrying. 6. once a country gets into the habit of spending beyond its means, relying on debts to finance its expenses and rolling over old debts with new ones, it is a matter of time that the country would run into trouble. the only way out is to reduce debt and endure the excruciating pain of de - leveraging. while leveraging or borrowing normally produces intoxicating feel - good effects, such as job and income growth, buoyant consumption and investment, strong credit demand, asset value appreciation and business boom, deleveraging has exactly the opposite effect, creating very unpleasant and painful consequences. the injection of ample liquidity into the banking system by central banks to suppress interest rates is certainly helpful in alleviating the pain of those debtors who can refinance their loans with lower interest rates and thus reduce their interest and repayment burden. however, many households in the us are denied access to cheaper and falling mortgage rates because they are in negative equity and cannot afford to refinance. lower interest rates are thus of little help to them. moreover, pushing interest rates to close to zero also deprives prudent savers of the interest income that they can earn from their savings. many savers, including pensioners, have to cut back spending because of the sharp fall in their recurrent interest income. this will offset the impetus to consumption and investment provided by the near - zero interest rates. 7. some academics believe that the effectiveness of the quantitative easing policy in the | 1 |
monetary means, the degree of control of the central bank is of paramount importance. " ( pp. 3 - 4 ). statistics. in 1939, the federal reserve began a project to bring together the available historical data on banking and money. this effort culminated in 1943 with the publication of banking and monetary statistics, which included annual figures on demand and time deposits from 1892 and on currency from 1860. academic interest in monetary aggregates increased after world war ii. milton friedman β s volume studies in the quantity theory of money, which contained phillip cagan β s work on money and hyperinflation, appeared in 1956, followed in 1960 by friedman β s a program for monetary stability, which advocated that monetary policy engineer a constant growth rate for the money stock. measurement efforts also flourished. in 1960, william j. abbott of the federal reserve bank of st. louis led a project that resulted in a revamping of the fed β s money supply statistics, which were subsequently published semimonthly. 5 even in those early years, however, financial innovation posed problems for monetary measurement, as banks introduced new types of accounts that blurred the distinction between transaction deposits and other types of deposits. to accommodate these innovations, alternative definitions of money were created ; by 1971, the federal reserve published data for five definitions of money, denoted m1 through m5. 6 during the early years of monetary measurement, policymakers groped for ways to use the new data. 7 however, during the 1960s and 1970s, as researchers and policymakers struggled to understand the sharp increase in inflation, the view that nominal aggregates ( including credit as well as monetary aggregates ) are closely linked to spending growth and inflation gained ground. in 1966, the federal open market committee ( fomc ) began to add a proviso to its policy directives that bank credit growth should not deviate significantly from projections ; a similar proviso about money growth was added in 1970. in 1974, the fomc began to specify " ranges of tolerance " for the growth of m1 and for the broader m2 monetary aggregate over the period that extended to the next meeting of the committee. 8 in response to house concurrent resolution 133 in 1975, the federal reserve began to report annual target growth ranges, 2 to 3 percentage points wide, for m1, m2, a still broader aggregate m3, and bank credit in semiannual testimony before the congress. in an amendment to the federal reserve act in 1977, the congress formalized the federal reserve | m1. currie argued that collection of monetary data was necessary for the federal reserve to control the money supply, which in turn would facilitate the stabilization of the price level and of the economy more generally. 4 in 1934, marriner eccles asked currie to join the treasury department, and later that year, when eccles was appointed to head the federal reserve, he took currie with him. currie β s tenure at the federal reserve helped to spark new interest in monetary board of governors of the federal reserve system ( 1998 ), 1 - 001. in his recent history of the federal reserve, allan meltzer ( 2003, p. 66 ) notes of some of the act β s proponents that : " [ o ] ne of their principal aims was to increase the seasonal response, or elasticity, of the note issue by eliminating the provisions of the national banking act that tied the amount of currency to the stock of government bonds. " see mankiw and miron ( 1986 ) for a discussion of the fed β s seasonal interest - rate smoothing. the federal reserve did publish data on the issuance of federal reserve notes from its inception. federal reserve notes were only part of total currency in circulation, however, the remainder being made up of national bank notes, united states notes, treasury notes, gold and silver certificates, and gold and silver coin. beginning in 1915, the federal reserve bulletin included data on currency that had been collected by the treasury and data on total bank deposits that had been collected by the office of the comptroller of the currency as a byproduct of its regulatory role, but publication was irregular. indeed, the federal reserve β s adherence to the real bills doctrine - which counseled against active monetary management in favor of supplying money only as required to meet " the needs of trade " - gave the new institution little reason to pay attention to changes in the money stock. see humphrey ( 1986 ) for a history of the real bills doctrine. the constraints of the gold standard also restricted ( without entirely precluding ) active monetary management by the federal reserve. in the second edition of his book, currie ( 1935 ) wrote : " the achievement of desirable objectives β¦ rests entirely upon the effectiveness of control. the achievement, for example, of the objective of a price level varying inversely with the productive efficiency of society demands a highly energetic central banking policy and a high degree of effectiveness of monetary control β¦ even for the achievement of the more modest objective of lessening business fluctuations by | 1 |
contribution to australia's economic success. our flexible inflation targeting framework has served the country well and the overall economic outcomes in australia have been at least as good as those elsewhere. the panel also concluded that the rba is held in high regard internationally and that its staff are highly dedicated and skilled. we are a strong institution that is served by a dedicated, diverse and highly experienced board whose members have to grapple with very difficult issues. we have a strong focus on doing what is right for the country as a whole over the medium term, even if it is difficult for some people in the short term. today's decision by the board is an example of that. i would like to take this opportunity to pay a tribute to two reserve bank board members who will soon be retiring. today's meeting was the final one for wendy craik, and mark barnaba's term on the board will end in august. both wendy and mark have served on the board with great distinction. they have had to deal with a period when inflation was too low, a global pandemic, unprecedented monetary policy actions, the economic effects of an horrific war in europe, the transition in our energy system and the highest inflation in 30 years. all that in less than six years. in my view, their contributions over these years reinforce the argument for the monetary policy board continuing to have strong, experienced and independent members drawn from a wide variety of backgrounds. as i hope you know, the rba has many other responsibilities other than setting interest rates. one of these is that we print and issue the nation's banknotes. this remains a very important function for us, despite banknotes being used less and less for payments. according to our latest survey of how australians make their payments, cash now 3 / 4 bis - central bankers'speeches accounts for just 13 per cent of all consumer payments. fifteen years ago, that figure was nearly 70 per cent. that is a big change and i expect that it will continue. despite this, the stock of banknotes on issue has continued to grow over recent years. there is nearly $ 4, 000 on issue for every australian, including 18 $ 100 bills for every man, woman and child. i don't have my share and i don't know many people who do. the rba is also investigating new forms of digital money, including a central bank digital currency. it is too early to tell where this will end up, but history teaches | globalised nature of markets. the discussion will also need to pay due regard to the potential for other consequences of changes to practice in this area, including the possibility that private entities become so confident that liquidity risk has effectively been removed that they end up taking more risk of other types. that could leave both themselves and their central banks in an awkward position at some point down the track. so in parallel with ongoing development of liquidity arrangements by central banks, there will need to be a focus in the supervisory community and the banks themselves on liquidity management. conclusion international financial events over the past nine months have been a source of considerable instability. risk that was always in the economic environment has belatedly been recognised. the ensuing process of assessing and disclosing losses, finding new capital and de leveraging has been very difficult. matters have not been helped by the opacity and complexity of some of the financial instruments involved, and the associated problems in valuing them. for market participants and policy makers alike, this environment has been challenging indeed. those of you in the markets are dealing with heightened volatility and uncertainty. policy makers, meanwhile, are working hard to stabilise the present international situation. in some countries, especially the us, that involves being prepared to take measures quite aggressively, in an effort to avert a cumulative spiral of declining asset values and deteriorating creditworthiness feeding back on itself and doing great damage to the economy. in other countries, where financial strains are also occurring though not always to the same extent, it has thus far involved significant changes to liquidity management, while balancing the financial risks against other macroeconomic risks in an effort to foster long run stability. in all countries, though, policy makers are also keeping an eye out for the potential low probability, but high cost, downside events that could emerge. it looks as though the environment will remain quite challenging for us all for a while but the strength of the australian financial system is, for australia, a good basis for meeting the challenge. | 0.5 |
over - interpreting a few isolated case studies, where excessive market conviction β that the next move in us rates would bis central bankers β speeches definitely be up ; and the swiss peg was immutable β led to highly crowded trades accentuating the price moves and the impact on volatility. but this is not the interpretation i lean towards. not least because we hear from market participants that, far from biting in extreme circumstances, these are issues that ficc businesses are grappling with on a daily basis. an eight standard deviation move in us treasuries, on weaker - than expected us retail data, lies outside the bounds of what could be considered a transient trend. consolidation and electronification have plausibly combined to accentuate the sharp moves seen last autumn and this january. the apparent increase in the incidence of such spikes in recent months may be because the β comforting cloak β of β low - for - long β has been less of a factor in suppressing volatility in preceding months. turning to the β so what? β, it is definitely not that the rise in volatility that is a concern per se : if anything, policymakers have long been concerned about the potential financial stability risks associated with a long period of low volatility. even with the recent rises, volatility in most asset classes is only close to the average level of the pre - crisis period ; a period which after the fact proved to have been associated with the under - pricing of risk and suppressed market volatility. nor is it that necessarily the case that some decline in the liquidity of financial markets would be a concern : the correct answer is not always maximal liquidity as i noted earlier. we are unlikely to return to this pre - crisis world and should not see it as an aspiration. but, if we accept the hypothesis that the market β s ability to digest significant news has changed such that sudden increases in volatility and loss of liquidity are more likely, then the concern is that the stabilising factors which dampened the impact of such events in recent months may not always kick - in. in those circumstances the period of market dislocation could become more persistent, increasing the scope of spillovers across financial markets, with potentially more significant impacts for financial stability. put another way, recent months have shown the potential for short, sharp shocks. but financial markets may not have been truly tested for the ability to absorb price moves or flows that persist for a | making capacity has been associated with increased concentration in many ficc markets, as firms have been more discriminating about the markets which they make, or the clients they serve. and this trend has gone hand - in - hand with a growth in assets under management by the buy - side community. the combination has served to amplify the implications of reduced risk warehousing capacity of the intermediary sector relative to the provision of liquidity from market makers during times of market stress relative to the past. that said, i would hesitate in drawing too much of a comparison between the market liquidity of today and that of pre - crisis. you don β t need a long memory to recall the impact of underpricing liquidity risk on the highly leveraged market makers. returning to such a situation would be a misplaced aspiration. the second theme i want to draw out is the evolution of market micro - structure. electronic platforms are now increasingly used across the various ficc markets. in some cases regulation has been the cause but in others, such as foreign exchange markets, firms have over a number of years increasingly embraced electronic forms of trading. this includes using β request - for - quote β platforms to automate processes previously carried out by phone. electronic platforms are effective in pooling liquidity in β normal β times but may have the potential, at least as currently calibrated and given today β s level of competition, to contribute to discontinuous pricing in periods of stress if circuit - breakers result in platforms shutting down. there has been much commentary about the temporary unavailability of a number of electronic trading platforms in the immediate aftermath of the removal of the swiss franc peg. a contrarian view, which i do not ascribe to, would be that no explanation is required. the argument would be that the apparent change in ability of markets to digest news is a mirage : the statistical analysis would prove to have captured a transient trend, and that intermediaries were never prepared to stand in the way of large market moves, during good times or bad. on this view, the reduction in balance sheet and the move towards electronic structures have been correlated with, but are not a cause of, the events we have seen. and the fact that the spikes in volatility have been visible in equity as well as bond markets, where market structure has not undergone as profound change as ficc markets, would be taken as supporting evidence. this view would caution against | 1 |
keeps turning, structural reforms in principle never end. the most appropriate speed and sequence of reforms e. g. depend on whether the output gap is positive or negative. this makes it difficult to draw a clear distinction between structural and fiscal policy. in international terms, including countries that apply best practice inflation targeting, denmark has seen very moderate volatility in inflation as well as output in recent years. we attribute this, in large measure, to the use of stabilisation policy as described above. in the 1970s and early 1980s, a very activist fiscal policy was pursued, as opposed to the current situation. our government debt rose steeply and the exchange - rate policy was anything but consistent. in those years, danish volatility was high by international standards. danish experience thus speaks against fiscal as well as monetary fine - tuning of the economy. efforts to stabilise the economy often end up rocking the boat. our experience, in the main, corroborates the focus on structural economic factors theoretically established by kydland and prescott. i want to make one final point : it is appropriate that drivers practise and qualify for a driver β s licence before getting behind the wheel. similarly, it is appropriate that a country documents that it is ready for emu prior to entry. part of this documentation is erm ii membership | an option, for brief periods of time, to counter adverse exchange - rate movements. intervention cannot stand alone, however. organisationally, this also implies that we must be able to adjust our interest rates when required, without being tied down by the meeting schedule of a monetary - policy committee. this is a well - known fact in the market and thus highly transparent. alternatively, one could say that our monetary - policy committee convenes every day and as required. central bank independence is a prerequisite in this respect. without it, the implementation of necessary measures can be endangered. we have a clear division of work regarding intra - marginal interventions. the board of governors, in collaboration with market operations, establishes a strategy based on current market conditions. the board of governors has access to real - time information on any interventions, but is not consulted in advance. interventions within one day are never capped, but subject to ongoing assessment in order to establish whether strategy adjustments are called for. the ecb is kept informed on an ongoing basis. in principle, one might ask whether the design of our stabilisation policy is appropriate? theoretically, there are two arguments for acting as we do. firstly, the institutions are designed to be in compliance with emu participation and thus also with the provisions of the treaty. at some future point in time we expect denmark to enter emu, and when it does, we will not have to alter our fiscal policy, since it is already based on government finances in surplus or close to balance. there is strong political support for this rule - bound division of labour in economic policy. the awarding of this year β s nobel prize in economic science demonstrates that the design of institutions is also considered to be of great theoretical importance. secondly, we know from the β impossible trinity β that in a world of free capital movements, it is not possible to set interest and exchange rates independently of one other. the central bank has one instrument, and one instrument only, at its disposal : the short - term rate. any attempts to stabilise the exchange rate while at the same time meeting other targets, are thus futile in theory. in practice, they spawn a number of problems which are aggravated the closer one seeks to stabilise the exchange rate. a number of central banks, including several from new eu member states, currently base their monetary policy on inflation targeting. in principle, the central bank seeks to approximately meet not only one, but two targets, an inflation target and an | 1 |
claudia buch : the deutsche bundesbank's 2020 financial stability review speech by prof claudia buch, vice - president of the deutsche bundesbank, at the press conference to unveil the financial stability review, frankfurt am main, july 2020. * * * ladies and gentlemen, i would like to welcome you to the presentation of the deutsche bundesbank β s financial stability review. this year β s report focuses on the impact of the coronavirus pandemic on the financial system. β the financial system should neither cause nor amplify a downturn in overall economic activity, and should perform its functions even in periods of stress. β our definition of β financial stability β may have sounded abstract up until now β but the pandemic has shown in very tangible terms how important a functioning financial system is for the economy. when infection rates surged in the spring and a lockdown was imposed, averting a liquidity crisis and a rise in insolvencies was necessary. enterprises and households were supported by extensive government measures. this largely shielded the financial system from the impact of the crisis β and this was a major reason why it has continued to perform its functions. in the phase of the pandemic that now lies ahead of us, corporate insolvencies are likely to increase. banks currently have capital buffers to absorb higher losses. however, they need to use those buffers to ensure that the credit market continues to function. and : both the public and private sectors need to prepare for an increase in insolvencies. in the medium term, dealing as well as possible with the impending structural change will be one of the main priorities. a well - capitalised and well - functioning financial system will play a crucial role in this. vulnerabilities that existed before the pandemic and which are being further amplified need to be kept in check. phase 1 : liquidity crisis averted parallels are often drawn between the pandemic and the global financial crisis, but these two episodes are not entirely comparable. when the financial crisis hit more than ten years ago, it affected advanced economies more than emerging market economies. the coronavirus pandemic, on the other hand, is affecting the global economy in its entirety. in germany, gdp plummeted by almost 10 % in the second quarter of 2020. the services sector was hit harder than it was during the financial crisis. the first signs of economic recovery are now beginning to emerge, but that recovery | create positive spillovers. innovative digital financial services can contribute to well - functioning financial markets. fintech firms and innovations such as crowd - funding and distributed - ledger technologies are at the center of this debate. fintechs can facilitate access to financial services. these innovations can foster competition, lower transaction costs, and improve risk sharing β thus promoting innovation and growth. but financial innovations might also affect systemic risks. they might induce procyclical behavior. risks posed by cyber - crime need to be monitored closely and, where necessary, addressed. this is to say that digital innovations should not undermine secure, transparent, and stable financial markets. 5. conclusion there is no lack of short - and long - term challenges facing europe and the world. under the german g20 presidency, we will be addressing two important issues : resilience and digitization. strong real economies are the basis for resilience. economic growth is therefore not an end in itself. strong growth is rather the basis for inclusive growth, as it opens up space for redistributional policies. strong growth is also built on innovation, which can contribute to sustainable growth. robust financial markets are the second pillar of resilience. as we are completing the reform agenda, we are gradually moving from policy implementation to ( ex post ) impact assessments. we need impact assessments to demonstrate the long - term benefits of the reforms β benefits in terms of financing innovation, growth, and the allocation of risk in the economy. we need to look at the effectiveness of individual reforms, the interaction between reforms, and their aggregate 4 / 5 bis central bankers'speeches affect. at the global level, maintaining a dialogue on economic policy is crucial. the g20 as well as the g7 are fora that play an important part in addressing the above challenges. they allow countries to learn from best practice across countries and to develop their policy framework. the member countries have diverse experience with regard to stability issues and national policy discussions. every financial crisis may be different, but core elements and mechanisms repeat themselves. therefore, by sharing experiences, policymakers can collectively learn from each other and improve their policy responses. 6. references balli, f., kalemli - ozcan, s. and b. e. sΓΈrensen ( 2012 ). risk sharing through capital gains. canadian journal of economics 45 ( 2 ), 472 β 492. bonfiglioli, a. ( 2008 ). financial integration, productivity and capital accumulation. journal | 0 |
came in at 2. 6 percent in july, again remaining well above our 2 percent goal. in addition, the latest consumer and producer price index reports suggest that 12 - month core pce inflation in august was likely a touch above the july reading. the persistently high core inflation largely reflects 1 / 5 bis - central bankers'speeches pressures on housing prices, perhaps due in part to low inventories of affordable housing. the progress in lowering inflation since april is a welcome development, but core inflation is still uncomfortably above the committee's 2 percent goal. prices remain much higher than before the pandemic, which continues to weigh on consumer sentiment. higher prices have an outsized effect on lower - and moderateincome households, as these households devote a significantly larger share of income to food, energy, and housing. prices for these spending categories have far outpaced overall inflation over the past few years. economic growth moderated earlier this year after coming in stronger last year. private domestic final purchases ( pdfp ) growth has been solid and slowed much less than gross domestic product ( gdp ), as the slowdown in gdp growth was partly driven by volatile categories including net exports, suggesting that underlying economic growth was stronger than gdp indicated. pdfp has continued to increase at a solid pace so far in the third quarter, despite some further weakening in housing activity, as retail sales have shown further robust gains in july and august. although personal consumption has remained resilient, consumers appear to be pulling back on discretionary items and expenses, as evidenced in part by a decline in restaurant spending since late last year. low - and moderate - income consumers no longer have extra savings to support this type of spending, and we have seen loan delinquency rates normalize from historically low levels during the pandemic. the most recent labor market report shows that payroll employment gains have slowed appreciably to a pace moderately above 100, 000 per month over the three months ending in august. the unemployment rate edged down to 4. 2 percent in august from 4. 3 percent in july. while unemployment is notably higher than a year ago, it is still at a historically low level and below my and the congressional budget office's estimates of full employment. the labor market has loosened from the extremely tight conditions of the past few years. the ratio of job vacancies to unemployed workers has declined further to a touch below the historically elevated pre - pandemic level - a sign that the | half of 2003, the bls procedure may overstate the deceleration in rents net of utilities and hence in owners'equivalent rent. as a result, on this particular count, the slowdown in cpi inflation may have been slightly overstated in the first half of 2003. if so, the stabilization in residential energy costs in the second half of 2003 should unwind this effect and likely add a bit to measured inflation going forward. another example of a special factor affecting measured inflation arises from the fiscal problems of state and local governments : to cover rising budget deficits, a number of public university systems have announced large tuition price hikes for the upcoming academic year. these tuition hikes will naturally affect the measured cost of living. as one - time events that are more fiscal than monetary in nature, however, i do not consider them particularly important from a monetary policy point of view. a similar effect was seen in the increase in the july cpi number, which was partly attributable to a rise in tobacco excise taxes imposed by a number of states. other examples arise because of lags in data collection : for example, telephone rates are incorporated into the cpi only with some lag, so that rate increases that occurred earlier this year will not be reflected in the index for a few months yet. i alert you to some of these special cases only to illustrate why the federal reserve does not react to monthto - month changes in inflation data, or any other series for that matter. for assessing the inflation forecast for the longer run, in this case the year 2004, one has to turn to the underlying economics. i do not disagree with the general tenor of the private - sector forecasts and the fomc projections. it seems plausible that the combination of a strengthening recovery, well - anchored inflation expectations, and a monetary authority strongly committed to stabilizing inflation will serve to keep inflation in the projected range. however, in my view, the most likely outcomes are in the lower part of that range, and i believe that the risks remain to the downside. the reason is that ongoing productivity growth, together with stepped - up capital investment, may enable producers to meet expanding demand without substantially increased hiring in the near term, with the result that labor markets remain soft. indeed, as i have noted, several of the private - sector forecasters project unemployment rates still near 6 percent in the fourth quarter of 2004, despite real growth approaching 4 percent for the second half of 2003 and all | 0.5 |
and media. we have received a number of useful suggestions and comments on the recommendations of the study group. these are being examined carefully and would help us to take a considered view, factoring in transition costs and providing a calibrated path to the desired benchmarking system. improving monetary transmission : shoring up bank balance sheets as explained earlier, even as the reserve bank has reduced its policy repo rate by 50 bps since october 2016 and by a cumulative 200 bps since december 2014, the banking sector β s credit growth has remained much muted. while weak demand for bank credit could be one of the factors leading to the observed slowdown in credit growth, a primary cause of the slowdown had also been the weak balance sheets of public sector banks in view of large non - performing assets which seem to have made banks risk averse and induced them to reduce the supply of credit : under - capitalized banks have capital only to survive, not to grow 7. the dominance of the supply side factor has also been borne out by the fact that the credit growth of private sector banks ( better asset quality and well - capitalised on average ) remains robust, whereas there has been a sharp deceleration in the credit growth of public sector banks ( especially the ones with high stressed assets ). against this backdrop, the enactment of the insolvency and bankruptcy code ( ibc ) in december 2016, the promulgation of the banking regulation ( amendment ) ordinance 2017 ( since notified as an act ), and the subsequent actions taken thereunder in the form of the reserve bank requiring banks refer the largest, material and aged non - performing assets ( npas ) to the ibc, have made the ibc a lynchpin of the new time - bound resolution framework for bank npas. these initiatives will now be supported by the government β s decision to recapitalise public sector banks in a front - loaded manner, with a total allocation of ` 2. 1 trillion, comprising budgetary provisions ( ` 181 billion ), recapitalisation bonds ( ` 1. 35 trillion ), and raising of capital by banks from the market while diluting government equity share ( around ` 580 billion ). the two steps together β asset resolution and bank recapitalisation β are expected to strengthen bank balance sheets significantly and improve banks β ability and willingness to lend at rates in consonance with policy rates and result in an improved monetary transmission. concluding observations in summary, efficient monetary transmission | development, speed of transaction processing and reduction in transaction costs. in india the major issue about new technology related delivery channels is their impact on the processing of information, which lies at the core of banking business. inspite of their advantages, reliance on technology based delivery channels often exacerbates traditional risks : operational risk ( since it requires changes in procedures ), reputational risk ( if the bank fails to deliver secure, accurate and timely service ) and legal risk ( uncertainty about which legislation applies to e - banking transactions ), besides emergence of other risks ( business and credit risks ). atms still remain the most successful delivery channel followed by telephone banking and internet banking. with about 9000 off - site and on - site atms installed, banks are effectively reaching out to a large customer base at a substantially lower cost. typically, it costs close to rs. 50 per transaction if conducted in a branch and the same if done through atm costs about rs. 15. in order to reduce the cost of transaction banks have started out - sourcing and sharing of atm services and this trend will gather momentum in near future. as this delivery channel gains mass acceptability and is user friendly, the bank can use it to cross - sell its as well as others β products. for example, banks have already started dispensing railway tickets, movie tickets through their atms. in future a bank β s atm would function like a kiosk delivering more of non - cash transactions, thereby simultaneously reducing the fixed and operating cost of atm. internet banking - an emerging delivery channel - offers significant cost advantage to banks. a net - based transaction costs the bank only around rs. 4 and costs per transaction are even lower than those of an atm, mainly due to savings on prohibitive real estate costs. internet banking has failed to take off due to a combination of psychological, legal, technological and socio - economic factors. lack of critical mass of early adopters, lack of a strong trust environment, slowness in adoption of the internet, low penetration of pcs and access to internet are some of the impediments in the adoption of internet banking in india. with drastic fall in cell phone tariff and emergence of seamless connectivity between fixed and mobile lines, mobile banking is set to emerge as one of the cost - effective delivery channels in near future. toll - free - numbers would also gain popularity as an important delivery channel. although banks abroad are using call centre as a delivery channel for some time | 0.5 |
has adopted : the ecb considers a market for a given set of financial instruments or services to be fully integrated when all potential market participants in that market ( i ) are subject to a single set of rules when they decide to deal with those financial instruments or services, ( ii ) have equal access to this set of financial instruments or services, and ( iii ) are treated equally when they operate in the market. let me now explain our definition of financial integration in more detail. one can say that a financial system consists of three principal components, namely the financial markets, the related financial infrastructure and the financial institutions. the ecb β s definition of financial integration uses the term β market β in a broad sense, covering all possible exchanges of financial instruments or services, be it on an organised market, such as a stock exchange, or an over - the - counter market created by a financial institution β s supply of a financial instrument or service. furthermore, a financial market can never be fully integrated without the integration of the related market infrastructure, in particular the payment and securities clearing and see the article entitled β the contribution of the ecb and the eurosystem to european financial integration β in the may 2006 issue of the ecb β s monthly bulletin. settlement systems. in this sense, you should also note that the term β rules β as contained in the ecb β s definition is used in a broad sense, and includes features such as laws and regulations, supervisory arrangements, market conventions and self - regulation, and standards and practices related to financial infrastructures. finally, financial integration can also be fostered by financial institutions establishing branches and subsidiaries in other euro area countries or by two institutions merging across borders. the wide coverage of the ecb β s definition of financial integration is attributable to the fact that if only the first condition is fulfilled, i. e. the existence of a single set of rules for a given market, potential participants might still be discriminated against in terms of access to the market. consequently, the ecb β s definition includes a second condition whereby participants should not be discriminated against in their access to a market. the third condition for full financial integration is that once all potential market participants have accessed the market, they should be treated equally in their operations within that market. these latter two conditions in particular should also be seen within the general treaty provision that the eurosystem acts β in accordance with the principle of an open market economy with free competition, | market, let me now briefly discuss the state of integration of the financial infrastructure related to securities markets in general, namely the securities clearing and settlement systems. only if financial infrastructures are adequately integrated can the financial markets, like bond and equity markets, function smoothly. and this is one area where financial integration is still lagging behind and where action from market participants is required. let me first give some figures for the present situation. just by looking at the development of the number of systems in the euro area over time, we note that the number of central securities depositories declined from 22 in 1998 to 19 in 2005, and the number of securities central clearing counterparties declined from 14 to 7. this leads us to conclude that the number of securities clearing and settlement systems that are often not efficiently connected to each other is still rather high, in particular if we compare it to the significant progress that has been made in the integration of largevalue payment systems, with the overall number standing at 4, down from the 23 that existed before the introduction of the euro and the target system. the eurosystem strongly supports further integration in the securities clearing and settlement infrastructure. to this end, it also acts as a catalyst for private - sector activities and holds meetings with the banking and securities settlement industry of the euro area to discuss the further integration of the euro securities settlement infrastructures. i would also like to highlight the work that the european commission is investigating whether to propose a framework directive on clearing and settlement. i can tell you, the ecb would indeed welcome a legislative initiative in this field. having mentioned securities clearing and settlement as one major area where further progress in integration is required, i will now turn to the banking markets where, as i stated earlier, the degree of integration in the retail segment can be deemed to be unsatisfactory. let me first briefly present some facts concerning banking consolidation. the decrease in the number of institutions has been a common trend in eu member states β banking sectors. the number of credit institutions in the euro area declined from around 12, 000 in 1985 to 6, 400 in 2004. consolidation has been attributed mainly to mergers and acquisitions ( m & as ) between institutions, and much less to failures or voluntary liquidations. the data also show that consolidation has so far been a primarily domestic development. between 1985 and 2005, cross - border mergers accounted for only about 20 % of the number and value of all m & a deals in the euro area and the eu. cross - | 1 |
the cpc central committee has made it clear that local government special bonds are allowed to be used for idle existing land buyback, new land acquisition and reserve, and for - profit housing purchasing. this will further accelerate the de - stocking of the real estate market and enable the real estate market to stop declining and stabilize. the fourth is to lay emphasis on the internal and external equilibria in the economic growth. in recent years, the external equilibrium of the chinese economy has been effectively improved. the current account surplus - to - gdp ratio dropped from around 10 percent in 2007 to around 2 percent in 2011, and remains within the range of 1 to 2 percent in recent years, which is generally considered as reasonable by the international community. the current geopolitical tensions have led to economic deglobalization as well as politicalization and instrumentalization of international trade, which hampers sustained growth of the world economy and the increase in the global welfare. we will firmly follow the path of reform and opening up and the path of multilateralism, advocate free trade and fair competition, and make better use of both international and domestic markets and resources, so as to accelerate the building of a new development paradigm. recently, the us dollar index has remained high, and most non - usd currencies have depreciated. the rmb has also depreciated moderately against the usd, but overall shows strong resilience. after years of endeavor, china's foreign exchange market has achieved remarkable development. market participants are more mature and the 3 / 6 bis - central bankers'speeches trading activities are more rational. the rmb cross - border payments and receipts have reached 30 percent in goods trade, lowering the exchange risk exposure faced by enterprises in production and operation. as the regulators of the foreign exchange market, the people's bank of china ( pboc ) and the state administration of foreign exchange ( safe ) are now more composed and experienced in the face of market changes. we are confident and capable of maintaining stable functioning of the foreign exchange market. we will pursue the principle of letting the market play a decisive role in exchange rate formation, and leverage the role of exchange rate as an auto stabilizer in macroeconomic management and for the balance of payments. meanwhile, we will firmly correct pro - cyclical behaviours, fight against conduct that disrupts market order, and prevent the risk of exchange rate overshooting, so as to keep the rmb exchange rate basically | pan gongsheng : speech - opening ceremony of the asian financial forum speech by mr pan gongsheng, governor of the people's bank of china, at the opening ceremony of the asian financial forum, hong kong, 13 january 2025. * * * honorable chief executive john lee ka - chiu, distinguished guests, good morning! it's a great pleasure to attend asian financial forum and get together with leaders from the global financial community in hong kong. in recent years, with the strong support of the central government and under the guidance of hong kong sar government, hong kong has actively embraced new development opportunities while upgrading its traditional advantages. the remarkable creativity and vitality hence stimulated have helped further consolidate and enhance the status of hong kong as an international financial center. we believe, with the " one country, two systems " policy as a strong guarantee and with the joint efforts made by people from all walks of life, hong kong will continue to leverage its unique advantage of enjoying the backing of its motherland and being open to the world, and enjoy longterm prosperity and stability. on this occasion, i'd like to exchange views with you on china's economic development, macroeconomic policies as well as the efforts to help develop hong kong as an international financial center. first, about china's economic situations and macroeconomic policies since 2024, the chinese economy has picked up admist fluctuations. the target of 5 percent growth throughout the year is estimated to be achievable. in the first three quarters, china's gdp grew 4. 8 percent year on year. since late september, the cpc central committee has arranged a package of incremental policies and thus promoted a remarkable pickup of the economy. on the whole, the chinese economy has managed to address a variety of risks and challenges in recent years, and proved to be strongly resilient. it has contributed approximately 30 percent to the global economic growth for years. currently, as the external environment is complicated and volatile, challenges remain in china's economic development. externally, as the world pattern is becoming increasingly chaotic and intertwined, geopolitical conflicts continue, and trade protectionism prevails, challenges and uncertainties loom over global economic recovery, exerting a spillover effect on the chinese economy. internally, we still face problems such as insufficient domestic demand, especially consumption demand, weak social expectations, low price levels, etc. 1 / 6 bis - central bankers'speeches the chinese | 1 |
house prices. when the recovery does come, as it surely will, the margin of spare capacity in the economy will begin to shrink and inflationary pressures will start to build again. so at some stage, we will have to begin withdrawing the large monetary stimulus. although this may be some way in the future, some market participants and commentators are already starting to worry about whether we will be willing and able to accomplish this sufficiently rapidly to prevent inflation taking off, particularly given the scale of the government β s prospective financing needs. three points are worth making. first, the timing of the withdrawal of the monetary stimulus will be governed by the need to meet the mpc β s inflation objective, not by the government β s financing needs. second, with bank rate at its effective floor, we presently have only the asset purchase programme as a tool to stimulate demand. but when it comes to tightening policy, we have two instruments at our disposal : asset sales ; and raising bank rate. it is not necessary to unwind the asset purchases before raising bank rate. third, if we felt the need to drain the extra reserves from the system rapidly, we could also do it by exchanging the reserves for short - term bank of england bills, allowing us to stagger the sales of the gilts. of course, the execution of our exit strategy will still present us with a tricky judgement call. we do not want to nip a recovery in the bud prematurely. equally we will not want to let the inflation genie out of the bottle. but that is the sort of balancing act that monetary policy makers regularly face, even if the scale of the downturn and the size of the policy stimulus that has to be withdrawn are so much larger now. a previous guest at this feast, winston churchill, declared that he β would rather see finance less proud and industry more content β, shortly before he took the fateful decision to return the pound to the gold standard at an overvalued rate. finance has certainly been humbled by the events of the past couple of years and the post - crisis financial world is bound to look very different from the pre - crisis one. but let us also hope that it is a world in which industry is more content. it remains only for me to thank you again for a marvellous meal and to propose a toast. to the manufacturing industries of hallamshire. | charles bean : monetary policy developments speech by mr charles bean, deputy governor ( monetary policy ) of the bank of england, at cutlers β feast, cutlers β hall, sheffield, 21 may 2009. * * * master cutler, lord lieutenant, high sheriff, lord mayor, my lords, ladies and gentlemen. i am very grateful to you, master cutler, for inviting me here to sheffield to speak at this great annual feast, to meet the leaders of such an important sector of british manufacturing industry, and to enjoy your magnificent hospitality. we are now almost two years into the financial crisis, which broke in august 2007. the preceding decade or so was marked by steady growth and low inflation, not just in the united kingdom but in many other parts of the world. in 2003, the bank β s governor, mervyn king, even went so far as to christen it the nice decade β standing for non - inflationary consistently expansionary. he was at pains to point out that one should not expect that unusual stability to be maintained. but although we subsequently fretted about the vulnerabilities building up within the global financial system as a result of the relaxed attitude to risk and the easy availability of credit, we never imagined quite how extreme the unwinding would prove, particularly after the bankruptcy of lehman's last september triggered a near collapse of the financial system and a world - wide plunge in business and consumer confidence. the result has been a sharp and synchronised contraction in economic activity across the globe and an unprecedented collapse in world trade. in the twelve months following the onset of the crisis, it seemed natural to expect those countries where the build - up in debt had been greatest, such as the united states and the united kingdom, and those sectors that seemed most exposed, particularly financial services and construction, to be the hardest hit. but that is not how it turned out. the fall in uk gdp of nearly 3Β½ % over the final quarter of last year and the first quarter of 2009 represents the largest half - yearly decline since records began in 1955. but that is comparatively mild seen alongside falls of almost 6 % in germany and nearly 8 % in japan, both countries running consistent current account surpluses. moreover, as most of you will be only too aware, the downturn has hit manufacturing especially hard, with output in that sector down over 10 % in the uk, 20 % in germany and 30 % in japan, reflecting the sharp decline in the demand for | 1 |
national bank of serbia speech at the presentation of the inflation report β may 2018 dr jorgovanka tabakovic, governor belgrade, 17 may 2018 ladies and gentlemen, representatives of the press, dear colleagues, welcome to the presentation of the may inflation report. we will give you an overview of the current macroeconomic developments, our new projections and monetary policy decisions. low inflationary pressures, with anchored inflation expectations, a sustained fiscal surplus in conditions of high growth of domestic gdp, and credit growth, with an extended fall in the share of non - performing loans to begin with, i would like to share with you our overall assessment that economic developments in the past months of 2018 have been favourable and that the positive trends are expected to continue for the remainder of the year. gdp growth particularly stands out given that, according to the preliminary estimate of the serbian statistical office, it accelerated considerably in the first quarter of 2018, to 4. 5 % year - on - year. the favourable structure of its sources is indicated by stepped - up growth in investment and activity in production sectors, primarily construction and manufacturing. in accordance with our expectations, during the first four months of this year, year - on - year inflation decelerated significantly, largely due to the base effect, that is, the drop - out of early - 2017 one - off price hikes of certain products and services from the calculation. consumer prices rose 1. 1 % year - on - year in april, with core inflation of 0. 8 % year - on - year, which is below our expectations stated in the february inflation report. the reasons for this are primarily lower - than - expected import prices and low costs in food production. coupled with lower inflation expectations, this confirms that inflationary pressures have additionally abated since the beginning of the year. positive fiscal movements continued in the first quarter, with a fiscal surplus of 0. 4 % of gdp recorded in conditions of accelerated growth, higher corporate profitability, positive tendencies in the labour market and more efficient tax collection. by structure, revenues increased mostly on account of excise taxes, allocated social insurance contributions and profit tax, while on the expenditure side, the rise in capital expenditures is assessed as highly positive. also conducive to the favourable fiscal result was the reduction in interest expenses in conditions of the government β s subdued need for borrowing, monetary policy easing by the national bank of serbia and a low country risk premium. as regards external economic relations, the current account deficit has | complex structured products and the liquidity in this market under stressed conditions. let me point out three key weaknesses : β’ first, the ability of investors to assess the extent of concentrations among various types of collateral β including sub - prime β within the structured finance securities has clearly been shown to be less than adequate. indeed, conducting adequate due diligence regarding the nature of underlying investment exposures cannot be replaced by decision - making based almost exclusively on ratings. β’ second, market participants were not sufficiently alert to the possibility that liquidity could dry up in structured finance markets, even though secondary market liquidity in the various structured finance markets has been traditionally thin. as you know, there are several reasons for this, inter alia : the specificity of these instruments, which are often tailor - made ; the β buy - and - hold β strategies followed by a large number of investors ( including, pension funds, insurers, and banks ) ; and the limited comparability of mark - to - model valuations, stemming from the complexity of these instruments. β’ third, the asset backed commercial paper ( abcp ) structures had intrinsic liquidity risk because they invested the proceeds of short term liabilities into longer maturity structured finance assets. in some cases, certain types of abcp structures such as structured investment vehicles ( sivs ) faced increased pressure resulting from an inability to roll - over. this came both from investor anxiety concerning the underlying collateral and the inability to value adequately the collateral as they were forced to sell assets. there are indications that the liquidity strains associated to these structures are not yet over. three key weaknesses of credit markets whilst it is too early to make a definitive assessment, certain supervisory and regulatory issues can already be identified as warranting further attention or action. initiatives are already underway at the international and eu level to address these various issues, but for our exchange of views here today i would like to focus on three key issues : transparency, valuation of complex structured products, and liquidity risk management practices, including liquidity risk stress - testing. β’ first, transparency for markets, investors and regulators. adequate transparency is a necessary basis for an efficient functioning of financial markets. recent experience has shown how perceived opaqueness or uncertainty regarding the underlying exposures, in particular of financial institutions, has translated into a loss of confidence with a resulting disruption in the interbank market. there have been recently many calls for enhanced market transparency both from banks ( e. g. enhanced disclosure of banks β liquid | 0 |
for monetary policy, our good inflation performance and the fiscal measures taken so far have given the bank of canada some room to ease monetary conditions in canada. i believe there is now substantial monetary stimulus in the economy, which should help counteract some of the concerns that affect the confidence of canadians, as we work our way through this crucial period of restructuring the canadian economy. | . such shifts have not been limited merely to the diversion of the production of goods requiring unsophisticated techniques to the developing countries. indeed, some developing nations, particularly in asia, are establishing themselves as important suppliers of a wide range of internationally traded products, including high - technology manufactured goods. at the same time, industrial economies are moving more towards the export of services, as a result of improvements in communications and information technology. all in all, these changes are to the good, in that they should result in expanding international trade, more rapid increases in productivity and, hence, improved living standards everywhere, but especially in developing countries. however, these ongoing globalization trends and adjustments to new technology do imply changes in the structure of national economies. canada and other industrial countries are having to cope with these changes. but change is never easy and is often stressful. even in the large u. s. economy, there has been considerable concern over the uncertain job prospects, especially for unskilled workers, in light of the changes in technology, production and trade trends that i have just described. however, the process of adjustment in the united states to these developments began early, and their economy has been operating successfully at full capacity. why is it that in canada we seem to have had a more difficult time of it? there are a number of reasons for this. but, in my view, one of the most important is the fact that in canada we started adjusting later and, as a result, we were further behind. why was that? the depreciation of the canadian dollar in the mid - 1980s, by easing the pressure from foreign competition, blunted the urgency to adopt more efficient production processes. and through much of the second half of the 1980s, because many canadians were still acting on expectations of accelerating inflation, we were devoting a good part of our energies and resources to speculative activities, rather than investing in improvements in productivity and competitiveness. rising government deficits, which were absorbing increasing amounts of domestic savings, were not helping either. thus, with poor productivity growth, rapidly rising wages and generally weak cost control, canadian businesses and exporters found it increasingly difficult to compete, especially at the end of the 1980s, when the canadian dollar had reversed its earlier depreciation. for a nation that is highly dependent on foreign trade, canada certainly was doing all the wrong things to get ready for the new world of changing technology and increasing global competition. it was not until the early 1990s | 1 |
unprecedented effort, also on our part, to understand more fully how far the 2 / 4 bis central bankers'speeches banks we supervise are exposed to these risks. it will also give us a clearer picture of their resilience on this front. the second of these initiatives is a comprehensive review of banks β practices related to strategy, governance and risk management β the thematic review on c & e risks, which is a key topic of the session today. two years after we launched the supervisory guide on c & e risks, we are conducting this thematic review to follow up on the self - assessment exercise conducted last year. our main goal will be to assess the evolution of the soundness, effectiveness and comprehensiveness of banks β c & e risk management practices, as well as their ability to steer their c & e risk strategies and risk profiles. do all banks β processes and analyses have visible consequences? does the way in which banks actually steer their balance sheets and risk profiles reflect the materiality of c & e risks? these will be some of the core questions of this review. as part of this exercise, we will monitor banks β alignment with the supervisory expectations set out in the guide, and encourage banks β progress towards the industry β s best practices. fortunately, those practices were identified across different european banks over the last two years. they show that some banks are already doing what we are asking. the ecb is doing its part by guiding banks in their climate journey, setting forth supervisory expectations and sharing updates on good practices in the industry. in light of the efforts banks have already made in devising their action plans, as well as all the information on this topic published to date β by both the ecb and several other public and private organisations we expect to see material progress in banks β implementation deadlines and concrete actions. as part of the thematic review, we will also be looking more closely at the risk management practices for environmental risks such as risks to biodiversity, water stress and pollution. all have similar features and warrant a coordinated approach. banks can make significant savings if, taking advantage of the momentum, they extend the range of their preparations to cover all these risks, and are thus ready for a new, more concrete, supervisory and regulatory environment. our benchmark from last year shows that, as of early 2021, very few banks were looking into environmental risks beyond climate. we have highlighted this gap to banks. this year, we will assess how banks are managing their exposures to environmental risks beyond | quantitative definition of price stability as the β best prediction β of medium - term price developments, since the governing council is committed to changing monetary policy whenever this is necessary to maintain price stability. the publication of staff macroeconomic projections thus informs the public about an important input into the governing council β s decision process, which has already been used in the past. the publication of projections has to be considered in the context of the ecb β s monetary policy strategy. publication thus changes neither the ecb β s monetary policy strategy nor the role of these projections within it. i am convinced that publication of these staff projections can help to improve the ecb β s presentation and explanation of monetary policy decisions. however, if this is to be the case, the public - and the european parliament and your committee - must recognise the limitations of forecasts and projections that i have just described, and the implications these limitations have for the role of staff projections in the ecb β s strategy. 3. cross - border retail payment services in the euro area you may recall that in september 1999 the ecb published a report presenting the views of the eurosystem on how to improve cross - border retail payment services and defining the objectives that the industry is expected to achieve by 1 january 2002. in september this year, the ecb published a progress report. this report concludes that, although most objectives have not yet been fulfilled, substantial progress has been made in preparing the ground for a more efficient handling of cross - border retail payments. allow me to give you some examples : i. the banking sector has agreed on straight - through processing standards, which will allow the automated execution of cross - border payments ; ii. the euro banking association has developed a payment system specifically designed for cross - border low - value payments, which commenced operations on 20 november 2000 ; iii. as from 2002, cross - border payments below eur 12, 500 will no longer need to be reported for balance of payments purposes and hence statistical reporting will no longer constitute a justification for high customer fees. insufficient progress has been made in the field of customer prices. in too many cases, the payee has been charged with some costs even though the payer had agreed to bear all costs. two initiatives currently being developed by the european credit sector associations are intended to address this situation. first, a multilateral interbank exchange fee is being developed, which, provided that the fee is low, could be acceptable and could indeed contribute to solving the problem of β double | 0.5 |
supporting bank lending to firms and households. let me now explain our assessment in greater detail, starting with the economic analysis. euro area real gdp contracted by 11. 8 percent, quarter on quarter, in the second quarter of 2020. following the trough in april 2020, the euro area economy rebounded strongly in the third quarter, making up about half of the contraction in the first half of the year. the significant surge in coronavirus infection rates and the associated intensification of containment measures since the summer constitute clear headwinds to the short - term outlook. in fact, recent hard data, survey results and high - frequency indicators point to a significant softening in economic activity in the final quarter of the year. moreover, economic developments continue to be uneven across sectors. in particular, activity in the services sector is slowing again as it is the sector most affected by the new restrictions on social activities and mobility. looking ahead, while the uncertainty related to the evolution of the pandemic will likely dampen the strength of the recovery in the labour market and in consumption and investment, the euro area economy should continue to be supported by favourable financing conditions and an expansionary fiscal stance. overall, the risks surrounding the euro area growth outlook are clearly tilted to the downside. this largely reflects the recent resurgence in covid - 19 infections, the associated intensification of containment measures and a highly uncertain timeline of the pandemic and its implications for economic and financial conditions. euro area annual inflation decreased to β 0. 3 percent in september, from β 0. 2 percent in august, reflecting developments in the prices of energy, non - energy industrial goods and services. on the basis of oil price dynamics and taking into account the temporary reduction in german vat, headline inflation is likely to remain negative until early 2021. moreover, near - term price pressures will remain subdued owing to weak demand, notably in the tourism and travel - related sectors, as well as to lower wage pressures and the appreciation of the euro exchange rate. once the impact of the pandemic fades, a recovery in demand, supported by accommodative fiscal and monetary policies, will put upward pressure on inflation over the medium term. marketbased indicators and survey - based measures of longer - term inflation expectations remain broadly unchanged at low levels. turning to the monetary analysis, broad money ( m3 ) growth rose to 10. 4 percent in september 2020, from 9. 5 percent in august, thus remaining well above the levels | this will foster the convergence of inflation towards its aim in a sustained manner, in line with its commitment to symmetry. in the meantime, we decided to reconfirm our accommodative monetary policy stance. we will keep the key ecb interest rates unchanged. we expect them to remain at their present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2 percent within our projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics. we will continue our purchases under the pandemic emergency purchase programme ( pepp ) with a total envelope of β¬1, 350 billion. these purchases contribute to easing the overall monetary policy stance, thereby helping to offset the downward impact of the pandemic on the projected path of inflation. the purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions. this allows us to effectively stave off risks to the smooth transmission of monetary policy. we will conduct net asset purchases under the pepp until at least the end of june 2021 and, in any case, until the governing council judges that the coronavirus crisis phase is over. we will reinvest the principal payments from maturing 1 / 3 bis central bankers'speeches securities purchased under the pepp until at least the end of 2022. in any case, the future roll - off of the pepp portfolio will be managed to avoid interference with the appropriate monetary policy stance. net purchases under our asset purchase programme ( app ) will continue at a monthly pace of β¬20 billion, together with the purchases under the additional β¬120 billion temporary envelope until the end of the year. we continue to expect monthly net asset purchases under the app to run for as long as necessary to reinforce the accommodative impact of our policy rates, and to end shortly before we start raising the key ecb interest rates. we intend to continue reinvesting, in full, the principal payments from maturing securities purchased under the app for an extended period of time past the date when we start raising the key ecb interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. we will also continue to provide ample liquidity through our refinancing operations. in particular, our third series of targeted longer - term refinancing operations ( tltro iii ) remains an attractive source of funding for banks, | 1 |
for as long as needed, and at least until the end of the second quarter of 2014. the fixed rate in these special - term refinancing operations will be the same as the mro rate prevailing at the time. furthermore, we decided to conduct the three - month longer - term refinancing operations ( ltros ) to be allotted until the end of the second quarter of 2014 as fixed rate tender procedures with full allotment. the rates in these three - month operations will be fixed at the average rate of the mros over the life of the respective ltro. third, the governing council decided to start consultations with other european institutions on initiatives to promote a functioning market for asset - backed securities collateralised by loans to non - financial corporations. in the meantime, it is essential for governments to intensify the implementation of structural reforms at national level, building on progress made in fiscal consolidation and proceeding with bank recapitalisation where needed. furthermore, they should maintain the momentum towards a genuine economic and monetary union, including the swift implementation of the banking union. let me now explain our assessment in greater detail, starting with the economic analysis. real gdp contracted by 0. 6 % in the fourth quarter of 2012, following a decline of 0. 1 % in the third quarter. output has thus declined for five consecutive quarters. overall, labour market conditions remain weak. recent developments in short - term indicators, notably survey data, bis central bankers β speeches indicate that weak economic sentiment has extended into spring of this year. looking ahead, euro area export growth should benefit from a recovery in global demand and our monetary policy stance should contribute to support domestic demand. furthermore, the improvements in financial markets seen since last summer should work their way through to the real economy. at the same time, necessary balance sheet adjustments in the public and private sectors will continue to weigh on economic activity. overall, euro area economic activity should stabilise and recover gradually in the second half of the year. the risks surrounding the economic outlook for the euro area continue to be on the downside. they include the possibility of even weaker than expected domestic and global demand and slow or insufficient implementation of structural reforms in the euro area. these factors have the potential to dampen confidence and thereby delay the recovery. according to eurostat β s flash estimate, euro area annual hicp inflation was 1. 2 % in april 2013, down from 1. 7 % in march. this decline in the annual inflation | ##minbi was added to the sdr basket. we made our first actual investments in 2014, following two years of preparations. i consider this to be our early contribution to the increased international role of the renminbi. dear colleagues, there are two main reasons why we decided to β go to china β. first, quite obviously, we were attracted by the higher yield offered by renminbi - denominated bonds β particularly given the low interest rate environment that we live in. and, second, the renminbi market also offered us new opportunities for much - needed portfolio diversification, as renminbi yields have little correlation with global yield movements. 1 / 3 bis central bankers'speeches in 2012 β 2014, there were two possible paths for us to enter china β s onshore market. the first was using the qualified foreign institutional investor scheme, or qfii. the second avenue was via bilateral agreements with the pboc. the bank of lithuania chose the qfii pathway. we liked that qfii status memorandum of understanding opened doors for china and lithuania - based investors to invest in the respective markets. moreover, the qfii scheme offered larger investment scope, including the possibility to trade equities onshore. such opportunity was itself very attractive β once you take the long - term perspective into account. indeed, we saw our investments in china as a strategic, long - term exercise. given this long - term horizon, the fact that the qfii scheme provided limited possibilities to repatriate our investment capital was not a big issue. since then, we have accumulated crucial know - how in managing the renminbi portfolio. this know - how has been recognised by the ecb as well. during the first half of 2017, the ecb invested in the renminbi an equivalent of eur 500 million of its foreign reserves. since the first quarter of this year, we, together with banco de portugal, are the sole active managers of the ecb β s renminbi foreign exchange reserves, managing the portfolio on a day to day basis. i consider this to be a significant recognition of the level of competence and experience in our institution. dear colleagues, since the beginning of its engagement in china β s onshore market, the bank of lithuania has been running the renminbi portfolio in a manner that embodies long term, conservative and low volume trading philosophy. our renminbi holdings currently stand at around 2 % of our financial | 0 |
. in the case of japan, since financial institutions initially underreported the amount of public funds they needed, the government was not able to inject sufficient funds for capital reinforcement at an early stage. this experience shows the importance of establishing an accounting standard of nonperforming loans and appropriate disclosure. ( 2 ) dispelling the myth that banks never fail the second point is the importance of the recognition within society that, although individual financial institutions could fail, just like non - financial firms, the stability of the financial system can be maintained. if the general public perceives that " banks are fail - safe, " a moral hazard is caused among depositors and banks, leading to the accumulation of risk for the financial system. looking back, there was a myth in japan that banks could not fail. in other words, the possibility of a bank's failure was not considered realistic. in fact, deposit insurance had not been triggered for 20 years, since its establishment until 1991. if we look back further, japan experienced a severe financial crisis caused by a series of financial institution failures in the 1920s. based on this experience, the japanese financial authorities adopted an administrative approach called the " convoy system. " this system strictly regulated competition among financial institutions with respect to interest rate setting and business operations in order to ensure that even financially weak institutions would not fail. the myth that japanese banks could not fail was formed by this " convoy system " and by undue trust in financial authorities. in addition, there was another myth that land prices could never fall. in fact, the business conditions of japanese banks were also supported by this " land price myth. " it was not until the burst of the bubble and subsequent financial crisis that these two myths were debunked. things changed all of a sudden, and the impact of a series of bank failures and the credit crunch in corporate finance on the japanese economy was extremely severe. if there is a myth in china that banks never fail, it is important to dispel it in normal circumstances. at the same time, it is also important to build trust among the general public that financial stability as a whole will be maintained even if individual financial institutions fail. for example, one approach is to encourage financial education, including promoting better understanding of the deposit insurance system among the public. until this year, china had not seen any bank failures since that of hainan development bank in 1998. after baoshang bank was temporarily nationalized this may, there was | that market incentives had been reduced and that we were losing the dividend of efficient uses of resources that such incentives provide. even those observers who derided the more unbridled forms of capitalism became increasingly aware that attempts to tame the market could be costly in terms of economic growth and the average living standards of a nation. over the past thirty years, as many countries have struggled to liberalize their economies and improve the quality of their policies, global per capita income has steadily risen. i recognize that poverty rates are notoriously hard to quantify, but according to a recent study, the share of the world's population living on less than $ 1 per day, a commonly used poverty threshold, has fallen dramatically over the past three decades - - from 17 percent in 1970 to 7 percent in 1998, representing a decline of 200 million people. in addition since 1970, the infant mortality rate has declined by more than half, school enrollment rates have risen steadily over the past thirty years, and literacy rates are up. smith ( 1776 ), vol ii, book iv, chapter v, p 43. world bank ( 2002 ) - - gdp per capita ( constant 1995 dollars ). sala - i - martin ( 2002 ). the $ 1 per day threshold is measured in 1985 dollars on a purchasing power parity basis. world bank ( 2002 ). while, from a global perspective, wealth and the overall quality of life have risen, that success has not been evenly distributed across regions or countries. the economies of east asia are often - repeated success stories. some, including china, malaysia, south korea, and thailand, stand out not only as growing very strongly, but also as having seen the greatest declines in poverty rates. overall, over the past three decades, asia's $ 1 per day poverty rate fell by one measure from 22 percent in 1970 to just 2 percent in 1998. moreover, asia was not alone. per capita incomes in latin america also expanded during the period, and poverty rates fell, although progress was somewhat slower. but, sadly, the story in africa has been quite different. levels of per capita income in that continent have actually fallen. the poverty rate, which in 1970 matched the rate in asia at the time, is estimated to have doubled to 40 percent by 1998. while africa's performance has clearly been subpar, some african countries have had some success. for example, botswana, lesotho, and more recently uganda have made some progress in raising per capita income | 0 |
of customers who have good credit histories. the rationale of credit information sharing is to address information asymmetries and enable banks to more effectively price credit risk. credit reference bureaus, banks, and other stakeholders must work together to develop credible credit scores that are incorporated in credit risk appraisal and pricing models. technology is also providing interesting opportunities to gather customer information through digital identities and footprints that can add to the traditional sources of credit information. on its part, cbk will support this vision by creating an enabling legal and regulatory environment that expands the sources of credit information, ensures data accuracy, and supports an effective resolution of customer complaints. third, transparency and information disclosure need to be enhanced. customers are increasingly demanding transparency and disclosures on interest, fees and charges. on their part, banks must fully disclose their interest rates, charges and particularly the fees that customers perceive as hidden. transparency and disclosure by banks should be a way of business and not just a regulatory requirement. technology offers an opportunity to enhance transparency and information disclosures. a case in point is the cost of credit website that was launched by cbk and kba in june 2017. the information on this website will be expanded in the future beyond the three loan products that are shown currently, to cover a broader range of loan products and even incorporate deposit products. moving further, a banking price index of a commonly used basket of products and services can be developed to further enhance customers β comparability of prices of banking products and services. customer confidence can only be achieved when they are able to fully understand the true cost of banking products and services. this will allay the ever - present fear of banks hiding some costs up their sleeves, out of sight of customers who only come to know of them much later when they are already in distress. fourth, banks need to do the right thing. at the heart of any transformation are people. without a change of attitude and behaviour by kenyan and other bankers around the world, any transformation will be futile. the global financial crisis and its aftermath underscored the need to raise the ethical standards of bankers. for instance, the scandals on the fixing of the libor and other rates in europe, and more recently the exchange rate fixing scandal in south africa, brought to the fore the greed and deceit that ravaged the global banking industry. 4 to address these shortcomings, there is a recognition of the need for ethics in banking. ethical banking requires that the needs of society trump those of | banks are expanding their size and services to cater to fast increasing customer needs through technology enabled payment systems, internet based access and innovative service delivery modes. other important business activities of banks such as participation in securities, currency and money markets, besides compliance functions like reserve maintenance, regulatory reporting etc. are all having processes heavily dependent on information technology. even in case of internal work processes having large component of manual processing, dependence on computers and it based communication mechanism is increasingly felt. overall, banks are dependent on it based systems for almost all of their activities, although the level of sophistication and refinement in such systems may vary from bank to bank or across activities or banking industry segments ( commercial banks, cooperative banks etc. ). reasons for this are not far to seek. technology has become essential component for customer related and market related activities and participant banks cannot meet the requirements imposed by timelines or volumes without leveraging on technology. even for backend and internal work processes, cost and time constraints are pushing banks to lean upon technology. it may not be possible to store and retrieve huge amounts of customer data, transaction data and business information, but for the power of technology based systems. more so, the globalization, competition and compliance requirements make it imperative for banks to increasingly use it based platforms and applications for most of their activities. it has become necessary for banks to use modern marketing as well as customer service tools to survive in a competitive environment ; which involve large scale data collection, analysis and efficient communication which are not possible without the help of it. it and financial inclusion it has a great role to play in furthering the financial inclusion drive, involving expansion of banking access to remote locations in a cost effective way. reaching banking to the excluded segments has been the focus of regulatory agenda and many initiatives have been taken in this regard. of the 74, 414 villages with a population of more than 2000 identified as unbanked, 74, 199 ( 99. 7 per cent ) villages have already been provided with banking services, on the back of concerted efforts of the banking fraternity encouraged by the government and reserve bank of india. in the next stage, it has been proposed to cover unbanked villages with population less than 2000. considering the vast geographical expanse of the country, bis central bankers β speeches such a gigantic task would not be possible at all without the help of technology. technology has the potential to cut down the costs, bring down the barriers and make the financial inclusion a viable business | 0 |
in a systematic way. here it is important to stress that any one set of instruments working alone is unlikely to be sufficient. interest rate policy, macroprudential levers, and capital flow management measures all interact and their application should be viewed as a whole rather than in isolation. more broadly, the underlying institutional and legal frameworks that govern financial markets must be taken into account. these include financial product regulations, deposit guarantee systems, as well as the resolution framework for troubled financial institutions. a national financial stability framework that brings together and assesses the whole spectrum of financial regulation serves this important function. the second response to the more complex monetary trade - off is greater policy coordination. the underlying rationale for coordination is that in certain situations, the collective outcome of central banks acting individually according to their mandates may be inferior because cross - country spillovers are not internalized. the current aggressive monetary easing of advanced economies are a case in point. whether intended or simply a by - product, the outcome has the semblance of competitive devaluations. as a starting point, it is important that advanced economies acknowledge the potential spillovers of their policy. the federal reserve, in particular, wields outsized influence given the dominance of the us dollar in global trade and finance. emerging market countries need to coordinate in voicing their concerns and engage in dialogue. at a minimum, consultation minimizes surprises and the exchange of views helps to narrow differences in perceptions. but there is a more implicit form of coordination that i believe holds much potential. that is the coordination of monetary policy frameworks. this brings me to the third and perhaps most profound avenue for dealing with the new monetary policy trade - off. and that is the adoption of a monetary policy framework that systematically takes financial stability into account. successive boom - bust financial cycles have made it clear that unsustainable buildups of credit and leverage lies at the heart of financial fragility. it is hard to deny the critical role that monetary policy plays in this. monetary policy sets the price of leverage and hence has first order implications for the pricing of all financial assets and the evolution of the financial cycle. a framework in which monetary policy reacts systematically to the financial cycle, in addition to traditional inflation and output developments, will help to keep the economy on an even keel. this differs from an approach in which policy leans against the wind only when financial stability risks become evident. given the long and drawn - out nature of financial cycles, such an | towards alternative saving instruments such as saving bonds and government bonds. as for financing, the needs expected by individual customers are those for the purposes of working capital, residential, education and business expansion, while those of corporate customers remain financing for long - term investment for business expansion and short - term working capital requirements. other financial service needs expected by individual customers to be on the rise are the use of atm and life assurance, while more uses of phone banking and internet banking, provident fund management and cash management are expected by corporate customers. unattractive aspects of financial institutions that drive customers away from using their financial services although financial institutions, especially banks, are still the main financial service providers to consumers in thailand, there are some aspects of their services considered not so user - friendly, such as : β’ complicated procedures and long period of time for getting credit approved ; β’ inconvenient access to the services ; β’ inflexibility in the terms and conditions of repayment ; and β’ the emphasis of banks on collateral instead of repayment ability. 2. social aspects of retail banking sector as you can see, these findings show that there are some gaps of the underserved to be filled in the financial sector, and retail banking is an area of potential growth. moreover, we regulators believe that the consideration in retail banking sector extends above and beyond profit making for service providers and systemic stability because excess in this sector not only exacerbates a boom and bust cycle of credit, but also causes financial distress to over - leveraged consumers, triggering more social problems. therefore, with profit - making comes responsibility - banks should be responsible for consumer education programs as well, disclosing information such as interest charges and fees of financial services. let me go over quickly these points : in order to fulfill this inadequate access to financial services by under - served consumers, the bank of thailand initiated a pilot project on micro finance in collaboration with commercial banks. against misconception that micro finance is an unprofitable segment, this project aims to demonstrate that the coexistence of profitability and satisfied customers is possible with a right business model. late last year, we invited foreign speakers to share with senior management of thai commercial banks their experience in successful conduct of retail business in their countries. following this seminar, a number of banks already expressed their interests to participate in this pilot project. one social aspect that has clear benefits to all parties concerned is consumer education. it has two major dimensions, one on the | 0.5 |
is changing rapidly, driven by technological change and by consumer preferences. the ways in which we as consumers buy, use and engage with financial services has changed hugely, leading to new risks in the financial sector we supervise and for the consumers we protect. 2 / 4 bis - central bankers'speeches as outlined in my two recent letters to yourselves, the central bank is making changes to the way we are organised to deliver our financial regulation responsibilities. consumer protection remains a core part of those responsibilities. but in order to continue to deliver on our mandate both today and into the future, we are changing our approach to ensure that consumers of financial services are protected in an increasingly complex environment. this enhanced approach is based on accumulated experience, on insight, on best practice and is built for a faster moving and more complex financial services sector. we are making the most fundamental strengthening of our consumer protection approach for more than a decade. in terms of frameworks, as you know, we will shortly be introducing an updated consumer protection code. this follows the largest, most in - depth review of the code since it was introduced to ensure that it is fit for purpose into the future, is reflective of the changed nature of financial services and strengthens protections for consumers. this is a tangible demonstration of our ongoing commitment to the protection of consumers of financial services right across the country, and we have consulted widely on it to ensure we hear consumers'and other stakeholders'views directly. to implement the rules we need the right operational approach internally. this includes moving to an integrated framework where, at an operational level, directorates with oversight of banks, insurance companies and capital markets will be responsible for the supervision of all the functions of their respective sectors ( as opposed to separate directorates undertaking supervisory activities for consumer protection, prudential regulation and market supervision ). the new approach will make it easier to direct our supervisory resources to the areas of most risk to consumers or the system more widely. importantly, we are taking the existing team that stood in a single consumer protection directorate and placing them where their expertise is most required, directly in supervisory directorates across banks, insurance and funds.'mainstreaming'consumer protection activity in this way will enable us to dedicate greater attention and resources to where the particular risk is at a point in time. the new approach will allow us to do more, not less, to protect consumers. let me give an example of how we see the interconnections in our work in relation to consumer protection. | agents ( governments, firms and households ). this leads us to monitor a large set of indicators, with a multifaceted and holistic approach. let me add some comments about the recent increase we have seen in long - term rates, following although to a lesser extent the move in the us. this increase has different causes, and hence calls for different reactions and instruments. first, in the euro area, the latest consumer price data have surprised on the upside, and there are some signs of an upturn in inflation expectations. this is actually good news, as philip lane noted last week. 1 that said, this rise shouldn β t be overstated ; it primarily reflects temporary factors rather than a persistent and significant change in the inflation path. the euro area economy is in a different situation compared with that of the us ( in terms of real activity, output gap and fiscal stimulus ). there is no risk of overheating in europe. second, this less disinflationary environment shouldn β t raise questions about our future monetary policy, and our reaction function. let me reiterate a strong conviction about our inflation objective : it is flexible, symmetric and medium - term. to put it clearly, these last two imperatives mean that 1 / 4 bis central bankers'speeches we cannot completely ignore the past inflation shortfalls, and that in the future we should be ready to accept inflation above target for some time. as necessary, our forward guidance could be strengthened to make this tolerance explicit. and third, there are other elements in this tightening of financing conditions, including excessive spillovers and tensions on the term premia. in so much as this tightening is unwarranted, we can and must react against it, starting with an active flexibility of our pepp purchases, which we have made possible since its inception in march 2020, and enhanced last december. ii. financial stability lessons have to be fully drawn from the past experiences about the obvious costs of financial crises. history has shown that price stability is not a sufficient condition to ensure financial stability. furthermore, low - for - long interest rates, in a context of a decreasing natural rate of interest, can contribute to the build - up of systemic risk and financial vulnerabilities, by encouraging excessive risk - taking and financial misalignments. 2this matters for monetary policy. of course, macroprudential policy is the first and main line of defence, and the toolkit has been considerably enhanced in recent years | 0 |
one with integrated services and management capabilities. especially since the return to the motherland, the local financial industry has experienced robust development along with strong gains in the domestic economy ; the active promotion of appropriate economic diversification and regional cooperation by the macao government. indeed, with the high degree of openness, macao β s economy and finance are susceptible to external shocks and volatilities of global financial markets. over the last twenty five years, macao β s financial sector in its development process experienced challenges one after another, for example, currency devaluation storms triggered by the change in floating exchange regime for the thai baht in 1997 ; global economic slowdown driven by tech - bubble burst in 2000 ; sars outbreak in neighbouring jurisdictions in 2003 ; and us - subprime - led global financial crisis which started in 2007. nevertheless, with the strong support and joint efforts of all parties, the financial industry has managed to overcome such difficulties as the local economy develops. as at the end of may this year, the npl and car ratios of the banking sector were 0. 1 % and 15. 5 % respectively ; profitability was at all - time high. meanwhile, in terms of premiums and operating results, the insurance sector has also made impressive achievements. bis central bankers β speeches apart from financial supervision, amcm has been vested with the responsibility to manage the foreign exchange reserves of macao. since the establishment of the fiscal reserve regime, amcm has been assigned by the relevant legislation the responsibility of fiscal reserve management. in managing the fiscal reserve and exchange reserves, amcm has observed relevant legal requirements while upholding safety and prudent management principles. furthermore, amcm has diversified asset allocation and optimized investment portfolios on a reasonable basis of balancing risks and capital preservation. it goes without saying that the effort and hard work of every department of amcm are indispensable. i would like to take this opportunity, on behalf of amcm, to express my candid appreciation for the dedication of all our colleagues, present or retired, including those who returned to portugal after their retirement. we are grateful to secretary tam for his guidance, support and trust. we would also like to thank the audit committee and the advisory council. as we celebrate the 25th anniversary of amcm this evening, it also marks the beginning of a new phase. i sincerely hope that in the coming years, all my colleagues at amcm will continue to cope with the increasingly complex environment | with effort, diligence and decent attitude, as all along, and continue to perform their duties in a professional and responsible manner, with a view to contributing to the sustainable development of macao β s financial industry. finally, i would like to wish you all good health and success in work. thank you! bis central bankers β speeches | 1 |
about the quality of corporate governance. * * * the struggle to understand developments in the economy and financial markets since the mid - 1990s has been particularly challenging for monetary policymakers. we were confronted with forces that none of us had personally experienced. aside from the then recent experience of japan, only history books and musty archives gave us clues to the appropriate stance for policy. we at the federal reserve considered a number of issues related to asset bubbles - - that is, surges in prices of assets to unsustainable levels. as events evolved, we recognized that, despite our suspicions, it was very committee on banking and financial services, u. s. house of representatives, july 22, 1999. for continuous discounting over an infinite horizon, k ( e / p ) = r + b - g, where k equals the current, and assumed future, dividend payout ratio, e current earnings, p the current stock price, r the riskless interest rate, b the equity premium, and g the growth rate of earnings. the relationship holds for both real and nominal variables. if k is assumed to be 0. 6, the average over the second half of the 1990s ( taking account of payouts made through share repurchases ), a rise in the p / e of the s & p 500 from 15 to 30, with r and b unchanged in real terms, implies an increase in g of 0. 02 in real terms. if earnings are a constant share of output in the long run, then real long - term earnings growth is the product of productivity growth and growth in labor force hours. in this exercise, the growth rate of hours, driven by demographics, is assumed not to change ; hence, the growth rates of earnings and productivity are the same. difficult to definitively identify a bubble until after the fact - - that is, when its bursting confirmed its existence. moreover, it was far from obvious that bubbles, even if identified early, could be preempted short of the central bank inducing a substantial contraction in economic activity - - the very outcome we would be seeking to avoid. prolonged periods of expansion promote a greater rational willingness to take risks, a pattern very difficult to avert by a modest tightening of monetary policy. in fact, our experience over the past fifteen years suggests that monetary tightening that deflates stock prices without depressing economic activity has often been associated with subsequent increases in the level of stock prices. for example, stock prices rose following | the completion of the more than 300 - basis - point rise in the federal funds rate in the twelve months ending in february 1989. and during the year beginning in february 1994, the federal reserve raised the federal funds target 300 basis points. stock prices initially flattened, but as soon as that round of tightening was completed, they resumed their marked upward advance. from mid - 1999 through may 2000, the federal funds rate was raised 150 basis points. however, equity price increases were largely undeterred during that period despite what now, in retrospect, was the exhausted tail of a bull market. 5 such data suggest that nothing short of a sharp increase in short - term rates that engenders a significant economic retrenchment is sufficient to check a nascent bubble. the notion that a well - timed incremental tightening could have been calibrated to prevent the late 1990s bubble is almost surely an illusion. instead, we noted in the previously cited mid - 1999 congressional testimony the need to focus on policies " to mitigate the fallout when it occurs and, hopefully, ease the transition to the next expansion. " * * * it seems reasonable to generalize from our recent experience that no low - risk, low - cost, incremental monetary tightening exists that can reliably deflate a bubble. but is there some policy that can at least limit the size of a bubble and, hence, its destructive fallout? from the evidence to date, the answer appears to be no. 6 but we do need to know more about the behavior of equity premiums and bubbles and their impact on economic activity. 7 the equity premium, computed as the total expected return on common stocks less that on riskless debt, prices the risk taken by investors in purchasing equities rather than risk - free debt. it is a measure largely of the risk aversion of investors, not that of corporate managers. an increased appetite for risk by investors, for example, is manifested by a shift in their willingness to hold equity in place of psychologically less - stressful, but lower - yielding, debt. stock prices peaked in march 2000, but the market basically moved sideways until september of that year. some have asserted that the federal reserve can deflate a stock - price bubble - - rather painlessly - - by boosting margin requirements. the evidence suggests otherwise. first, the amount of margin debt is small, having never amounted to more than about 1 - 3 / 4 percent of the market | 1 |
##rage. this cannot be our goal, and we need to resist any temptation of doing so. when all is said and done, we all have the same objective : a stable financial system β of course at the national level, but it is equally important at the global level. what we have learned in the recent years is that financial distress doesn β t stop at national borders. in the euro zone we have experienced the hard way that instabilities even in small member states have the potential to put the continuance of the entire european monetary union at risk. i would like, if i may, to say a few words about yesterday β s decision by the ecb governing council. first things first : the eurosystem staff macroeconomic projections presented give no cause for concern over the development of the euro - area economy. in fact, they confirm the view that the steep drop in energy prices is supporting the recovery of the euro area β s economy. the lower energy prices also go a long way towards explaining the expected evolution of consumer price inflation. it β s clear that inflation as forecast by the eurosystem staff will fall short of the governing council β s price stability target not only in 2016 but probably into 2017 as well. that β s not something we should simply brush aside. but given the predominant role which the drop in energy prices plays in euro - area inflation and the extensive monetary policy measures that have already been taken β which can entail risks and side - effects of their own β i am not really convinced that a further easing of monetary conditions was necessary. 5. conclusion ladies and gentlemen, since the beginning of the financial crisis, regulators have done a lot of work and thereby followed the instruction given by theodore roosevelt. do you remember? β β in any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing. β and i believe doing nothing and expecting the markets to recover on their own would not have been an option. i am sure that the financial system is now safer and more resilient than it was before lehman collapsed. i do not deny that stricter regulation may translate into higher costs for banks. bis central bankers β speeches however, when measured against the burden that financial crises place on society, i consider these costs to be very much justified. the post - crisis reforms are in large part finished, but some regulatory projects remain on the agenda. i strongly | do act as intermediaries in the transactions, but it is the behaviour of the ultimate seller that matters for the economic impact. bis central bankers β speeches the upbeat retail sales figures announced at the end of last week may be a sign this is already starting to happen. but while growth should gradually strengthen, the continuing headwinds from the unwinding of excessive debt and the government β s continuing fiscal consolidation mean that the pace of recovery is likely to remain moderate by historical standards. as a consequence, a margin of unused capacity and labour in the economy is likely to persist for some while yet, helping to ensure that domestically generated inflation β presently running around 1Β½ %, depending on exactly how one chooses to measure it β should stay subdued. indeed, in the absence of the extra Β£50 billion of gilt purchases announced two weeks ago, we judged that inflation would be rather more likely than not to undershoot our 2 % target in the medium term. that was why we decided that it was necessary to do more. moreover, the longer capacity lies idle, the more likely it is to be scrapped completely. and the longer people are out of work, the more likely they are to become disconnected from the labour market altogether. so there is an added incentive to getting the recovery back on track quickly. the euro area represents the biggest single downside risk to this picture. greece is the country in the headlines right now, but several countries of the euro - area periphery face, in varying degrees, a challenging mixture of unsustainably high public and / or private indebtedness and weak competitiveness. correcting those problems requires : fiscal consolidation ; bank recapitalisation ; and a rebalancing of demand towards net exports. the first two are under way, but the third is harder to achieve in a monetary union where no exchange rate movement is possible to bring about the necessary improvement in international competitiveness. at best, these countries face an extended period of very low growth while the necessary adjustments take place. and while this morning β s agreement between the greek government and the euro - area authorities is certainly welcome, there still remains a possibility that events could unfold in a disorderly and damaging fashion at some stage in the future. the linkages to the united kingdom from such a disorderly outcome would be threefold. first, and most obviously, almost half our exports go the euro area, so weak growth there has a rather direct spillover on to us. second | 0 |
i am asked, " which is important, knowledge of law or that of economics? " i will come to a very commonsense conclusion : in the work of a central bank, knowledge of economics, of law, and of broader areas is all necessary. i believe that the best part of economics is that it always strictly analyzes human behavior from a viewpoint of incentives. without such analysis, we cannot conduct monetary policy and system design with respect to financial regulation and supervision. however, at the same time, if " policy discussion " based on such economic analysis is not taking due account of the supporting rules or contracts, things will not practically work. in this regard, legal knowledge is quite important. 11 importance of business operations third is the importance of business operations. when the policy of the bank of japan is taken up in the newspapers or on television, in many cases the focus is its " policy, " such as raising or reducing interest rates. however, a consideration of monetary policy requires much more than examination of the target level for the interest rates. the interest rates are induced through banking operations including the sale and purchase of bonds and bills as well as lending to financial institutions. these operations entail consideration of various factors such as from whom and under what conditions the bank will purchase, how much liquidity the bank will provide and for how long, and what kind of scheme should be prepared for settlement. when discussing policies, therefore, understanding of business operations is indispensable. in particular, as was the case in the current crisis, when it becomes necessary to respond in ways that differ from those in normal times, it becomes important to take due consideration of business operations. the difference such a consideration would make in the effects and risks associated with policies are just as i have explained. based on these understandings, the central banks of the major countries are encouraging and supporting examination by legal experts, including legal scholars and practicing lawyers, of legal issues related to financial transactions. the bank serves as the secretariat of the financial law board ( flb ), a japanese organization that examines such legal issues. for information on the purpose, activities, and other details concerning the flb, see its web site. at the same time, we should also recognize that discussing policy without a proper perspective does nothing but harm. the real world is not so simple that gathering all information from the field, namely micro information, will lead to an understanding of the total, and policy cannot be judged from the viewpoint of practical operations | deal with their problems. some of the initial uncertainties involved in setting up and getting these imf adjustment programs going have been resolved. and there are now some encouraging signs of improved confidence and financial stability in the region. among the industrial countries, japan is the one most affected by the spillover effects from its asian trading partners. not only are its trade links with them important, but this external shock comes at a time when the japanese domestic economy is much less buoyant than was anticipated earlier. substantial loan exposure by japanese banks to the asian region has also weakened an already ailing financial sector in that country. but it is important to note that japan has the financial wherewithal to deal with its banking difficulties and that a series of measures to combat these problems and to strengthen the economic recovery have already been taken. additional financial sector and fiscal measures were announced recently. at this stage, the situation in asia is still evolving, and, while prospects have improved, we cannot be sure just how quickly and effectively the south - east asian, korean, and japanese economies will respond to the adjustment measures that have been taken. what about the potential effects of all this on canada? since our trade with asia, including japan, makes up less than 10 per cent of our total exports, the direct effects will be relatively modest. but we must also take into account the indirect effects that work through our other major trading partners and through the prices of some of the products we sell abroad. indeed, the implications of the asian crisis for global economic growth and for primary commodity prices on world markets will probably have a more important impact on canada than the reduction of our exports to asia. the fallout from asia will no doubt have a dampening effect on canadian output growth for the current year. but there are also other, more positive, developments that could well work to mitigate this effect. as i said before, economic performance in our major trading partners in the west, particularly the united states, has been somewhat stronger than anticipated. and even though our short - term interest rates have risen, canadian longer - term rates have been falling, along with their counterparts in the united states and europe, reflecting declining inflation and lower inflation - risk premiums. these longer - term rates are an important element in both business investment decisions and household spending on consumer durables and housing. the bank continues to monitor the situation carefully and to appraise the overall effect of these positive and negative influences on our economy. it is clear, however | 0 |
the gold rush days in bendigo. on the other hand, during this period, the virtues of a well run, straightforward business model, reliable retail funding, strong knowledge of the local market, and a suite of attractive retail banking services came once again to the fore. soundly run institutions have seen a rise in their market positioning relative to more risky ones. soundness, however, is only one part of the equation. of course we need the financial system to be a safe repository for the savings of the population. but to play its full role in the economy, the financial sector needs also to mobilise those savings, putting them in the hands of investors who are in a position to make effective use of them. banks are in the business of risk management, not complete risk avoidance. their job is to offer a secure savings vehicle on the liability side of the balance sheet, but to take a measured degree of credit, maturity and liquidity risk β very carefully managed! β to provide finance for sound investment propositions. those propositions range from housing, to small business, to large scale investment projects such as the ones that are happening apace at present with the commodity price boom. with capital markets struggling at present, this role is even more important than it normally is. in addition, the transaction services that banks and other authorised deposit - taking institutions offer their customers are key to facilitating the huge volume of transactions which occur every day in the modern economy. historians point out that this function of the financial system broadly defined β the efficient mobilisation of financial capital β is critical for economic growth. as the industrialised economy took shape, markets for capital grew alongside. had it been otherwise, brilliant technological innovations would have remained in the laboratory, entrepreneurship would have been stifled, growth would have been slower and living standards lower. debt and equity markets, together with banks and other financial intermediaries, have been, and remain, key parts of the financial infrastructure. the history of bendigo provides a good example of this general principle. in the early years, prospectors sought alluvial gold, which was found in or around streams and for which the requisite capital equipment was a pan and a shovel. as time passed and prospectors increasingly turned their attention to quartz - gold deposits, in some places deep underground, more physical capital was required. steam - and air - driven equipment made men working deep underground productive enough that profit could be earned even when a great deal of rock had to be | adelaide bank, the new entity has assets of around $ 50 billion, and is australia β s 11th largest bank. 1 though small in market share, its branch presence is considerably larger. if we were to compile a list of financial institutions of the second half of the 19th century, we would find that few of the names would be familiar ones. not many entities of that time are still in existence today. our major banks, of course, have a long history, in some cases dating back to the early convict era. but a great many financial institutions of the 19th century, particularly victorian building societies, succumbed to one or other of the busts that occurred in the 1890s, the 1930s and the 1990s. the 1890s episode was a particularly severe depression in victoria, with a collapse in land values and widespread closures of financial institutions. nearly half the building societies ranking based on banks β resident assets in australia. closed. this, as always, followed a period of extreme euphoria. consider the way the historian michael cannon describes the general scene in melbourne in the 1880s : the land mania of the 1880s took two main forms. the first was based on a plethora of building societies, whose optimistic officials believed that every family in the colony could simultaneously build their own house, keep up the payments through good times and bad, and support an army of investors who were being paid high rates of interest for the use of their money. the second form of mania was the deeply - held belief that it was impossible to lose money by β investing β in land β a belief which persists to the present day. 2 those words, penned in 1966 about an event a century ago, carry a more than faint echo of more recent times in other parts of the world. if we may paraphrase cannon, too many of the world β s major financial intermediaries thought that loans of dubious quality, originated by salespeople they knew little about, to borrowers whose credit standing, to the extent it was known, was very poor, could be sold in ever increasing quantities to investors looking for aaa security. one day the music stopped, as it always does, and they were left standing. the 1890s were tough for the city of bendigo, as for most of victoria. a number of banks in the city closed their doors. but its main building society remained sound. β the bendigo β had not ventured as far into melbourne real estate as others, nor was it as highly leveraged. | 1 |
a reliable government securities market and the availability of robust reporting, trading and settlement mechanisms would lead to a rapid development of a vibrant corporate debt market. a framework for the development is already available through the recommendations of the patil committee, the implementation of which has already been taken up by the various agencies. in support of my optimism in this regard, let me quote from a recent working paper of oecd : β β¦ well functioning government securities markets give public support to private fixed - income market ( both cash and derivatives ) in the form of pricing benchmark, while they also provide a tool for interest rate risk management. for these reasons, the development of a well functioning government bond market will often precede, and very much facilitate, the development of a private - sector corporate bond market β¦ β ( new strategies for emerging domestic and sovereign bond markets, working paper no. 260, oecd development centre, april 2007 ) as regards, policy challenges in india, they may be similar to those identified by a recent report of the committee on global financial stability ( cgfs ). β three important policy challenges that remain are : to improve market liquidity of the new markets ; to encourage greater private sector issuance ; and to spread the risks of bond investment more widely. β ( financial stability and local currency bond markets, cgfs paper no. 28, bank for international settlements, june 2007 ) let me conclude with this optimistic note on the development of the corporate debt market also in india, sooner than the expectations of many in the financial markets. thank you. | taken in recent years. first, initiatives have been taken to widen the investor base for the government securities. traditionally, commercial banks and insurance companies have been the largest holders of government securities. major part of the holdings of these investors is generally in the nature of statutorily mandated investments. the entry of mutual funds and non - banking finance companies in recent years has broadened the base. in addition, the entry of 100 per cent gilt mutual funds has broadened the potential for retail investor base. to enable small and medium sized investors to participate in the primary auction of government securities, a β scheme of non competitive bidding β was introduced in january 2002, which is open to any person including firms, companies, corporate bodies, institutions, provident funds, trusts, and any other entity prescribed by rbi. the scheme provides for allocation of up to 5 per cent of the notified amount at the weighted average rate of accepted bids. with a view to further promoting liquidity in the secondary market and to strengthen the emergence of a benchmark yield curve across maturities, re - issuances of benchmark securities have been in place for quite some time. in furtherance of the objective, a scheme of active consolidation of government securities through buy - backs was finalized. this is expected to be implemented during the current financial year. the settlement system for transactions in government securities was standardised to t + 1 cycle with a view to provide the participants with more processing time at their disposal and therefore, to enable better management of both funds as well as risk. in order to provide banks and other institutions with a more advanced and more efficient trading platform, an anonymous order matching trading platform ( nds - om ) was introduced. the nds - om is an additional facility available to the participants and the participants continue to have the option of using the current telephone - trading platform. the settlements of both types of transactions are, however, integrated. recently, in 2006, short sale was permitted in dated government securities to provide an opportunity to market participants to manage their interest rate risk more effectively. this measure is expected to further improve liquidity in the secondary market. β when issued β ( wi ) trading in central government securities was also introduced in 2006. this is expected to contribute significantly to distributional efficiency in primary issuance, in addition to permitting pds to manage their auction risk more effectively. there is a fairly active interest rate derivative market in india. the market started with rbi permitting interest rate swaps and forward rate | 1 |
a clean and transparent jurisdiction. we have taken significant steps to enhance the effectiveness of our jurisdiction in our fight against tax avoidance and tax evasion. indeed, at its plenary meeting in paris just a week ago, fatf agreed to move trinidad and tobago from its list of countries with strategic anti - money laundering and combating the financing of terrorism ( aml / cft ) deficiencies. over the past decade, the central bank of trinidad and tobago has taken measures to enhance know your customer ( kyc ) procedures for institutions falling under its purview. we have issued guidelines on aml / cft, which comply with the standards of the fatf and which eventually formed the basis for new legislation in bringing the country closer to full compliance. in this respect, the central bank is one of three supervisory authorities responsible for preventing money laundering and terrorist financing, the other two authorities being the ttsec and the financial intelligence unit ( fiu ). trinidad and tobago is party to 17 double taxation treaties in force, and there are others awaiting ratification or under negotiation. we signed our first double taxation treaties with both norway and denmark in 1969. our double taxation treaty with the united states was signed in 1971. we also have a tax information exchange agreement ( tiea ) with the united states. this should make it relatively easier to enter into intergovernmental agreements of the model types proposed by the united states, in which foreign financial institutions report information to authorities in their residence country and have those foreign authorities report the information to the irs. we recognize that several benefits may arise from concluding a fatca - style agreement using the intergovernmental model. it eliminates u. s. withholding on payments to our financial institutions ; it identifies specific categories of our financial institutions which are deemed compliant or which present a low risk of tax evasion ; it relieves our financial bis central bankers β speeches institutions from terminating the account of a recalcitrant account holder ; and it imposes passthru withholding on payments to other foreign financial institutions in the fatca treaty partner or in another jurisdiction with which the u. s. has a fatca agreement. based on submissions, it appears that all of our banks are ready to respond to, and comply with, facta requirements. however, there are varying levels of preparedness within the banking sector. our three canadian and the u. s. - owned banks are at the highest level of preparedness, having been part of their parents | u. s. internal revenue service ( irs ) all clients who are u. s. citizens, green card holders living in the u. s. or abroad, or who are foreign entities in which u. s. taxpayers hold a substantial ownership interest. to properly comply with these new reporting requirements, a foreign financial institution will have to enter into a special agreement with the irs by june 30, 2013. under this agreement, a participating foreign financial institution will be obligated to : 1. obtain information to determine which account holders are u. s. persons ; bis central bankers β speeches 2. comply with verification and due diligence procedures on such account holders as required by the irs ; and 3. report annually to the irs on the name and address of each u. s. client, as well as the largest account balance in the year and total debit and credits of any account owned by a u. s. person or foreign entities with substantial u. s. ownership. the penalties are steep for non - compliance. a participating foreign financial institution will be required to deduct and withhold a 30 percent tax on all payments of u. s. source income ( such as interest and dividends ) as well as u. s. source capital gains made to recalcitrant account holders ( those who do not willingly and promptly provide the requested information ), and to foreign financial institutions that did not enter into an agreement with the irs. in addition, fatca requires u. s. citizens and green card holders who have financial assets outside of the united states exceeding us $ 50, 000 to report these assets to the irs. fatca focuses on the high net - worth individuals, the so - called β fatcats β. if a foreign financial institution refuses to comply with these requirements, a withholding tax of 30 percent will be applied on all u. s. source income of that institution, regardless of whether or not such payment was made for the benefit of the u. s. account holder, for another client, or for the institution itself. foreign financial institutions, as currently drafted, may broadly include every member of the investment community and encompass banks, credit unions, custodians, asset managers, investment funds and pension fund schemes, brokers and insurance companies ( where their products have an investment element ). ladies and gentlemen, it would be quite easy for some non - u. s. institutions to believe that they will not be affected by fatca, as | 1 |
however, the view that we prefer a strong rand to a weak rand is not well - founded. ideally, what we would like to see is an appropriately valued stable exchange rate, one that is not a significant issue for inflation. however, that is in an ideal world. in reality, the exchange rate is buffeted by a number of fundamentals which require adjusting to ; in south africa β s case, these fundamentals include commodity - price changes and capital flows. over time, we have learned the hard way that trying to β lean against the wind β in the face of markedly changing fundamentals can be both futile and expensive, and any success in this respect is likely to be short - lived at best. that is not to say that we will never get involved, particularly in the event of liquidity drying up in the market. that said, let me be clear : no amount of central bank intervention, no matter how well intentioned, can prevent an exchangerate adjustment from aligning with fundamentals. the best contribution that the bank can make bis central bankers β speeches to competitiveness is to ensure that inflation is contained to the extent possible during periods of rand weakness to ensure that the depreciation is real. it is then up to the relevant sectors to take advantage of the increase in competitiveness. conclusion in conclusion, the domestic economy is facing a challenging future. while the global economy is a constraint, it is important that we do not focus on that only and ignore the very real domestic impediments to growth as well as the opportunities. it is too easy to sit back and bemoan the fact that we are hostage to global developments. there are things that can be done, many of which are clearly spelled out in the national development plan. we often hear about a focus on infrastructure, but we always seem to under - deliver in this respect. if south africa wants to develop its industrial sector, it needs to improve its infrastructure apart from electricity. there also needs to be policy coherence and less regulatory uncertainty. if we are to succeed in reducing unemployment, we must have a growing, competitive economy. competitiveness is not simply about the exchange rate ; it is a multidimensional concept. these dimensions include the quality of goods and services produced, reliability of delivery, reliable and appropriate infrastructure, appropriate technologies, appropriate and sufficient skills, the ease of doing business, and the minimisation of red tape. our financial sector is regarded as one of the most | that it makes the aim of monetary policy much clearer, ie the achievement of an average annual increase of 3 to 6 % for cpix inflation in 2002. the government chose to set the 3 to 6 % target level. the setting of monetary policy instrument values ( like the level of the β repo rate β ) is entirely up to the reserve bank. therefore the inflation - targeting variable chosen provides for the instrument independence of the reserve bank, but not goal independence. by means of the mission statement and an explanatory memorandum about the adoption of an inflation - targeting monetary policy framework, the public has been informed about the objectives of monetary policy. on the basis of this information the public can therefore evaluate the actions of the reserve bank in attaining these objectives. 6. transparency of monetary policy the south african reserve bank also fulfils the second condition for independence, namely transparency. government and the public are provided with a stream of information on the monetary policy stance. some of my staff and i regularly appear before the parliamentary portfolio committee on finance. we also issue comprehensive statements following each meeting of the bank β s monetary policy committee. the reserve bank β s quarterly bulletin, annual economic report and governor β s address at the annual meeting of shareholders provide comprehensive analyses of macroeconomic events. a six - monthly monetary policy review will soon be introduced, describing in more detail the decisions taken by the reserve bank. policy is also explained by the governors of the bank and comments on policy are heard at the monetary policy forum meetings. these meetings are held twice a year in the main centres - at least one in each province - and involve organised business, labour, politicians, academics and the media. 7. institutional independence in south africa finally, the present institutional framework in south africa in the form of the south african reserve bank act, act no 90 of 1989, allows the reserve bank a great degree of autonomy in its operations. the reserve bank β s functional independence in monetary and related policies is clearly stated in sections 10 and 35 of the south african reserve bank act. section 35 empowers the board of the bank to make rules β for the good government of the bank and the conduct of its business β. in section 10 the powers and duties of the central bank are spelled out in great detail. most of the functions described in this section are the normal functions that one would expect a central bank to perform. section 10 ( 2 ) also clearly states that β the rates at which the bank will discount or redis | 0.5 |
long they can actually go. there are a number of concerns including banks β profitability, how negative rates may act as an anaesthetic to euro area governments especially in the euro area β s southern periphery, taking into account that the fiscal space gained from lower debt service costs may result in a slower implementation of necessary fiscal and structural reforms. policy rate cuts to negative levels have generally been reflected in corresponding declines in money market rates and short - term government bond yields ( see figure 17 ). in turn, the fall in bank wholesale funding costs has helped lower lending rates, but to varying degrees across countries. the decline in rates on new loans has been particularly notable in the eurozone ( vinals et al. 2016, jobst and lin 2016 ). inflation expectations have continued to decline in most economies with negative interest rate policies ( also known as nirp countries ). 13 / 15 bis central bankers'speeches in addition, there are concerns about the political and institutional feasibility of negative rates as their long - term effects are still unknown. most importantly, their effectiveness is put under question during a recession, if this were to emerge in the near future. i would personally, in my professorial hat, prefer to see more qe rather than further negative rates. if this is the case, the next question is where could more qe in the eurozone come from? in other words, does the ecb have the tools for more qe stimulus? well, there are several options. from changing the parameters of the current qe programme like, for instance, buying bonds below the deposit rate, increasing the 33 % issue share limit, dropping the capital key allocation, or even adding new securities to the pool of eligible assets such as bank bonds or equity. let me now turn to the effects of brexit on the dynamics of european integration and indeed offer a southern point of view and, more particularly, make five points from the south on the brexit vote. 3. a southern view on brexit β s implications for the eu1 the european union is currently facing crises on multiple fronts ( anaemic growth, high unemployment, persistently low inflation close to deflation, a debt crisis, an ongoing migrant crisis ), but brexit represents the biggest medium - to long - term challenge of all. i will focus here on a couple of rather important points. 14 / 15 bis central bankers'speeches euroscepticism is now a strong sentiment in europe. populi | nicholas c garganas : the european financial marketplace speech by mr nicholas c garganas, governor of the bank of greece, at the economist conference : private banking and asset management, athens, 22 october 2002. * * * ladies and gentlemen, let me start and by thanking the economist for inviting me to speak at this conference. in recent years, there has been a visible acceleration in the development and integration of eu financial markets. in what follows, i will discuss, first, why financial integration is desirable, second, why it has occurred, third, trends toward financial integration in the eu, and fourth, the role of public policy in supporting integration. why is financial integration desirable? i think it fair to say that the main function of the financial system is to serve the needs of the real economy, encouraging productive investments, allowing risks to be diversified, mobilising savings, monitoring firms β use of funds, etc. to this end, the development of both markets and sound financial institutions plays a key role. to the extent that increased financial integration allows the tasks of markets and institutions to be completed more efficiently, it will bring about greater benefits through two main channels : increased capital accumulation and higher productivity of capital. through these two channels, the greater efficiency of an integrated eu financial system will lead to increased economic growth and a higher standard of living for eu citizens. three main interrelated factors have underpinned the acceleration of integration of eu financial markets. the first factor is globalisation. the integration of financial markets in europe is part of a wider global development. globalisation has many dimensions, all of which have been stimulated by the decline in costs of communication, transportation, data processing, and transactions. the second factor is the advances in creating a common regulatory framework across the eu as part of the effort to complete the internal market in financial services. the adoption of a common eu policy has been accompanied by liberalisation of financial markets in the member states. as i will discuss shortly, however, there is still some distance to travel in this respect. the third factor is the adoption of the euro. before january 1999, the need to operate in many national currencies was a major obstacle to financial integration in the union. the presence of a sizeable exchange risk limited the attractiveness of cross - border investment, reduced the incentive to proceed with regulatory harmonisation at the eu level, and dampened competitive pressures in member states'home markets. the introduction of a common currency for twelve member | 0.5 |
sizes contribute to the sustained and efficient provision of credit and other financial services to consumers and businesses that support the growth and stability of the economy. community banks play a distinctive role in the provision of financial services, offering a wide range of products and serving specific segments. community banks often use a unique β relationship - based β approach that, for example, leverages personal knowledge of their customers β creditworthiness and local business conditions to customize lending decisions and meet demand for credit and other financial services. this allows both consumers and small 1 / 6 bis central bankers'speeches businesses to contribute to economic activity. community banks also provide important financial services to key β often underserved β sectors of the economy. for example, a study from a few years ago found that almost one out of five u. s. counties has no other physical banking offices except those operated by community banks. 1 as a second example, in the typical county in the second district ( excluding puerto rico and the virgin islands ), community banks account for about half of all banking deposits. it is the ability of smaller institutions to leverage β soft information β in important ways and reach underserved sectors that gives community banks a unique and critical role in driving sustainable economic growth. supervisors are also keenly aware of the potential unintended consequences of the supervisory and regulatory framework. one of our goals as supervisors is to ensure that our efforts are not having an adverse effect on the ability of firms to provide credit and financial services that supports economic growth at businesses of all sizes. as i said in an earlier talk, in my view, it is entirely appropriate to continuously evaluate and rigorously debate whether the supervisory and regulatory framework is meeting its objectives efficiently. 2 i β ll return to this topic shortly. trends in small bank and small business lending as we evaluate the financial system and the broader economy, we regularly examine firms from a horizontal and aggregate perspective to gain insight on the trends in the provision of financial services in the second district. today, i β ll say a few words on trends in small business lending. of course, looking at trends is not sufficient to identify causal relationships, but it does provide one perspective on these developments and identifies areas for future inquiry. the overall level of commercial and industrial ( c & i ) lending at second district firms with under $ 50 billion in total assets has grown steadily in recent years ( chart 1 ). since the financial crisis, these loans have increased by just over 80 percent, which is somewhat faster than growth | unduly burdensome. the full report covers 430 pages, so i β d like to highlight three of the recommendations that may be of interest to second district community bankers. they relate to simplifying capital requirements ; reducing regulatory reporting ; and reducing the frequency of examinations for certain qualifying, smaller firms. capital is in many ways the foundation of the health of the banking system. it β s important to note that more than 500 banks failed during and after the financial crisis because they lacked sufficient capital, and many of them were community banks. nonetheless, we have consistently heard since then that some of the capital rules are too complex for community banks and not commensurate with their size and risk profile. this link with the risk profile is critical and an important part of our efforts to β tailor β our supervisory approaches. as part of the egrpra process, we are continuing to think about ways to simplify the capital rules. the agencies are developing a proposal and are planning to seek industry comments on certain proposed amendments to the capital rules. such amendments could include 4 / 6 bis central bankers'speeches replacing the framework β s complex treatment of high volatility commercial real estate exposures, ( 2 ) simplifying the current regulatory capital treatment for mortgage servicing assets and regulatory capital instruments issued by financial institutions ; and ( 3 ) simplifying the current limitations on minority interests in regulatory capital. i should note that, in april 2015, the board approved a final rule that raised the asset threshold of the small bank holding company ( bhc ) policy statement from less than $ 500 million in total consolidated assets to less than $ 1 billion in total consolidated assets and expanded the application of the policy statement to savings and loan holding companies ( slhcs ). after the issuance of the final rule, 89 percent of all bhcs and 81 percent of all savings and loan holding companies were covered by the policy statement and were excluded from certain consolidated capital requirements. a second relevant topic reflects the challenges and burdens for smaller firms to file call reports. in response to industry concerns, the agencies began in 2014 the process to streamline the call report for community banks and subsequently published a series of proposals for comment. the result is that, effective march 31, 2017, call report requirements have been streamlined for community banks. this new call report will reduce the number of report pages from 85 to 61 pages and will remove approximately 40 percent of the data items currently included in the capital schedule. a third | 1 |
c koep, m leibbrandt, h mcewan and i woolard, β employment and inequality outcomes in south africa β, southern africa labour and development research unit and school of economics : university of cape town, 2010. another part of the failing job creation machine is simply weaker real economic growth compared to the 2000s, when job creation was quite strong. this should not, however, lead us down the path of grasping at another seemingly β easy β answer. higher inflation will not give us higher sustainable growth. instead, higher inflation undermines short - run growth by increasing interest rates on borrowing, affecting consumers β buying on credit and business owners who want to use credit to invest. higher interest costs reduce short - run cash flow, reducing all future consumption spending. while surprise inflation reduces the real value of the existing stock of debt owed, the trade - off is lower economic growth in subsequent years. the short - run benefit of a surprise lower interest rate is transformed by higher inflation into a long - run cost to growth. when inflation is higher than that of our trading partners, we suffer a continuous loss of competitiveness. high inflation overall also generally means higher inflation for poorer and less - skilled south africans than for the wealthy. this increases inequality further and worsens the already low standard of living for those households, making them costlier to employ. for a few years before the gfc in 2008, the relationship between growth and employment was better β if economic activity grew by 1 %, employment grew by around 0. 62 %. but since then, up to 2018, each percentage point improvement in growth only gives us 0. 37 % more jobs. our low employment problem overlaps entirely with our low growth problem. in this context, the best a central bank can do is stabilise unemployment at the rate consistent with price stability. if a central bank attempts to get unemployment below the nairu, the result will be larger quantities of inflation but only small and temporary quantities of jobs as the supply curve becomes more vertical. the same is true for economic growth. 11 assuming that most of our unemployment problem is structural, are we at least sure that the residual cyclical unemployment is being reduced by monetary policy? is a dual mandate better at addressing these cyclical drivers? at the sarb, we use an alternative measure of economic activity to the nairu for understanding where the economy is relative to its tipping point into more inflation or into deflation. this is the output gap, or the | ##ramanian of the peterson institute of international economics, this latter share is expected to increase to as much as 45 per cent by about 2030. south africa is now part of the brics grouping, and although a relatively small partner, we are full members and are working to maximize the opportunities that present themselves. we are also aware that there are other countries that are also deserving of being members of this club, and a further indication of how a growing number of emerging markets are part of the shifting economic paradigm. our membership should also be seen in the context of the bis central bankers β speeches economy being a gateway to africa, which has been one of the outperforming regions in the past number of years, and which is expected to continue to grow at rates of around 5 per cent. as a region, africa is the most important destination of our manufactured exports, and china has now become south africa β s largest trading partner, although much of our exports to that country are commodities or commodity based. despite these developments, the experience of the past few years has shown that emerging markets cannot completely decouple from the advanced economies. but the continued weakness in south africa β s traditional trading partners in the eurozone and the uk underlines the need to seek new markets for manufactured exports. germany has long been one of south africa β s traditional trading partners, and remains the second largest destination by country for south africa β s manufactured exports, after the united states. in 2012, the value of these exports, mainly machinery and electrical equipment, amounted to r21, 8 bn and accounted for about 60 per cent of our total exports to germany. on the trade front, we still run a fairly large deficit with germany, with total exports of r37, 8 billion, and imports of r84, 0 billion. most of these imports are manufactured goods. in addition, germany is one of the most important sources of direct foreign direct investment, with around 620 german companies operating in the country, employing approximately 90, 000 people. german firms have invested r33. 7 billion in south africa since 2003. trade and investment flows are important not only for employment, but also from a balance of payments perspective. since the crisis, the weak recovery in the advanced economies constrained south africa β s export growth which impacted adversely on the trade account of the balance of payments, particularly at a time when the exchange rate was relatively strong in response to strong capital inflows to emerging market economies. the current | 0.5 |
to continue to deliver price stability in the years to come. our defence of our mandate will be just as resolute as it has been in the first 11 years of monetary union. a monetary policy that pursues short - term objectives is doomed to failure. however, this focus on the longer term means that those independent central banks also stand in contrast to the short - termism of the financial markets. the global financial crisis is also fundamentally a result of short - term thinking. challenges arising from the financial crisis the handling of the financial crisis and its economic consequences has been a great challenge for us all. governments and central banks have had to intervene on a massive scale in order to stabilise the financial system and the real economy. the monetary policy measures adopted by the eurosystem have allowed inflation expectations to be kept stable even during the crisis. from the very beginning, our interventions were designed in a way that allowed us to unwind them easily as soon as conditions improved. at no time did we lose sight of our price stability objective. countries β budget deficits have risen substantially on account of the crisis. rising debt levels do not just bring with them the potential for greater conflict between fiscal and monetary policy. above all, they also place a burden on the sustainability of public finances in the countries in question. it is therefore in the interests of each and every country to return to sound public finances as quickly as possible. in the current circumstances, where europe faces pivotal decisions, it is more important than ever to recognise that a prosperous union requires determined action by all. the most important issue is that europe β s policy - makers live up to their responsibilities. as i mentioned yesterday, the governing council of the european central bank has always stressed the need to preserve and reinforce peer surveillance inside the euro area, to strictly apply the treaty provisions and the stability and growth pact, and to have the best functioning possible of the commission and of the eurogroup. particularly as regards the government members of the eurogroup, the ecb β s governing council has always considered that it was important that they would, as a college, live up to their very important responsibilities as regards fiscal policies, the monitoring of relative competitiveness and structural reforms. i am therefore pleased that the heads of state and government of the euro area could work out a solution, implementing their earlier declaration to β take determined and coordinated action, if needed β¦ β, which maintains the lead responsibility of european policy makers. monetary union in europe is far more | to correct them by way of risk reduction and risk sharing, both as regards the financial sector and as regards economic and fiscal policies. it is now up to political leaders to fill this road map with life. i am aware that at the moment much of the political attention lies elsewhere. but we should not forget that a stable and sound economy is a vital precondition to be able to tackle challenges in all other policy areas ; therefore, making emu function in the long run is not a luxury β it is a necessity for europe to flourish. thank you for your attention ; i am now looking forward to our debate. bis central bankers β speeches | 0.5 |
john hurley : a central banker β s perspective of the irish and international economic situation speech by mr john hurley, governor of the central bank of ireland, at the finance dublin conference, dublin, 25 march 2003. * * * the international and euro area economy this is a time of exceptional uncertainty in the world economy. this uncertainty has been driven by a number of factors, notably the deterioration of equity and financial markets during 2002 and more recently, rising geopolitical tensions and the ensuing war in iraq. as a result, the outlook for global economic growth has weakened compared with earlier expectations. the impact of the war in iraq on the global economy will depend on the extent and duration of the conflict. the range of scenarios is wide but one can characterise two contrasting situations. in one case, a prolonged conflict could trigger a marked increase in oil prices and undermine consumer and business confidence, slowing consumption and investment spending and leading economic growth to weaken. alternatively, a short and decisive conflict would eliminate the uncertainty that now exists. it is not possible at this point to assess conclusively the implications for the euro area. but the governing council has made it clear that developments will be monitored closely, that it stands ready to act if necessary and will provide liquidity should that be required. the geopolitical situation masks the fact that, by historical standards, this has been an unusual economic recovery. evidence from the past half - century suggests that typically a recovery in economic growth is driven by rising equity prices and falling savings rates, in addition to low interest rates. over the past year, however, equity markets have weakened further, while savings rates have risen. these developments reflect to a large degree an attempt to correct the problems of the past, in particular the significant economic and financial imbalances generated during the preceding boom in the us. the current account deficit has, moreover, continued to grow and is now being driven by the emergence of a sizeable fiscal deficit. ultimately, this situation has to be corrected, and this will undoubtedly have implications for the rest of the world. with the external impetus to growth likely to be modest, euro area growth will have to be driven largely by domestic demand. however, the recent track record of larger euro area economies is not encouraging. their underperformance has acted as a headwind to sustainable economic recovery and this situation may change only gradually. in summary, i would remain concerned that, even in the event of an unwinding of geopolitical tensions, euro | currently by - passed by their communication and build higher and durable levels of trust, complementary activities are needed in addition to simpli ed communication. the authors summarise these activities as explanation, engagement and education, the 3 es of central bank communication. in short, better education makes explanation easier, and increases the effectiveness of engagement. explanation, engagement and education are essential to help the public understand why the ecb prioritises price stability over other, perhaps more tangible, economic objectives, why a positive rate of in ation, of say 2 per cent, is better than zero in ation, why people β s perception of in ation can be so different from the price index. they are necessary, in short, to help people understand and appreciate what central banks do and why they do it. this should allow monetary policy to be trusted by the public and central banks to be able to guide the formation of expectations and to deliver effective policymaking. but successfully explaining to, engaging with and educating the public is far more than just a matter of removing jargon from our communication. central banks should rst ask themselves : is our monetary policy framework suf ciently consistent, and are we open and transparent enough to allow for such engagement and understanding? conclusion. the eurosystem : the progress made, the remaining challenges, and the strategy review so nally, what about the eurosystem? the review of the monetary policy strategy, is an opportunity to re ect on our communication strategy. at its foundation, the ecb β s communication strategy was less transparent and open to the public than today. for example, accounts of the meetings were not released, staff forecasts were not published and the price stability de nition needed clari cation. since then, we have seen a higher degree of transparency of both the strategy and the decision - making process of the ecb. staff economic forecasts have been published since december 2000, the two - pillar framework and the price stability de nition was amended during the 2003 strategy review, and accounts of the meetings have been released since january 2015 ( rostagno et al 2019, hartmann and smets 2018 ). 33 although these have been important improvements, there is more to be considered in our review. i began this speech by asking a number of questions. all of them are important to our understanding of monetary policy and some are within the direct control of the central bank, while others are not. in preparing this speech, | 0.5 |
the covid - 19 pandemic : evidence from surveys ], economic review 73, no. 2 ( 2022 ) : pp. 133 - 59 ; uesugi, i., chusho kigyo kin'yu no keizaigaku : kin'yu kikan no yakuwari ; seifu no yakuwari [ economics of small business finance : the role of financial institutions ; the role of the government ] ( tokyo : nikkei publishing, 2022 ), pp. 43 - 47. 8 moreover, recent studies have shown that small and medium - sized firms with no debt, which do not rely on bank loans, have a rather small appetite for capital investment. see uesugi, chusho kigyo kin'yu no keizaigaku, pp. 35 - 38. would need to pursue policies to support the economy by further lowering market interest rates below the natural rate of interest. 9 c. revisiting the importance of inflation targeting earlier, i mentioned that the bank adopted the price stability target of 2 percent in 2013. here, i would like to explain the importance of inflation targeting once again. currently, the most important mandate for many central banks is to maintain price stability. inflation targeting clearly defines this mandate in quantitative terms, and many central banks around the world have adopted such targeting ( chart 15 ). theoretically, one could argue that other indicators, such as the nominal gdp growth rate, could be set as a policy objective. however, it is the inflation rate that most naturally relates to the mandate of maintaining price stability. 10 major central banks, such as the federal reserve and the ecb, also target a 2 percent inflation rate. ambiguity in this inflation targeting would make the objective of monetary policy vague, and therefore could undermine the transparency of monetary policy and its effectiveness. 11 this applies to dealing with not only deflation but also inflation. iii. recent and future economic activity in shizuoka prefecture before closing my speech, i would like to talk about the economy of shizuoka prefecture. the prefecture's economy is currently picking up as a trend, despite being affected by in his paper published in 1998, which advocated at an early stage for japan having more aggressive monetary easing, professor krugman assumes that japan's natural rate of interest is falling due to a declining birthrate. the paper suggests that macroeconomic policies are necessary especially when there are structural problems. see krugman, p. r. | and animal and plant extinction. in the form of disasters that threaten lives and livelihoods. nature and climate have gone rogue β in spain and in the netherlands, in europe and in the rest of the world. but - hope is the thing with feathers. 1 / 3 bis - central bankers'speeches to turn the tide, europe needs the green transition. sooner rather than later. but, of course, that costs money. the european commission estimates that a yearly additional investment of 350 billion euros is needed to meet the 2030 emissions - reduction target in energy systems. another estimated 130 billion euros is needed for other environmental goals ( refers to an external site ). in total, we are talking about 480 billion euros a year. both in terms of type of investment as in the sheer number, this is simply too much for the public sector alone. we need private investment. like equity financing. because more than debt financing, it is equity financing that will increase investments in green and innovative projects. because of the greater riskappetite of equity investors and their longer term investment horizon ( refers to an external site ). currently, however, european smes are heavily reliant on own funds and bank loans for their green and innovative projects. in the us, for example, they would be able to turn to venture capital. but that kind of market for risky investments doesn't exist here β at least not to the same degree ( refers to an external site ). as a result, successful, green, innovative companies lack funding for substantial growth. enter β indeed β a capital markets union. this would allow for a proper allocation of the necessary private investment for the green transition ( refers to an external site ). it would sustain investment flows. and it would strengthen our resilience to nature - and climate - related shocks. and this also works the other way around. today, sustainable finance products account for a small share of the euro area capital markets. but that share is growing. and that offers a leverage to foster a european capital markets union. because, compared to the aggregate bond market, the green bond market has a lower home bias. it shows a higher degree of integration. and euro area green bonds are held cross - border twice as likely as other bonds. green investment funds also have a more stable and committed investor base. and so, if green capital markets were to deepen further, sustainable finance could help advance financial integration in the european union. and remove the legal impedime | 0 |
investment tend to be substantial, and the β demand switching β effects of the lower exchange rate in enhancing external demand for the country β s goods are likely to be bis central bankers β speeches relatively small. indeed, one could argue that the spillovers to the rest of the world could be positive on net, as the enhanced domestic demand draws in substantial imports, offsetting the higher exports. matters are less clear in the circumstances we find ourselves in today, and with the unconventional policies countries are adopting. for instance, if the interest rate sensitive segments of the economy are constrained by existing debt, lower rates may have little effect on enhancing domestic demand, but continue to have demand switching effects through the exchange rate. similarly, the unconventional β quantitative easing β policy of buying assets such as long term bonds from domestic players may certainly lower long rates but may not have an effect on domestic investment if aggregate capacity utilization is low. indeed, as argued earlier, savers may respond to the increased distortion in asset prices by saving more. and if certain domestic institutional investors such as pension funds and insurance companies need long term bonds to meet their future claims, they may respond by buying such bonds in less distorted markets abroad. such a search for yield will depreciate the exchange rate. the primary effect of this policy on domestic demand may be through the β demand switching β effects of a lower exchange rate rather than through a demand creating channel. of course, if all countries engage in demand switching policies, we could have a race to the bottom, with no one any better off. nevertheless, countries may find it hard to get out of such policies because the immediate effect for the country that exits might be a serious appreciation of the exchange rate and a fall in domestic activity. the bottom line is that simply because a policy is called monetary, unconventional or otherwise, it may not be beneficial on net for the world. that all monetary policies have external spillovers does not mean that they are all justified. what matters is the net spillovers. one source of spillovers is through the trade channel, the relative magnitude of demand creating versus demand switching effects. another source of spillovers is through cross border capital flows, and their effect on financial stability elsewhere. of course, a country β s international responsibilities in this regard are murky, while the central bank β s domestic mandate is explicit. this leads to a possibly serious asymmetry in responsibility. if the central bank is in danger of falling below the lower bound of its inflation mandate | let me quickly reflect on the state of play of these long - term determinants of growth. concerning labor, the region has been facing constant shrinking of working - age population - 0. 5 % on average, per year in the last nine years, mostly due to unfavorable demographics and emigration. if we take into account estimates that 1 / 3 of the emigration is high - skilled labor, then obviously, this is not only an issue of quantity, but quality as well. in this context, global competitiveness report points to a large human capital gap of the region with an index rank of 62. 2, compared to 16. 7 for eu15. the health crisis emphasized even more the long - standing and burning issues that need to be tackled such as increasing participation rates ( that currently hover around 54 % ), rising life expectancy, skill mismatches, and in particular digital skills and " jobs skills of tomorrow ", although given the structural nature of the problem it will continue to weigh on the medium - term growth dynamics. concerning capital stock, data reveals that the capital stock in the region constitutes only one third ( 35 % ) of the capital stock in the countries of the european union. this calls for raising investment ratio and closing investment gaps. these gaps are particularly wide in infrastructure, looking at the average rank of 70. 5 for the region compared to 16. 7 for eu152. however, there is also a great scope for improvements in ict infrastructure, as a cornerstone of the new economy, in order to accelerate digital transformation of the economies. as for productivity, it remains low, about 1 / 3 of the eu average. in the last five years before pandemics, the average gdp growth of the region was 3 %, with tfp 2 / 3 bis - central bankers'speeches contribution of merely 0. 3 p. p. to increase productivity, the region must tackle structural and institutional obstacles that inhibit efficient allocation of resources. the evidence suggests that institutional reforms in emerging economies are associated with about 1 p. p. a year higher total factor productivity growth compared to " normal " years3. so far, fdis in the tradable sectors are one of the traditional venues that increase productivity that implies not only tapping additional external sources for growth financing, amidst low domestic savings, but also transfer of know - how and technologies. however, pandemics led to significant deceleration of fdis and trade flows, flagging up many vuln | 0 |
agencies β that helps different perspectives come together to create effective practices. 7 in addition to engagement with the public, the joint member agencies have continued their interagency collaboration. we have been working together to share information and help shape the most effective path forward for public policy. these actions include the signing of a memorandum of understanding that further facilitates information sharing related to the treasury market, and again co - hosting this conference. going forward, the staff of the joint member agencies will continue to work together on effective and comprehensive data collection, monitoring of market activity and liquidity through the interagency working group, development of principles and best practices for treasury market data transparency, and the regulatory framework for government securities. a main focus of recent work by the joint member agencies has been to improve the availability of information to both the official sector and the public. given this emphasis, it is worth spending a few moments discussing the benefits of obtaining timely and robust data on treasury market transactions. data are essential to understanding flash events and market liquidity. attendees at this 1 / 3 bis central bankers'speeches conference are very familiar with the events of october 15, 2014, when the 10 - year treasury yield experienced a 37 - basis - point trading range over the session. at that time, market participants struggled to identify what had caused that sharp movement. similarly, a flash event occurred in the british pound just this month. the pound depreciated nearly 6 percent, and then largely retraced this move within several minutes, seemingly without a major catalyst. once the domain of equity markets, flash events have happened with increasing frequency, also occurring in the dollar - yen and euro - dollar currency pairs in recent years. treasury and foreign exchange markets share a number of common attributes. they are evolving rapidly, they are highly automated in key market segments, and information on trading activity is not widely available. as a result, it is challenging for the official sector, market participants, and members of the public to effectively analyze these markets, understand the sources and risks of flash events, and evaluate how liquidity is changing. given the role of the treasury market as the deepest and most liquid fixed income market in the world, it is clear that both the official sector and the public need improved access to transactionlevel data, and i am pleased that we are making real progress on this front. greater transparency into treasury market activity is necessary in maintaining the market β s many important roles : as a risk - free benchmark for financial instruments | william c dudley : solving the too big to fail problem remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york and chairman of the committee on the global financial system ( cgfs ), at the clearing house β s second annual business meeting and conference, new york city, 15 november 2012. * * * it is a pleasure to have the opportunity to speak here today. i am glad to see the progress our city and region have made recovering from sandy, but obviously significant challenges remain. i am going to focus my remarks today on what is popularly known as the β too big to fail β ( tbtf ) problem. in particular, should society tolerate a financial system in which certain financial institutions are deemed to be too big to fail? and, if not, then what should we do about it? the answer to the first question is clearly β no β. we cannot tolerate a financial system in which some firms are too big to fail β at least not ones that operate in any form other than that of a very tightly regulated utility. the second question is the more interesting one. is the current approach of the official sector to ending tbtf the right one? i β d characterize this approach as reducing the incentives for firms to operate with a large systemic footprint, reducing the likelihood of them failing, and lowering the cost to society when they do fail. or would it be better to take the more direct, but less nuanced approach advocated by some and simply break up the most systemically important firms into smaller or simpler pieces in the hope that what emerges is no longer systemic and too big to fail? 1 as i will explain tonight, i believe we should continue to press forward on the first path. but, if we fail to reach our destination by this route, then a blunter approach may yet prove necessary. as always, my views may not necessarily reflect those of the federal reserve system. what is the too - big - to - fail problem? the root cause of β too big to fail β is the fact that in our financial system as it exists today, the failure of large complex financial firms generate large, undesirable externalities. these include disruption of the stability of the financial system and its ability to provide credit and other essential financial services to households and businesses. when this happens, not only is the financial sector disrupted, but its troubles cascade over into the real economy. there are negative externalities associated with the failure | 0.5 |
david dodge : bank of canada β s outlook for the canadian economy remarks by mr david dodge, governor of the bank of canada, for a meeting with canadian banks and the investment community, new york, 31 january 2002. * * * i am pleased to be here today and to have this opportunity to talk about the bank of canada's outlook for the canadian economy and to update you on our monetary policy actions. this has been a very difficult year for all of us in north america, but especially for you here in new york city. the tremendous loss of human lives as a result of the 11 september terrorist attacks has been tragic. among those who died there were family members, friends, and colleagues. and there were other innocent citizens of many nationalities caught in this tragedy, including canadians. all of us at the bank of canada share a deep sorrow and extend our heartfelt sympathy. the immediate impact and the fallout from last september's events introduced new layers of uncertainty into the economic picture, compounding the effects of a deepening global economic slowdown that had become more evident during the summer. the bank of canada quickly responded to this extreme uncertainty by aggressively lowering interest rates in order to minimize the economic impact of the attacks and limit the loss of confidence. since september, we have lowered our key policy interest rate by 200 basis points, bringing the total reduction since the beginning of 2001 to 375 basis points. this substantial monetary easing, together with measures taken by canadian governments to reduce taxes and to strengthen national security, should support growth in domestic spending. on this basis, and with the improvement we have seen since the fall in the geopolitical climate and in consumer confidence, it is now clearer that the canadian economy will gather momentum as the year unfolds. the timing and strength of the recovery will partly depend on how quickly business confidence and business investment, which remain weak in many countries, bounce back. here, it is important to note that in canada we did not have the same degree of overinvestment in fixed capital in the manufacturing sector during 1998 - 2000 as in the united states. so, the need for retrenchment and for adjustment of excess capacity in canada would be less. the bank of canada's current view is that economic growth in canada will be relatively modest in the first half of 2002 β between 1 and 2 per cent, on an annualized basis β but that it will accelerate in the second half β to a range of 3 to 4 per cent β | and strengthen further in 2003. this output profile means that there will be an appreciable amount of excess supply in the economy through 2002. because of this, we see core inflation averaging just under 1 Β½ per cent in the second half of 2002 β below our 2 per cent target. total cpi inflation should remain below the core rate until late 2002. with slack in the economy starting to be taken up in the second half of 2002, and expected to disappear by late 2003, inflation should move back up close to 2 per cent in about two years. i would now like to reiterate some of the comments i made on current developments last week, when we released our update to the november monetary policy report, and in two speeches i gave in western canada earlier this week. it is now becoming clearer that the canadian economy will strengthen as we go through this year and into 2003. recent data increasingly support the view that a recovery is taking hold. household spending in canada, particularly on interest - sensitive purchases, has been stronger than expected. the latest data on exports and manufacturing activity show signs of recovery. the inventory adjustment is progressing. and with early evidence of a revival in the u. s. economy, the world prices of non - energy commodities appear to have bottomed out. these signs of a pickup in economic activity in canada, and elsewhere, are encouraging. over time, exchange rates should reflect economic and financial developments and prospects. but movements in the canada β u. s. exchange rate do not yet appear to have reflected the recent developments in our economy. and to the extent that the recent depreciation of the canadian dollar risks affecting consumer and business confidence in canada, it is clearly not helpful for our economy. furthermore, at this juncture, it is certainly the case that the economic recovery in canada does not hinge on the current low levels of the canadian dollar against its u. s. counterpart. let me sum up. there is a good chance that when the final national accounts data for canada come out, we will see positive, albeit modest, economic growth in both the last quarter of 2001 and the first quarter of this year. at this point, all available data suggest that final demand in the fourth quarter was stronger than we had anticipated. with production coming in at a much lower rate than final demand, the implication is that there has been a sharp rundown of inventories during the fourth quarter. this bodes well for the future, since it underpins the significant | 1 |
year real interest rate has fallen over recent decades note : ten - year zero coupon yield ( spot interest rate ) computed from uk index - linked government debt. see yield curves. source : bloomberg finance l. p, tradeweb and bank calculations. chart 2 : there has been a trend decline in real interest rates in most countries note : high - income countries include finland, france, italy, japan, netherlands, spain, the united kingdom and the united states. see appendix a. 2 to bailey et al. ( 2022 ) for data definitions. source : authors β calculations using eu klems, the penn world table 10. 0 and the jorda et al. ( 2017 ) macrohistory database. see appendix a. 1 to bailey et al. ( 2022 ) for more details. this pattern is suggestive of a structural trend in the underlying global trend real interest rate, in other words global r *. this concept can be estimated, using a variety of statistical methods, all of which extract an underlying slow - moving trend from the more volatile data. some of these estimates, from a range of different academic papers, are shown in chart 3. the teal line shows a new estimate by bank staff, based on data for 31 high - income countries. though there are relatively wide error bands around this central estimate, and alternative estimates from the literature exhibit different patterns, the direction of travel has been clear. in other words, a decline in global r * over recent decades is common across estimates. chart 3 : empirical measures of global r * have fallen in recent decades source : consumer prices indices, short - term interest rates and government bond yields for the calculation of cesa - bianchi et al. ( 2022 ) β s global measure of r * from the jorda et al. ( 2017 ) macrohistory database and eikon refinitiv. other estimates from del negro et al. ( 2019 ), hamilton et al. ( 2016 ), holston et al. ( 2017 ). while these statistical estimates help us to understand the dynamics of the trend real rate, they do not tell us why it has been falling. the dynamics of the trend real rate are determined by slowmoving structural factors that affect the balance between the demand for capital for production and the stock of wealth available to finance it. [ 6 ] understanding the underlying structural trends that drive this balance requires a structural model. recent research by staff at the bank has developed a | one - off exercise. we need continuous engagement so that market infrastructure keeps pace with market innovation. that β s why the bank is announcing that it will hold an open forum this autumn which will bring together all stakeholders in ficc markets. our goal is to discuss the prospects for market functioning, where regulations might overlap or conflict, and whether enough has been done to build the real markets the uk deserves. to prompt an open discussion, we are publishing a detailed paper which reviews these issues and draws out such questions. 5 everyone has an interest in the future of financial markets, so i would strongly encourage you to engage with our open forum process online and at the conference itself. an open and accountable bank welcomes your input. our response to recent failings should be as ambitious as those of our predecessors to the great fire : renewed prosperity built on private markets and public market infrastructure. let our legacy be the earthly equivalent of wren β s ethereal genius, real markets so that the city can do what it does best : transact and innovate for the good of the people of the united kingdom and the world. thank you. see http : / / www. bankofengland. co. uk / markets / pages / openforum. aspx. bis central bankers β speeches | 0.5 |
the nonmanufacturing sector that is at the forefront of the recovery. since the nonmanufacturing sector is more labor - intensive than the manufacturing sector, this has resulted in a tightening of labor market conditions. in the construction, retail, and service sectors, some firms have found it difficult to expand their business due to labor shortages. according to the tankan survey, excess capacity has almost disappeared. with the high level of capacity utilization, there have been more frequent disruptions of the smooth operation of production. all in all, the output gap has been moderately improving to reach around 0 percent recently and has turned positive in the january - march quarter of this year due partly to the front - loading of demand prior to the consumption tax hike ( chart 12 ). with the economy expected to continue growing at a pace above its potential, that is, with growth in demand exceeding growth in supply capacity, the positive output gap is likely to expand gradually. therefore, inflationary pressure from the output gap is likely to steadily increase. rising medium - to long - term inflation expectations let me move on to inflation expectations. medium - to long - term inflation expectations appear to have been rising on the whole ( chart 13 ). this, in turn, has started to affect wage and price setting. for example, as seen in wage negotiations this spring, the rise in inflation is increasingly being taken into account in wage setting between management and labor. moreover, firms β price - setting strategies have been changing. under deflation, many firms pursued low - price strategies by putting priority on cost reductions since there had been a strong preference among consumers for low - priced products. recently, however, an increasing number of consumers have been purchasing goods and services even at somewhat higher prices as long as their quality was in line with their price. in response, some firms have started to raise sales prices while increasing value added in terms of the quality and functionality of the goods and services they provide. in the output prices di of the tankan survey, until recently the share of firms responding that their output prices are β falling β exceeded that responding that their output prices are β rising ; β however, in the june survey the two shares were identical ( chart 14 ). thus, the mechanism in which the rise in observed inflation alters people β s inflation outlook and behavior, which in turn raises observed inflation, continues to operate. this means that people β s inflation expectations will likely follow an uptrend and inflationary pressure from | than to hire new employees. these investments will lead to a more efficient utilization of labor amid a tightening labor market and eventually raise labor productivity. third, more than a year has passed since the correction of the excessive appreciation of the yen and firms have been reviewing the location of their global production bases. in the phase of yen appreciation after the global financial crisis, the share of firms β overseas investment increased, and this trend continued for some time even amid the correction of the excessive appreciation of the yen. this is because firms need a certain period of time between the decision to invest at home or abroad and the actual subsequent implementation. recently, there have finally been signs that firms are planning to increase the share of domestic investment. for example, some firms regard japan as the base for the manufacturing of and research and development for strategically important products, as well as for improving production processes, and have been investing or planning investment in these areas. overseas economies and japan β s exports let me turn to developments in exports. exports have recently more or less leveled off despite the correction of the excessive appreciation of the yen ( chart 9 ). the relatively lackluster performance of exports is essentially due to cyclical factors, including the sluggishness in emerging economies with strong economic ties with japan such as the asean countries. at the same time, however, structural factors may have also played a certain role. such factors include the accelerated relocation of production overseas by japanese firms reflecting the appreciation of the yen and a decline in international competitiveness in sectors such as it - related goods in which japanese firms have traditionally had a competitive advantage. in addition, temporary factors putting downward pressure on exports seem to have had an impact through early spring, although this impact bis central bankers β speeches has been waning. such temporary factors include the effects of the unusually severe winter weather in the united states and the fact that firms placed priority on domestic shipments in response to the front - loading of demand prior to the consumption tax hike. future developments in exports to a great extent will depend on the performance of overseas economies, which are expected to continue to recover moderately, led by advanced economies. this is also confirmed by the world economic outlook by the international monetary fund : global economic growth, which slowed to 3. 2 percent in 2013, is projected to accelerate gradually to 3. 4 percent in 2014 and 4. 0 percent in 2015 ( chart 10 ). japan β s exports are likely to increase moderately due mainly to this recovery in overseas economies. in fact | 1 |
##rutinising seriously the wisdom of increased top - down prefunding requirements for ccp resolution. it is doubtful that such requirements would be effective or proportionate, given the very low probability of ccp resolution and the marked differences between ccps β risk profiles. what is more, increasing funding requirements could discourage the use of ccps and instead push counterparties towards riskier and more opaque bilateral clearing. and while i would not 1 / 4 bis central bankers'speeches exclude cases where additional financial resources should be available for both recovery and resolution, ring - fencing resources for resolution only may distort the incentives of all stakeholders to support a successful recovery. that said, the resolution authority should have flexibility to determine the optimal choice of available tools, as well as the best point in time for entry into resolution, as long as the β no creditor worse off β principle is respected. it is helpful to assess how further guidance could support authorities in assessing potential resolution funding needs for individual ccps, taking into account, for example, the specific risk characteristics of the products they clear, the types of market they serve and the concentration in ccp memberships. i fully support work currently under way in the fsb in this respect. today, i would like to focus on three key areas where more work is needed. first, more international cooperation is needed. authorities responsible for several major cross - border ccps have not yet embarked on resolution planning and no cross - border crisis management arrangements are yet in place. 5 this could be because of barriers to sharing confidential information, including different approaches as to what is considered confidential and what timely. if that is true, then these barriers need to be removed. likewise, authorities may be reticent to engage with others while legislative frameworks are still evolving. assessing the cross - border implications of a ccp resolution takes time and discussions should get under way as soon as possible. cpmi and iosco are conducting some work in this respect. second, authorities need to better understand how a ccp resolution might look like. ccp resolution scenarios cannot be defined in absolute, quantitative terms given the nature of market events causing resolution. there will always be considerable uncertainty around ccp resolution and related funding needs. nevertheless, further steps should be taken to improve the analytical foundation of ccp resolution planning and to better prepare authorities. while the fsb is addressing this issue in its report, i see two steps in particular. first, cpmi and iosco have recently published | class traded in well - functioning, liquid markets. prior to the loan - level initiative, however, there was insufficient transparency in order to assess the risk profile of the abs. third, there was a coordination problem among abs market participants in 2012. although many acknowledged the need for enhanced transparency in the abs market, there was no market infrastructure that could have been supplied by individual actors. a bundling of efforts was needed and a catalyst role of the ecb was called for in an exceptional situation where market participants did not provide the market infrastructure. such a situation is exceptional, but not unprecedented, as we see if for example in the field of benchmarks or market agreements. so these are the three main reasons why the ecb prioritised abs transparency. let me add, however, that the ecb does not believe that abs should warrant special treatment where it is not justified from a theoretical, empirical and practical perspective. the ecb is interested in abs 1 / 3 bis central bankers'speeches insofar as they can help us achieve our policy objectives in compliance with our legal obligations, while ensuring risk equivalence in our collateral framework. having said that, the ecb will also β in the not too distant future β have to review the specific role of abs in the context of the broader issue of qe beyond 2017. as regards its achievements, the loan - level initiative set an example of swift and convincing action to show that european abs were, broadly - speaking, less risky than feared. and this was done in spite of the many technical difficulties of establishing common templates covering eur 1 trillion of assets from many different jurisdictions and asset classes. a set of common templates were established which are easily accessible to market participants. today loan level data is widely used by market participants and we can be confident that the initiative improved the transparency on abs. yet, it is no secret that the revival of the european abs market is, broadly speaking, still anaemic at the moment. market - placed issuance is at historic lows. the investor base has not recovered. the eu abs markets are impacted by bank deleveraging, unfavourable regulatory treatment and relative costs of funding of alternative instruments. admittedly, the sizeable eurosystem covered bond purchase programme and long term loan operations have also represented viable funding alternatives for banks. thus, the extended timeframe in creating legal certainty through forthcoming regulation on securitisation, the β sts regulation β has been regrettable. the ec | 0 |
not been clear. we must appreciate that restrictions on capital flows were enshrined in the bretton woods system. however, after the breakdown of the bretton woods system in the early seventies, a set of strong arguments emerged in favour of free capital flows and was endorsed by imf. in the wake of the far eastern crisis of the late 1990 β s, the debate about its desirability was revived. the debate again came to life after the global financial crisis and there has been a general agreement since that β and i quote the words of harry dexter white, one of the principal architects of the bretton woods, β β the desirability of encouraging the flow of productive capital to areas where it can be most profitably employed needs no emphasis, but there are periods when failure to manage flows have led to serious economic disruption. β keynes was in agreement. 6. the reason i have dealt with the propositions relating to trade and capital flows is to bring out the point that there is no universally acceptable policy prescription relating to either. both theory and empirics accommodate the possibility of specific sets of policy appropriate to a country β s idiosyncratic requirements and it is in this backdrop that we shall consider our policies in respect of cross - border transactions, past and present. 7. there are several dimensions of the regime for cross border transactions : but what we shall be concerned with in this discussion is that relating to exchange control or rather foreign exchange management. the foreign exchange management policy ultimately hinges on two factors : the quantity of foreign exchange available and the exchange rate. this has guided the evolution of the exchange control regime in india, and indeed elsewhere in the world. 8. the war - time exchange control through administrative fiat was converted to a statutory regime in 1947 through the fera, 1947. the acute shortage of foreign exchange in the 1960 β s and various other factors such as food shortage, wars, etc. led to a more stringent regime through the fera, 1973. foreign exchange per se was considered important and the policy regime comprised rules to grudgingly allocate foreign exchange to various demands. import control and promotion of import substitution provided complimentary policy instruments. beginning midseventies ( soon after the enactment of fera, 1973 but not necessarily because of it ), the situation relating to the external sector started improving primarily because of increasing remittances from indian diaspora and impact of green revolution. thus, through the 1980 β s, there was | action. 19. now i come to the foreign exchange markets. i am aware that treasury professionals dealing with the forex market constitute a large part of this gathering and this is a theme with which you are closely involved. as i mentioned earlier, an orderly forex market is an important objective and also a precondition driving the evolution of the exchange management regime. we have come a long way from the days of β rbi β s middle rate β. today, the indian forex market is pretty well developed in terms of daily turnover as well as the range of products available. yet, it continues to be a regulated market and let us now turn to the motivation for and the future of the regulatory regime. 20. the forex market determines the exchange rate, an important macro - variable with implications for balance of payments, monetary policy, capital flows, and several other derived issues. now, it is well known that in the long run the exchange rate depends on economic fundamentals like inflation, interest rates, balance of payment position, etc., but in the short run there can be significant deviations in the exchange rate from the value dictated by the fundamentals. though the exchange rate can be measured in several ways such as reer, neer with different combinations of currencies and different weighing schemes, my discussion will be centred around the headline inr - usd rate, which drives sentiments and decisions. the fluctuations in the exchange rate are caused by sentiments and perceptions of a host of events, some domestic and some global. as you dealers say, β buy the rumour, sell the news β. we have had many such episodes. during the last one year or so the rupee saw levels of 64 to a dollar in march 2018, depreciated to near - 75 levels in october 2018 and again appreciated to 68 + levels by march, 2019 and has been trading almost flat since then. during this one year, there has not been any change in the fundamentals of the indian economy, nor any dramatic change in the global conditions either. the cause mostly has been surge or ebb in capital flows, driven by perceptions and risk aversion or appetite. however, understanding these gyrations in the exchange rate does not provide any solace to the policy maker : there is a response necessary lest the expectation turn to panic and bring a great deal of disorderliness in the market in its wake. the first line of defence is market interventions. but then the impossible trinity comes | 1 |
a lot, but that does not tell us how much, bis central bankers β speeches and in the limit there are utterly catastrophic risks for which it is not sensible to hold capital as the answer. third, when we look at the low market value of some banks relative to their book value, how much of this should we attribute to lending margins being considerably lower than they were expected to be? net interest margins are squeezed in the current environment. this is important because, to the extent this argument holds true, the action taken to deal with it, if any, could be different. another relevant consideration is to what extent it reflects different market valuations of banks β tangible assets or of their intangible assets, such as goodwill, that are to some extent already and will to a greater extent under basel iii be accorded no value for regulatory capital purposes. fourth, to what extent are low market values caused by uncertainty among investors about the future regulatory and operating environment for banks? this could be caused by a number of factors, including ringfencing and capital policy as supervisors adjust risk weights. fifth, by how much further should we adjust risk weights to reflect past inadequacies. and, finally, how rapidly should we make any adjustments, and how should such adjustments fit with both the basel iii implementation timetable and the changes that firms themselves are making? in conclusion, and pulling all of this together, there is a lot of talk about the need for simplicity. i agree. the proliferation of rules is unhelpful and particularly when it extends into making rules on how to supervise, a feature that we see in the eu processes. to return to kahneman β s point, solid intuition is a part of supervision. but simplicity is not about one - club golf, and it is not about abandoning risk - based regulation. a simple timeline would suggest that basel i did more to cause the crisis than basel ii. but the latter would surely have made it even worse had it be in place for longer. looking forwards, we do need strong judgemental supervision, and we do need the powers to separate trading activities into separate legal entities as the icb has proposed. as paul volcker recently pointed out, customer banking involves a fiduciary duty, whereas trading with counterparties does not. my only caveat here, and it is a very important one, is that the fiduciary duty of customer banking was sadly lost in the wave of mis - selling. judgemental supervision has | is largely due to falling oil prices as well as our projections that cumulative exchange rate effects will continue to taper off and food price inflation will recede to past years β averages. the course of inflation in 2015 will be determined by base effects. we expect base effects to pull annual inflation down until august and push it up the rest of the year. thus, we project that annual inflation will remain on a downward track until the third quarter and increase slightly to 5. 5 percent due to base effects in the fourth quarter ( chart 18 ). in addition to these forecasts, we discuss alternative scenarios on the inflation outlook and the global economy in the risks section of the inflation report. you can examine the report for details. bis central bankers β speeches while concluding my remarks, i would like to thank all my colleagues who contributed to the report, primarily those at the research and monetary policy department as well as the members of the monetary policy committee, and thank every one of you for your participation. bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches | 0 |
fdi inflows went to developing and transition economies. more specifically, fdi inflows to non - japan asia increased from less than 7 % of world inflows in the 1970s to around 19 % in the 1990s. in the 1970s, fdi inflows to china were a trickle that barely registered. but by the 1990s, these flows had grown significantly, representing ( on average ) 7. 7 % of all global fdi flows. fdi outflows from non - japan asia also rose substantially over the same period : on average they represented 9 % of world outflows in the 1990s, compared with less than 0. 5 % in the 1970s. overall, we can certainly conclude that the euro area and china have become key economic partners. such interdependence is likely to continue to strengthen to the mutual benefit of both regions. the increase in trade integration and capital mobility with emerging asia β and china in particular β constitutes an opportunity, but also a challenge, for the euro area. beyond the short term, the international competitive pressures exerted on the euro area reflect structural factors, and notably strong productivity growth, which are most likely to be favourable to the european economy over the long term. a deepening in the integration processes of both manufacturing and services industries offers the prospects of significant gains at the economy - wide level. europe should indeed benefit in terms of lower prices for firms and consumers, enhanced trading volumes and potentially higher levels of productivity and growth. that said, the necessary adjustments in the short term can be controversial : you are probably aware of the debates in europe on the dislocation of manufacturing and pressures on labour markets. and i will frankly admit that sino - european economic relations, too, have occasionally experienced some tensions in this respect. last year, for instance, the expiration of textile quotas under the multifibre agreement raised concerns that rapidly growing imports of chinese textiles would put a severe strain on european textile manufacturers. however, china and the european union reached an agreement last september, regarded by both partners as a β win - win β outcome, which that, with mutual trust and understanding, tensions can be overcome. we, at the ecb, strongly believe that avoiding protectionism is essential for global prosperity, a sentiment which we share with many other central banks around the world. in any event, the implications of global trade integration for european labour markets and competitiveness are not necessarily exclusively related to china and emerging asia, but also to | be sure about the precise timing or the size of the adjustment. as i previously emphasised, external imbalances could persist for a fairly long period, and the prospect of a rapid adjustment is not imminent. the main concern is that a purely market - determined adjustment might turn out to be abrupt, with a potentially adverse impact on global economic growth and financial stability. what can be done, then, to avoid this? global challenges require global answers. each of us must play his part to ensure an orderly adjustment. industrial countries, in particular, can make a key contribution. in the united states, this contribution can come from higher national savings, including from further fiscal consolidation. moreover, the low level of private savings in the united states is a concern and needs to be addressed. as regards europe, our contribution should come from further structural reforms aimed at increasing productivity growth and market efficiency through more competition and innovation. such reforms will help stimulate economic activity and raise growth potential. furthermore, such reforms, by improving the functioning of markets, can be expected also to increase the flexibility of the european economies through greater reliance on market mechanisms, and thus enhance our economies β resilience to shocks. this would also prove beneficial when current account imbalances begin to unwind. in this joint effort to avoid a disorderly adjustment of existing current account imbalances, what role does emerging asia play? the reduction of global imbalances in an orderly manner is a key international policy priority. emerging asian countries β and especially china β have become, over the past decade, major economic players at the global level. this greater weight and influence in the world economy also entail a greater responsibility to assess the global implications of national economic policies. as i have already stressed, this is what the euro area and the united states also need to do so as to facilitate a smooth adjustment of global imbalances. the development of the chinese economy and its growing trade surplus have been spectacular. they reflect the international competitiveness and dynamism of your economy and the confidence which international investors have in its future. they have been accompanied by the accumulation of foreign exchange reserves at a pace and magnitude almost unprecedented in history. but, as walter benjamin, the german philosopher, once said about happiness, could this be β too much of a good thing β? this depends on the underlying causes of reserve accumulation and on the potential risks to the sustainability of the performance of the domestic and world economies. we in europe are confident that the chinese | 1 |
lucas papademos : ecb financial stability review june 2006 opening remarks by mr lucas papademos, vice president of the european central bank, at the press briefing on the occasion of the publication of the june 2006 ecb financial stability review, frankfurt am main, 1 june 2006. the slides and charts for this speech can be found on the ecb website at www. ecb. int. * * * ladies and gentlemen, 1. introduction welcome to this press briefing on the occasion of the presentation of the june 2006 edition of the ecb β s financial stability review. as usual, the financial stability assessment contained in the review reflects the input of a significant number of experts, and it builds on both inter - departmental work within the ecb and very close collaboration with the escb banking supervision committee. the report that has been made available to you follows the same overall structure as the previous reviews which the ecb has been publishing semi - annually since december 2004. however, the scope of the analysis has been broadened to include dedicated sections on the euro area commercial property markets, credit risk transfer market issues and hedge funds. specific themes of particular interest have been addressed in a total of 17 boxes. there are also three special feature articles, notably a discussion of macro - level stress testing practices across eu countries, an assessment of banking system risk using extreme value analysis, and an investigation of the driving forces behind eu banks β stock returns. i should note that the review uses data that was available up to 5 may 2006. in my presentation ( some of the slides ), i will refer to developments since this cut - off date. in presenting the main findings of the analysis, i will broadly follow the structure of the review ( as outlined on slide 2 ). 2. overview of the main risks and vulnerabilities i would like to begin with an overview of some pertinent developments in the euro area financial system and of the main sources of risk and vulnerabilities for euro area financial stability, in comparison to the assessment in the december 2005 review. overall, the developments since last december lend support to the view that the euro area financial system is robust and well - capable of withstanding shocks. first, the pace of global economic activity has strengthened and it has become more evenly distributed. second, the balance sheets of euro area banks and insurance companies have continued to strengthen. at the same time, these positive developments are clouded by the fact that the risks and vulnerabilities we | vitor constancio : interview with spiegel online interview with mr vitor constancio, vice - president of the european central bank, and spiegel online, conducted by mr stefan kaiser and mr henning jauernig on 22 may 2018 and published on 29 may 2018. * * * mr constancio, you β ve worked at the european central bank for 18 years. was there ever a moment when you thought that maybe the euro wasn β t such a good idea after all? no. there were times at the height of the crisis when there were existential doubts about how things would turn out. but i was never in any doubt that monetary union was the right thing for european countries. but there were some very severe crises. in 2012, for example, when the risk premia for spanish and italian government bonds rose dramatically and there was a risk that the euro area might break apart. or in 2015, when greece was close to bankruptcy. didn β t that demonstrate that the euro area doesn β t work well? the problems were a consequence of the way the euro area was set up to start with, which was very minimalistic. at the time, it was felt that all we needed was a single currency, a central bank and a fiscal brake. but events have shown that that wasn β t enough. for example, a crisis mechanism was not envisaged and there was no banking supervision at the european level. a number of important decisions have been taken in the meantime, for instance on the banking union and the european stability mechanism. the euro area has started to fix itself β and we β re still in the middle of that process. have the countries in the south of the euro area done enough on their side to fix monetary union? yes. the countries hardest hit by the crisis had high budget deficits and high current account deficits at the start of the crisis. so they were importing a lot more than they were exporting. but a great deal has been done since then. in the meantime, all the countries concerned have a primary fiscal surplus, which means that they are reducing their debt bit by bit. and all these countries now have a current account surplus ; they are exporting more than they import. that is quite a turnaround. these achievements are now hanging in the balance because one country may no longer want to do its part. even if their attempt to form a government has failed for now, italy β s dominant parties are euros | 0.5 |
november 24, 2020 bank of japan policy measures to date and in the future, in response to the spread of covid - 19 - - lessons from the global financial crisis - opening remarks at the virtual conference co - hosted by the international monetary fund and the university of tokyo kuroda haruhiko governor of the bank of japan introduction it is my great honor to speak today at this virtual conference co - hosted by the international monetary fund ( imf ) and the university of tokyo. it has been a decade since the global financial crisis - - or gfc - - and two decades since japan's financial crisis and the asian financial crisis. today, we are facing a new crisis, triggered by the spread of covid - 19. this conference is intended to learn from our past experience and to gain insight into how best to respond to these extremely challenging circumstances. in this sense, the conference could hardly be more timely. i. policy responses to date regarding covid - 19 the spread of covid - 19 has had an even greater impact on the global economy than the gfc. the gdp growth rate for the april - june quarter of 2020 declined substantially in many countries. moreover, due to concerns over the deterioration in the real economy, global financial markets temporarily became volatile in march : there was a sudden drop in the prices of stocks and credit assets ; the cp and corporate bond markets became frozen ; and there were substantial outflows of capital from emerging economies. in response to these developments, governments, central banks, and international organizations have been swift to implement policy response measures, both fiscal and monetary, on an unprecedented scale. these responses have helped economic entities with their financing, markets to regain stability earlier than in the case of the gfc, and the global economy to start picking up. i would point to three particularly important elements in the policy responses taken so far to address the impact of covid - 19. the first is that swift and abundant liquidity provision by central banks and international organizations prevented the materialization of a negative feedback loop between economic and financial activities. one of the lessons learned from the gfc is that if market confidence is undermined amid heightening uncertainty, there is the possibility of the real economy and finance falling into an adverse spiral. there would be a significant credit contraction as financial institutions'funding becomes difficult. mindful of these risks, central banks have played a considerable role in recovering market confidence, acting as the global lender of last resort, with ample liquid | and an increase in production has not yet restored a clear increasing trend, private consumption has remained firm on the back of favorable labor and income conditions. exports have been showing signs of recovering, albeit with fluctuations. infrastructure investment has recently been increasing partly due to the policy authorities β prop - up measures, and a slowdown in an increasing trend in fixed asset investment as a whole has come to a halt. business sentiment, particularly in the manufacturing sector, has been improving. from a longer - term perspective, the chinese economy is in a transition phase from high growth to stable growth, and there remains uncertainty whether a smooth transition could be made. having said that, as for the immediate future, in addition to policy effects both from the fiscal and monetary fronts, inventory adjustment is likely to progress, supported by firm domestic demand, and exports are also expected to pick up, and thus the recovery trend in the chinese economy will gradually become pronounced. developments in the nies and asean economies at present, partly due to stagnant exports to europe and other countries, the pick - up in the nies and the asean economies has moderated. however, as for the outlook, if the global economy increases its brightness led by the united states and china, exports will gradually pick up and the pace of recovery will likely accelerate. developments in global financial markets meanwhile, the global financial markets have considerably restored stability. global investors have gradually become ready to take risks. behind that are ( a ) in the united states, amid a continuing moderate recovery, the β fiscal cliff β has been barely averted, ( b ) in europe, progress has been seen in policy responses with regard to the debt problem, and ( c ) in the bis central bankers β speeches chinese economy, a silver lining has gradually started to be seen. against such a backdrop, stock prices in the united states and europe bottomed out last summer and have been rising. as investors have turned ready to take risks, yields on southern european countries β government bonds have declined substantially. in the foreign exchange market, the euro has been bought back and the yen has been depreciating. outlook for overseas economies to summarize the above, overseas economies will gradually emerge from the deceleration phase and turn to a moderate recovery, with the united stated and china being driving forces. of course, we cannot keep our eyes off the developments in the european debt problem. whether the recovery in the u. s. economy will continue while overcoming the fiscal problem requires | 0.5 |
about a possible decline in stock prices triggers the aforementioned fallacy of composition. against such a backdrop, the bank has decided to begin exploring specifically the provision of subordinated loans to the banks that are subject to international capital standards. this measure aims at ensuring the smooth functioning of financial intermediation and the stability of japan β s financial system, by enabling japan β s banks to maintain sufficient capital bases even in severe financial and economic environments. by the measure taken by the bank, financial institutions are provided with three channels to raise capital ; ( 1 ) capital raising by financial institutions through markets, ( 2 ) capital raising based on the act on special measures for strengthening financial functions, ( 3 ) borrowing subordinated loans from the bank. subordinated loans by the bank will work effectively in conjunction with the other two measures to raise capital. in addition, providing such a safetynet measure would enhance the robustness of japan β s financial system and the functioning of financial intermediation even under the stressed conditions. for a central bank, this kind of direct provision of quasi - capital funds is an extremely extraordinary measure. however, considering the future stress scenario of the financial system, the bank has judged that, from the standpoint of a central bank, it is necessary to do its best to maintain the smooth functioning of financial intermediation and ensure the stability of the financial system even by conducting this extraordinary measure. the bank expects financial institutions to grasp the thinking behind the measure and to strive to maintain the smooth functioning of financial intermediation with further efforts of boosting capital bases. needless to say, risk management is extremely important for financial institutions, which cannot be emphasized too much. however, under the current circumstances, as i mentioned above, the surfacing of the risk stemming from the fallacy of composition should be avoided. to that end, it is important for the management of financial institutions, while conducting sound business operations, to boost capital bases with envisioning the consequences for japan's economy. the bank also expects financial institutions to pay due concern for the smooth communication with their client companies to convey business policies and lending stances. it is the basic premise that the stability of the financial system should be ensured in order to return to a sustainable economic growth path under price stability. from the standpoint of a central bank, the bank is determined to make its best effort to secure the stability of the financial system. we would appreciate your continued support and cooperation. thank you. | toshihiko fukui : recent developments in economic activity in japan summary of a speech by mr toshihiko fukui, governor of the bank of japan, at a meeting with business leaders, osaka, 27 november 2006. * * * today i will explain the bank of japan's view regarding recent developments in economic activity and prices and the basic thinking behind its conduct of monetary policy. in addition, i will touch upon the issues facing japan's financial system. introduction today i will explain the bank of japan's view regarding recent developments in economic activity and prices and the basic thinking behind its conduct of monetary policy. in addition, i will touch upon the issues facing japan's financial system. i. the current situation and the outlook for economic activity and prices japan's economy has been expanding moderately. the current phase of economic recovery began in january 2002. by the end of november, the economy will have experienced a long economic expansion that has lasted for four years and ten months. this sustained period of economic expansion is likely to continue. recent economic indicators have shown mixed developments. for example, while the results of the family income and expenditure survey and machinery orders were weak, the preliminary estimate of real gdp growth turned out to exceed market expectations, recording 2. 0 percent in the julyseptember quarter on an annualized quarter - on - quarter basis. these mixed results seem to have introduced some volatility into market participants'view of the current economic situation. the important point at this juncture is to examine whether these indicators as a whole suggest any changes in the fundamental mechanisms underlying economic activity and prices. in the latest outlook for economic activity and prices ( the outlook report ), which was released at the end of october, the bank made public its projection for the next two years or so. the bank projected that the economy was likely to experience a sustained period of expansion with domestic and external demand increasing and the positive influence of the strength in the corporate sector feeding through into the household sector. although economic indicators have shown mixed developments since the bank released its projection, the bank considers that they do not suggest a change in the mechanisms underlying the economy. the bank will continue to confirm this by carefully assessing various relevant economic indicators as well as microeconomic information. let me touch upon a few important factors in this regard. the first factor is developments in overseas economies, especially the u. s. economy. the pace of u. s. economic growth has been decelerating | 0.5 |
flexible procedures that do not penalize countries that respect the rules of the union. the progress of troubled countries in financial restructuring and structural reform must be accompanied by the undertaking of the european authorities to orient the markets β assessments. bis central bankers β speeches at the same time, it is necessary to resist the re - nationalization of financial systems. measures taken from a purely national standpoint could severely hamper the working of the euro area. we need to speed up the transition to a uniform system of financial sector rules and oversight. this should be accompanied by common guarantee and insurance mechanisms that can reassure savers and investors and prevent flights of capital. rapid progress in setting up a european fund for the resolution of banking crises would help to dispel uncertainty. 8. second, consolidation measures were implemented in a number of euro - area countries to restore the markets β confidence in fiscal sustainability. to varying degree these interventions were accompanied by structural reforms to increase potential growth and avert a downward spiral of deeper recession and deteriorating public finances. in the case of italy, action on the public budget has been rapid and decisive. structural reform has met with more resistance, but some important results have nevertheless been achieved. current forecasts put italy β s budget deficit for 2012 below the 3 percent ceiling ; next year the budget should be near structural balance and the public debt - to - gdp ratio should begin to fall, thanks in part to the completion of the pension reform. there is a large and growing primary surplus ; current expenditure net of interest payments has been falling in real terms for two years now. however, the recent fiscal consolidation consisted chiefly of tax increases. this burden can be sustained only temporarily. a stronger and more incisive fight against tax evasion and the implementation of spending cuts are the indispensable premises for the necessary reduction of tax rates. if expenditure savings are targeted to removing inefficiencies and if they are equitable, they will not hamper growth but should stimulate it. on the structural front, in italy more has been done since the summer of 2011 than during the previous decade. work has begun on a vast scale with reforms to remedy the structural deficiencies that are holding the italian economy back. measures have been adopted in such crucial areas as competition and regulation, business environment, civil justice and infrastructure development. the reform of labour market regulation and the social safety net now in course of approval by parliament aims at attenuating labour market dualism by altering the relative economic advantage of temporary | credit information system for enterprises and individuals. credit records were created for 13 million enterprises and nearly 600 million natural persons, including information of their borrowing activities and law - compliance in environmental protection etc, facilitating their economic and financial activities and promoting economic and social harmony. banking financial institutions have included inquiry into the credit information system as an indispensable step in pre - lending examination. some regions mandate that personal credit reports should be referred to when reviewing candidacy of deputies of the national people β s congress and delegates of china people β s political and consultative conference and admitting public servants. authorities in charge of human resources, social security, environment protection and quality inspection and quarantine also access the credit information system for information that will help them with industrial credit building and law enforcement. the credit information system, while exposing and preventing financial risks, promoting the deepening of china β s financial sector and improving the international competitiveness of china β s financial sector, contributes to the improvement of the social credit environment and the healthy development of economy. today the national credit information education month is kicked off in beijing. we hope the event is the just the beginning of credit knowledge dissemination and the improvement of credit awareness. the pbc will continue to support and actively engage itself in the building of a credit system in beijing so as to push forward the reform and development of beijing β s financial sector. this event takes the theme of β keep good credit records and enjoy a happy life β. if you want to know more about credit information, how to build good credit records and etc., you are welcome to join our activities in the education month. i wish the education month a complete success. | 0 |
large challenges i see. first, we have to balance the use of bis central bankers β speeches sensible judgement against the risk of creating undue uncertainty in our behaviour which damages your ability to do business. this is not easy i accept. it requires us almost constantly to check and test our judgements against a framework of reasonable predictability. also, it requires a greater degree of transparency from us to you, and i think from both of us to the public and investors. this is important to ensure that we can both be held to account for applying judgement in a way that is consistent with the pursuit of our objectives. i am conscious that achieving accountability in insurance supervision in the current environment is challenging because all the focus is on the banks. no visits to the treasury select committee may seem like a blessing, but we have to ensure that the accountability still holds water. on that point, frankly, i think there should have already been more accountability for how the processes of the european union could have created such a vast cost for an industry for the implementation of a directive which has not even yet been finally agreed, and for which i cannot give you a date. largely unseen in the banking crisis has been the shocking cost of solvency ii. the second challenge with the use of judgement in supervision is that elsewhere we have seen a preference to have many rules, but often ones which can then be gamed. paul volcker put it nicely in his evidence to the parliamentary banking commission. he said that people ask for clear and simple rules so that they can tell when they are in abeyance, but they typically fail to add that they want to know how to get round the rule too, but that is part of the deal. at the pra we will apply judgement rigorously ; sometimes you will agree with us, and sometimes you won β t. we will be clear and transparent in our judgements, and we will be accountable. finally on the issue of the pra β s approach to supervision, i want to assure you that we will take supervision of insurers just as seriously as we do the other lot. it is not in our nature to do otherwise. and, we are putting more emphasis on senior level contact in the new approach. we want to deliver key messages very clearly to senior management and boards, and we want to know how your governance works in practice. i will give one example of this approach in recent months, returning to solvency ii. it was clear to me by | financial stability threat, which at the bank of england we dealt with via a market intervention. it has, of course, caused us to look at the regulatory standards in this area, and recommend substantially greater resilience, which is now in place. the point i want to draw out today is that responsibility for oversight of these funds rested both in the uk where they operated and in some eu countries, including ireland, where they are typically domiciled. i want to thank the central bank of ireland for the excellent assistance they have provided in tackling these issues. our strong working relationship has paid off. the work we are doing is no doubt important. three current priorities for both of us illustrate this well. first, we are both putting in place stronger resilience standards for ldi funds. second, we agree on, and both emphasise, the pressing need for action to implement the financial stability board's recommendations for enhancing the resilience of money market funds. and third, we are both committed to the review and, i believe, upgrade of the standards for managing risks in open - ended funds, where sharon donnery is coleading the global work. i take three very important lessons from all of this. first, strong co - operation and coordination is a much better approach than fragmentation. there is no reason to be restrictive when a much better alternative exists. second, i sometimes hear an argument made that the fallacy of this first conclusion is that no - one can credibly commit with certainty to this standard of co - operation at all times in the future. i reject this proposition. let's go back to the global public good of financial stability for a moment. the stakes are simply too high to throw away financial stability, and the global institutional structures now create the necessary commitment. 3 / 4 bis - central bankers'speeches the third argument is part of the co - operation and commitment point, but sufficiently important to draw out separately. i am going to be direct here β i usually am. it is said that there is an over - dependence on the uk as an international financial centre. by the way, dublin is a thriving international centre too, and that's good to see. the overdependence argument leads, wrongly in my view, to a belief that the dependency needs to be reduced. as i have already said, the responsibilities that go with a global public good argument point firmly against the logic of this point. but, as the ld | 0.5 |
ready. an important issue for the financial sector is the state of preparedness of providers of infrastructure services ( e. g. electricity, telecommunications ). these, too, are reporting that they are year 2000 ready. with all the effort, time, and resources devoted to the task, it is not surprising that a number of knowledgeable year 2000 commentators have singled out the canadian financial sector, especially the banking sector, as one of the world leaders in year 2000 preparedness. that is a strong vote of confidence, which should help reassure canadians. still, we cannot afford to be complacent and relax our efforts. computer systems will continue to be monitored and retested right up to the end of the year. there is also a need for ongoing clear, responsible communication to keep the public well - informed and confident in a smooth year 2000 transition. at the same time, increasing attention is rightly being paid to contingency plans. in this connection, the bank of canada has recently announced a number of arrangements to provide an additional measure of confidence to financial institutions and the general public. we are putting in place a special line of credit to assure these institutions and the users of financial services that if there is any unusual demand for liquidity around the turn of the year, it will be met. and the bank is prepared to accept a wider - than - normal range of collateral to support any liquidity loans it provides. we have also made arrangements to counter any unusual pressures on money market interest rates during this period. all this should be enough to reassure the vast majority of canadians that the safest place to keep their money is with their financial institutions. in fact, they should prepare for the century - changeover weekend much as they would for any other long weekend. nevertheless, there will be some who still feel that they need to take further precautions. those who prefer a little extra reassurance in the form of additional cash can rest easy β it will be readily available. the bank has increased considerably its inventory of bank notes. and it has been working with financial institutions to ensure that the system can meet an increase in demand for cash across canada. but let me reiterate that there is no reason for canadians to feel that cash is the only way they can pay for goods and services over the new year β s weekend. overall, the bank of canada and other financial sector participants have every confidence that canadians can plan on it being β business as usual β in the financial sector heading | ##lfsson, d. li and l. r. raymond, β generative ai at work. β national bureau of economic research working paper no. 31161 ( april 2023 ). 4 s. peng, e. kalliamvakou, p. cihon and m. demirer, β the impact of ai on developer productivity : evidence from github copilot, β arxiv : 2302. 06590 ( february 2023 ). boost total factor productivity ( tfp ) by 9 % over the next decade. 5 a similar sustained improvement in tfp in canada would raise the average income per - person by roughly $ 4, 000 a year. this productivity boost is not just from automating tasks. as workers in lower productivity jobs are replaced by ai, they are freed up to fill other, more productive jobs in the economy. and new products and services emerge. these latter two effects provide most of the positive impact on productivity. 6 however, more pessimistic estimates suggest that ai might have only a modest impact on productivity. 7 these assessments take the view that fewer tasks can be effectively automated. ai could also create negative outcomes, such as amplifying internet addiction and enabling malicious actors. these adverse effects could substantially decrease the net positive impact of ai. as we look at the effects of ai on the broader economy, we also need to ask if this technology will be transformative enough to significantly boost productivity growth. or will ai simply be the latest innovation in a chain of innovations β like the invention of the sewing machine or the evolution of telecommunications β to keep productivity rising at its historical pace. this matters a lot because productivity growth plays a key role in determining how fast the economy can expand without sparking inflation. so what is actually happening? the infrastructure needed to make ai broadly available is being built quickly. ai platforms are sprouting up, and it is getting easier for businesses β large and small β to access the technology. but we are still looking for the new products and services β and the new business models β that will transform efficiency and productivity. prices and inflation ai adoption β and its full effect on productivity β will play out over many years. in the long run, we can expect ai to boost productivity. higher productivity allows for higher wages and more spending without pushing up inflation. but what about in the short run? already, strong investment in ai technologies is boosting demand in the economy. the run - up | 0.5 |
to many as the dual mandate. it directs the federal reserve β to promote effectively the goals of maximum employment, stable prices, and moderate longterm interest rates. β 3 while there are actually three discrete objectives in the dual mandate, most economists would say that moderate long - term interest rates are a tool to produce maximum employment and price stability. such economic reasoning also involves some clever and simple arithmetic β it reduces a tripartite mandate to a dual mandate. with respect to financial stability, leading economic thinkers would now say, and the financial crisis seems to offer us the perfect illustration, that price stability and maximum employment are possible only in a context of financial stability. this is an implicit part of what chairman bernanke was communicating at the national press club β until financial stability could be restored, the ability to achieve the goals of maximum employment and price stability through the monetary transmission mechanism were beyond the federal reserve β s reach. accordingly, the federal reserve used its monetary policy tools to lower the targeted fed funds rate to zero. in addition, the federal reserve used its lender of last resort authorities in new and creative ways to restore financial stability to the u. s. economy. when the crisis in the united states abated in late 2009, following the successful introduction of stress testing, the federal reserve began to speak about terminating some of its emergency facilities. these facilities had been introduced during the β whatever it takes β era, and when the federal reserve was executing the delicate task of winding these facilities down, the federal open market committee ( fomc ) made clear that financial stability remained a key objective. for example, the committee said in its release of december 16, 2009 that β [ t ] he federal reserve is prepared to modify these [ wind down ] plans if necessary to support financial stability and economic growth. β 4 the legal basis for deriving implied powers from the penumbra of other express powers is best seen in justice douglas classic opinion in griswold v. connecticut. 5 in the griswold case, the united states supreme court struck down a connecticut law prohibiting the use of contraception. justice douglas β opinion struck that law down as inconsistent with a constitutional right of privacy, notwithstanding that the u. s. constitution nowhere mentions any such right, let alone even using the word β privacy β. justice douglas noted that individual privacy concerns were protected by a series of express constitutional provisions, like the third amendment β s prohibition on quartering soldiers during peacetime, the fourth | the outlook for the non - commodity exporters remains bright, with growth rates of more than 6 percent in countries such as cote d β ivoire, ethiopia, kenya, and senegal. the other development that altered many people β s view of africa, were the political and security - related improvements. while africa is, unfortunately, still the continent where most conflicts take place, the absolute number of conflicts in africa has declined over the past 25 years. many of the wars of the 1990s have ended, and despite some ongoing and intensifying conflicts in north africa and the middle east, overall africa nowadays seems to be more peaceful than in the early 1990s. moreover, since the start of this millennium democratic governance has improved and institutional reforms have taken place in many countries, be it from a low level. at the same time, business environments have taken a turn for the better. while the starting point was perhaps less than auspicious, it is very encouraging to see that african countries as benin and senegal nowadays often appear among the global top 10 reformers in the world bank β s β ease of doing business β indicators. due to these promising developments, africa has become a region that boasts strong business opportunities, both for african entrepreneurs and for foreign ones. also dutch firms are increasingly aware of these opportunities. for instance, nowadays more than 2, 000 dutch firms are doing business in africa, ranging from smaller β mainly trade - oriented β companies to major dutch companies such as heineken, unilever and philips. africa is also increasingly important for dutch exports and imports. among the 20 most important emerging countries to which dutch exports are destined, 9 are situated in africa, with togo, ghana and senegal even in the top 5. and, according to statistics netherlands, about 70 percent of our imported roses come from africa, where, by the way, also dutch rose growers are active. certainly, africa works for dutch entrepreneurs! the second reason why i am delighted to be here is the theme of the conference : innovation in finance. in my view, this is a very well - chosen topic. new technologies are changing our lives and our industries. also finance is undergoing a rapid transformation, most visibly in the field of payment transfers, but also in lending, insurance and, importantly, remittances. the advent of smart phones, for instance, has led to the development of new mobile wallets, which makes it easy to β send money home β : goodbye long unsafe travels, hello smart phones | 0 |
2007, intensified considerably last fall. failures and near - failures of some major financial institutions greatly undermined confidence in financial institutions and severely disrupted financial markets, leading to a further sharp tightening of credit conditions. risk spreads, which were already elevated, escalated further and equity prices fell. in addition, the financial turmoil contributed to a sharp decline in consumer and business confidence. the result was a major pullback in spending as consumers responded to decreases in wealth and the deterioration in their future employment prospects and as businesses, worried about the demand for their products, cut back on capital spending and sharply reduced production to avoid an accumulation of unsold stocks. a gradual decline in economic activity through most of 2008 took a decided turn for the worse late in the year. the policy response because the threat to economic stability in the current episode has been so closely related to problems in the financial sector, most of the policy responses have been focused on financial institutions and markets and the flow of credit to households and businesses. many of these policies have been aimed at countering the tightening of financial conditions that occurred as lenders became more risk averse and took steps to conserve capital and liquidity. to that end, the federal reserve has lowered interest rates, made backup sources of liquidity available to private lenders, and used its own lending capacity to try to revive a variety of financial markets. in addition, the federal reserve, the treasury, and the federal deposit insurance corporation ( fdic ) have taken a number of steps to stabilize and repair financial institutions in order to limit the tendency of those institutions to pull back from lending and thereby intensify the decline in spending. other government policies operate at the intersection of the financial and real sectors. foreclosure mitigation, for example, not only serves to keep people in their homes, but also should reduce downward pressures on house prices and hold down loan losses at lenders. finally, fiscal stimulus works directly on demand, in effect bypassing the financial sector in its first - round effects ; by strengthening aggregate demand, it too should help alleviate strains on lenders and contribute to stemming the vicious cycle. although i'll be discussing each of these policy initiatives separately, it is important to keep their interactions in mind. they all attempt to break into that adverse feedback loop we've been talking about at different points in the chain of cause and effect and then cause again. the expectation of recovery rests importantly on the natural recuperative powers of the economy, but it also | have designed many of our facilities to discourage use when markets are functioning more normally, and securities that have been accumulated can be sold when such sales are judged to be appropriate. however, given very large purchases of long - term assets and substantial longterm lending for the talf and other purposes, the federal reserve would benefit from new tools that would allow it to drain reserves from the banking system. we are working with the treasury and the congress to obtain such tools. financial repair in addition to the federal reserve's monetary policy actions, which broadly support the financial sector and the economy, the government β including the treasury, the federal reserve, and the fdic β has been working to provide more direct support to financial firms. 4 in part, this effort has involved targeted actions to prevent the failure or substantial weakening of specific systemically important institutions, including bear stearns, fannie mae, freddie mac, aig ( american international group, inc. ), citigroup, and bank of america. these actions were not taken to protect the affected firms'managers or shareholders from the costs of past mistakes. indeed, managers have been replaced in some cases, and shareholders of the weakest firms have experienced massive losses. instead, our actions have been driven by concerns that the disorderly failure of a large, complex, interconnected firm would impose significant losses on creditors, including other financial firms, dislocate a range of financial markets, and impede the flow of credit to households and businesses. losses sustained by other financial firms could erode their financial strength, limiting their ability to play their intermediation role, or even cause them to fail, reinforcing financial pressures. moreover, the disorderly failure of a large, complex interconnected firm could undermine confidence in the u. s. financial sector more broadly, potentially triggering a widespread withdrawal of funding by investors and an additional tightening of credit conditions, which would, in turn, cause a further reduction in economic activity. besides this targeted support, the government has undertaken programs to inject capital more broadly into the banking system. since last fall, nearly $ 200 billion has been distributed under a treasury program that provides government capital investments to banks in good condition. more recently, the treasury, in conjunction with the bank supervisory agencies, announced a new program to ensure that u. s. banking institutions are appropriately capitalized. under this program, the capital needs of the major u. s. banking institutions are being evaluated relative to the losses that | 1 |
finance facilitates the diversification of savings and is a primary source of funding for innovative projects, but it can make the financial system more complex and risky. banca d β italia carries out in - depth supervision of about 650 non - bank intermediaries with diverse activities and risks. 24 however, strong supervision requires that national efforts be complemented by effective international cooperation. interaction between different national regulatory and supervisory frameworks is necessary to oversee the activity of financial intermediaries operating on a cross - border basis. this is the case for foreign intermediaries providing financial services in italy using the single european passport. 25 this model offers advantages in terms of competition and freedom of choice for savers, but it assumes that supervision is highly effective everywhere, a condition that is not always met. the supervisory rules and practices for non - bank intermediaries need to be strengthened and harmonized across countries. banca d β italia is working towards this goal at both european level and as part of the financial stability board. 5. the role of banca d β italia in the protection of savings the protection of savings does not end with the supervision of financial intermediaries. it is also about ensuring the smooth operation and integrity of the financial system as a whole. this means working to improve people β s financial skills, 26 and hence their ability to make sound investment decisions. it means offering tools to uphold savers β banca d β italia supervises insurance companies ( 89 at the end of 2023 ) through the italian insurance supervisory authority ( ivass ). other non - bank operators supervised by banca d β italia include investment fund managers, investment firms, financial corporations providing loans, crowdfunding service providers, electronic money institutions and payment institutions. the single european passport allows financial intermediaries to freely provide their services in any eu country without the need to establish themselves on their territory. these intermediaries are supervised by their home country authority. as part of its activities in the field of financial education, banca d β italia reaches more than 150, 000 people each year, including students, small business owners, and socially and economically vulnerable groups at high risk of financial exclusion. rights quickly and inexpensively. 27 it means protecting the financial system against money laundering and the financing of terrorism. 28 it means taking direct action to counter cyber risks to financial and market infrastructures and making sure that financial intermediaries put the necessary safeguards in place. 29 it means ensuring the efficiency and security of the payment | we need to realize the full potential of the single market ; launch joint projects in innovation and technology, starting with the as i noted recently, italy is the only euro - area country where interest payments on public debt almost match spending on education ; see f. panetta, β if we are not after the essence, then what are we after? β, speech at the 45th foundation meeting for friendship among peoples, rimini, 21 august 2024. f. panetta, β the governor β s concluding remarks for 2023 β, rome, 31 may 2024. these figures include preliminary estimates for the third quarter of 2024 released on 30 october. f. panetta, β the future of europe β s economy amid geopolitical risks and global fragmentation β, lectio magistralis on the occasion of the conferral of an honorary degree in juridical sciences in banking and finance by the university of roma tre, 23 april 2024 ; f. panetta, β the governor β s concluding remarks for 2023 β, rome, 31 may 2024 ; m. draghi, the future of european competitiveness, september 2024. digital and green transitions ; reduce foreign dependency in the energy and defence sectors ; streamline rules and regulations ; create a centralized and autonomous fiscal capacity ; and address the demographic challenge. italy has an important responsibility in lending credibility to the european project, which it can fulfil by carrying out the investments and reforms laid out in the national recovery and resilience plan, reducing the public debt - to - gdp ratio, and decisively tackling the unresolved issues i have mentioned. 3. monetary stability monetary stability is the second pillar in the protection of savings. inflation worsens the allocation of resources and erodes the real value of savings. 17 in its first two decades of existence, the monetary union ensured moderate inflation. the pandemic and the energy shock, however, changed this : in 2022, consumer prices grew by 10 per cent in the euro area and by 12 per cent in italy. the ecb β s monetary tightening actions helped bring inflation down as swiftly as it had risen : today, price growth stands at around 2 per cent for the first time since 2021. the ecb has thus been able to cut its key interest rates in three consecutive governing council meetings since june. however, monetary conditions are still tight and new cuts will be necessary. as inflation subsides, our focus should be on the | 1 |
, after the formation of the albanian state. during ww2, the albanian currency underwent radical changes. on its obverse and reverse we no longer see king zog. instead, victor emanuel iii is featured and the most significant change is that the albanian franc was officially pegged to the fate of the italian lira. we will have the opportunity to hear, during the day, other interesting and important examples in the monetary and economic history of albania. dear ladies and gentlemen, this conference does not seek to analyse wars and the various factors triggering them ; instead, it aims to show how the radical changes introduced by wars or conflicts on political systems and alliances, or the divisions between states have affected monetary developments. the history shows that conflict or war periods are particularly related to radical changes in monetary systems and policies. over the centuries, we find various examples of such developments, materialised in changes in the monetary system or introduction of temporary fiscal policies, additional quantity of money 1 / 2 bis central bankers'speeches issued before the start and during a war, massive circulation of a monetary type in areas far away from their place of origin, higher number of hoards found in a conflict zone or massive usage of the currency of allied countries. numerous phenomena testify to the constant presence of a relationship throughout epochs, between military conflicts on the one hand and the role of money in wartime on the other. to better reflect the relationship between conflicts or war and money, we have decided for the conference proceedings to follow a chronological order of presentations, starting from antiquity, to middle ages and the modern history of the xx century. our guests are distinguished professors, scholars, historians, and representatives from central bank museums who responded to our invitation to research and lecture on this topic. the views and conclusions expressed in the presentations are of the authors and not necessarily of the respective institutions or the bank of albania. wishing success to the conference, i hope that all the participants will benefit from the interesting presentations that will be shared with the audience today. i have now the pleasure to invite our keynote speaker, prof. olivier picard, former director of the french archaeological school in athens, professor at the sorbonne university, member of the β academie des inscriptions et belles β lettre β ( institute of france ), who will hold a presentation on β minting of coins in illyria in wartime β. thank you! 2 / 2 bis central bankers'speeches | gent sejko : effectively using remittances sent by albanians abroad address by mr gent sejko, governor of the bank of albania, at the high - level meeting on the remittances from the albanian diaspora, tirana, 11 december 2017. * * * dear minister majko, dear guests, welcome to the premises of the bank of albania! i would like first to thank the minister of state for the diaspora, mr pandeli majko, for his initiative for higher attention to drawing in and effectively using the remittances sent by albanians abroad. today β s meeting is the first in a series of common steps to be taken by albanian institutions, in an effort to give its due place to the financial contribution by albanian emigrants to the welfare of their families at home. this contribution is also vital for the sustainable and long - term development of the albanian economy. the bank of albania has always considered the remittances as a very important contributing factor for the economy of albania and beyond. in this light, the bank of albania measures and analyses the available statistics, and conducts non - quantitative assessments related to the geographical distribution of the sources of remittances, at the national and international level. the assessment of factors contributing to the level of remittances and the cyclical volatility of their flows over the years remains at the focus of our work. for albania, remittances represent a steady and considerable source of inflows, which surpass foreign direct investments, being thus a substantial source of financing economic growth in albania. in this regard, the bank of albania considers remittances as an important source of income in the economy and a contributor to the balance of payments. from a narrower perspective, remittances are estimated to have a significant impact on albanian households, for reducing the poverty and improving the quality of life. even in the case of albania, the studies performed by the bank of albania and the world bank show that the income from remittances are allocated mainly for consumption, medication, and education, as well as for savings and investments, the latter mainly for residential properties. in addition to the above, the bank of albania treats remittances also from the perspective of their inflow channels in the albanian economy. recent studies show that the formal transfer channels dominate, mainly through money transfer financial institutions, and less through banks. in the meantime, remittances in cash remain at | 0.5 |
to the challenge posed by china β s rise. 1 i believe that this impression has more to do with the specificities of the institutional setting of europe than with a lack of awareness and initiative from individual european policy makers. to be sure, today i will mainly take a european perspective on china. in doing so, i will first deal with two global aspects of the emergence of china that are of particular interest to my institution : its potential impact on ( i ) inflation dynamics and ( ii ) the patterns of international capital flows. i will then focus on ( iii ) the growing economic ties between europe and china and their implications. finally, i will conclude by providing a few comments on ( iv ) the constructive relations of european policy makers, including the european central bank ( ecb ), with our chinese colleagues, in the broader framework of international policy cooperation. see β the china trade syndrome β in the charlemagne section of the oct 4th issue of the economist. 1. two important channels : inflation and capital flows the growing weight and impact of china on the global economy has become an indisputable fact that no policy maker or business leader can ignore. china overtook the uk to become the fourth largest economy in the world in 2006 in terms of nominal gdp and is already the second largest economy when measured in ppp terms. according to the latest imf projections china could overtake germany in 2008 and become the third largest world economy after the us and japan. in terms of contribution to global gdp growth in 2006, china accounted for 11. 2 % of global real gdp growth in 2006, compared to 14. 5 % for the us. on the basis of its relative weight in ppp terms it accounted for 31 % of global real gdp growth compared to 10. 4 % for the us. it will not surprise you if i start by addressing the implications for price stability. although money and monetary policy ultimately determines inflation, globalisation seems to have embedded some effects on inflation in the short term. this takes the form of a two - sided coin. the doubling, from around 1. 5 to 3 billion, of the global labour force after the fall of the berlin wall β with new workers coming from formerly planned economies in the 1990s and then from population giants such as china β has exerted downward pressure on import prices of manufactured goods and on wage demand in mature economies, also compressing firms β price - cost mark - ups. but there have been other, opposite forces : certain resources, such as oil | and minerals, have become relatively scarcer given the increasing demand from emerging economies. accordingly, this has been a source of upward pressure on headline inflation in the past few years. for these reasons, measuring the overall short - term impact of emerging countries on inflation remains a challenge. this becomes even more difficult when trying to disentangle the specific effect of china on recent price developments in the euro area. in this regard, what we can, at present, say with a sufficient degree of confidence is that there has been a downward chinese effect on euro area manufacturing import prices via both the increasing share of chinese imports in euro area imports β an issue on which i will come back later β and the relatively lower prices of chinese goods. based on highly detailed data disaggregated both by sectors and countries over the period 1995 - 2004, the level of euro area import prices from china and the new eu member states are estimated on average to have been substantially lower than the price of imports from more mature economies. overall, it is estimated that the increase in import penetration from low - cost countries over this period may have dampened euro area import prices for manufactured goods by an average of approximately 2 percentage points each year, an effect almost equally accounted for by china and the new eu member states. most recently, however, a noteworthy feature of the chinese economy has been a significant upturn in domestic inflationary pressures, with consumer price inflation increasing from 1 % in july 2006 to 6. 2 % in september 2007, largely on account of higher food prices. this has been coupled with some increase in chinese export prices in recent months. nonetheless, ongoing and expected developments in domestic prices and costs in europe and china suggest that potential increases in import prices in the euro area originating from this country remain relatively contained. in particular, the ongoing rise in import shares from china combined with its continuing lower price levels should on the whole continue to put downward pressure on euro area import prices. a second dimension of particular interest to the ecb concerns the current configuration of international capital flows and its global and domestic implications. a group of less than twenty emerging countries β especially china, but also oil exporters, russia and a few other economies in asia β have become, so to speak, the β financiers of the world β. they are indeed large net savers with hefty current account surpluses. china β s surplus, in particular, has increased very rapidly in recent years, from 1 - 3 % of gdp | 1 |
the value of forecasting in an uncertain world a speech delivered to the new zealand manufacturers and exporters association ( nzmea ) in christchurch on 15 may 2017 by dr john mcdermott, assistant governor and head of economics 2 the terrace, po box 2498, wellington 6140, new zealand telephone 64 4 472 2029 online at www. rbnz. govt. nz " we are all forecasters. " tetlock and gardner, superforecasting. 1 it has often been said that there is no escaping forecasting. every decision we make in life involves forming a view about what the future might hold. likewise, there is no escape for the bank. we have a policy targets agreement that requires us to keep future inflation between 1 and 3 percent and therefore we need to form a view of where we currently are, how future developments might influence the path of output and inflation, and thus how we should respond. 2 we use our forecasting to establish a clear and well - founded plan for what monetary policy settings are necessary to achieve our inflation target, to communicate this plan to the public and to support the effectiveness and transmission of monetary policy. we present our forecasts in the quarterly monetary policy statement. a great deal of effort goes into producing these forecasts. more often than not, the world does not turn out as we forecast. however, forecasting is still a valuable and necessary part of the monetary policy process. producing forecasts and allowing them to be publically subject to challenge enables us to build a solid foundation for policy decisions, learn from developments, and improve our policy outcomes. forecasting is not supposed to be prophecy ; rather, it is about being precise about our thinking. uncertainty and the challenges for forecasters a major challenge for forecasters is β radical uncertainty β, that is, we fundamentally don β t know what the future holds. examples of this uncertainty are β black swan β events that fall outside any existing experience. the term is derived from the northern hemisphere belief that all swans were white, based on the empirical 1 philip tetlock and dab gardner ( 2015 ), superforecasting : the art and science of prediction, cornerstone digital. our specific mandate is established by the rbnz act ( 1989 ) and the policy targets agreement ( pta ) which state that the bank should use monetary policy to maintain price stability in the new zealand economy. we have considerable flexibility around how we do this, reflecting the tradeoffs necessary to protect | market and self - discipline are effective, they are not enough on their own because of market failures. 6 regulatory discipline β the imposition of requirements on regulated entities β is necessary to improve the effectiveness of market and self - discipline, and to minimise the costs of that could be visited on the financial stability commons. our role as regulator means setting robust requirements that are fit for purpose β that address risks and market failures at source, taking into account the costs of regulation and of supervision on our regulated entities and the wider economy. setting rigorous but not too stringent requirements is our challenge, informed by research, experience and feedback. 7 we need to understand new zealanders β appetite for risk, analyse the costs and benefits of regulatory requirements, and have processes for decisionmaking that provide confidence that in high quality decisions being made. β¦ and we do not run a zero failure regime achieving financial stability does not mean eliminating all risks. this would create inefficiencies of its own β it would potentially stifle new entrants, and remove the incentives for growth, innovation and healthy risk - taking. so we do not run a zero failure regime. allowing institutions to fail provides the incentives for self - and market - discipline to operate effectively. however, in order to allow individual institutions to fail we need a robust financial system that can continue to function even when individual entities are experiencing distress or failure. in those situations the bank is tasked with minimising the impact of distress or failure of an institution on the financial system and the economy. our role is dynamic by necessity our role is a dynamic. the financial system is constantly evolving, as are the risks and challenges. this means that establishing baseline standards is not a set - and - forget exercise. our requirements and expectations of regulated entities continue to evolve. while it is impossible to predict the future, it is incumbent upon us, when we do impose requirements and set expectations, to think about their effect, and how they might be adapted, in different states of the world. we monitor the financial system β¦ we continuously monitor the financial system in order to identify and assess : β’ β’ structural risks : ever - present risks related to the composition of the financial system, in terms of its institutions, and their assets and funding. new zealand is exposed to external shocks and standards must recognise these risks and shield the domestic system and economy. emerging risks : risks related to traditional areas of focus like credit or funding risks, or to new and emerging technologies or to | 0.5 |
media and research - speeches speech during the fscc release of the systemic risk crisis management framework date : june 05, 2022 occasion : fscc release of the systemic risk crisis management framework speaker : bsp governor benjamin e. diokno ladies and gentlemen, good morning. the last three decades have seen significant developments in the financial market. technology has practically eliminated physical divides, while financial engineering has allowed instruments to be specifically designed for certain stakeholders with certain needs at a certain point in time. as a result, financial markets today are complex and highly interlinked across national borders. this creates a value chain as much as it provides the channels for various spillovers. we have seen, over the past three decades, the asian financial crisis, the global financial crisis and, more recently, the covid - induced global recession. although these have happened at nearly a decade β s interval between them, regulators as well as the public do not take comfort when the unexpected happens. this is the nature of crises. they are unexpected but creates significant disruptions as they unfold. someone will always bear the costs of the least disruptions, and invariably, it is the public. as we move forward towards full recovery, now is the opportune time to look ahead, recognizing lessons from the past while anticipating the possibilities of the future. this is why the financial stability coordination council put together this systemic risk crisis management framework which we are releasing today. financial stability, after all, is about systemic risks and the continuous task is to enhance the resilience of the financial system. stability is, therefore, simply about risks and resilience, preemptively assessing the former while ensuring the latter by both avoiding shocks to the system as well as strengthening the ability to recover once those shocks occur. the srcm is in keeping with the objective of managing systemic risks and strengthening the resilience of the system. it defines arrangements among the fscc agencies that we will rely on in good times so that we are best organized under stressed conditions. the srcm is a strategic document that highlights how ongoing tasks contribute to crisis management and identifying initiatives which we believe are needed moving forward. as we develop the tactical plans that underpin this strategic document, the srcm is thus a living document that evolves with the market and the needs of its stakeholders. the council fully understands the importance to the public of managing systemic risks and mitigating its disruptive effects. while financial stability is not about a | speeches exposures or monoline business models, for example, with a heavy exposure to customers in the crypto - asset industry. the cyclical nature of regulatory issues itself presents a challenge for regulators. over time, examiner attrition and retirements that come along with an aging workforce erode institutional knowledge, expertise, and experience, making it more difficult to maintain an appropriate focus on longstanding risks. as we look to the future of banking, we should consider the dynamic nature of the banking system and know that we must be assertive in identifying known and emerging risks, and nimble in responding to them, keeping in mind that risks that appear to be extinct may only be hibernating. banking changes bring new risks of course, even with a relentless focus on the known risks that affect the banking system - credit risk, interest rate risk, liquidity risk, cyber risk, and others - we also know that as the banking system evolves, the risks evolve as well. even though change in the banking system is constant, many banking services have stayed relatively similar over time. the use of paper checks, while helpful to consumers in many ways, have reemerged as a source of increased fraud risk. the advent of the automated teller machine ( atm ) and electronic banking opened up new avenues for banks to bring convenience and access to their customers, but also gave criminals new opportunities to attack the banking infrastructure. even the legal and regulatory changes that allowed interstate banking to flourish fundamentally altered the composition of the banking sector, bringing both greater efficiencies of scale as banks took advantage of opportunities to consolidate, but also putting pressure on some banking models - and perhaps perversely resulting in less availability of local banking options in some geographic and socioeconomic areas. of course, recent changes provide consumers with enhanced options for services, including improvements to the u. s. payment system. recent enhancements in real - time payments services have made them more widely available. but with this growth comes additional risk, including limitations on the ability to detect and prevent fraud. banks also increasingly rely on important relationships with third parties, including service providers and partners who provide services to customers through " banking - as - aservice " arrangements. as third - party relationships continue to play an increasingly critical role in the banking system, they present another new avenue for risks that must be managed. emerging risks often arise in the context of a new mindset we see among some bank directors and management. this mindset | 0 |
gentlemen central banks and financial supervisory authorities face a difficult balancing act. on the one hand, in view of the objective of safeguarding stability, the institutional and regulatory framework has to be tightened and harmonised internationally. on the other, the new rules must not overburden market participants, and the effects of regulation, including its impact on competition, must be evaluated from a macro perspective. however, the supervisory rules can only set the framework in which financial transactions take place. market participants themselves must do their part to strengthen the financial system β by improving risk management, for example. i would propose that we central bankers and financial supervisors work through our agenda item by item and you, as representatives of large institutional investors, work through the tasks that you have to address. since we drive on the same roads, so to speak, i look forward to continuing this dialogue with you. a good dialogue is the best way of avoiding any more collisions in future. bis central bankers β speeches | over the years, the bank has been producing and disseminating more detailed financial accounts. we are in discussions with our external auditors to see how much more transparent we can be in publishing the accounts, while at the same time not compromising the requirements of international financial reporting standards. communication is not just about our interaction with markets. we have deemed it appropriate to communicate with different stakeholder groups in the broader civil society through our financial literacy programme. we regularly meet business associations from different sectors of the economy. we find it useful not only to express our own views but also to hear the views of 1 / 6 bis central bankers'speeches market participants. it is important for us to know what the thinking about the bank and our policies are. although we may not be always successful in changing perceptions and misconceptions about the bank and its policy, we have found that these interactions and initiatives have helped to create a greater appreciation of the challenges we face. a more candid relationship between the bank and the media will accompany us in our mission. it does not mean that the media should be our porte - parole nor report uncritically on our actions. this has more value to the central bank than an uncritical media. media is perceived as a source of objective and independent information and analysis and whatever is reported in the local press has an international coverage, which could affect the credibility and image of the jurisdiction. even my predecessors have reiterated on this point in their previous addresses. let me reassure you that we operate within the parameters of the bank of mauritius act and assume our duties and responsibilities independently. the act grants the bank operational independence to implement its policies. section 12 of the act states that β the board of directors β¦ in the exercise of their functions, shall not be subject to the direction or control of any other person or authority β. i take this opportunity to thank all my board members for having displayed an independence of thoughts and for their guidance and support. further, section 55 ( 3 ) stipulates that β in the discharge of its functions, the monetary policy committee shall not be subject to the direction or control of any other person or authority β. again, let me commend the impartiality of the members in their assessments and for voting independently on interest rate decisions. the mpc minutes are so transparent that they reflect the voting pattern of each individual member. we are also mandated to manage the official foreign exchange reserves of mauritius in the manner specified in the act | 0 |
s 2 / 4 bis central bankers'speeches package of monetary policy measures is providing substantial support to the australian economy in the face of lockdowns and the expected resumption of the economic expansion. these monetary policy measures include : the term funding facility a yield target for the april 2024 australian government bond of 10 basis points the bond purchase program under which the rba is purchasing bonds issued by the australian government and by the state and territory governments a cash rate target of 10 basis points. i would like to provide the committee with an update on each of these elements of the package. first, the term funding facility. a total of $ 188 billion was drawn down by financial institutions under this facility before the deadline for final drawings of 30 june. the interest rate on most of these funds is 10 basis points and the funding does not have to be repaid for 3 years. this means that, even though the facility is now closed to new drawings, it will continue to support low funding costs in australia out to mid 2024. at its july meeting, the board considered the yield target and decided to retain the april 2024 australian government bond as the target bond, rather than extend it to the november 2024 bond. the target remains at 10 basis points, the same as for the cash rate. the target has played an important role in keeping funding costs low and reinforcing our forward guidance regarding the cash rate, and it will continue to play this role over the next few years. the decision not to extend the target to the next maturity reflects a shift in the probabilities regarding future movements in the cash rate. when the 3 - year yield target was introduced last year, it was difficult to conceive scenarios in which the cash rate would be increased over the subsequent 3 years, which at the time ran to early 2023. eighteen months on, there are now plausible scenarios in which the cash rate is increased over a 3 - year horizon, which now runs until late 2024. given this shift, the board decided that it was not appropriate to extend the yield target to the end of 2024. at our july meeting, we also decided that we would continue purchasing government bonds following the completion of the second $ 100 billion program in early september. in addition, we decided that the purchases would be at a rate of $ 4 billion a week until at least november, rather than the current $ 5 billion a week. we also indicated that we had a flexible approach and could adjust the | bostjan vasle : introducing the euro in times of high inflation - case of croatia opening speech by mr bostjan vasle, governor of bank of slovenia, at the lecture " introducing the euro in times of high inflation - case of croatia ", ljubljana, 20 april 2023. * * * the spoken word applies. dear ladies and gentlemen, dear guests, welcome to the second lecture of foreign central bank governors this year. after hosting the governor of the central bank of estonia in march, today we have with us the governor of the croatian national bank, boris vuji. just a few months after croatia became the 20th country to join the euro area, governor vuji will present croatia's path to and the first experiences with adoption of the euro. with croatia's entry into the euro area this year, the euro has become the official currency for 347 million people. euro area enlargement adds to the role of the euro and the european economy, which is particularly important at a time of increased geopolitical tensions. the euro remains the second most widely used currency for trade invoicing, crossborder lending and foreign exchange trading, and holds the second largest share of global foreign exchange reserves, after the us dollar. even at a time of high inflation, support for the single currency among the eu population remains high, at over 70 % according to this winter's eurobarometer. with support at 87 %, slovenians are among the biggest supporters of the euro. * * * while we can draw several parallels between the introduction of the euro in slovenia in 2007 and in croatia this year, there are also some interesting differences. ( i ) slovenia was the first of the so - called new eu member states to adopt the euro. the introduction of the euro was accompanied by broad support in politics and the professional community, which contributed to an exceptionally high 72 % acceptance of the euro among the population. 1 / 3 bis - central bankers'speeches the fact that slovenians, as savers and consumers, were well familiar with the euro also boded well. in addition, it is worth highlighting the importance of thorough tree - year preparations for the euro adoption, in terms of technical, managerial and communication aspects. in croatia, there were more divisions and doubts about euro adoption, which made the determination and public engagement of the central bank and the government even more significant. ( ii ) for slovenia, one of the major challenges in meeting the criteria for joining the euro | 0 |
the disaster on the year - on - year annual growth rate at the end of that quarter. in principle, one mitigating factor may be insurance, which in the past has helped support aggregate demand and hastened reconstruction following disasters, reducing the overall impact on economic activity ( chart 2, right panel ). in practice, however, there is already a substantial insurance β protection gap β. only one - third of climate - related economic losses in the euro area are currently insured, a situation that could worsen with climate change. more frequent and severe natural disasters are likely to increase insurance claims, which may result in higher insurance premiums and potentially lead to lower insurance coverage, further widening the protection gap. green finance as a driver of financial integration a substantial amount of finance will be needed for there to be a smooth transition to meet the ambitious goals for a carbon neutral economy. but we also need a robust financial system capable of maintaining the flow of credit even if asymmetric shocks happen or if the transition is a little bumpy. that brings me back once more to the importance of financial integration. progress has certainly been made in stepping up sustainable finance. since 2015, the assets under management of environmental, social and governance ( esg ) [ 7 ] funds have almost tripled, the volume of outstanding green bonds has risen tenfold, and the amount of catastrophe bonds has almost doubled ( chart 3, left panel ). chart 3 investments in esg funds sources : artemis, bloomberg finance l. p., emir data, epfr global, lipper and ecb calculations. notes : left panel : data on catastrophe bonds are copyright to www. artemis. bm, steve evans ltd. to avoid end - of - year effects, the outstanding amount of emission - related derivatives is the notional value of open positions reported under emir as at the end of november. 2015 values are not included due to data unavailability. see footnote 19 in alogoskoufis et al ( 20201 ), op. cit. for data limitations. the right panel shows the relationship between net flows as a share of a fund β s lagged total net assets and lagged fund returns. it is based on a sample of 1, 452 and 8, 337 nonesg fund shares, and 131 and 1, 017 esg shares, of corporate bond and equity funds domiciled in the euro area between january 2016 and september 2020. green funds are identified using text | njuguna ndung β u : combating money laundering and the financing of terrorism address by prof njuguna ndung β u, governor of the central bank of kenya, at the cocktail to usher in the eastern and southern africa anti - money laundering group ( esaamlg ) 16th taskforce meeting of senior officials, mombasa, 18 august 2008. * * * mr. serwalo tumelo, permanent secretary, ministry of finance and development planning, botswana and chairman of the task force of senior officials ; permanent secretaries here present ; dr. eliawony kisanga, executive secretary, esaamlg ; representatives of co - operating nations and organisations ; members of the esaamlg taskforce of senior officials ; distinguished guests ; ladies and gentlemen : it is my joy and pleasure to be here this evening on the occasion of the official opening of the 16th esaamlg taskforce of senior officials meeting. i must start by extending a very warm welcome to all the delegates here present. it is indeed an honour for kenya to be hosting this important meeting. we appreciate the hosting of the esaamlg meeting in kenya even after the period of turbulence that we underwent at the beginning of the year. however, this is now behind us and we are back in business. as the swahili say, β kuteleza sio kuanguka β ( to slip is not to fall ). anti money laundering and combating the financing of terrorism are indeed current buzz words in the global financial circles. forums such as this therefore serve as useful avenues of sharing various country experiences. for the case of kenya, the timing of this meeting could not be more opportune. the proceeds of crime and anti - money laundering bill, 2008 is currently under consideration by our parliament. we remain cognisant that kenya β s vision of being a regional trade and financial services hub is founded on the enactment of an enabling legal and regulatory framework. a sound anti - money laundering legal and regulatory regime is therefore a critical plank to this aspiration. ladies and gentlemen : the region is vulnerable to money laundering particularly given its mainly cash based economies. this is further aggravated by porous borders and weak institutions for enforcements. though much has been done in the recent past by organizations such as esaamlg, more remains to be done. the challenges we face are multifaceted, but as the region has demonstrated through the support member countries have given to esa | 0 |
interest rates still relatively low, share prices continued to rally. on the jse, share prices reached record highs in the second quarter of 2015 but have subsequently receded as growth projections for china weakened which in turn contributed to the chinese share market correcting from the exuberant levels previously reached. further contributing factors included bis central bankers β speeches softer commodity prices and expectations of an imminent increase in us interest rates. despite the downward correction, south african price - earnings ratios still seem to be on the demanding side when compared to historical trends. south african house prices have continued to rise over the past year, but at a subdued single - digit rate. ever since the onset of the global financial crisis, south africa β s public finances have been growth - supportive. caution about the upward trend in government debt has prompted authorities to adopt a programme of gradual reduction in the deficit, both through capping expenditure and through raising additional revenue. this has been somewhat complicated by the weakening in international commodity prices and the subdued domestic and global economy, resulting in downward pressure on tax collections and the extension of the original fiscal consolidation timeframe. small business in the economy β small business β is difficult to define. in south africa β s national small business act, passed in 1996, the definitions provide for β micro enterprises β to have fewer than 5 employees, β very small businesses β to have 6 to 20, β small businesses β to have 21 to 50, and β medium businesses β to have fewer than 200 employees. 2 government has recently raised the status of its small business initiatives with the creation, in 2014, of a department dedicated to this cause : the department of small business development, under the political leadership of minister lindiwe zulu, with an annual budget of approximately r1 billion. previously, programmes dealing with small business development fell under the department of trade and industry and the economic development department. estimates of the contribution of small, medium and micro enterprises ( smmes ) to the economy vary. in terms of contribution to gdp, an estimate of 52 to 57 per cent has been quoted by the deputy minister of trade and industry, elizabeth thabethe, who put the number of smmes in south africa at 2, 8 million and their contribution to employment at 60 per cent. moreover, looking ahead, the national development plan projects that, by 2030, no less than 90 per cent of new jobs will be created in small and expanding firms. small business, furthermore forms part of the backbone of a thriving society. | be predicted, and although the likelihood of failure could be very small, proper planning always puts authorities in a better position to successfully manage an orderly resolution. being caught unawares β without the necessary information, resolution tools and / or cooperation agreements β may cause delays during which asset values and market confidence are eroded and possibly destroyed. v. it is not only banks whose failure can cause a financial crisis. the failure of nonbank financial institutions can have equally devastating effects on financial stability, as was clear from the failure of lehman brothers, aig and others. authorities therefore need tools to deal with the failure of various kinds of financial institutions, as well as of financial groups. vi. financial failures cause hardship for ordinary people. financial crises can result in job losses, financial losses, and an inability to conclude transactions. an effective resolution framework should contain safety net arrangements to protect the most vulnerable citizens from severe hardship as a result of a financial failure. vii. cooperation and coordination among regulators and other authorities is essential to achieving an orderly resolution, especially if a financial group operates in various jurisdictions. coordination arrangements should be supported by appropriate legislation. the international response various international standard - setting bodies, including the g - 20 and the financial stability board ( fsb ), have made significant progress in developing and promoting the implementation of enhanced regulatory standards to increase the resilience of the financial sector to shocks. bis central bankers β speeches south africa β s own regulatory framework is undergoing significant changes as a result of this response, with the introduction of basel iii, β¦ ( sam ), over - the - counter ( otc ) derivatives market reforms and the twin peaks regulatory framework, to name but a few. however, even the most effective regulatory framework cannot completely rule out the possibility that financial institutions and financial groups may fail. therefore, significant attention has been given to the development of new standards for resolution. g - 20 member countries have committed themselves to the objective of implementing measures which will allow large financial institutions fail in a way that critical economic and financial functions continue uninterrupted and without taxpayer money while maintaining the financial stability of the sector. to achieve this objective, the fsb has developed a set of new international standards that g - 20 member countries have to implement in order to make it possible to resolve the failure of large, complex and interconnected financial institutions, which often operate in multiple jurisdictions, without having to provide public support and without interrupting the provision of critical functions. drawing on lessons learnt during the global financial crisis | 0.5 |
it with the high standards demanded by the international community. the lack of proper tools is another reason for our low productivity. given the oversupply of labour in our economy, we tend to be labour intensive in our industries. our ratio of capital to labour is quite low. unfortunately, this equates to low productivity. it does not necessarily be so. we can still have labour intensive industries but higher productivity. this means that productivity must be internally driven by organisations or firms themselves. the introduction of performance contracts in the civil service is a classical example. another problem faced by us is the lack of up - to - date and appropriate technology. we still find some industry with outdated or inappropriate technologies. our sugar mills are an example. there are some industries that have taken advantage of the latest technologies and adopted international best practices, such as fiji water. of course, adopting new technologies cost money and a business case needs to be made. but those that have been able to adopt new technology have reaped good results whereas the others have lagged behind. in this regard the rationalization of telecommunications charges. they will help lower our cost of doing business and catalyze innovation to the industries. another factor is the skills in our workforce. education and retention of skills are important. because of our size, we have a limited pool of skill people. but to make it worse, we are losing them all the time. this is a graph of our emigration trend. they average around 5000 people a year. developed countries like australia, new zealand and canada reap the benefits of our training. its aid in reverse. but it is a free world! these countries themselves loose labour to other countries. global labour movement is intensifying and the global war on talents is fierce. the world is now the market place. fiji therefore must look elsewhere to fulfill its short - term skills requirements. this will add to our costs. but we cannot afford to wait around until we have the right skills. on the flip side, we are just beginning see the positive side of labour transfers with our soldiers in kuwait, care givers in the united states and rugby players in japan. one of the direct results of this export is the phenomenal rise in the remittances that we now receive from our workers and families abroad. last year it rose to about $ 315 million and counting. this blessing has come at the right time with our exports performing well below potential. how can we raise productivity? who should do | the financial system. the program or facility will not be considered to have a broad - based eligibility if fewer than five persons or entities would be eligible to participate, or if it is designed to assist a company avoid bankruptcy, resolution or insolvency ( including by removing assets from its balance sheet ) or aid a failing financial company. see regulation a, 12 cfr 201. 4 ( d ). in addition to the β unusual and exigent β circumstances and broad - based eligibility requirements, other conditions for making section 13 ( 3 ) emergency credit include obtaining the affirmative vote of a requisite number of federal reserve governors and the prior approval of the u. s. treasury secretary, the emergency credit is not extended to an insolvent borrower, the lending federal reserve bank is secured to its satisfaction, evidence is obtained regarding the unavailability of adequate credit accommodation from other banking institutions under prevailing circumstances to borrowers of the emergency credit, penalty interest rate is set for the emergency credit, and meeting disclosure / reporting requirements. see section 13 ( 3 ) of the federal reserve act ( 12 usc 343 ) and regulation a ( 12 cfr 201. 4 ( d ) ). bis central bankers β speeches in the u. s., given the restrictions on central bank lending, if a securities firm were to lose access to funding the remaining options available would be finding a means of replenishing the firm β s capital, selling assets, or selling all or part of the securities firm β s operations. while this might be manageable in the case of a firm - specific idiosyncratic shock, it might prove more difficult if a common shock was broadly hitting the securities industry. in this circumstance, the failure of one firm could increase the stress on other firms that were facing similar difficulties. if all of the requirements for section 13 ( 3 ) are met, the central bank could provide liquidity support. however, since this is not a certainty, it is worth considering possible alternatives. now that all major securities firms in the u. s. are part of bank holding companies and are subject to enhanced prudential standards as well as capital and liquidity stress tests, providing these firms with access to the discount window might be worth exploring. to me, this is a more reasonable proposition now than it was prior to the crisis when the major dealers weren β t subject to those safeguards. more generally, i am happy to report that the committee on the global financial system β one | 0 |
odds of inflation rising noticeably above target could become palpable. but such a breakout is just not at all very likely today. indeed, many fed critics have been voicing this concern since 2009, and it hasn β t even come close to happening. what if inflation just ran moderately above target for some time? well, i see the costs of this outcome as clearly being much smaller than the costs of falling back into the zlb. first, i believe the u. s. economy could weather the modest increases in interest rates that would be needed to keep inflation in check. such rate increases would be manageable for the real economy ; this is particularly true if industry and labor markets have already made the most difficult reallocations of jobs and overcome other factors so that productive resources are more efficiently and fully employed. second, as i β ve noted many times in the past, a symmetric inflation target means we should be averaging 2 percent inflation over time. we β ve averaged well under that 2 percent mark for the past six and a half years. with a symmetric inflation target, one could imagine moderately - above - target inflation for a limited period of time as simply the flip side of our recent inflation experience β and hardly an event that would impose great costs on the economy. the murky state of inflation expectations is another factor that enters my risk management considerations. for inflation to take off rapidly, we would have to see a jump in inflationary expectations. but inflationary expectations have been quite stable. indeed, we may be facing a quite different problem. many forecasters β myself included β assume that stable 2 percent bis central bankers β speeches inflation expectations will be an important factor helping to pull actual inflation up. over the past five years, professional forecasters β projections for long - run inflation have been at the 2 percent target and treasury inflation - protected securities ( tips ) break - evens have been flat. yet actual inflation has only just recently made it back up to 1 β 1 / 2 percent. moreover, we still have not seen much at all in the way of higher inflation compensation being built into interest rates or wages. so there is cause for concern that expectations might not produce as strong a pull on inflation as we hope. we can turn to the japanese experience again to highlight this risk. long - run inflation expectations in japan have averaged a little over 1 percent. yet during that period, the only time inflation was palpably above zero β let alone not in outright deflation β | may not be directly measureable. in light of this uncertainty, the committee considers many factors in gauging maximum employment. as the extremely relevant research presented at this conference makes clear, judging the degree of slack along these many dimensions is a difficult and complex task. but it is one that is critical for the conduct of monetary policy β we must have a good idea of what constitutes achievement of our full employment target. our chicago fed research staff has been working long and hard, and in my remarks today, i will briefly talk about some of our results that touch on several of the most contested labor market issues on the table today. these involve labor force participation, job openings and wages. to give you the punch line, this research and work done by others in the field lead me to conclude that, although we have made great strides, a good deal of slack remains in the labor market. labor force participation and employment as everyone in this room is aware, the labor force participation rate has fallen throughout the recession and recovery and is now at a 35 - year low. 1 as julie hotchkiss described earlier this morning, it is well understood that much of the decline is due to trends that far predate the great recession. the movement of baby boomers into retirement age and the longrunning declines in teenager and prime - age male participation would have significantly reduced labor force participation rates independently of the economic downturn. chicago fed economists first did work on the prospects for a declining labor force participation trend back in 2001 β near the time the rate peaked at just over 67 percent. 2 even after revisiting this topic numerous times and with multiple generations of research assistants running the programs, their views about the trends that are consistent with the composition of the population and a labor market near equilibrium have not changed much the labor force participation rate is defined as the share of the population aged 16 and older who are either employed or unemployed. to be unemployed, a person has to not have a job but be actively looking for work in the prior four weeks and to be currently available to work. these data are collected by the u. s. bureau of labor statistics as part of its monthly current population survey. aaronson and sullivan ( 2001 ). bis central bankers β speeches since then. 3 among the many robustness analyses they performed, their models produce nearly the same trend for labor force participation as they have since 2001. 4 depending on the details of the specification, chicago fed economists estimate that at the end of | 1 |
amando m tetangco, jr : rbap β sustaining reforms for an economically vibrant countryside speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the inaugural dinner for the newly elected rbap officers and board of directors, manila, 14 july 2009. * * * the leadership of the rural bankers association of the philippines ( rbap ) led by president omar andaya and immediate past president mitch gomez, the officers and members of rbap, good evening. i am delighted to be part of this inaugural dinner celebrating your new set officers at rbap. to me, this seamless transition in the association β s leadership is a strong indication that the rural banking sector will continue the many significant initiatives that have characterized the past year. united, your initiatives under rbap have kept the rural banking sector resilient in the midst of a particularly challenging environment. let us therefore give the rbap leadership a well - deserved round of applause! indeed, the past year was full of challenges, for the economy in general and for the rural banking sector in particular. and yet, latest available figures indicate that the rural banking sector continues to perform relatively well. it appears that our rural bankers have turned this period of challenges as an opportunity to further strengthen your institutions. thus, even with the series of bank closures affiliated with one group, total capitalization of the rural banking sector actually improved further from p24. 8 billion in december 2008 to p25. 4 billion as of march 2009. less measurable, but no less important, is rbap β s success in maintaining public confidence in rural banks in the face of successive bank closures. through vigilance and proactive measures, rbap ensured that your clients understood that these high profile bank closures basically involved a single group that is not representative of the management of other rural banks. i also wish to acknowledge rbap β s pioneering work on inclusive banking through technological and product innovations, as well as your continuing efforts to be more responsive and efficient in serving your clients. in particular, the rural banking sector continues to expand its operating network to reach more clients. what we have today, therefore, is a more solid and more inclusive rural banking industry. and so, once again, ladies and gentlemen, let us celebrate our rural banking sector with another round of applause! however there is much more that we have to accomplish and we are looking at rb | ##ap β s new set of officers and members of the board of directors to provide leadership for this. among others, it is important to sustain reforms we have started. in this context, your banks β risk management infrastructure should be a priority. this is the infrastructure that allows you to identify risks and to act on these in a responsive manner. in the case of rural banks, particular focus must be given to credit risks and liquidity risks, because your position as community - based financial institutions magnifies these risks. equally important is your commitment to maintain strong capital positions. banks must fully appreciate that capital adequacy is not merely a compliance issue, but is central to the prudent control of leverage. banks must have sufficient buffer for risks which could turn into losses. while we will not dictate your specific allocation decisions, maintaining capital adequacy above the bsp β s regulatory floor rate of 10 % is itself reflective of a bank β s commitment towards prudential control and financial governance. i am sure you have heard me discuss these key reform issues in other occasions. however, for as long as we have not reached our desired destination, i assure you, you will continue to hear from me on these issues. you can also be sure that the bangko sentral will continue to do its part toward creating the appropriate policy and regulatory environment that enables more innovations, greater efficiency, better risk management, stronger capitalization, improved disclosure and transparency practices, and enhanced corporate governance standards in the banking system. high on our agenda is to open doors for you in housing microfinance and microinsurance, as well as possibly grant you more flexibility to use non - bank agents as a way to expand your reach. we are also looking at the use of independent rating agencies to attest to your inherent strength and secure market credibility. we are also designing a program with pdic to encourage mergers and acquisitions through targeted financial incentives to would - be β white knights β of rural banks. ladies and gentlemen. the rural banking sector has stood up well to the difficult challenges of the past. now, i look forward with optimism to the future of our rural banks. while i am sure rural banks will be facing new challenges moving forward, i am heartened by the fact that we are on the same page insofar as the need, and the wisdom, of adhering to good governance principles ; of implementing appropriate policies for credit and liquidity risks management ; and of working on having | 1 |
importantly, globalisation - led productivity gains contributed to a trend decline of inflation across countries. more and more countries, including emerging market economies ( emes ), strengthened their monetary policy frameworks with a number of them adopting inflation targeting. there was growing talk of globalisation leading to sustained disinflationary forces, technology diffusion and competition. we witnessed low and stable inflation in advanced economies ( aes ) and several emes beginning the 1990s and through the second decade of the new millennium. 5. with greater trade and financial integration, the domestic economies get more exposed to global shocks including volatile short - term capital flows. for instance, global shocks to food, energy and commodity prices affect inflation in every country. during the covid - 19 pandemic and now due to the war in europe, there are clear signs of transmission of global shocks to generalised and synchronised inflation across the world. 6. the recent upsurge in inflation due to the black swan event, i. e., the war in europe, on top of another such event, i. e., the covid - 19 pandemic offers a classic example of the globalised nature of current inflation. around 77 per cent of countries reported acceleration in inflation in 2021 and this proportion is expected to rise further to 90 per cent in 2022, according to the imf β s latest projections. moreover, for advanced economies, against an inflation target of 2 per cent, and emerging market economies, against an average target of about 3 - 5 per cent, two - thirds are witnessing inflation above 7 per cent 1. while global factors have always been an important driver of domestic inflation, what we have witnessed over the past three years is the more protracted and sizeable role of global factors in proportions not witnessed in decades. these factors have an even more conspicuous effect on net commodity importing countries like india. 7. with the origins of this inflation being essentially in the supply side, energy and food prices account for more than 50 per cent of the rise in prices. there are also increasing signs of sectoral price spillovers, given that the rise in global energy and commodity prices quickly translate into higher input price pressures. while in some advanced economies, pricing power of firms has increased significantly due to strong domestic demand since 2021, other advanced economies and emerging market economies have just started experiencing such pressures beginning 2022. household inflation expectations have started firming up, though they are based on current inflation data from | case of noncompliance with the prescribed disclosure requirements. conclusion so far, we have covered the various issues in the implementation of the simplified approaches of basel ii. the implementation of advanced approaches, such as irb approach for credit risk and advanced measurement approach for operational risk, require much more preparation and pose several challenges for both the banks as well as the supervisors. the banks would require to meet the minimum requirements relating to internal ratings at the outset and on an ongoing basis, such as those relating to the design of the rating system, operations, controls, corporate governance and estimation and validation of credit risk components : probability of default ( pd ) for both foundation and advanced irb, and loss given default ( lgd ) and exposure at default ( ead ) for advanced irb. the banks should have at a minimum pd data for five years and lgd and ead data for seven years. the manpower skills, the it infrastructure and mis at the banks would have to be upgraded substantially. the supervisors would require developing skills in validation and back testing of models. with the focus on regulation and risk management in the basel ii framework gaining prominence, the post basel ii era will belong to the banks who manage their risks effectively. the banks with proper risk management systems would not only gain competitive advantage by way of lower regulatory capital charge but also add value to the shareholders and other stakeholders by properly pricing their services, adequate provisioning and maintaining a robust financial health. as we stand at this juncture, i trust innovative and illuminating ideas, fresh insights and alternative ways of thinking about the competitive yet cooperative combat that the world of banking and finance is readying itself for will mark the south indian bank β s business strategies and institutional development plans and will give you the emotive content to carry forward the legacy and vision of your founding fathers and take your institution to new heights. with these words i wish you every success in all your future endeavours. thank you. | 0.5 |
like to reflect on the future of supervision and the changes we need to implement to adapt it to the new age. back in september 2022 the ecb considered it necessary to assess the functioning of the ssm, and appointed a group of independent external parties to prepare a report with proposed improvements. published in april 2023, 4 the report contains a wide range of proposals, and reforms to supervisory tasks have since begun to be implemented. the most noteworthy reform aims to establish a more risk - based approach to supervision. this means that the inspection teams will have more flexibility in flagging the areas of focus for their supervisory activity. the aim is not to conduct a global and comprehensive review of the banks every year, but rather to focus resources on the most significant risks at each bank. this will help make more efficient use of the ever - scarce resources available. although this new approach will entail risk - taking by the supervisor ( as some areas will be left outside the supervisory perimeter for some time ), it is a risk we must take if we are to become more efficient, focused and, at the same time, more flexible. https : / / www. bankingsupervision. europa. eu / ecb / pub / pdf / annex / ssm. pr230417 _ annex. en. pdf. flexibility and agility are essential in such turbulent and evolving times, and we must be able to react swiftly to any new scenarios that could affect the financial system. although the events of recent years have demonstrated how, as supervisory authorities, we have been able to adapt our activity, priorities and procedures to the circumstances of any given moment, this quality needs to be reinforced and incorporated more explicitly into our methodology. in this respect, i consider that the suptech tools we currently have and the ones we will develop over time will prove to be highly efficient in the early detection of weaknesses and areas for improvement in banks β management and their risk profiles. this will improve the efficiency of supervision. another key element we need to reinforce is the implementation of supervisory measures. unless the corrective measures are duly complied with, any problems or shortcomings detected will not be properly addressed. this is another lesson learned from the crisis at mid - sized us banks in spring 2023. such tools should be governed by the principle of proportionality and able to adapt to the seriousness of the shortcomings they seek to address. moreover, the deadlines set for implementing the corrective measures should also be | and monetary policy β are generating new patterns of funding, new players and changes in capital flows across global markets. those issues will be reviewed in the initial session. as i mentioned before, the euro area has to deal with a severe crisis which has led to the fragmentation of the european financial system. while there are signs of a certain reversal in this process, a failure in this respect would be particularly harmful for the european project, since integration is at the core of the european union itself. the policy actions of the ecb and other european authorities, including the decisive drive towards a banking union, have been able to overcome or dissipate the worst fears, but the road ahead is still long and difficult. finally, the role of central bankers should be highlighted in this new context. we are big players in the financial arena, both from the regulatory and monetary policy standpoint ; and the framework for our actions β and reactions β must necessarily change and adapt to the new environment. the renewal of the set of instruments to address the price stability bis central bankers β speeches mandate, be it in a situation of low growth, as happens to advanced economies, or in a situation of large capital inflows, as happens to emerging market economies, is one aspect of that change. the need to take on board financial stability considerations is another aspect widely discussed. you will devote the final part of the day to this quest. and i do not want to take more time out of the tight agenda you will follow now. thank you very much for your attendance to this conference. i wish all of you and excellent day and a good discussion. bis central bankers β speeches | 0.5 |
the many and sizeable economic shocks that have hit the euro area since the introduction of the euro. when looking at the euro area as a whole, a regime shift towards greater monetary stability took place during the second half of the 1990s. this was associated with the emu project enshrined in the maastricht treaty, and in particular with the convergence process and the introduction of the euro. since the ecb became responsible for monetary policy in the euro area in 1999, hicp inflation has averaged 2 %. this is very near to the β below and close to 2 % β at which the ecb aims over the medium term. let me remind you that during the 1980s and 1990s, the average inflation rate was 4 %. inflation expectations have also been remarkably stable in recent years. average long - term consensus inflation expectations have fallen from 2. 8 % in the 1990s ( 1990 to 1998 ) to 1. 8 % over the past six years. this is fully in line with our definition of price stability. the very low levels of short - term and long - term interest rates which we are currently observing are providing substantial support to favourable financial conditions. these low levels would be unthinkable without the successful stabilisation of inflation expectations. β¦ have also contributed to low macroeconomic volatility a further remarkable feature of the change in economic performance is the strong decline in nominal macroeconomic volatility. with the convergence process during the 1990s, inflation volatility fell strongly. the volatility of quarterly hicp inflation in the euro area ( measured as the standard deviation over the previous six years ) fell from around 0. 6 percentage point during the late 1980s to less than 0. 3 percentage point in the mid - 1990s. since then, inflation volatility has stabilised at this very low level, in spite of major inflationary shocks. and the average volatility of long - term consensus inflation expectations has also declined substantially, by four - fifths, from almost 0. 5 percentage point in the 1990s to around 0. 1 percentage point in recent years. lower volatility of actual and expected inflation reduces consumer and investor uncertainty and thereby enhances welfare. stable inflation expectations and a high degree of confidence on the part of financial market participants in monetary policy should, over time, also lead to a reduction in the volatility of longer - term interest rates, and thus also to lower risk premia. indeed, over the past six years, there has | from 8 percent to 4 percent, no adequate restrictions are imposed. in this respect the differentiated reserve requirement ratio to be applied from april 25 will help regulatory implementation. in sum, only when the micro foundation with well - defined business objectives and control mechanisms is in place, could monetary policy transmission work. ii. in a transition economy, policy - makers tend to rely on quantity measures and avoid price instruments. in fact, the experience of price reform shows that price mechanism is often more effective than expected. monetary policy transmission mechanism to a great extent determines the choice of instruments. in the monetary policy conduct, there have always been disputes on the pros and cons of price and quantity instruments. currently, price instruments such as interest rate and exchange rate coexist with quantity instruments such as liquidity absorption and foreign exchange control. for an extended period of time in china, quantity measures were preferred while price instruments were seldom used. this was the expediency given the constraints of the transmission mechanism as well as the result of the policy legacy from the demand economy mentality. a centrally planned economy emphasized quantity control. when demand and supply are out of balance, quantity indicators are often imposed to increase supply or contain demand. the same mentality, when applied to the financial sector, tends to tighten liquidity when there is inflationary pressure, and in the sequence of policy choice, price instruments are only considered after quantity control. some believe that in financial sector transition, the borrowers, e. g. the soes, and lenders, e. g. state - owned banks are not sensitive to price movements. however, empirical studies did not support this assumption. china has been gradually moving to focus on the use of price instruments. an example would be that when inflationary pressure emerged at the beginning of this year, the central bank adjusted its lending rate and rediscount rate. as a matter of fact, the effects of and responsiveness to price instruments usually turn out far better than expected. examples are abundant. it is foreseeable that with market liberalization of the economy, price mechanism will play a more prominent role and there will be more willingness to use price instruments. it should be noted that when the actual price is close to equilibrium, price is elastic and price instruments are more effective. whereas if the actual price is too far from equilibrium, price may not longer be elastic and price instruments cease to be effective. this can be proved by empirical analysis. iii. the study of | 0 |
mark w olson : a regulator's view of emerging issues in community banking speech by mr mark w olson, member of the board of governors of the us federal reserve system, at the 118th assembly for bank directors, las croabas, puerto rico, 27 february 2004. * * * in 2003 community banks once again demonstrated their value to their shareholders, delivering solid profitability. community banks - by that i mean commercial banks with assets less than $ 1 billion earned $ 12. 9 billion in 2003, based on preliminary call report data. this figure translates into a return on assets of 1. 18 percent and a return on equity of 11. 55 percent. fourth - quarter returns were a bit below that, following a familiar seasonal pattern. overall, return on assets has been consistently between 1. 10 percent and 1. 20 percent and return on equity has been close to 12 percent. higher non - interest income - including mortgage origination and servicing income - and decreases in required provisioning allowed earnings to remain strong despite pressure on margins. only about 6 percent of community banks lost money for the year, representing less than 3 percent of their total assets. consolidation continued in the industry in 2003. according to our preliminary figures, there were about 7, 300 community banks at year - end 2003, some 140 fewer ( 1. 9 percent ) than a year earlier and about 500 ( or 11 percent ) fewer existed five years ago. the consolidation in the industry, and the search for efficiency and scope, should not be misunderstood. it does not signal a threat to the community banking franchise ; far from it. the market for community bank charters makes this point clear. seventy - seven new commercial bank charters were issued in the first nine months of 2003, and nearly five hundred since the beginning of 2000. over that same period, for every five banks that disappeared through consolidation, another two new charters were granted. in total, that represents $ 2. 4 billion in new equity capital invested in community bank charters. community bank net interest margins continue to be above those of the industry as a whole. for 2003, the community bank margin was about 4. 1 percent, nearly thirty - basis points higher than the comparable figure for the industry. to some extent, this reflects a different business mix, despite the role of high - spread credit card lending at larger institutions. a closer look at the call report shows that community banks seem to pay more for their nonmaturity deposits than do larger institutions. the average effective rate | should be particularly attentive to this possibility given the extended period of weak loan demand that we've recently experienced. a natural temptation for a banker when facing pressures for earnings growth would be to extend maturities in search of more attractive rates of return. i'd like to say a few cautionary words about this temptation. with a steep yield curve, the portion of community bank assets maturing beyond five years has grown steadily since year - end 2000, from 16. 9 percent to 18. 4 percent of assets. larger institutions hold a greater share of their assets in long - term instruments and have also seen an increase in long - term assets over the same period. they arguably may have better access to derivatives markets and more sophisticated programs for managing their interest rate risk. rather than resorting to the derivatives market - fewer than 600 commercial banks hold any derivatives contracts at all - most community bankers may simply choose to rely on the interest rate protection provided by their stable and reliable core deposit base. they may believe this base to be more stable and reliable than at larger institutions, and from a historical point of view that belief might be difficult to dispute. community bankers depend on these deposits maintaining the stability and reliability they have exhibited in the past. as a result, interest rate and liquidity management become even more closely intertwined. money market deposit accounts and savings deposits at community banks grew sharply in 2003, although they dropped slightly - less than $ 2 billion or 0. 6 percent - in the fourth quarter. a drop of this size hasn't taken place at community banks for some years, and has not occurred at all at the larger banks. if our analysis is correct and deposit growth has been fueled by low interest rates and weakness in the equity markets, community bankers should be aware that they may face unexpected liquidity and interest rate pressures if their deposit customers shift their funds to other investment vehicles. this is not idle speculation. we need to remember that depositor behavior can change. an excellent example is the high - interest rate period we experienced in the late 1970s and early 1980s, when long - term certificates of deposit were redeemed early - despite the significant penalties assessed - in order to lock in higher market rates. the relative stability of these nonmaturity deposits and the liquidity they provide have been an important strength to community banks, although there have been too many instances in which rapidly growing banks have faced unexpected liquidity pressures because they relied more heavily on non - core or volatile funding sources. | 1 |
very limited. let me conclude by getting back from austria β s focal point of interest, central and eastern europe, to new york β s focal point of interest : the world economy. the increasing globalization of the world economy, with new players emerging on the world stage, has contributed to the very impressive expansion of the world economy in the recent past. yet, this dynamic growth has also spurred economic challenges, such as strongly rising commodity prices and significant current account imbalances. recently, global growth appears to be somewhat more even - footed, as growth in japan and the euro area has been picking up. the economic upswing recorded in the euro area can be attributed, at least partly, to improved economic structures and is based on the stability - orientated framework of emu. the ecb and the eurosystem respectively, will continue to support economic growth in the euro area by vigorously pursuing price stability. following this approach also guarantees that the euro can contribute most effectively to international stability. central -, eastern - and southeastern europe, excluding cis - countries. | of a member state or from any other body. likewise, rights of third parties to approve, suspend, annul or defer central bank decisions on escb - related tasks are incompatible with the eu treaty. the same is true of any rights to censor such decisions on legal grounds. personal independence is about ensuring tenure for members of the escb β s decision - making bodies by minimum terms of office and giving protection against arbitrary dismissal. to make this latter aspect more concrete, a central bank governor may be relieved from office only if he or she no longer fulfills the conditions required for the performance of his or her duties or if he or she has been guilty of serious misconduct, with the possibility of appeal to the european court of justice. financial independence, in essence, denotes that central banks have to be in a position to avail themselves of the appropriate means to ensure that they can properly fulfill their escb - related tasks. those applicant countries which engaged in accession talks with the european union in 1998 - among them the czech republic - already dealt, in detail, with the issue of central bank independence during the membership negotiations last fall, when the chapter β economic and monetary union β was on the agenda. progress in the candidate countries on this issue is being monitored very closely by the european union at large and by the european system of central banks in particular. let me now shortly sketch the second and the third step of the prospective monetary integration of the central and eastern european applicant countries. upon joining the european union, the new member states are bound to the fulfillment of a number of emu - specific obligations : they obligate themselves to orient their overall policies, and specifically their economic and monetary policies, toward the objectives of emu, and they must endeavour to make progress toward meeting the convergence criteria stipulated by the maastricht treaty. they participate in the economic policy coordination process within the eu, are compelled to avoid excessive budget deficits, and commit themselves to present convergence programs on a regular basis. with a view to their eventual participation in the euro area, these new members are expected to gradually adapt their monetary policy instruments to escb standards. eu membership also includes the obligation to treat exchange rate policy as a matter of common interest. among other things, this means that the newly acceding countries are expected to join the exchange rate mechanism of the eu. they need not necessarily participate in this exchange rate system immediately upon joining the european union, but, depending on the specific circumstances in the individual candidate | 0.5 |
move forward, there needs to be a collective change of attitudes and mindsets β particularly towards things like corruption, good governance, and consideration for the public good. here there is good news and bad news. on the positive side, mindsets and attitudes are things within our control. the bad news is that changing attitudes and mindsets is perhaps one of the most difficult things to do. as leo tolstoy once wrote β everyone thinks of changing the world, but no one thinks of changing himself. β for many of you here who will go on to serve in public policy, i urge you to embrace this challenge and give you my wholehearted support. today is a legacy of the past, but history is not destiny. you can make a difference and we need more people who devote themselves to do so. thank you very much for your attention. bis central bankers β speeches | . for asia, industrializing the agriculture sector through the adoption of modern methods and the development of agribusinesses will be a key source of productivity growth. similarly, the composition of the service sector, which is also quite large, has to shift from low - productivity activities to modern, high value - added services. countries that have achieved sustained growth are those that are better at removing the bottlenecks that impede such transformation. this typically requires a number of key fundamental capabilities, such as macroeconomic stability, rule of law, good education, strict enforcement of contracts, a competent bureaucracy, good governance, and low tolerance of corruption. these are often encapsulated under the rubric of strong institutions. one can think of institutions as the set of rules and norms that both governs the incentives of economic agents as well as constrains their behavior. good institutions encourage growth, bad institutions stifle it. entrepreneurship, a critical driver of structural change, relies heavily on the institutional environment. the contrast between north and south korea serves as a striking example of how institutional differences can lead to wildly divergent paths between two regions that were initially very similar culturally and geographically. this does not mean that a country needs to achieve comprehensive institutional development before growth can occur. β big bang β institutional reform is typically infeasible. instead, tackling the most binding constraints one - by - one can yield substantial growth benefits. a country does not need to attain swiss level of institutional quality in order to be able to compete with swiss producers in many products. for example, china β s growth miracle has occurred through selective market - oriented reforms against a backdrop of pervasive economic and political institutional weaknesses. but eventually, the growth process has to evolve to be sustained. at this point weak institutions will hamper growth. transitioning towards a diverse and sophisticated growth model is only possible once institutional strength is achieved along sufficiently many dimensions. this reflects the existence of large complementarities. a strong legal system and enforcement of property rights, for example, won β t boost innovation much if the education system fails to produce a skilled workforce. a highly educated workforce cannot contribute meaningfully if macroeconomic stability is lacking. good macro policy will make bis central bankers β speeches little difference if corruption is rampant. the individual institutional elements complement each other in such a way that the whole is greater than the sum. without sufficiently broad institutional development, growth will stall. many analysts actually believe that several emerging market countries are already | 1 |
receive cra credit for activities serving those areas. the updates related to native land areas provide needed clarity to recognize investment in native communities, but there are of course many native people who live outside of these areas. the final rule also includes provisions that can be used to recognize activities benefiting native individuals and communities outside of designated native land areas. community development activities that serve individuals and communities outside of the native land areas may qualify for cra consideration under another community development category. for example, a loan to a nonprofit organization focused on providing housing to low - or moderate - income urban native individuals could qualify as an affordable housing community development activity. another example would be loans or investments to facilitate community supportive services for low - or moderate - income individuals, such as childcare, education, workforce development and job training programs, health services programs, and housing services programs. another important part of the new rule establishes a community development category that includes cra credit for activities undertaken with cdfis, including native cdfis, 2 / 3 bis - central bankers'speeches which are certified by the treasury department. with this update, the final rule provides clarity that a loan to a native cdfi - including one serving a native community outside of a native land area - would receive positive cra consideration. we know from research conducted by the center for indian country development that native cdfis play a key role in addressing capital and credit needs in indian country. these and other updates to the regulations implementing the cra open promising new opportunities for supporting community development activities in indian country. one objective of the final rule is that it provides greater transparency and consistency in application of the regulations. for example, the new regulations include a list of " impact and responsiveness review factors " designed to standardize the assessment of a bank's community development performance. this is an important change that will guide structured evaluation of banks'community development activities. finally, the definition of " native land area " in the final rule, coupled with data collection and reporting provisions regarding bank community development activities, will support greater transparency in how indian country is served, and provide stakeholders with a better understanding of the needs and opportunities for community development in these areas. in the years to come, we have an important responsibility to monitor and assess how well the updated cra regulations meet the needs of indian country. in our role as one of the cra's regulatory agencies, it will be critical that we continue to listen to and learn from your experiences. native | of the reduction in pricing power observed in this cycle should be reversed as firming demand enables businesses to take back large price discounts. though such an adjustment would tend to elevate price levels, underlying inflationary cost pressures should remain contained. a lack of pressures in labor markets and increases in productivity are holding labor costs in check, resulting in rising profit margins even with inflation remaining low. although energy - using companies will experience some profit pressures as recent increases in spot oil prices become imbedded in contracts, these effects should be limited unless oil prices increase appreciably further. to be sure, over time, the current accommodative stance of monetary policy is not likely to be consistent with maintaining price stability. but prospects for low inflation and inflation expectations in the period ahead mean that the federal reserve should have ample opportunity to adjust policy to keep inflation pressures contained once sustained, solid, economic expansion is in view. improved profit margins over time and more assured prospects for rising final demand would likely be accompanied by a decline in risk premiums from their current elevated levels toward a more normal range. with real rates of return on high - tech equipment still attractive, the lowering of risk premiums should be an additional spur to new investment. reports from businesses around the country suggest that the exploitation of available networking and other information technologies was only partially completed when the cyclical retrenchment of the past year began. many business managers still hold the view, according to a recent survey of purchasing managers, that less than half of currently available new and, presumably profitable, supply - chain technologies have been put into use. recent evidence suggests that a recovery in at least some forms of high - tech investment is under way. production of semiconductors, which in the past has been a leading indicator of computer production, turned up last fall. expenditures on computers rose at a double - digit annual rate in real terms in the fourth quarter. but investment expenditures in the communications sector, where overcapacity was substantial, as yet show few signs of increasing, and business investment in some other sectors, such as aircraft, hit by the drop in air travel, will presumably remain weak in 2002. on balance, the recovery this year in overall spending on business fixed investment is likely to be gradual. the u. s. economy has displayed a remarkable resilience over the past six months in the face of some very significant adverse shocks. but the strength of the economic expansion that is under way remains to be clarified | 0.5 |
ardian fullani : challenges facing the albanian economy and financial sector speech by mr ardian fullani, governor of the bank of albania, at the regional summit of governors and bankers, becici, montenegro, 20 june 2009. * * * distinguished governors, dear participants, i want to start by thanking the organizers of this meeting, for promoting this joint discussion regarding the status of our financial sectors and the measures which are necessary to sustain its resistance to the negative effects of this unprecedented global crisis. indeed, what started as financial crisis in the usa, has transformed itself into an economic crisis, that is having dire consequences in real sectors of the world economy. i will start by describing the main macroeconomic developments of our economy and the characteristics of our financial system, which is similar to other countries in our region. then i will proceed with some of the measures taken by bank of albania, to alleviate the impact of the international financial crisis on our banking sector and the economy. i will finish by mentioning some thoughts on future policies, which i consider important to strengthen the economic environment and the financial stability in our region and in albania. the albanian economy has been growing steadily over the last decade our economy has been in a solid path of growth for the last decade, with an average annual growth rate of around 6 percent. it has benefited from economic reforms that have provided development opportunities for our private business sector, have sustained markets development, have promoted competition, have stimulated flexible labor markets and have increased social revenues. supported by an imf assistance program, both fiscal and monetary policies have been cautious in providing the necessary stimulus to the economic growth, by being consistent and disciplined in the pursuit of their objectives to achieve fiscal consolidation and ensure a low - inflation environment. this steady good economic performance has been supported by a flexible exchange rate that has been instrumental in supporting and maintaining a balanced growth, by maintaining the right incentives for interaction between domestic and foreign counterparties. as in other countries in our region, the banking sector dominates the financial system in albania the assets of the banking sector make around 95 percent of the total financial assets in albania, or around 80 percent of gdp. nowadays, the banking sector counts 16 banks with around 500 branches, all in private hands, where the foreign capital dominates. over time, the sector has increased the number of branches, has improved its products to the public and has increased its intermediating role. at the same time, the entrance of well - known european banking groups from greece, austria | services expansion through the bank offices over 2005 the banking system continued to expand its network rapidly within the republic of albania territory. it expanded with more than 50 branches and agencies throughout the country, although most of them were established in tirana. a considerable number of branches and agencies have been opening in small towns, indicating that a large share of the population is now being provided with banking services. almost all banks have established new branches and agencies, but just like in 2004, the opening of 29 branches and agencies by the small banks ( g1 group ) makes an impact. it mainly relates to the significant growing number of banka popullore branches, which opened 15 new branches throughout the territory of albania over 2005, and to several other banks within this group, which expanded with some new branches and agencies after a period of long inactivity. the number of employees grew considerably over 2005, by 24 per cent, from the growth of 26 per cent over 2004. this significant growth in the number of employees is mainly related to the expansion of the banking system network and to the extension of the banks β activities, which requires a better division of work and a more complete organizational structure. by the end 2005, the albanian banking system had 3, 479 employees, from 2, 816 over the previous year. compared to the previous year, the number of employees per banking unit decreased over 2005. in 2005, banks had 13. 9 employees per banking unit, compared to 15 over 2004. such a decrease has been a consequence of the growing number of branches and agencies with higher rates than the growth of the number of employees. a considerable number of branches and agencies have been established in sparsely populated areas ; as a consequence, the number of employees in these branches and agencies has been quite small. the number of loan officers has increased considerably, following the significant growth of lending over 2005 and in the upcoming period. a considerable number of banks have restructured their loan departments, aiming at a more distinct division of duties and responsibilities. the increase in the number of banks, branches and their agencies, as well as the growing number of bank employees have caused the coverage of the population to improve significantly. thus, the number of inhabitants per bank, banking unit and per bank employee has decreased considerably. table 2 : coverage with banking services 2, 236 2, 816 3, 479 13. 9 13. 9 bank 206, 851 194, 971 184, 410 banking unit 20, 815 16, 593 | 0.5 |
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