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john hurley : the role of the central bank and the current issues being considered by the financial services regulator opening statement by mr john hurley, governor of the central bank and financial services authority of ireland, to the joint committee on finance and public service, dublin, 1 june 2004. * * * introduction thank you chairman for the opportunity to address the committee this afternoon. my colleagues and i are happy to discuss with the committee the general issues arising from the overcharging by aib of certain foreign exchange customers. i appreciate that you noted, in your invitation to us, that an examination into specific issues relating to aib bank is ongoing. other serious issues have emerged since the time of your invitation. as you know, work on all these matters is now the responsibility of the irish financial services regulatory authority rather than the bank. in my opening remarks i would like to deal with the following : β’ the role of the central bank in financial regulation following the restructuring that took place last year ; β’ the central bank β s role in relation to financial stability ; β’ the profile of the banking system in ireland ; β’ the former responsibilities of the central bank in relation to foreign exchange charges ; β’ the current issues being considered by the financial services regulator ; and β’ the compliance environment. role of the central bank i would like to start by briefly putting the role of the central bank in context by describing the new regulatory structures that are now in place following the establishment of the new financial services regulator and our own restructuring last year. on the first of may 2003 the central bank and financial services authority of ireland was established. this body carries out all the activities formerly carried out by the central bank of ireland as well as several additional regulatory functions, including those previously discharged by other regulatory bodies. the regulatory departments of the central bank, i. e., staff and records, were transferred to the regulatory authority. accordingly the cbfsai has two distinct component entities : 1. the central bank in addition to being the corporate entity with responsibility for central services, the central bank also has extensive other functions, including euro - area related functions. our main functions are : a ) monetary policy operations ; b ) financial stability ; c ) economic analysis ; d ) currency and payment systems ; e ) investment of foreign and domestic assets. 2. the irish financial services regulatory authority as you know, this body is responsible for the regulation of all authorised financial entities including banking, securities and insurance and for consumer protection and consumer information matters. the financial services | investigated by the financial services regulator. the financial services regulator has gone about its task in a comprehensive, detailed and pro - active manner. i have full confidence that it will reach the appropriate conclusions and take any necessary further remedial action. thank you, chairman, for permitting me to make this opening statement. my colleagues and i will be very happy to answer any questions the committee may wish to put to us. | 1 |
of macroeconomic stability. achievements made both in the fight against inflation and in easing the budget deficit and public debt were only made possible with great effort and sacrifices. however, the road ahead calls for more effort. we have to use our resources more efficiently in order to converge with the developed countries. to that end, investments in human capital aimed at improving the quality of the labor force in our country should be intensified and competition should be enhanced through effective regulations and implementations, especially in the goods market. the competition authority is one of the main institutional building blocks of the β open economy growth model β implemented in the period after 1980 and is based on strengthening the market economy. competition policies and price stability, which is the core objective of the central bank, are strongly related. in an environment where competition conditions are ensured, monopolistic market behaviors will not be possible. simplifying the entry and exit of firms to the various sectors and increasing transparency are the main factors preventing pricing habits that are based on a high profit margin. additionally, due to pressures from both domestic and foreign competition, firms choose to implement strategies with the aim of increasing productivity, which in turn triggers innovation and technological development and contributes to the acceleration of the potential growth rate of our country. if firms increase profitability through measures that decrease costs instead of increasing prices, our country can reach higher growth rates in an environment of low inflation. various instruments can be utilized to establish an effective competition environment in an economy. the most outstanding of these can be listed as : establishing macroeconomic stability, liberalization of foreign trade, facilitating firms β β including companies owned by nonresidents β entry into and exit from sectors, easing tax and other public burdens, establishing an effectively - operating regulation - supervision structure, preventing unregistered economic activity, ensuring transparency and preventing monopolistic behaviors by reinforcing the regulatory and supervisory institutional structure, ensuring transparency in the public purchases of goods and services and ensuring an effectively - operating judicial system. significant progress has been made in these areas recently. however, there still is more to be done. i believe that the concept of competition should be explored not only using general indicators but also at the level of sub - items. achievements have been made in lifting the hurdles before the liberalization of foreign trade and entry / exit of new firms to the sectors. however, the studies conducted by the central bank show that the foreign competition pressure exerted by imports is not enough to reduce the price - cost margin in | oriented towards domestic markets have been made, particularly during the process of turkey β s accession to the eu. these regulations aim to ensure the integration of the turkish economy with the eu on a sectoral basis and to strengthen the competitive power of our firms. it is not merely the relatively low labor costs that allow our firms to assume a position as important actors in international markets. providing a stable macroeconomic structure for our economy is a must, but it is not enough. the qualified manpower of our country should be increased, our firms should be institutionally open to new developments and our industry should also adopt a structure that is not only demanding but also producing technology. to this end, it is of great importance to implement well - designed microeconomic reforms decisively. competition policy is certainly one of the cornerstones of these reforms. encouraging the entry of new firms equipped with the latest technology and institutional structure into the market constitutes one of the pillars of a well - designed competition policy, whereas the other pillar is to facilitate the elimination of sluggish firms, which have difficulty adapting to changes in a competitive environment, firms will begin to allocate more resources to activities focusing on productivity gains and enriching the product range. it is clear that the ability to access, produce and use information is very important nowadays. in such an environment, only those firms, which closely follow the changes in consumer tendencies, have flexible organizational structures, are institutionalized, are ready to cooperate with other firms and their research units, and draw up their resource allocation plans with a long - term perspective aimed at enhancing the production capacity, will prevail in the arena of global competition. to sum up, in the recent period, important steps have been taken to create an efficient competition environment in the turkish economy. indicators such as the growth rate, the increase in productivity, direct foreign capital inflows and the number of new firms reflect the outcomes of these steps. however, there are still many reforms and regulations to be made. in this framework, it is important that policies regarding the enhancement of the competition environment go beyond general implementations and are established by taking into account the sub - items and their interaction with each other. there is no doubt that information sharing and cooperation among public institutions make up an important part of these policies. naturally, the turkish competition authority and the central bank are among these public institutions. strong relations among public institutions including the last two are critical for the central bank to reach price stability and for turkey to attain a | 1 |
realities. in this context, we note that there have been recent efforts by the imf to promote the use of sdr as a potential reserve asset for the evolving international monetary system. for the sdr to take on this significant role, several prerequisites have to be in place. the sdr has to be accepted as a liability of the imf, has to be automatically acceptable as a medium of payment in cross - border transactions, be freely tradable and its price has to be determined by forces of demand and supply. as the sdr does not satisfy these conditions, it cannot be a reserve currency in the international payment system. in principle, one needs a global central bank to issue sdrs which take the characteristic of unit of global payment and settlement system. thus, we see the move to multicurrency world as a gradual evolution. another dimension of this issue is to change the composition of the sdr basket. going by the recent initiatives, if at all there is a move to alter the composition of the sdr basket, we could consider including currencies of those dynamically emerging market economies that satisfy the existing inclusion criteria : in particular, a fully convertible capital account and a market determined exchange rate. developments in the constituency 13. i now turn to developments in my constituency. bangladesh 14. bangladesh is steadily moving towards a higher growth trajectory that is largely inclusive, environment - friendly and well supported by continued high performance in the agriculture sector. external sector viability has benefited from export growth estimated at 30 percent and the strength of inward remittances. concerted efforts to address the shortage of power have improved the investment climate. however, inflation remains high, with pressures from global prices of fuel, food and fertilizers interacting with enhanced internal demand. revenue mobilization has risen by 28 percent till february 2011 strengthening fiscal sustainability. the budget deficit is expected to remain below 4. 5 percent of gdp thereby aiding overall macroeconomic stability. as import demand picks up on the back of domestic demand, some strains could build on the balance of payments, although the level of foreign exchange reserves would remain sufficient at the level of over four months of imports. accordingly, monetary policy is being tightened with the exchange rate being allowed to depreciate and cushion the balance of payments. over the medium term, the progressive removal of constraints on investment, domestic and foreign, particularly in the context of private and public sector partnerships in large infrastructure projects would enable bangladesh to embark upon double | although it was not as large as that in australia. 2 / 12 bis central bankers'speeches this difference reflects two factors. the first is that the prices of australia β s main commodity exports β iron ore and coal β increased by significantly more than the price of canada β s main commodity export, oil. the short - run supply curve in iron ore and coal tends to be very steep, so the prices for these steel - making commodities increased very sharply when chinese investment in property and infrastructure really took off. the second factor is that commodities make up a larger share of australia β s total exports than is the case for canada. both of our countries have also experienced a pronounced cycle in mining investment. not surprisingly, reflecting the larger movement in our commodity prices, the cycle has been bigger in australia. here, mining investment went from 2 per cent of gdp in the early 2000s to 9 per cent in 2012 ( graph 2 ). another difference with canada is that our main export partner, china, has grown at an average rate of almost 10 per cent over this period, compared with just 2 per cent average growth in canada β s main export partner, the united states. 3 / 12 bis central bankers'speeches both our countries accommodated the increase in mining investment without overheating. our flexible exchange rates played an important role here. given the larger cycle in mining investment here, the impact on the rest of the economy has been more pronounced. while many parts of our economy did well from the boom in mining investment, others did not as they dealt with the higher exchange rate and found it difficult and more expensive to hire workers. one illustration of this broad impact is the substantial decline in australia in non - mining investment as a share of gdp from the mid 2000s ( graph 2 ). by way of contrast, canadian non - mining investment has shown much less variation. for some time, a major factor shaping our forecasts for the australian economy has been a rebalancing of investment between the resources and non - resources sectors. we estimate that the decline of mining investment back to normal levels is around 90 per cent done. so this headwind, which has been weighing on gdp growth for some time, will blow itself out before too long. another headwind we have had for some years is the fall in commodity prices, but this has turned into a gentle tailwind since mid last year. since then the prices of all our main commodity exports have risen. this is good news for us, although we are | 0 |
β how have australian banks responded to tighter capital and liquidity requirements? β, rba bulletin, june, pp41 - 50. debelle, g ( 2018 ), β lessons and questions from the gfc β, speech at the australian business economists annual dinner, sydney, 6 december. the maturity of the loans may be longer than that of the bond / swap, so a new bond / swap may be needed. berger - thomson, l and chapman b ( 2017 ), β foreign currency exposure and hedging in australia β, rba december, pp 67 - 75. as a result, despite being a net debtor nation, australia enjoys a transfer of financial wealth from abroad when the australian dollar depreciates, other things equal. debelle g ( 2017a ), β how i learned to stop worrying and love the basis β, speech at the bis symposium : β cip β rip? β, basel, 22 may. i direct you to any undergraduate finance textbook for a worked example that, under simplifying assumptions, demonstrates how to exploit the basis to earn a risk - free profit. borio c et al ( 2016 ), β covered interest parity lost : understanding the cross - currency basis β, september, pp 45 β 64. available at < https : / / www. bis. org / publ / qtrpdf / r _ qt1609e. pdf >. kearns & patel ( 2016 ), β does the financial channel of exchange rates offset the trade channel? β,, december, pp95 β 113. available at < https : / / www. bis. org / publ / qtrpdf / r _ qt1612i. pdf >. review bulletin, bis quarterly review, bis quarterly Β© reserve bank of australia, 2001 β 2018. all rights reserved. https : / / www. rba. gov. au / speeches / 2018 / sp - ag - 2018 - 12 - 10. html 10 / 10 | a separate monetary easing policy tool and are supplementing the interest rate policy and forward guidance. in contrast, the bank applies forward guidance to qqe as a package. once the pace of the annual increase in the monetary base is set, the approximate pace of increase in jgb purchases is determined accordingly. in this sense, the pace of increase in the monetary base and that in asset purchases are treated as β non - separable, β as shown in chart 3. then the bank uses forward guidance to inform the public of its intention to maintain an increase in the monetary base and thus in asset purchases in the future. in other words, the bank attempts to exert downward pressure on the entire yield curve by influencing the expectations of the markets and the public about the low level of the yield curve in the future. second, the bank purchases treasury discount bills ( t - bills ) and other assets, in addition to jgbs, to meet the monetary base target. 6 moreover, it regularly conducts fixed - rate fundssupplying operations ( with a duration of mainly three months, but available up to one year ). therefore, these short - term operations exert downward pressure directly on short - term interest rates. in contrast, the federal reserve purchases longer - term treasury securities ( with a remaining maturity from four to 30 years ) and agency mortgage - backed securities ( mbss ). the downward pressure on short - term interest rates is exerted through the forward guidance. third, the bank and the federal reserve have different views on long - term inflation expectations. forward guidance issued by the federal reserve assumes that longer - term inflation expectations have been anchored at around 2 percent. however, there may be some limited concerns on the dis - anchoring of inflation expectations. therefore, one of the main tasks for the federal reserve is to continue with monetary easing measures to seek economic improvement, while ensuring that the anchored inflation expectations are maintained. in contrast, the bank has not yet successfully anchored long - term inflation expectations at around 2 percent. thus, the bank must help transform the deflation - oriented mindset of all economic entities and then increase inflation expectations to a higher level of 2 percent. therefore, the threshold used for forward guidance concentrates solely on β 2 percent β or β maintaining 2 percent in a stable manner. β fourth, federal reserve forward guidance includes employment - related thresholds. it has a dual mandate of promoting price stability and maximum employment, so the reason for this is clear. | 0 |
attains the economy β s long - term sustainable level, remains for the most part intact. β¦ while the conditions for a turnaround in the euro area are poorer. the total international recovery expected during the coming year does not look to be as strong as the riksbank anticipated in december. the background to this is that developments in the euro area in general and in germany in particular look rather gloomier than they did before. the euro area β s export industry is hampered by international uncertainty, as well as a stronger euro and a weak labour market is affecting households β consumption and confidence in the future. this means that the international economic prospects look rather poorer now, which was also the conclusion of the executive board at its monetary policy meeting on 6 february. however, this assessment is based on the assumption that the iraq crisis will develop in a way that will not significantly deteriorate economic prospects. flat growth path for the swedish economy the financial unease has also affected the swedish economy. industrial production has stood still during the autumn and order books have been slow to fill. this is perhaps not so strange in the light of the β wait - and - see β mentality prevailing on important export markets. however, as the international economic climate improves, this and the cyclical pattern for investment are expected to give impetus to industrial production in sweden. over the past six months, swedish households have become increasingly pessimistic in their view of the future, which is perhaps understandable taking into account the negative news with which they are confronted : rising energy prices, higher taxes and expected cuts. the scope for consumption will be under pressure from these factors in the near future. at the same time, households β savings were at a high level in 2002, which means that there may be some scope to increase consumption despite the restraining effects. altogether, i believe there is also reason for a downward revision of the estimate of the swedish growth rate over the coming years. the expected upturn is assessed to be somewhat superficial. this also assumes that the iraq conflict does not develop in a way that will seriously deteriorate future prospects. the shaping of monetary policy a decisive factor in the shaping of monetary policy in future is the total picture of inflation prospects. a slightly more subdued growth in demand both in sweden and abroad is expected to lead to capacity utilisation being slightly less strained. at the same time, energy prices have pushed up inflation. however, the riksbank β s assessment is that the upturn in inflation | hermann remsperger : heavy tails and stable paretian distributions in finance and macroeconomics welcome address by professor hermann remsperger, member of the executive board of the deutsche bundesbank, at the bundesbank conference centre in celebration of the 80th birthday of professor benoit b mandelbrot, eltville, 9 november 2005. * * * ladies and gentlemen, dear professor mandelbrot, i have the great pleasure of welcoming you to the bundesbank conference on β heavy tails and stable paretian distributions in finance and macroeconomics β on the occasion of the 80th birthday of professor benoit mandelbrot. nowadays, it is common knowledge that prices in financial markets do not always behave in the manner that normal distribution would predict. at the same time, modelling financial markets is one of the most important tasks a central bank has. a thorough understanding of financial markets is necessary for appraising the transmission of monetary policy and thus maintaining price stability as well as for preserving financial stability. either way, extracting market expectation is always an important part of the exercise. ultimately, we would like to estimate a distribution of all the relevant economic variables. but the complexity of the real world does not allow a meaningful estimation of the economic system as a whole. so far, we have been restricted to concentrating mainly on estimating the conditional expected value, knowing that information on dependencies and higher moments would be desirable. models of the monetary transmission channels would suggest that the central bank sets the short - term interest rate, which, in turn, influences interest rates over the entire maturity range, the exchange rate and, possibly, other asset prices. through the different spending components, these financial variables affect output and prices. furthermore, the banking channel has to be taken into consideration. that means that the effect on the availability and terms of bank loans and subsequent impacts must be observed. this is especially true in a bank - dominated financial system such as the german one. standard models used to assess the impact of monetary policy decisions, like the expectation augmented phillips curve, need to model inflation expectations. it is normal practice to deduct a certain formation of expectations from economic theory, which produces an estimation model. lucas β rational expectations are probably the best - known example. a different approach for extracting expectations concentrates merely on reading financial data β without the underpinning of a comprehensive economic model. prices of financial instruments can reveal some expectations. and innovative products are widening | 0 |
to cover 99 % of current and potential losses that may arise from their participants defaulting. on top of this, they need to hold additional resources to withstand a range of extreme but plausible stress scenarios. these could include, for instance, the two largest participants in a major cross - border ccp defaulting. to prepare for situations of even more extreme market distress, ccps also need to formulate recovery plans that show how they intend to absorb losses and restore business viability. see cΕure, b. ( 2015 ), β ensuring an adequate loss - absorbing capacity of central counterparties, β remarks at the federal reserve bank of chicago 2015 symposium on central clearing, chicago, 10 april. 3 see cpmi - iosco ( 2017 ), β recovery of financial market infrastructures β revised report β, july. 4 see cpmi - iosco ( 2016 ), β guidance on cyber resilience for financial market infrastructures β, june. the eurosystem recently established the euro cyber resilience board ( ecrb ) for pan - european financial infrastructures, which will help raise awareness and provide a platform for discussing issues related to cybersecurity. see cΕure, b. ( 2018 ), β a euro cyber resilience board for pan - european financial infrastructures β, introductory remarks at the first meeting of the ecrb, frankfurt, 9 march. 5 under the fsb key attributes of effective resolution regimes, fsb members have committed to establish crisis management groups for ccps that are systemically important in more than one jurisdiction. 6 see cpmi - iosco ( 2018 ), β framework for supervisory stress testing of central counterparties ( ccps ) β, april. 7 see bcbs, cpmi, fsb and iosco ( 2017 ), β analysis of central clearing interdependencies β, 5 july. 8 see also ecb ( 2017 ), opinion of the european central bank on a proposal for a regulation of the european parliament and of the council on a framework for the recovery and resolution of central counterparties and amending regulations ( eu ) no 1095 / 2010, ( eu ) no 648 / 2012, and ( eu ) 2015 / 2365 ( con / 2017 / 38 ), 20 september. 4 / 4 bis central bankers'speeches | ##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 | 1 |
kazi abdul muktadir : islamic finance developments in pakistan keynote address by mr kazi abdul muktadir, deputy governor of the state bank of pakistan, at the islamic finance news ( ifn ) roadshow 2012, karachi, 4 september 2012. * * * distinguished guests, ladies and gentlemen! assalam - u - alikum and a very good morning. it is my great pleasure to welcome you all in this ifn road show. i would like to congratulate and thank redmoney for organizing the show in pakistan, which is one of the fastest growing islamic finance markets across the globe. such events not only enhance islamic finance awareness and stimulate its demand but also provide a platform to islamic finance stakeholders to share their experiences and insights about this fast emerging segment of the financial system. i hope that today β s discussions and deliberations would help in addressing the key challenges being faced by the industry and contribute towards sustaining the growth momentum. ladies & gentlemen! since the inception of modern islamic finance in 1960 β s, islamic banking has evolved from its relatively modest size to a vibrant industry with an increasing global footprint. with a size of us $ 1. 35 trillion ( according to global islamic finance report 2012 ) and annual growth rate of more than 20 percent, the islamic financial industry now comprises 430 islamic banks and financial institutions and around 191 conventional banks having islamic banking windows operating in more than 75 countries. the relative resilience and stability of the industry during the financial crisis and its flexibility and responsiveness to changing business needs has helped the industry to establish itself as a viable financial system. the tremors and aftershocks of the financial crisis are still on either in the form of european debt crisis and / or weakening global economic outlook and the policy makers are still looking for answers to fix these issues. islamic finance, with its roots in a moral economic model that supports productive economic activity and discourages excessive leveraging and imprudent risk taking, can play an important role in rebuilding the financial system. i believe that this is high time for islamic economists and scholars to highlight the inherent strengths and potential of islamic finance in addressing the existential challenges faced by the global financial and economic systems. ladies & gentlemen! the evolution of islamic finance industry in pakistan has followed the same trajectory as global islamic financial industry ; with growth mainly intensifying over the last decade. despite having introduced landmark changes during 1980s including amendment in the banking companies ordinance, enactment of mudaraba companies and | www. federalreserve. gov / newsevents / speech / brainard20210113a. htm ; and lael brainard ( 2021 ), β how should we think about full employment in the federal reserve's dual mandate? β speech delivered at the ec10, principles of economics, lecture, faculty of arts and sciences, harvard university, cambridge, mass. ( via webcast ), february 24, https : / / www. federalreserve. gov / newsevents / speech / brainard20210224a. htm. - 3workers in the lowest - wage quartile continued to face staggering levels of unemployment of around 22 percent in february, reflecting the disproportionate concentration of lower - wage jobs in services sectors still sidelined by social distancing. 5 the leisure and hospitality sector is still down almost 3. 5 million jobs, or roughly 20 percent of its pre - covid level. this sector accounts for more than 40 percent of the net decline in private payrolls since february 2020. overall, with 9. 5 million fewer jobs than pre - covid levels, we are far from our broad - based and inclusive maximum - employment goal. inflation similarly remains far from the goal of 2 percent inflation on average over time. both headline and core pce inflation were below 2 percent on a 12 - month basis throughout 2020 and came in at 1. 5 percent in january. finally, while vaccinations are continuing at an accelerating pace, over two - thirds of the adult population have yet to receive their first dose, and there are risks from more contagious strains of the virus, social - distancing fatigue, and vaccine hesitancy. 6 outlook as the economy reopens, the potential release of pent - up demand could drive stronger growth in 2021 than we have seen in decades. however, it is uncertain how much pent - up consumption will be unleashed when social distancing completely lifts, and how much household spending will result from the new stimulus and accumulated savings. with pce accounting for roughly 70 percent of the economy, this uncertainty about consumption spending contributes to uncertainty about activity, employment, and inflation. for more information on this analysis, see the box β disparities in job loss during the pandemic β in board of governors of the federal reserve system ( 2021 ), monetary policy report ( washington : board of governors, february ), pp | 0 |
have fallen by 30 per cent, while the combined receipts from stamp duties, cgt and corporation tax have fallen by 58 per cent over the same period. in total, just over half of the revenue loss since 2007 reflects declines in these three categories. along with the collapse of tax revenues, an expansion of government spending β partly driven by policy, partly by the automatic response to a deteriorating output and employment situation β resulted in the sudden emergence in ireland of a sharp fiscal deficit, after years of surpluses. i don β t need to dwell today on the robust, measured and appropriate policy response in ireland that has stemmed and begun to reverse this fiscal set - back. instead, i want to note the striking extent to which uk fiscal trends up to 2009 have paralleled, albeit in a more muted way, those of ireland. as i understand it, the recession in the uk has also been characterized by a fall - off in tax revenues and a rise in spending which, though not quite as sharp as in ireland, have together resulted in the emergence of a deficit of comparable proportions as a percentage of gdp ( in this case following a number of years where the deficit ran at around 3 per cent ). uk tax revenue too has been sensitive not only to the economic cycle, but also to the level of housing market and financial sector activity. in terms of corporation tax, for example, revenues from the financial sector have typically accounted for around 25 per cent of the overall corporation tax take, while the housing sector has provided revenue in much the same way as i have described for ireland. uk treasury estimates suggest that receipts from taxes linked to these two sectors rose from around 3 per cent of gdp in 2002 β 03 to 4ΒΌ per cent of gdp by 2007 β 08 and accounted for around half of the increase in total current receipts over this period. receipts from the two sectors are projected to decline to around 2ΒΎ per cent of gdp in the current fiscal year, down by over one - third as a share of gdp. public spending has also been growing, not least designed to offset some of the downturn in other spending. in summary, in both countries, the collapse of the housing and credit booms has had a major impact on the public finances. for ireland at least, the lesson has been that our taxation system needs to be on a firmer footing than in the past. british and irish banks and the property bubble β home and abroad while tax incentives undoubtedly played a part in the irish story, however | gabriel makhlouf : remarks - launch of the consumer protection discussion paper remarks by mr gabriel makhlouf, governor of the central bank of ireland, at the launch of the consumer protection discussion paper, dublin, 3 october 2022. * * * good morning everyone, i am delighted that you have been able to join us here in north wall quay this morning, for the launch of our consumer protection discussion paper. the publication of this paper marks the first step in what we hope will be an open conversation on important consumer protection issues. we want to take the time to listen to you so that we understand your perspectives in order to inform our consumer protection work. consumer protection is at the heart of everything the central bank does. our guiding principle, from our founding legislation, is that our " constant and predominant aim shall be the welfare of the people as a whole. " we harness our wide - ranging economic, financial stability and regulatory expertise to protect consumers'interests. i will hand you over to deputy governor derville rowland shortly who will speak about the consumer protection framework, the themes in the paper and the role our planned engagement will play in the evolution of the framework. but first let me explain why we are publishing this paper today. as you all know, financial services are undergoing major change and we are already in a period of transition driven by innovation and changes in consumer preferences. increasingly people are accessing their financial services digitally, while some continue to favour a traditional means of access. through this period of transition, the central bank aims to continue to protect consumers'interests. we want to better understand, anticipate and be forward - looking and responsive to the new environment and the far - reaching changes taking place in financial services. in our view, consumers'interests are best protected through having effectivelyfunctioning financial services markets made up of sustainable, resilient and well - run consumer - focused firms who provide availability and choice. positive consumer outcomes depend on firms acting in their customers'best interests, consumers being empowered to make informed decisions, and rules and regulations that provide users of financial services with a proportionate level of protection. the consumer protection code sets out the conditions in which this objective is fulfilled by firms. the code has served consumers well. it has established a set of rules and 1 / 2 bis - central bankers'speeches expectations for how firms should treat their customers and has allowed us to intervene to protect consumers. but with financial services evolving rapidly, the code must also | 0.5 |
policy rates, particularly in the euro area ( slide 9 ). the trend line is much flatter than in the past β that is, markets expect less monetary policy tightening for each incremental improvement in the medium - term inflation outlook. such correlation patterns do not imply causality. but they do suggest that the market may have started internalising our new forward guidance, especially regarding the conditions that we need to see to start raising policy rates. 3 / 5 bis central bankers'speeches first, we want to see inflation reaching 2 % well ahead of the end of our projection horizon and we want it to remain at 2 % thereafter. and, second, realised progress in underlying inflation needs to be sufficiently advanced to be consistent with inflation stabilising at 2 % over the medium term. in other words, given the significant uncertainty surrounding inflation projections many years out, we want to see clearer signs that inflation is reliably moving towards our 2 % target. this will imply a more patient reaction function, consistent with the previous scatterplot analysis, and hence may also imply a transitory period in which inflation is moderately above target. two additional developments corroborate the view that investors have started internalising our more patient reaction function. one relates to the distribution of risks around the future interest rate outlook. after the announcement of our new strategy and forward guidance, the risk distribution around the future evolution of the 3 - month euribor has been truncated from the top, meaning that investors have effectively priced out contingencies that foreshadow a very steep increase in policy rates ( slide 10 ). such expectations are consistent with our new september ecb staff projections, which show that inflation is expected to remain below our 2 % target in the medium term. the second development relates to the distribution of risks around the future inflation outlook. since the beginning of the year, the balance of risks priced in by investors has noticeably shifted to the upside. option prices, for example, currently suggest that, in the united states, the market attaches a probability of around 80 % that inflation over the next five years will, on average, be above the federal reserve β s 2 % aim ( left - hand chart, slide 11 ). 4 in the euro area, the priced - in probabilities are smaller but have also increased visibly to nearly 40 %. this is also increasingly reflected in the euro area bond market. the compensation that investors demand for uncertainty around the future inflation outlook β the inflation risk | of short - term interest rates, or, alternatively, that other factors are holding yields down. the delta puzzle the factors that may explain current bond market conditions remain the subject of intense market speculation. i would like to focus on two such factors pointing in different directions as to whether current yield levels constitute a puzzle or not. the first relates to the possibility that the market may be overestimating the risks to the global growth outlook from the spread of the more contagious delta variant. our analysis shows that, in the united states, adverse macroeconomic shocks β in all likelihood related to covid - 19 β have systematically suppressed long - term interest rates since about may ( left - hand chart, slide 5 ). to some extent, this seems surprising. there is no doubt that the delta variant has started affecting mobility and business conditions in contact - intensive services industries in some regions, especially in the united states. it is also likely that the delta variant is aggravating and prolonging supply bottlenecks ( right - hand chart, slide 5 ), also because vaccination rates in emerging economies remain low. all in all, the delta variant has many characteristics of a genuine supply - side shock, raising prices and lowering output. but market analysts β growth expectations suggest that this shock is widely perceived as being short - lived. for example, consensus economics β expectations for real gdp growth in 2022 have remained unscathed by the renewed surge in infection rates, both in the euro area and the united states ( left - hand chart, slide 6 ). these expectations have continued to increase and have settled at levels well above estimated potential growth rates. a recent survey among european fund managers showed that only 3 % of investors consider covid - 19 as a significant risk to the growth outlook. 2 high and rising vaccination rates in advanced economies are expected to make growth increasingly immune to economically painful stop - and - go disruptions. 2 / 5 bis central bankers'speeches similarly, credit rating upgrades have recently outpaced downgrades by a substantial margin on both sides of the atlantic ( right - hand chart, slide 6 ). in europe, the pace of upgrades has even accelerated compared with the second quarter. the delta explanation becomes even more of a puzzle when considering recent developments in stock markets, which have continued their undeterred rally over the summer ( left - hand chart, slide 7 ). today, the euro stoxx is some 15 % above its pre - pande | 1 |
it. but what exactly do we mean by β normal β? this leads me to the next question. is the policy rate higher on average if inflation in general is relatively high than if it is very low? as i have already mentioned, the interest rate consists, somewhat simplified, of a real part and a part that is compensation for inflation. 6 in a world with a very low average inflation rate, interest rates in general β the normal situation β will be lower than in a world where inflation is on average higher. as i just pointed out, one reason why interest rates are lower now than during the 1980s, for instance, is that inflation has fallen. a lower inflation rate was indeed what the introduction of inflation targeting was meant to achieve. but it is not only a too high inflation rate that is problematic, a too low inflation rate can cause problems as well. let us assume that inflation in one country is on average 2 per cent, while in another it is on average 0 per cent β one can assume, for instance, that they have different inflation targets. the interest rate in the first country will therefore be 5 the examples i use focus on the central bank's policy rate, but the reasoning can be extended to include more long - term interest rates. unconventional monetary policy in the form of asset purchases works partly by lowering long - term interest rates. 6 this correlation is described by what is known as the fisher equation, named after the american economist irving fisher, who is renowned for his works on the theory of interest and debt deflation during the first decades of the 20th century. the fisher equation is expressed by the formula i = r + Ο, where i is the nominal interest rate, r the real interest rate and Ο is inflation. 4 on average 2 percentage points higher than that in the second country, as those borrowing money do not need to pay any compensation for inflation if it is zero. let us now assume that a recession occurs in both countries, and the respective central banks need to cut their policy rates. let us also assume that real interest rates are at record low levels, as is the case today, and that the neutral level of the policy is therefore already low. the second country has less scope to cut its policy rate than the first one. when the policy rate in the second country reaches its lower bound, the first country still has 2 percentage points at its disposal. in other words, it is not possible to make monetary policy as expansionary in the country where | falling interest rates, perhaps combined with greater predictability as to how interest rates and inflation will develop in future, explain a large part of the increased willingness to borrow. one can thus say that households β growing debt burden is to some extent a natural consequence of the successful inflation - targeting policy pursued over the past decade. as i see it, it is reasonable to assume that we are heading towards a new equilibrium, where households have adapted their borrowing to what they perceive as a lower long - term level for interest rates, although it is not yet possible to say when we will reach this stage. there is still a possibility that households are underestimating the uncertainty of future trends and therefore borrowing more than would correspond to a long - term equilibrium position. in sweden, as in many other countries, households have primarily borrowed in order to buy accommodation, which has led to house prices rising at roughly the same rate as the borrowing. the question now is whether there is reason to take this development into account in monetary policy decisions. a strictly - applied inflation - targeting model would not take this into account, and there is no mention of it in the monetary policy clarification published in 1999. the general problem is whether low inflation can make various asset prices, such as equity prices or house prices soar way beyond what is reasonable and if so, what monetary policy can do to remedy this. should the repo rate be used to slow down this development to try to prevent prices becoming so high that the fall, when it actually comes, will be too fast and too far? there are many examples of how the air has gone out of asset markets and thereby triggered or aggravated a downswing in economic activity. or is it more reasonable to wait until the β bubble β has burst and then try to counteract the effects the best one can? this question is neither a simple one nor a new one. it is discussed by central banks around the world, whether or not they have specific inflation targets. and there is hardly a clear - cut answer. as i see it, the seriousness we in sweden should attach to households'increased debt burden is closely connected with how we assess price trends in the housing market. although there has so far been a large rise in prices, particularly in metropolitan areas, we have not seen the clearly speculative tendencies apparent in other markets, for instance australia and the united kingdom. in sweden we still usually buy housing to live in it ourselves. in some other countries, where the tax legislation and | 0.5 |
that was made available to the uk during the period from 1964 to 1977. the scheme was undertaken under the auspice of broader international initiatives, and the two central banks, in particular, were in very close cooperation. for details, please refer to the handout of a historical summary of major events that involved the uk - japan relationship. in this regard, i would also like to refer to some of the bank of england β s collections that are displayed in the showcase. the collections are commemorative of relations between the bank of england and japan as a whole. they are made available here today kindly by mr. keyworth, the archivist of the bank of england. concluding remarks finally, let me move from the past to the future. the future is always uncertain, but some current trends and changes can be certain in the future as well. among them are globalization and the advancement of communications technology. it is true that these things will reduce notional distance between countries, but nobody would deny the importance of direct face - to - face interactions between people in the market. as far as we understand it, the very strength of the london market comes from such direct face - to - face interactions between market participants, who work here in financial, accounting, legal and other related businesses. the london market attracts the best and brightest professionals and management from all over the world. in fact, their close interactions generate the dynamism of market development. that is why the bank of japan highly values information and insights that our london office gains from direct contacts here. moreover, that is why the bank of japan sees our london office as one of the important channels of communication to market participants. in concluding, i thank again, all the guests, predecessors and your institutions for the 100 - year - long friendship and cooperation. and i am convinced that this established good relationship will continue for another century. there is no β exit policy β from london. i wish all the best for each of you. thank you. | s economic activity and prices. meanwhile, japan's financial system has maintained stability on the whole. although attention is warranted on, for example, the impact of the tightening of global financial conditions, the financial system is likely to remain highly robust on the whole, even in the case of an adjustment in the real economy at home 1 / 2 bis - central bankers'speeches and abroad and in global financial markets, mainly because japanese financial institutions have sufficient capital bases. regarding financial risks from a longer - term perspective, while there is a possibility that prolonged downward pressure on financial institutions'profits may lead to a gradual pullback in financial intermediation, the vulnerability of the financial system could increase, mainly due to the search for yield behavior. although these risks are judged as not significant at this point, it is necessary to pay close attention to future developments. ii. conduct of monetary policy next, i will explain the bank's conduct of monetary policy. the bank considers that sustainable and stable achievement of the price stability target is not yet envisaged with sufficient certainty at this point, and that it is important to closely monitor whether a virtuous cycle between wages and prices will intensify. in this situation, it will patiently continue with monetary easing under quantitative and qualitative monetary easing ( qqe ) with yield curve control, aiming to support japan's economic activity and thereby facilitate a favorable environment for wage increases. in october, the bank decided to conduct yield curve control with the upper bound of 1. 0 percent for 10 - year japanese government bond ( jgb ) yields as a reference and to control the yields mainly through large - scale jgb purchases and nimble market operations. this decision was based on the assessment that it was appropriate for the bank to increase the flexibility in the conduct of yield curve control. the bank will conduct monetary policy with the aim of achieving the price stability target of 2 percent in a sustainable and stable manner, accompanied by wage increases. thank you. 2 / 2 bis - central bankers'speeches | 0.5 |
labour income inequality : evidence from italy β, bank of italy occasional papers series, n. 606, 2021. this important topic. his contributions to the literature on the impact of technology on the labour market and on inequality have set milestones in these fields. while new technologies can affect welfare and inequality, requiring a reaction from labour market institutions and policies, the latter can in turn have an important influence on the adoption of technologies. a few papers in the programme discuss this interplay. one shows that improving the quality of worker - job matching, including through well - designed institutions and labour law reforms, is crucial to unlocking the economic gains of innovation. 2 another paper shows that unions play an important role in technology adoption : their actions reduce the negative effects of technology on workers and can even improve the quality of the technology in which firms invest3 ( today β s opening paper, also about unions, confirms that they negotiate over different job characteristics, not just about money ). 4 another paper to be presented this morning shows that digital technology can also improve occupational training and skills acquisition, and ultimately promote the adoption of new technology itself. 5 digitalization has also enabled the rapid and massive shift to remote working triggered by the pandemic. employees benefit from reduced commuting time and costs, more flexible daily schedules, and a better work - life balance. firms can reap significant cost savings from reduced need for office space, and can achieve better job - matches by potentially recruiting from a larger pool of candidates, as physical proximity is no longer indispensable. but there could be a dark side of these visible benefits : in the medium to long term, the changes in interactions patterns among colleagues brought about by remote working could have unwanted and hard - to - identify effects on productivity, innovation and even mental well - being. working from home also poses challenges for firms in terms of adapting management practices and incentivising employees. 6 research on these effects is hampered by the relative novelty of the phenomenon, but it will become very relevant to private and public decision - makers as soon as availability of good quality data makes it possible. let me now turn to the issue of rising inequalities. the pandemic has exacerbated deep - seated inequalities β in income, access to health care, job security, and opportunities. unequal societies tend to be more prone to economic inefficiencies and political instability, and the two are likely to reinforce each other. | ignazio visco : creating job, eradicating poverty and achieving sustainable prosperity statement by mr ignazio visco, governor of the bank of italy, on behalf of the constituency representing albania, greece, italy, malta, portugal, san marino and timor - leste, to the development committee, tokyo, 13 october 2012. * 1. * * creating jobs for development : a challenge for all countries according to the ilo β s latest estimates for 2012, the global number of unemployed is 200 million, about 30 million more than in 2007. at the same time, the share of the working age population with a job declined to an estimated 60. 3 per cent in 2012 from 61. 2 per cent in 2007. this scenario is projected to remain mostly unchanged in the coming years and can even turn out to be optimistic should some of the downward risks materialize. thus, the world development report ( wdr ) 2013 on jobs recently published and its companion paper β creating jobs for development : policy directions from the 2013 world development report on jobs β are timely in addressing one of the most pressing problems for many policy makers around the world. they also offer an opportunity to refocus the attention of the bank on its original mandate of eradicating poverty and boosting prosperity. jobs and especially good jobs, are the main avenue to achieve both goals. as the wdr 2013 states, it is for the private sector to create economically and socially sustainable jobs, and for the government to provide a stable macroeconomic environment, an investment friendly business climate, a solid rule of law and a balanced labor market regulation. policies and interventions will need to be tailored to each country β s initial conditions, based on the diagnosis of the constraints to job creation. 2. the knowledge bank : implications for the business model the strategy that aims at eradicating absolute poverty in poor countries and achieving sustainable and inclusive prosperity in middle income countries deserves support. financial resources need to be directed with priority towards countries that do not have access to the market at a reasonable cost. on the contrary, about 50 per cent of the overall ibrd exposure is currently to countries with per capita income above 2, 900 us dollars, and 30 per cent is to countries that can borrow from the market at a spread of no more than 150 basis points over the corresponding us treasury. redirecting financial resources to the least developed countries cannot imply that the wbg ceases to serve middle income countries. the wbg needs to define a | 0.5 |
##coins β do not come exclusively from flows out of deposits in those same banking sectors. european central bank directorate general communications sonnemannstrasse 20, 60314 frankfurt am main, germany tel. : + 49 69 1344 7455, e - mail : media @ ecb. europa. eu website : www. ecb. europa. eu reproduction is permitted provided that the source is acknowledged. media contacts related topics https : / / www. ecb. europa. eu / press / key / date / 2019 / html / ecb. sp190917 ~ 9b6... 18. 09. 2019 digital challenges to the international monetary and financial system digitalisation crypto - assets financial markets international relations money page 8 of 8 currencies disclaimer please note that related topic tags are currently available for speeches and introductory statements to the press conferences ( with q & a ) from 2018 - 19 only. copyright 2019, european central bank https : / / www. ecb. europa. eu / press / key / date / 2019 / html / ecb. sp190917 ~ 9b6... 18. 09. 2019 | much more severe than the impact our measures are said to have. 2. the impact of regulation alongside monetary policy, the new regulatory environment is a second key policy parameter affecting market functioning. the most prominent regulations cited by dealers as having had an impact on market liquidity are the leverage ratio, the liquidity coverage ratio ( lcr ), the net stable funding ratio ( nsfr ), as well as structural bank reforms ( e. g. the volcker rule ). while it is difficult to definitively identify a causal link β some observers note that banks and dealers are in the process of re - allocating business between risk - weighted asset and leverage ratio constrained lines of business β there are some reasons to suggest that market behaviour is consistent with the dealer behaviour mainly being constrained by the leverage ratio. the implied reduction of balance sheet available to trading desks, however, does not have a straightforward effect on liquidity. instead of a general widening of bid - offer spreads, which would be consistent with a general drop of liquidity, the reduction of available balance sheet has had two salient features in recent years. first, liquidity has been rationed to a larger degree in the sense that dealers have had to deploy their balance sheet selectively towards the most profitable businesses. second, liquidity itself has become more volatile and unevenly distributed across market segments, leading to greater market segmentation. in particular, it is now more difficult for dealers to use cross - market positions to bridge liquidity across the sub - segments of the euro area bond market, because it is more expensive to carry spread positions. volumes in the bond futures market provide a good example. before the crisis, only three german government bond contracts on eurex were reasonably liquid and the bellwether 10 year bund contract saw trading of around one million contracts a day. today, daily trading volumes in that contract have fallen to around 600, 000, while around 100, 000 10 year btp contracts and 80, 000 10 year oat contracts trade every day. neither of these bis central bankers β speeches contracts even existed before the crisis. bearing in mind that the locus of trading has shifted from cash bonds towards futures, these volume developments show that trading activity has decreased overall at the same time as it has splintered across markets. to give another example of this trend, we can recently observe that it has become more expensive to borrow certain securities, such as those issued by the german government, over the quarterly balance sheet closing dates | 0.5 |
with the most important representatives of socialism. catholic economists and sociologists β from the italian scholar giuseppe toniolo to the germanic intellectual carl von vogelsang β analysed the problems of capitalism and proposed new models of work organization ( see o. kohler, la formazione dei cattolicesimi nella societa moderna, in storia della chiesa, vol. ix : la chiesa negli stati moderni e i movimenti sociali 1878 - 1914, milan, jaca book, 1982, pp. 234 - 239, and o. de dinechin, sj, rerum novarum, in β aggiornamenti sociali β, 3, 2019, pp. 258 - 262 ). 1. war cannot generate prosperity humanity cannot thrive without peace, and neither can the economy. in the countries involved in a conflict, war seriously damages the drivers of growth. 4 hostilities destroy productive capital : infrastructure, machinery and raw materials. they claim victims, especially among the young generations, bending learning opportunities and the formation of a skilled workforce to the requirements of war. this reduces the availability and quality of β human capital β. furthermore, wars often erode social capital, 5 thereby weakening social cohesion and trust in institutions. the war effort supports aggregate demand and can stimulate innovation, but seriously distorts its purposes. the economic benefits are short - lived and do not remove the need to reconvert the economy once a conflict is over, even in countries that were involved in the conflict but suffered no direct damage to their territory. the high inflation and the steep fall of economic activity that often mark wartime periods are signs of the damage that wars inflict on the economic fabric ( figure 2 ). the manufacturing of war equipment does not help increase a country β s growth potential. 6 development comes from productive investment, not from arms. that is why, in the 1930s, john maynard keynes proposed a massive rise in public investment spending as a solution to economic depression in the united states, suggesting that president roosevelt β s focus should be on β the rehabilitation of the physical condition of the railroads β. 7 moreover, it is misleading to attribute technological progress to military expenditure. it is scientific research that sparks innovation. military investment can generate innovation if it is allocated to research. 8 however, we do not need to resort to war for this : technologies developed for military purposes only translate into progress when they later find civilian applications. war is therefore a | peace and prosperity in a fragmented world speech by fabio panetta * governor of banca d β italia economy and peace : a possible alliance fondazione centesimus annus pro pontifice bologna, centro san domenico, 16 january 2025 today, our world is facing an alarming rise in geopolitical tensions and conflicts. the number of wars, which had decreased after the fall of the berlin wall, has turned upward again in the last fifteen years ; in 2023 it reached its highest level since world war ii ( figure 1 ). in many regions, war β often fratricidal β is a daily reality. 1 day after day, the news brings us dramatic images, reawakening fears linked to the traumatic experiences of the two world wars. in western europe, the debate about significantly increasing defence spending has resurfaced after a long time. but conflicts are not the only cause for concern. the denial of basic needs, which still affects large parts of the world's population, is also a form of violence. after decades of ever stronger international cooperation and economic integration, history now seems to be taking a step backwards. it is a very different world from the days when i started working as a central banker. in many ways, it is a world of greater uncertainty and less hope for the future, although even back then there was no shortage of stark clashes and dramatic tensions. 2 * i would like to thank andrea brandolini, patrizio pagano, roberto piazza, pietro rizza and girolamo rossi for their help in writing this speech, and valentina memoli and roberto pisano for their editorial support. most of the ongoing armed conflicts are civil wars. those in myanmar, sudan and ethiopia are among the bloodiest ( source : acled ). the war in sudan is causing a devastating humanitarian crisis : some 25 million sudanese are suffering from food shortages ; 10 million have fled their homes and 2 million have sought refuge abroad. in the 1980s, despite signs of progress and hope β such as the possible rapprochement between the superpowers β there were still geopolitical, social and economic tensions. the cold war shaped world politics, fuelling fears of an imminent nuclear conflict. in the middle east, the iran - iraq war and the conflict in afghanistan, with the soviet invasion, strained international relations. apartheid in south africa was a further sign of the persistence of racial segregation dividing societies around the world. in poland, the solidarity movement | 1 |
international monetary fund deputy managing director, mr tao zhang, visit to botswana welcome remarks by moses d pelaelo governor, bank of botswana july 25, 2018 distinguished guests, i am privileged to welcome you to this special dinner, hosted by the bank of botswana, in honour of our esteemed guest, the deputy managing director of the international monetary fund, mr tao zhang. on behalf of the board, management and staff of the bank, we very much appreciate your honouring the invitation and your presence tonight. thanks to you all. in welcoming the deputy managing director, i wish to observe that, coincidentally, his visit to botswana comes shortly after the conclusion of the annual article iv consultation that took place just over a month ago. it is also two weeks after the workshop on fintech, payments and financial inclusion, jointly organised by the bank of botswana, the international monetary fund and the bank of canada. thus, the visit reinforces the beneficial relationship between botswana and the international monetary fund. mr zhang is accompanied by his advisor, mr steven allen barnett, mr enrique gelbard, the mission chief for botswana β s imf article iv consultations, who is quite familiar to several of us ; and mr abdulqafar abdullahi, advisor to the executive director for the africa group 1 constituency at the imf, to which botswana belongs. tonight mr zhang will address the global, regional and botswana connections with respect to economic and policy developments. previously, in 2007, the then deputy managing director, mr takatoshi kato, while visiting botswana dealt with challenges and opportunities for growth in sub - saharan africa, with special focus on botswana. in 2011, mr naoyuki shinohara discussed challenges relating to the management of natural resources and developmental opportunities in botswana. in 2016, mr zhang β s immediate predecessor, mr min zhu, eloquently articulated technological progress and evolving industry arrangements that nations, such as botswana, can harness to take development to the next level. honourable minister, distinguished guests, given the high level attention given to botswana by the imf, it is fitting to briefly highlight the benefits of being a member and working with the imf since 1968. first, the capacity of the imf to analyse global developments and potential transmission channels and spillover to various regions and countries is key to timely responses to harness opportunities and / or mitigate risks. second, the regular consultations, on the main through the article iv missions, enables dialogue with local stakeholders in the policy arena, industry | , as well as economic analysts and civil society. this enables an understanding of the unique situation of botswana and the interaction with global and regional developments ; thus, structural evolution and trends, developmental aspirations and needs that inform policy priorities and key data trends. in turn, such exchange of information enables evaluation of prospects and policy options, going forward. third, the bank, as well as institutions such as the non - bank financial institutions regulatory authority and statistics botswana, benefit from targeted technical assistance and skills development provided by the imf from the headquarters in washington dc or through the regional technical assistance centres, such as afritac south based in mauritius, to which botswana is affiliated. this technical assistance enables improvements in areas such as legislation, macroeconomic policy frameworks and formulation, regulatory approaches, as well as structuring and governance of institutions as necessary. in addition to improving operational competencies, access to training and skills development also encompasses interaction with other practitioners globally to share experiences. distinguished guests, it is clear, therefore, that the imf facilitates access to resources that members can opt to tap into subject to evaluation and assessment of their needs. in this regard, sustained judicious and prudent management of resources and the economy, as is the case in botswana, enables a wider range of choices and options with respect to policies, prioritisation of resource allocation, as well as the timing of implementation to achieve the desired objectives. distinguished ladies and gentlemen, you will be aware that botswana desires to transit from upper middle income status to high income status, and globally this transition is judged to be challenging, as it requires substantial structural transformation and shifts in growth strategies and policies. for botswana, it is estimated that this requires annual gdp growth rates of 8 percent over a six year period to leap from the current per capita income of just under usd8 000 per annum to above usd12 000. as a country, in the recent years, we noted challenges of slower growth rates compared to when we graduated from low - income status, slower than desired rate of economic diversification, as well as relatively high level of unemployment. in this respect, it is expected that, going forward, our relationship with the imf will focus on drawing on their expertise and sharing of experience of other countries to support transformation policies and strategies to enable botswana to fulfil its aspirations for a high - income status on a sustainable basis. distinguished guests, ladies and gentlemen, i thank you for your kind attention. | 1 |
the u. s. and in the u. k. were instrumental in decreasing yields by several tens of basis points, with spillover effects on other asset prices, including mortgage rates and exchange rates. in turn, gdp growth and inflation rates also appear to have been significantly affected. after all, even if they have to use new instruments, central banks cannot avoid their responsibility in ensuring price stability, as long as inflation continues to be determined by monetary policy. broad - based asset - purchases would allow the ecb to continue pursuing its mandate even under more adverse circumstances. it is however important that other policies also play their part. an extreme adverse scenario that has recently appeared in the public debate is that of a β secular stagnation β. 8 this is effectively a situation where the β natural β long run growth rate of the economy falls significantly and permanently, e. g. because of a fall in the growth rate of population or because of a fall in technological progress, or both. this scenario is only still a possibility, but it is illustrative of a broader need for structural policies to again unleash the growth potential of our economies. public spending should be redirected towards public investment in infrastructures and education. international trade and labour mobility should be fostered. these are the best recipes to ensure that the secular stagnation will remain a purely academic hypothesis. conclusions today, i have focused on the low inflation challenges, but let me conclude with a quick reminder that we remain watchful of financial market developments. a necessary condition to ensure the effectiveness of our intended monetary policy stance is to alleviate credit supply constraints. this explains why new targeted ltros are part of the package of measures decided by the governing council in june. see e. g. krugman, p ( 2013 ) β secular stagnation, coalmines, bubbles, and larry summers β http : / / krugman. blogs. nytimes. com ; krugman, p. ( 2014 ) β inflation targets reconsidered β, presented at ecb forum on central banking, sintra ; summers, l. ( 2013 ) β remarks at imf fourteenth annual research conference in honor of stanley fischer β β ; eggertsson, g. and mehrotra, n. ( 2014 ) β a model of secular stagnation β, mimeo. bis central bankers β speeches to sum up, the main challenge monetary policy faces in the euro area today is to ave | ##lfil our monetary policy tasks. i also want to stress that, as a rule, the implementation of the regime for non - eu countries should continue to rely as much as possible on cooperation with, and deferral to, local authorities. let me also stress the crucial importance of finalising the adoption of key pieces of eu legislation β such as emir ii β well in advance of brexit, in order to be prepared for all possible contingencies, including a no - deal scenario. failing to do so could leave central banks and supervisors without the appropriate tools to handle the risks linked to systemic euro ccps operating outside the umbrella of eu regulation. naturally, we are available to provide any assistance in the context of these discussions. finally, we should not overlook the systemic cross - border implications of central clearing within the eu. we should therefore also strive to achieve enhanced supervisory convergence within the union. this would contribute to ensuring the integrity of the single market 3 / 4 bis central bankers'speeches and a level playing field, consistent with the objectives of the capital markets union. the european parliament can play a key role in furthering these objectives. conclusion let me conclude. our monetary policy measures have had tangible benefits for the euro area economy. further policy initiatives are however needed to reduce vulnerabilities, strengthen resilience in crisis situations and increase growth potential. only ambitious policies will deliver concrete benefits for the people of europe. this is also what our common history tells us. this year marks the 25th anniversary of the single market and of the maastricht treaty β s entry into force. those were bold decisions and we continue to benefit from them today : goods, people, services and capital can move freely and eu legislation ensures that commensurate rights and obligations apply throughout our union. with the creation of economic and monetary union ( emu ) we went further by adopting the single currency. it is in this spirit that i look forward to the coming months and the pivotal discussions we will have on reforming emu governance. thank you for your attention. i am at your disposal for questions. 1 www. ecb. europa. eu / press / key / date / 2018 / html / ecb. sp180205. en. html 2 see β low inflation in the euro area : causes and consequences β, ecb occasional paper series, no 181, january 2017. 3 see β domestic and global drivers of inflation in the euro area β, ecb economic bulletin | 0.5 |
##bitrage relationships, leaving them incapable of explaining recent developments in both credit volumes and risk premiums. economists at central banks and in academia will need to devote much effort to overcoming these deficiencies in coming years. however these models are adapted, recent events suggest that central banks should be wary of placing too much faith in model - based analyses, which are necessarily predicated on past empirical correlations and relationships. as we have seen, financial innovation can induce structural changes that can importantly alter the way financial institutions, markets, and the broader economy respond to shocks. for this reason, policymakers should take a critical approach to evaluating analyses of this sort, and should always probe to find the sensitivity of results to unstated assumptions that may no longer be valid. given our limited understanding, the first line of defense against systemic risk must be building more robust and resilient financial systems. private parties are doing a great deal to increase capital and liquidity and enhance risk - management practices. but policymakers must also adapt their supervisory and regulatory structures to promote a robust financial system that can withstand occasional shocks, even severe ones, without systemic problems that become destabilizing. we must ensure that financial firms β especially those central to the functioning of our highly interlinked markets β have sufficient capital, liquidity, and management resources to back financial intermediation activities both on and off their balance sheets. another important consideration should be to make sure that our regulatory policies do not exacerbate credit and business cycles. and we should be considering ways to promote transparency that would enhance market functioning and the ability of investors to bring their own discipline to bear on decisions to buy and sell. a central challenge will be to structure financial oversight to both deter unwanted and excessive risk - taking and permit the innovation that can ultimately boost economic growth. because central banks are ultimately responsible for financial stability, they must work closely with legislators and with other supervisory authorities at home and abroad to ensure that these goals are met. can the conduct of monetary policy also be adapted to reduce the odds of systemic financial events, and should the manipulation of short - term interest rates take account of the potential for imbalances and price bubbles as well as the traditional objectives of price stability and economic growth? here i think the lessons of the current episode need to be studied further. before the recent experience, i believed that the appropriate strategy for conventional monetary policy was to focus exclusively on the stability of economic activity and overall prices for goods and services over the next | different set of forces that mold the development of discount factors which, together with earnings projections, produce estimates of market value. first, the rapid shift in the composition of gross domestic product towards idea - based value added is muddying our measures of current earnings and, hence, our projections of future earnings. the key definitional question that must be confronted is, what is a capital outlay? conversely, what is an expense that, by definition, is consumed in the process of production and deemed an intermediate product? this issue is most immediately evident in accounting for software outlays, but it is rapidly expanding to a much broader range of activities. software that is embedded in capital equipment, and some that is stand - alone, is currently being capitalized and consequently amortized against current and future earnings. but a substantial portion of software spending is expensed, even though the equity prices of the purchasing companies are clearly valuing the software outlays as contributing to earnings over their useful economic lives β the relevant criterion for capitalizing an asset. there has always been a fuzzy dividing line between what is expensed and what is capitalized. this has historically bedeviled the accounting for research and development, for example. but the major technological advances of recent years have exposed a wide swath of rapidly growing outlays that, arguably, should be capitalized so that the returns they produce would be more accurately reflected as earnings over time. indeed, there is even an argument for capitalizing new ideas, such as different ways of organizing production, that enhance the value of a firm without any associated outlays. some analysts judge the size of undercapitalized outlays as quite large. 1 the important point, however, is that decisions about which items to expense will have important consequences for reported earnings. in general, if the trend of expensed items that should be capitalized is rising faster than reported earnings, switching to capitalizing these items will almost always accelerate the growth in earnings. the reverse, of course, is also true. but the newer technologies, and the productivity and bull stock market they have fostered, are also accentuating some accounting difficulties that tend to bias up reported earnings. one is the apparent overestimate of earnings that occurs as a result of the distortion in the accounting for stock options. the combination of not charging their fair value against income, and the practice of periodically repricing those options that fall significantly out of the money, 2 serves to understate | 0.5 |
markets and payment systems. as far as interbank markets are concerned, two factors should play a key role : β’ the first factor relates to the various rules market operators have to abide by. these rules apply to counterparts, market makers, brokers, rating agencies and market enterprises such as clearing houses. they take the form of codes of conduct, regulations, master agreements and market standards. an appropriate degree of harmonisation of these market rules should be reached under the aegis of central banks and prudential authorities ; β’ the second factor, the use of a single range of reference interest rates would guarantee the transparency of the euro money market. in this respect, short - term maturities are of special interest to central banks. this justifies that they intervene to some extent in the process of elaborating these indicators. as a matter of fact, the emi has recently agreed that the escb should sponsor the computation of an overnight reference rate for the euro area. as regards payment systems, the target system will also contribute to the rapid emergence of a unified money market throughout the euro area. target will connect the domestic real - time gross settlement ( rtgs ) systems operated by the national central banks. it will enable participants to make totally safe cross - border settlements in euro, in real time and at a low cost, thereby facilitating interest rate arbitrage. all large - value payments related to monetary policy operations will have to process through target. a common closing time for domestic rtgs and the harmonisation of conditions under which intraday liquidity will be provided by national central banks within the euro area should also help prevent any risk of segmentation of the single money market. 2. 1. 2. interest rate volatility the emi has described in various publications the set of monetary policy instruments that will be made available to the escb. 7 this set will comprise open market operations, standing facilities and minimum reserves. it should fulfil two basic functions : firstly, to enable the escb to control efficiently its operational target ; secondly, to signal the escb monetary policy stance. it should also be consistent with the requirement laid down in the maastricht treaty that the escb should act in accordance with the principle of an open market economy with free competition, favouring the efficient allocation of resources. in practice, the concrete design and use of monetary policy instruments will depend crucially on the degree of volatility of the short - term rate chosen as the operational target that | benjamin e diokno : empowerment of persons with disabilities through digital financial inclusion speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the43rd national disability prevention and rehabilitation week, 18 july 2021. * * * good day to everyone. the bangko sentral ng pilipinas is pleased to join the celebration of the 43rd national disability prevention and rehabilitation week. this year β s theme of β kalusugan at kaunlaran ng pilipinong may kapansanan, isulong sa gitna ng pandemya β is timely and very much aligned with the thrust of the bsp. the covid - 19 pandemic, while sparing none, has worsened difficulties for our most vulnerable and overlooked segments. socioeconomic gaps, including access to vital services, have widened. empowerment could thus not be a greater imperative. this is why we at the bangko sentral ng pilipinas believe that empowering our kababayan, especially in these extraordinary times, can lead to a better financial future and propel us to post - pandemic recovery and growth. the empowerment of the vulnerable sectors has always been an underlying objective of the bsp β s efforts. for this reason, we are continuously stepping up our financial inclusion efforts to ensure financial services are within easy reach for all filipinos, including persons with disability. with access to a wide range of financial services, filipinos can better manage their finances, seize income opportunities, and build financial resilience. financial inclusion therefore empowers individuals to improve not only their welfare, but also that of their family and community. the need for financial inclusion has been highlighted by the pandemic as people needed to transact digitally. people who had a transaction account were able to safely and conveniently conduct financial transactions through their mobile devices at the comforts of their home. this crucial capability for digital transactions should be within reach by every filipino in the new, and increasingly digital, economy. the bsp has therefore committed that by 2023, at least 70 % of adult filipinos own and use a formal account, and at least 50 % of retail payment transactions are performed digitally. we are optimistic of achieving these targets, even earlier than planned. over the years, the bsp has laid down the foundation for financial inclusion through our regulations and initiatives to build the inclusive digital finance ecosystem | 0 |
persons, find themselves, with no fault of their own, in a property or life threatening situation. the compensation right of these persons is and must remain inviolable, which is why this aspect will remain to be intensely present in our on - site supervisions. off - site insurance supervision of the national bank of serbia is a high - quality innovation which surely marked this year. our goal was to find some specific aspects of business of insurance undertakings, which are not of particular interest in standard supervision, but are nonetheless very important for citizens. in that way, we tried to provide better protection to, for instance, students of primary and secondary schools, hotel guests, citizens paying for public utilities, public transport commuters and other persons that are or can be in the role of the insured. through such supervision, we first learned about the business of the insurance undertakings selected as representative in those segments, after which we established the standards of good business practices, which we then recommended to the entire market with the aim of improving it. i particularly wish to emphasise that insurance undertakings have recognised this intention of ours, to which they not only responded appropriately, but even chose to voluntarily take part in the proliferation and promotion of such practices. in this way, we managed to together create better work conditions for all market participants, which should in the first place be working based on uniform principles, and to which their supervisor should apply the same standards and criteria. we are very pleased with the achieved results. some poor practices have been entirely done away with, others have been improved, while some brand new, good and desirable practices are becoming the standard for doing business. off - site insurance supervision has thus greatly stepped out of the mould of a passive collector of various reports and data, bringing the scope of its activity to the level the modern insurance market requires and deserves. perspectives of insurance supervision are inextricably bound to serbia β s path towards europe. the national bank of serbia particularly supports the commitment of the serbian government to european integration and acts as an active participant in this process, through negotiations, mainly in the area of financial services, but also through a wide array of other activities aimed at harmonising regulations and creating an economic environment that is more favourable and secure for both companies and citizens. it is already well known that the regulatory objective of the serbian insurance sector and its supervision is the solvency ii regulatory framework. countries in the european union already started implementing it last year, whereas we | claudia buch : data sharing for better policy making introductory statement by prof claudia buch, vice - president of the deutsche bundesbank, at the g20 dgi - 2 workshop on data sharing, virtual event, 24 march 2021. * * * dear ladies and gentlemen, let me, on behalf of the deutsche bundesbank, welcome you very much to this workshop on the g20 data sharing initiative. a very challenging year lies behind all of us. the covid - 19 pandemic has been one of the most severe and devastating shocks to the global economy in decades. global output contracted by about 3. 4 % in 2020, according to oecd estimates. output losses were even higher in germany ( - 5 % ) and the euro area ( - 7 % ). obviously, the pandemic has had severe implications which go far beyond the observable macroeconomic impacts. covid - related health effects and deaths pose a considerable burden on our societies and imply severe suffering. many firms, small and large, are feeling the impact of the lockdown measures and are struggling to keep operations going. given these huge economic and social costs, it is almost impossible to take an optimistic perspective on what the pandemic has done to our societies. if anything, it has shown to all of us that health and economic risks cannot be addressed in isolation. our economies are so closely interwoven that cooperation and coordination of policy responses are essential. hence, we need to find solutions to global problems together. sharing data and information is a core element of these common solutions. detailed health - related information is available globally, the development of vaccines has been promoted through sharing of relevant information, and many analytical projects use detailed granular data to assess the economic impacts of the pandemic. so what does all of this imply for us as central banks and providers of statistical information? let me answer this question through the lens of financial stability. the corona pandemic clearly demonstrated the importance of coordinated and timely policy responses. all over the world, governments took health policy measures to contain the disease from spreading. extensive monetary and fiscal policy measures helped avert turmoil in financial markets and a liquidity crisis in the real economy. these policy measures also shielded the financial system from the corona shock. as a result, the financial system has proven robust β not least thanks to the g20 regulatory reforms implemented after the global financial crisis. regulation is more flexible and less procyclical. higher capital buffer | 0 |
martin redrado : overview of monetary and financial policy in argentina speech by mr martin redrado, president of the central bank of argentina, before the committee on treasury and budget of the national senate, buenos aires, 20 december 2006. * 1. * * monetary and financial policy guidelines in our third year in office, we are laying the foundations and starting points for the monetary and financial system of the coming decades. this strategy is based on four main pillars - a consistent, articulate and gradual monetary policy ; a foreign reserve accumulation and management policy that provides a long - term horizon ; a system that is independent from public sector needs ; and a policy framework that boosts corporate and household credit. the economic literature has shown that there is no optimal one - size - fits - all scheme. worldwide, there are success stories both of fixed and floating exchange rate regimes, with or without explicit inflation targets, that use the money supply or the interest rate as an instrumental variable. the important thing here is not the label of the regime, but the monetary policy internal consistency, designed to ensure a balanced money market. at this stage in national history, there are no adequate substitutes for a monetary policy that allows the system to develop while keeping the growth of monetary aggregates in check and fosters savings without affecting investment. in fact, we carry out a sterilization program that is unprecedented for argentina - because of its depth as well as its quality - on the basis of a public sector that saves, a sound financial system, and a central bank with a strengthened balance sheet. while we are enjoying a favorable international scenario, believing that this scenario will last forever would be misleading. in fact, the world today is highly volatile and, as we all know, the challenges we face are magnified in emerging countries such as argentina, where transmission mechanisms are still vague and instruments have a limited power. as a consequence, our risk management approach entails that monetary and financial policy should help prevent crises and weather uncertain scenarios. this leads to the development of countercyclical mechanisms to cushion the effects of external disruptions on the economy. one of them is the prudential policy of international reserve accumulation, which enables us to hold a stock of over usd 31 billion, an unforeseen level not long ago. besides, after decades of financing public spending through various monetary arrangements, we are designing an independent monetary and financial system. this structural change sets out a substantial difference from the past : neither the central bank | martin redrado : a convincing strategy article by mr martin redrado, governor of the central bank of argentina, published in la nacion newspaper on 18 may 2008. * * * in argentina we have overcome a week of financial turmoil. however, those focusing on the ghosts of our troubled history are looking at our country through the rear - view mirror. there is currently no relationship, not even remote, to the conditions that led to the critical events of the past. the central bank has proven that it is in a position to play for the first time in decades its fundamental role : ensuring monetary and financial stability to all argentineans. our strategy in the foreign exchange market is the most eloquent proof of the robustness of our policies. this resilience of our system is not by chance but causal, since it derives from the existence of multiple preventive mechanisms built throughout recent years so as not to jeopardize stability even in situations like the current one. preventing the use of reserves in times of dollar demand by the public would be as absurd as not using an umbrella when it rains. in this case, the stock of foreign reserves would not be a β cushion β to buffer financial ups and downs but a β bedrock β with no absorption capacity. the strengths of our monetary and financial system are evident. foreign reserves reached a record - high level for argentina : they currently account for almost 100 % of demand deposits plus cash held by the public ( 45 % in 2001 ). in addition to providing resources to face possible shocks, foreign reserves are also a deterrent : they limit the chances of success of any speculative movement against the peso. likewise, a trade surplus close to 12 billion dollars this year ensures a structural foreign exchange supply that may more than offset any temporary dollar demand, making any nominal devaluation speculation irrelevant. exports dynamics in general, and industrial exports in particular growing at an annual rate of 18 %, show that there is no competitiveness problem today, which was the main cause for past crises. in turn, the current managed floating regime proves to be the right one for an economy in transition like ours. that is, it provides predictability and prevents excessive volatility from affecting economic decisions. what would have happened in these circumstances under a pure floating exchange rate regime? our strategy curbed depreciation expectations and, thus, the potential pressure on prices. moreover, thanks to a sound financial system we are not facing a run on deposits as in the past | 0.5 |
are still in search of a β friend β to negotiate with the bank. as mentioned above, i understand that above all the reason behind might be our poor tradition in addition to the high degree of informality and a lot of other objective and subjective reasons. however, i think that the cause might be even the lack of detailed clarifications, and lack of informative publications, and lack of the propaganda in the public environment as well as in media. i think that in the propaganda spaces in the media more space should be given to the clarifications of special products, while launching of new products should be accompanied by standard advertising campaigns. dear participants, allow me that before closing my speech to express again my high appreciation on the albanian association of banks, ensuring that governor of bank of albania will always be its decent partner in the long path of institutional co - operation. i sincerely hope that this meeting of banking associations is an important step towards establishing a fruitful regional co - operation. i am personally committed, in future contacts with my colleagues of the region β s countries, to dedicate a special room to this co - operation, hoping that i will find on them a well - understanding and full support. i again wish you successful and fruitful proceedings of this meeting. thank you. | of credit growth reflects the banks β cautious in terms of lending. in this context, the bank of albania points out that, notwithstanding the externally generated short - term risks, the medium and long - term outlook for albania remains sound. albanian consumers and businesses should be more realistic about their development plans and adopt a more pragmatist approach to increase current investments and consumption. also, the banks β sound balance sheets should provide more financial funds to support the economy by increasing lending. looking forward, the new information obtained during the last month confirms our previous projections on the expected performance of the albanian economy over the monetary policyrelevant horizon. the albanian economic activity is expected to grow at positive but low and below potential rates. the poor performance of private investments and consumption restricts the room for economic growth. on the other hand, preliminary information suggests that the fiscal stimulus may be upward in the next year, complementing the foreign demand as a short - term contributor to next year β s economic growth. however, the overall effect of fiscal stimulus will depend on the response by the private sector and financial markets. at the same time, its long - term effect will depend on additional costs that it will bring about on the budget. the bank of albania deems that the aggregate demand will not exert upward pressures on inflation. against the backdrop of a stable monetary environment, well - anchored inflation expectations and moderate impact from import prices and exchange rate, inflation is expected to remain within the bank of albania β s target over the period ahead. under these circumstances, our monetary policy is expected to retain its stimulating nature in the medium term. * * * concluding the discussions, the supervisory council decided to keep the key interest rate unchanged, at 4. 0 %. bis central bankers β speeches | 0.5 |
exclusively taken by individual borrowers. these loans account for around 10 % of total loans to households, and individuals with chf - denominated loans ( 75, 412 ) account for 2. 1 % of the total number of individual borrowers. for comparison, in poland, the number of chf borrowers exceeds 500, 000. the rationale behind the boom in chf lending during 2007 - 2008 is in close connection with the social factors. the chf borrowing costs were lower at the credit agreement date, which ensured easier access to lending for lower income borrowers, as well as larger loans for larger income borrowers. on the other hand, the unfavourable developments in the chf may have a major adverse impact on debtors β capacity to repay the loans. a simulation of the instalments of a standard loan in chf, ron and eur respectively, extended in december 2008, shows that : ( i ) at the credit agreement date, the monthly instalments on chf - denominated loans were lower compared with similar monthly instalments on loans granted in ron or eur, and ( ii ) the impact of the change in the exchange rate and / or the interest rate was stronger on chf loans than on those in the other currencies. the number of chf borrowers is on the decline ( by 31. 8 % in november 2014 compared with december 2008, i. e. by around 35, 200 ). the drop is due to loan repayment, loan conversion into another currency, their removal from the balance sheets or their sale. the number of chf borrowers fell at a faster rate compared with the household loan dynamics at aggregate level, the number of debtors moving down 15 % between december 2008 and november 2014. the number of chf loans witnessed a similar development. credit risk associated with chf - denominated loans is relatively higher compared with other currencies. in november 2014, the npl ratio on household loans in chf stood at around 12 % versus 9. 4 % for all foreign currency - denominated loans to households, yet the dynamics were similar to those of foreign currency - denominated loans overall. bis central bankers β speeches recent studies also identify heightened risks and correspondingly high costs associated with chf loans to unhedged borrowers at an international level, particularly in non - euro area countries. individuals with chf - denominated loans are not a homogeneous group | mugur isrescu : the most important economic decision nations have ever faced lecture by mr mugur isrescu, governor of the national bank of romania, at the bitcoin versus central bank digital currency conference, bucharest, 6 april 2023. * * * ladies and gentlemen, good afternoon! thank you for attending this conference on the topical issue of cryptocurrencies and central bank digital currencies. today i have the pleasure of welcoming and introducing our distinguished guest speaker, ms. sundri khalsa, professor at the national intelligence university - known as " the harvard of the intelligence field ", and a us marine corps veteran. welcome, professor khalsa, to romania and to the national bank of romania! sundri khalsa's background also includes being a professor at the united states naval academy, director and instructor of the marine corps military occupational specialty training school, where she trained and certified marine corps signals intelligence and electronic warfare officers. she is an expert with field experience in signal intelligence and information support for integrated military operations. let me add that her studies also include degrees from harvard university, john f. kennedy school, with additional certification in management, leadership and decision sciences, university of virginia ( with specialization in chemistry and biochemistry ) and new mexico military institute ( where she was awarded the science scholar awards in physics and chemistry ). her book " terrorism forecasting : indicators and analytical techniques " is on the cia's reading list and used in university courses. her articles and research cover topics such as mutual support of qualitative and quantitative methods in the field of intelligence or topics related to the debate in the intelligence community about intuition versus structured technique in prediction and decision making in conditions of risk and uncertainty. she is a supporter of structured methods and statistical, cybernetic and mathematical analysis in the development of prediction systems. one final thing about her background, which i am certain many of you will find interesting, is that she is a marine corps black belt mixed martial arts instructor. she has led the marine expeditionary unit training in martial arts and trained over 200 marines and certified 60 to the next higher belt. so all in all, a very impressive background and track record. professor sundri khalsa is visiting the research institute of the university of bucharest. professor marian preda, the rector of the university, wrote me about this visit. he pointed out that, in addition to being a specialist in the development of applications of quantitative and statistical | 0.5 |
submitted to the bank of italy. of course this in no way means that machines will replace the'judges ', but we believe that it can improve the assistance given to the panel members in making decisions. let's see what comes out of the debate, also regarding the risks of potential errors or even biases in decisions that are partly automated. lastly, another very important topic is the connection between the work done by adr systems and the work assigned to the supervisory authorities for consumer protection. it will be interesting to understand and see how adr systems can help to strengthen the wealth of data available to the sectoral supervisory authorities when carrying out their supervisory functions. i think some useful ideas will emerge here that we can discuss together. we see the ombudsman ( together with the managing of customer complaints ) as a very important part of consumer protection, flanked by supervision ( in both its regulatory aspects and its interventions ), and by financial education : dialogue between these three different functions is fundamental. international debate can be useful in identifying good practices in this area too. 3 / 4 bis - central bankers'speeches i hope the challenges that adr systems in the financial and insurance sectors will have to tackle will also be outlined during the upcoming debate and that we can take away some interesting ideas on the policies to be implemented. i am referring to the new aspects of customer protection to be safeguarded in relation to the development of new fintech operators and smart contracts, the relationship between individual and class actions, the regulation of an ecosystem that hosts different types of adr, the growth of cross - border complaints and the integration of the access channels of the various adr systems borrowing from some exemplary international experiences. it only remains for me to'formally'open the conference, and to greet and thank all the participants. the floor now goes to the general counsel of the bank of italy : marino perassi. thank you all 4 / 4 bis - central bankers'speeches | upon the introduction of qqe. compared to the united states and europe, inflation expectation formation in japan is judged as being largely adaptive, meaning that the expectations are formed in accordance with developments in the observed inflation rate. against this background, reflecting a substantial fall in crude oil prices since summer 2014 and a slowdown in emerging economies from 2015 through 2016 accompanied by turbulence in the global financial markets, the observed inflation rate declined, dragging down inflation expectations as well. the bank aims to drastically convert the deflationary mindset entrenched among people and re - anchor inflation expectations at 2 percent, but this has met with difficulties. given that qqe is unprecedentedly powerful, due attention also has to be paid to side effects that could materialize going forward. if an excessive decline in and a flattening of the yield curve were to last for too long under powerful monetary easing, risks of a pullback in financial intermediation and of destabilizing the financial system through downward pressure on financial institutions β profits could not be ignored. if these risks were to materialize, the transmission mechanism of monetary easing would be hampered and it would become more difficult to achieve price stability and sustainable economic growth in a self - fulfilling manner. it was judged that the bank has to achieve the most appropriate interest rate level with a view to containing such side effects to the minimum. bearing these issues in mind, the bank introduced β qqe with yield curve control β last september. this new policy framework was established through a further evolution of qqe, consisting of mainly two components ( chart 7 ). the first is yield curve control, which was introduced with the aim of realizing the combination of the levels of interest rates that are deemed most appropriate for maintaining the momentum toward achieving the price stability target of 2 percent, while also considering the effects on the functioning of financial intermediation. under this framework, japan β s yield curve during this one year has been formed smoothly in a manner consistent with the guideline for market operations, in which the short - term policy interest rate is set at minus 0. 1 percent and the target level of the 10 - year jgb yields at around zero percent. the second component is an inflation - overshooting commitment, which aims at ensuring that inflation expectations will be anchored at 2 percent. this is a further powerful commitment by the bank ; namely, it is committing itself to expanding the monetary base until the year - on - year rate of increase in the observed | 0 |
jerome h powell : central clearing in an interdependent world speech by mr jerome h powell, member of the board of governors of the federal reserve system, at the clearing house annual conference, new york city, 17 november 2015. * * * thank you for inviting me to speak today. 1 i attended the clearing house annual meeting in 2013 and spoke about financial market infrastructure reform. two years have passed, and this is a good opportunity to take stock. i β ll start by reviewing the progress made in strengthening central counterparty ( or ccp ) clearing, and then offer some thoughts on expanded central clearing for repurchase agreement ( or repo ) markets β an area of significant current interest. in the years leading up to the financial crisis, the over - the - counter ( otc ) derivatives market experienced rapid growth and an underappreciated buildup of risk. the huge losses suffered by the american international group ( aig ) on its derivatives positions and the lack of transparency about the exposures of aig β s counterparties were major accelerants to the financial panic that reached its acute phase in september 2008. in response, in 2009 the group of twenty nations committed to moving standardized derivatives to central clearing, and to requiring posting of margin for derivatives that are not centrally cleared. 2 i am a believer in the potential benefits of central clearing under the right circumstances. but central clearing is not a panacea. charts similar to that in figure 1 are often used to illustrate the netting of exposures and simplification that central clearing can bring to an otc market. the tangled and highly opaque picture of a purely bilateral market is replaced by the neat hub - and - spoke network in which a ccp is buyer to every seller, and seller to every buyer, allowing netting and greater transparency for participants and regulators alike. of course, reality is not so elegant, as figure 2 illustrates. there are multiple ccps, even within product classes, and major dealers act as clearing members across a broad network of ccps. clearing members also perform a range of services for ccps, including custody, liquidity provision, and settlement. by design, increased central clearing will concentrate risks in ccps ; it is essential that, as these risks accumulate, the ccps build up their ability to manage them. it is often noted that ccps made it through the recent financial crisis without direct government assistance. but many of their major clearing members did receive such assistance. cc | ##ers are among the most prominent cash providers in segment 4, while securities dealers are the primary borrowers of cash. dealers may use this cash to fund their own portfolios ; they may also lend it to other dealers in the general collateral finance ( gcf ) repo market ( segment 5 ). this segment is cleared through the fixed income clearing corporation, and is currently the only segment of the market that is centrally cleared. based on figures from september 2015, the size of the tri - party repo market, segment 4, was approximately $ 1. 5 trillion and the gcf market ( segment 5 ) was approximately $ 300 billion. the general lack of data on bilateral repo activity makes it difficult to know the precise size of each individual segment of that market, but bilateral repo and securities lending taken together accounted for approximately $ 1. 7 trillion in outstanding activity. 7 general collateral or gc repo involve repo transactions secured by a range of treasury or other assets that are accepted as collateral by the majority of intermediaries in the repo market. gc repo assets are high quality and liquid, but not subject to exceptional specific demand. these estimates are based on the methodology described in adam copeland, isaac davis, eric lesueur, and antoine martin ( 2012 ), β mapping and sizing the u. s. repo market. β bis central bankers β speeches given its vast scale and position at the center of the wholesale finance markets, repo is without doubt a critical activity. repo is a key source of financing for a wide range of firms, and an important β safe asset β for investors. the gcf segment, although modest in size compared to the overall market, is a key source of financing for smaller dealers, particularly in times of financial stress. the availability of repo funding for a diverse range of participants supports market liquidity by enabling them to make markets in treasury and agency securities. ccps themselves also rely on these markets, often using repo to earn interest on cash collateral and counting on access to repo markets in their liquidity planning. the fsb has called on authorities to β consider the pros and cons of broadening participation in repo clearing arrangements. β 8 what are the potential benefits of greater clearing in this market? in addition to the potential netting benefits i mentioned earlier, a ccp typically performs three other beneficial economic functions : 1 ) a reduction in the potential cost of counterparty default coming | 1 |
we are desirous of seeing a union leadership, which is well - informed and constantly upgrading their leadership skills for the attainment of organisational goals and workers welfare. in conclusion, i wish to once again implore you to actively participate and take a keen interest in the deliberations of this forum. it is my expectation that you will have an opportunity to carry out an appraisal of your individual and collective skills and how they impact upon the job market and workers welfare in the financial sector. with these remarks, ladies and gentleman, i declare this forum officially open. i thank you bis central bankers β speeches | of the economy. a 2005 study by finmark trust revealed that only 33 % of the total population in zambia had access to financial services. the survey also revealed that most zambians prefer to invest in nonfinancial instruments such as a businesses, livestock, land or agricultural equipment. in recognition of the strategic importance of the financial sector to the country β s development and poverty reduction efforts, the zambian government launched the financial sector development plan ( fsdp ) in 2004 to address weaknesses that had been identified in the financial sector. the fsdp is a comprehensive strategy that is aimed at achieving a financial system that is sound, stable and market - based, that would support efficient resource mobilization necessary for economic diversification and sustainable growth. the weaknesses noted in the financial sector are addressed through a public and private sector partnership. a number of activities have already been undertaken under the fsdp such as the establishment of a credit reference bureau. similarly policies and the legal and regulatory frameworks have been developed to take into account the fast changing financial environment. these developments have resulted in a considerable increase in the number of banks and other financial service providers in the country. ladies and gentlemen, this workshop is therefore timely as it tries to bring together zambian financial sector players and international financial players who have an interest to see that zambia takes its rightful place in the world economy. apart from being a sensitisation platform to the general public, this workshop should diligently explore ways on how entrepreneurs can access venture capital funds in zambia. although venture capital organizations in zambia are not many and evident to the general populace, our expectation is that after this workshop, we shall see the emergence of an interactive and symbiotic alliance between international and zambia financial institutions. this alliance is expected to provide venture capital funds and financial services that should uplift the well - being of the zambian people at large. this sounds like a difficult task to achieve but it is my conviction that it is better to begin a step towards this direction rather than waiting for it to happen in future. mr chairman, as i conclude, let me take this opportunity to guide the participants that discipline is key in accessing venture capital funds. it is common practice in zambia for entrepreneurs to mis - apply funds obtained for capital purposes. instead of growing businesses, we tend to use funds obtained as loans, for luxurious goods such as latest cars, suits etc. this results in business failures and thus non - performing loans for banks and thereby higher interest rates | 0.5 |
spillovers to asset markets. our analysis also shows that leverage increases the procyclical behaviour of investors and asset managers, even if they are not excessively leveraged. in any case, it is quite comforting that leverage in the european investment fund sector seems to be low, on average. average leverage multipliers reach only up to 1. 3 across different fund types. this is partly because about 60 % of all investment funds fall under the undertakings for collective investment in transferable securities ( ucits ) directive and so face tight leverage constraints. on the other hand, many alternative investment funds do not face any binding restrictions on leverage. among those alternative funds, we find a tail of highly leveraged bond and hedge funds, which sometimes have a leverage multiplier of more than 30. i urge authorities to use the new data which is available to shed more light on this highly leveraged part of the sector. 5 this may help to better understand some of the lightly regulated and less transparent activities where risks may be building up. for instance, private loan funds may potentially erode credit standards and take on higher credit risk in the current market environment, whereas private equity funds may facilitate excessive leverage in the non - financial sector. some of these activities may be escaping our attention, as statistics on them are scarce and they are often conducted by funds outside the euro area. leverage may be building up, for instance, by the use of derivatives or in off - shore centres. therefore, consistent reporting frameworks have to be developed with a view to gaining a system - wide perspective on evolving risks, also at global level. it will be important to develop comparable leverage measures in line with the recommendations of the financial stability board ( fsb ) to the international organization of securities commissions ( iosco ). 6 this will facilitate consistent monitoring and assessment of the build - up of risks in the investment fund sector. as the global crisis has shown, we cannot afford to be complacent and must remain vigilant to possible new risks that might emerge in the financial system. so we need to better understand the macroprudential dimension of risk in the investment fund sector. and we need to further enhance the sector β s resilience to system - wide shocks. possible macroprudential and other policy responses β what needs to be done? let me now set out a few regulatory actions which could contribute to mitigating risks arising from interconnectedness, liquidity and leverage in the investment | transparency. the most challenging area though was agreeing on the guidance that should be provided with regards to the specific topic of trading activity in the last look window. what is clear to me is that there is β at the very least β the potential for misuse of this specific feature, as various ongoing misconduct cases bear testament to. the code already provides guidance that is designed to minimise the risks of that misconduct occurring. the underlying debate, which our consultative process seeks to resolve, is whether there are ways of reducing those risks even further. if we can identify specific, legitimate, uses of this type of trading activity, as well as the already well - known illegitimate uses, we can then cater for both within the code. but if the evidence suggests that trading in the last look window is simply inconsistent with good conduct, this section of the code will need to be updated accordingly. it β s impossible for me at this stage to presuppose the outcome. what i want to emphasise is the gfxc β s commitment to acting on the evidence we receive. we are fully aware that the committee β s eventual conclusion has the potential impact on some firms β current business models, and that is why we are committed to establishing the broadest possible evidence base on which to take our decision. there are nine days remaining before the feedback window closes, and i encourage all of you β both price makers and takers β to provide us with your views. while the last look debate is the current centre of attention it is important to recognise that over time the committee will need to update other areas of the code. in some cases these might amount to tweaks to avoid unintended consequences ; in other cases they will be in response to further evolution in the market itself. and although crystal ball gazing is always a perilous exercise, if you take the agenda for this conference as a guide, then one area likely to remain in focus in coming years is transparency. http : / / www. globalfxc. org / consultative _ process. htm all speeches are available online at www. bankofengland. co. uk / speeches on the one hand the demand for market data will only continue to rise β for example, as end users demand transaction cost analysis tools and analytics to measure the quality of their execution and to predict the optimal time to execute trades. but on the other hand, growing market complexity and greater internalisation of flows tend naturally to reduce the ease with which | 0 |
facilitate flexible work arrangements and improve access to training in skills required for enhancing productivity in the economy. further, there is a commitment to implement energy sector initiatives to achieve diversification in the sources of fuel and facilitate energy conservation in order to reduce the cost of energy to the economy and more so to the productive sector. as you would have heard from recent presentations in parliament, these initiatives are well underway. these reforms and commitments are all aimed at improving the competitiveness of jamaica β s goods and services. accordingly, the macroeconomic programme aims to reduce the hindrances to economic growth such as the macroeconomic instability caused by high and unsustainable fiscal balances and debt. these factors have limited the government β s ability to tackle social issues, including the improvement of education and training and the reduction of crime. for the central bank, our primary role is to maintain price stability and financial system stability. bank of jamaica is committed to maintaining single - digit inflation over the medium term with the long - term objective of reducing inflation to the level of our major trading partners. bank of jamaica is also committed to a flexible exchange rate regime consistent with enhancing the competitiveness of the jamaican economy. the combination of low inflation and exchange rate flexibility is a valuable tool in maintaining the competitiveness of our export sector. in addition, the current historically low interest rates are conducive to stronger investment and growth than we have had in the past. what then does the implementation of this programme mean for businesses, small, medium or large? first, a flexible and competitive exchange rate will enhance the ability of jamaican businesses to compete in both the export markets and the domestic market. a flexible exchange rate is an exchange rate that responds to market forces. a competitive exchange rate is an exchange rate that adjusts so as to at least account for the difference between jamaica β s inflation and that of our trading partners. the bank is aware of the concerns about recent movements in the exchange rate. however, let me reassure you that the depreciation thus far has been in keeping with our expectations and the policy objective of ensuring that bis central bankers β speeches goods and services produced locally can be sold at competitive prices in the global market. this is absolutely essential for export - led growth. the recent movement in the exchange rate also comes against a background where the bank has been steadily and deliberately rebuilding the net international reserves. bank of jamaica had already halted the decline in reserves which, with reason, was a source of considerable concern in all corners | brian wynter : the international monetary fund β s regional economic outlook opening remarks by mr brian wynter, governor of the bank of jamaica, at the launch of the international monetary fund β s regional economic outlook, kingston, 20 october 2010. * * * ladies and gentlemen, welcome to the bank of jamaica. we are especially glad to have our colleagues and partners from the international monetary fund β both resident, dr gene leon, and itinerant, mr gilbert terrier ( senior advisor in the western hemisphere department of the imf ) β and our fellow caribbean central banker, dr shelton nichols, deputy governor of the central bank of trinidad and tobago. i know that none of you are strangers to jamaica, personally or professionally, and i hope that you will find this visit pleasant and fulfilling. i am also happy to recognise the jamaican members of the panel who will speak later : the financial secretary, dr wesley hughes, mr keith collister, member of the economic policy committee of the private sector organisation of jamaica and dr damien king, head of the department of economics at the university of the west indies mona campus. many of you in the audience are accustomed to gather in this forum for a discussion of the quarterly developments in the jamaican economy and the role of the bank in the way forward. there will be some of that today but the point of view will be more panoramic and will cover the whole region, including central and south america. sufficient account will be taken of the jamaican situation to enable us to appreciate the context and the parallels across the region. for most of the last two years, policymakers around the world have focused their attention on attenuating the impact of the fallout in the global economy ; repairing the damage to financial infrastructure ; supporting those sectors and persons that were hit hardest ; and stimulating recovery as fast and as far as possible. the review of the outcomes in different countries will no doubt reveal that those with flexible or growing links to the new poles of growth fared much better than those without such links. here in jamaica, we did not experience the collapse of financial firms as many others did owing mainly to the reform and recapitalization of the sector that took place over the previous decade. neither did we undergo the sharp declines in housing and other asset prices that others did. jamaica, however, found itself in a position where it faced the prospect of a slow, uncertain path to economic recovery not only because of its own inertia and uncompetitive | 0.5 |
the 2019 u. s. monetary policy forum, sponsored by the initiative on global markets at the university of chicago booth school of business, new york, new york, february 22 ; and jerome h. powell ( 2019 ), β monetary policy : normalization and the road ahead, β speech delivered at the 2019 siepr economic summit, stanford institute of economic policy research, stanford, california, march 8. 3 one reason for caution is the risk of building financial market imbalances, such as currently elevated levels of risky corporate debt. in my view, it is better to address such financial imbalances by activation of our countercyclical capital buffer, rigorous use of stress tests, and beefed - up monitoring of leveraged lending than by monetary policy. 4 see lael brainard ( 2016 ), β the β new normal β and what it means for monetary policy, β speech delivered at the chicago council on global affairs, chicago, illinois, september 12. 5 5. see sharon kozicki ( 2019 ), β monetary policy strategies for the federal reserve : discussion of practical considerations ( pdf ), β presentation at the conference on monetary policy strategy, tools, and communications practices, federal reserve bank of chicago, june 5. 6 see lars e. o. svensson ( 2019 ), β monetary policy strategies for the federal reserve ( pdf ), β paper prepared for the conference on monetary policy strategy, tools, and communications practices. federal reserve bank of chicago, june 5. 3 / 4 bis central bankers'speeches 7 see katharine g. abraham and john c. haltiwanger ( 2019 ), β how tight is the labor market? ( pdf ) β paper prepared for the conference on monetary policy strategies, tools, and communications practices, federal reserve bank of chicago, june 5. 8 see board of governors of the federal reserve system ( 2019 ), β panel 1 : what does full employment look like for your community or constituency? β at the conference on monetary policy strategy, tools, and communications practices, federal reserve bank of chicago, june 5 ; and board of governors of the federal reserve system ( 2019 ), β panel 2 : transmission of monetary policy to the economy : beyond the headlines, β at the conference on monetary policy strategy, tools, and communications practices, federal reserve bank of chicago, june 5. 4 / 4 bis central bankers'speeches | lael brainard : " fed listens " in cincinnati - how does monetary policy affect your community? speech by ms lael brainard, member of the board of governors of the federal reserve system, at the policy summit 2019 " connecting people and places to opportunity ", federal reserve bank of cleveland, cincinnati, ohio, 21 june 2019. * * * it is good to be here in cincinnati. i want to thank my colleague, loretta mester, for inviting me to participate today, and it is a pleasure to participate in the federal reserve bank of cleveland β s policy summit. 1 today β s session is part of a series called fed listens. the federal reserve is reaching out to communities around the country to hear how americans are experiencing the economy day to day and to make sure we are carrying out the monetary policy goals assigned to us by the congress in the most effective way we can. 2 the congress has assigned the federal reserve to use monetary policy to achieve maximum employment and price stability. these two goals are what we refer to as our dual mandate. by price stability, we mean moderate and stable inflation. the federal open market committee ( fomc ) β the group at the fed responsible for determining monetary policy β has announced that our goal is to keep inflation around 2 percent over time. the maximum - employment part of our dual mandate means that the congress has directed us to achieve the highest level of employment that is consistent with price stability. the outlook earlier this week, president mester and i participated in the meeting of the fomc, where we had the opportunity to share our views on the economy and policy. my own assessment is that the most likely path for the economy remains solid. the latest data suggest that consumer spending is robust, and consumer confidence is high. although the pace of payroll gains has moderated recently, unemployment is at a 50 - year low, wages are growing, participation in the labor force has expanded, and unemployment insurance claims are at cycle lows. despite recent volatility, financial conditions overall remain supportive. recent weeks, however, have seen important downside risks. crosscurrents from policy uncertainty have risen since early may, crimping business investment plans, raising concerns in some financial market segments, and weighing on global growth prospects. foreign authorities are seeking additional policy space to address growth and inflation shortfalls. in addition, recent indicators of inflation and inflation expectations have been disappointing, making it all the more important to sustain the economy β | 1 |
million people, will increase the eu population by about 20 %, to more than 450 million people. the economic weight of the new member states is lower. their total gdp represents, at market exchange rates, around 5 % of that of the current eu. looking beyond these numbers, the largest ever expansion of the union in terms of new countries will bring important economic benefits. both new and current member states alike will be able to enjoy the mutual benefits of a wider union, in particular from the expanded internal market, as the cases of past enlargements showed. trade integration has already reached a high level in the acceding countries, where 67 % of the total exports and 60 % of total import stems from the eu. both the current and new member states have prepared intensively for enlargement. let me first focus on the situation in the new member states and then in the present union members. i will concentrate on the ultimate objective of enlargement from the monetary standpoint, namely the future adoption of the euro by the new eu member states. the acceding countries have made remarkable progress in recent years. they significantly advanced macroeconomic stabilisation and structural reforms. moreover, the former centrally planned economies have been able to establish functioning market economies. overall, the progress they have made so far is encouraging. there remain, however, great challenges. the key ones are to advance real convergence while safeguarding and, where necessary, enhancing macroeconomic and financial stability. locking in inflation at low levels, preserving the soundness of the financial sector, correcting of unsustainable external imbalances in a few cases and renewing efforts towards fiscal consolidation are all of the utmost importance. moreover, the gap in per capita income between the current and most of the new member states remains large. and in some countries, the process of catching - up in real incomes has been slower than expected at the start of transition. for acceding countries as a whole, per capita income today is less than half of the average of the eu. given the low starting point for most countries, increasing prosperity and living standards will be a major policy objective for quite some time. in view of that strategic objective, one has to underline that prudent macroeconomic policies are key to support and facilitate progress towards higher gdp - per - capita levels. accession to the eu is expected to have positive effects on the countries'prospects for convergence. the full integration into the internal market will increase growth prospects and thus | mar guΓ°mundsson : preserving the credit of the sovereign through a financial sector meltdown β the case of iceland speech by mr mar guΓ°mundsson, governor of the central bank of iceland, at the international monetary seminar 2013 β sovereign risk, bank risk and central banking β, organised by the bank of france, paris, 8 july 2013. * * * i would like to thank banque de france for inviting me to speak at this interesting seminar. this session is on resolving sovereign debt crises and the relative roles of the public and private sectors in that process. my comments will obviously be based on my own country β s experience during the financial crisis, which is a case of a sovereign debt crisis being avoided in spite of the meltdown of a large part of the financial sector and the country β s deepest recession since the interwar period. that result was achieved by relatively good fiscal position prior to the crisis, by a refusal β based on need rather than stubbornness β to rescue private cross - border banks with public money, and by on - going medium - term fiscal consolidation that was an important part of the economic programme developed in cooperation with the imf. the bottom line is that all sovereign obligations have been honoured ; the sovereign has maintained investment - grade credit ratings and market access. in order to distinguish between the parts of this story that provide lessons that are applicable to the rest of the world and those that do not, we need to get some of the facts straight, because to this day there are still several misconceptions floating around about what was done in iceland during the crisis. the collapse of iceland β s three cross - border banks in early october 2008 was the most noticeable event in the unfolding of the financial crisis. the combined balance sheet of these banks was 10 times iceland β s gdp ( see figure 1 ), and their combined bankruptcy, measured in terms of balance sheets, ranks second in size in the international history of corporate failures, only after lehman brothers. and this happened in a country that ranks among the smallest in the world! we are still dealing with the complications that this entails, as can be seen in our overblown and unbalanced iip and the controls on capital outflows. figure 1 source : central bank of iceland. bis central bankers β speeches before the collapse, the banking system had expanded very rapidly, growing in just five years from a combined balance sheet of less than 2 times gdp at the end of 2003 ( see figure | 0 |
to assume that inflation will during certain periods deviate from the target and sometimes deviate substantially. the important thing in the long term is not the temporary fluctuations in inflation, but that expectations are anchored around the inflation target. the inflation target can then fulfil its important function as nominal target when prices and wages are set and investment decisions are made. and in this respect we appear to have succeeded well ( figure 7 ). let me in this context also briefly mention how we make our forecasts. previously we made forecasts on the basis that the repo rate - our policy rate - would remain constant during the forecast period. if inflation was expected to be lower than two per cent, this was a signal that the interest rate needed to be cut, and if it was expected to be higher, the rate needed to be raised. however, the assumption that the repo rate would remain entirely unchanged over a long period of time is fairly unrealistic. many times β for instance when everyone is expecting a long period of interest rate increases or interest rate cuts β this assumption of a constant repo rate makes it difficult for us to make reasonable forecasts. now our forecasts are instead based on an assumption that the repo rate will develop in line with market expectations. our current forecast assumes, for instance, that there will be gradual increases in the repo rate over the coming period. this new assumption does not in itself have any significance for the policy conducted. however, it makes it easier to evaluate our forecasts as they become more realistic and it is easier to compare them with others β forecasts. it is also important to know this assessment to understand our communication. if the forecast shows inflation as being lower than two per cent a couple of years ahead, this is no longer a reason to cut the repo rate. it may instead mean that there is reason to raise the interest rate at a slightly slower pace than the market is expecting. a further step in our method of making forecasts could be to make our own forecasts for interest rates, instead of using market expectations as a basis. this would require a number of changes in working methods, both for those making forecasts and for us executive board members. personally, i think this would be a natural progression and it is a possibility we are considering. it is not only the inflation forecasts we examine when formulating monetary policy and considering how to set the interest rate in future. our policy is flexible in the sense that we | and o. tristani ( 2010 ), β lessons for monetary policy strategy from the recent past, β paper presented at the 6th ecb central banking conference, frankfurt am main, 18 β 19 november 2010. bis central bankers β speeches shifted attention to credit and leverage as critical parameters that a central bank should consult regularly to measure the pulse of the economy. 11 the ecb consistently used these parameters even when they were derided as relics of a defunct monetary doctrine. they proved useful. they gave information about financing conditions and the financial structure, as well as about the condition and behaviour of banks, when these sources of information were critical to the assessment of the health of the transmission mechanism and, more broadly, the state of the business cycle. and this dimension of monetary analysis has proved particularly valuable in shaping the ecb β s response to the financial crisis. there is indeed evidence for the euro area that without duly taking the monetary analysis into account, inflation in the euro area would have been distinctly higher at times of financial exuberance and would have fallen deep into negative territory in the wake of the financial market collapse, starting in the autumn of 2008. the economy as a whole would have been more volatile. 12 on a more general note, by including monetary analysis in their monetary strategy, central banks can ensure that important information stemming from money and credit, typically neglected in conventional cyclical forecasting models of the economy, is considered in the formulation of monetary policy decisions. there is compelling empirical evidence showing that at low frequencies, that is over medium to longer - term horizons, inflation shows a robust positive association with monetary growth. 13 5. complementarity between price stability and financial stability the fifth lesson from the financial crisis is that ensuring price stability is not sufficient for financial stability. to be sure, the conventional wisdom prevailing before the crisis was twofold. first, stabilising inflation would do the job. as inflation is β according to the pre - crisis consensus β a summary statistic for the state of the economy, for demand pressures, then any exuberance in financial markets would not be policy - relevant unless it exerts upward pressures on inflation. second, and partly as a consequence, central banks should only pick up the pieces after the bubble has burst, and the costs of doing this relative to a policy of resisting the bubble while it is forming would not be large. both these prescriptions have turned out to be major mistakes. for one thing, inflation and financial exuberance are | 0 |
this case, liquidity conditions would remain scarce, leading to a credit crunch with recessionary and deflationary risks. providing insurance against funding or tail risks let me move on to the second principle of providing insurance against tail risks. the recent financial crisis has been a stark reminder of the potentially devastating effects of self - fulfilling crises. self - fulfilling liquidity crises for individual banks are, of course, well there are actually three dimensions along which fragmentation can and should be reduced : the vertical, or intertemporal dimension ; the horizontal, or interpersonal dimension ; and the spatial dimension. see cΕure, b. ( 2013 ), β monetary policy in a fragmented world β, speech delivered at oesterreichische nationalbank 41st economics conference : β a changing role for central banks? β http : / / www. ecb. europa. eu / press / key / date / 2013 / html / sp130610. en. html. see gertler, m. and karadi, p. ( 2011 ), β a model of unconventional monetary policy β, journal of monetary economics, elsevier, vol. 58 ( 1 ), january, pp. 17 β 34, and gertler, m. and kiyotaki, n. ( 2010 ), β financial intermediation and credit policy in business cycle analysis β, in friedman, b. m. and woodford, m. ( eds. ), handbook of monetary economics, vol. 3, pp. 547 β 599. bis central bankers β speeches documented. the experience of bank runs is far from unprecedented. what has been new in the recent financial crisis is the systemic or market - wide nature of bank runs. interbank market freezes and deposit withdrawals from distressed countries are examples of confidence crises that have affected the whole or an important segment of the banking system at the same time. the effects of such systemic confidence crises can be much more devastating owing to externalities. 5 if all banks are distressed at the same time, they will all scramble to sell their assets to be able to meet their obligations. in so doing, asset prices will be pushed on a downward spiral, which exacerbates banks β distress and leads to further credit and asset price losses and a further deepening of the confidence crisis. the general scarcity of credit, in turn, leads to a substantial worsening of the macroeconomic outlook. the potential negative aggregate effects of such systemic liquid | pandemic has yet to peak in some countries, others including malaysia are heading towards periods of recovery while continuously managing the risk of virus resurgence. as this phase commences, islamic finance has significant potential and role to play. three attributes, at least, come to mind on how islamic finance can respond and contribute meaningfully towards sustainable and inclusive growth : first, islamic finance must be value - driven and impact - focused to deliver maqasid shariah ( the objectives of shariah ). the intrinsic values of islamic principles are aligned with a vision of economic growth that is balanced, sustainable and inclusive. shariah advocates for balance between wealth creation and wealth circulation. this in turn promotes fairness and ihsan in promoting the attainment of benefits as well as preventing harm. this crisis has indeed created a wealth of opportunities for islamic finance. shariah contracts can deploy a diverse range of capital that is risk - absorbent, patient and philanthropic in nature using instruments such as risk sharing, waqf and sadaqah to support inclusive finance. the flexible nature of such capital encourages allocation of resources towards entrepreneurial ventures and social impact projects that can improve and rebuild well - being of society. it can also to some extent help smoothen structural adjustments in the economy. globally, we have seen a silver lining in the response to the pandemic. in malaysia, the nation has rallied closer together to become more socially conscious not just in aspects of public health and welfare, but also in supporting the local economy. the islamic financial institutions in malaysia, in particular, have risen to the call to generate more positive impact through the β value - based intermediation β ( vbi ) agenda. participating islamic financial institutions have endeavoured to refine their products and services offerings in response to the need of their customers. eight islamic banking institutions ( half the total number of islamic banks in malaysia ) are offering microfinancing facility, utilising the micro enterprise facility established by the bank to increase access to finance for microenterprises with viable business. in terms of financial protection, more than 50, 000 participants have benefitted from various microtakaful products that provide affordable or free protection for the hard core poor and individuals with special needs. islamic financial institutions also continue to steward efforts towards building a greener financial system. in august 2020, the vbi community of practitioners in collaboration with the bank issued three sectoral guides on energy efficiency, renewable energy and palm oil for public consultation | 0 |
try to make their portfolios β greener β. so, we recently ran a pilot stocktake on a sample of banks to gather evidence on how they are approaching these challenges. we designed a qualitative questionnaire to evaluate how banks integrate climate risks into their strategy and their risk management framework. preliminary results show that, while many banks are already aware of the risks posed by climate change, much more needs to be done in this field. banks seem to have approached this topic from a corporate social responsibility perspective rather than from a risk management perspective. 1 / 3 bis central bankers'speeches some banks have asked for clear guidance from regulators, or for more information about best practices. others see business opportunities. for example, some are interested in financing clean energy or issuing green bonds. however, as i said before, the lack of common definitions and data makes it difficult to estimate the microprudential impact of these risks. it β s clear, then, that the ngfs and other fora for cooperation and knowledge - sharing will continue to play a key role. last but not least, the ecb has worked to foster sustainable investment in our own nonmonetary policy portfolios. for example, for the ecb pension fund, we have delegated proxy voting for equity investment to investment managers that have signed up to the united nations principles for responsible investment. with the help of our external asset managers, we are also looking to broaden the options for ecb staff to invest in sustainable financial products. in the near future, we should first of all clearly define the policy parameters of green finance and climate change risks for us as central bankers and supervisors. the challenges we face with regard to climate change can only be successfully solved if all stakeholders accept responsibility. central bankers and supervisors cannot replace the full range of political actions required to respond to climate change. for example, i would caution that any potential changes to regulatory or prudential frameworks must be justified from a prudential perspective. we should do our utmost to acknowledge, assess and act upon climate change - related risks within our mandate, but we should not be obliged, for example, to promote green finance by granting banks preferential capital treatment if this is not justified by the specific risks linked to green finance. second, we need to organise and coordinate the work of the different global groups in order not to overburden the financial industry with a myriad of different information - collecting exercises. the ngfs could play a key role in | reference to bagehot, which suggests that after more than 130 years and despite several financial crises the basic principles of central banking have not, and should not be, fundamentally changed. thank you for your attention. references adalid, r. and c. detken ( 2007 ), β liquidity shocks and asset price boom / bust cycles. β ecb working paper no 732. bernanke, ben and mark gertler ( 1989 ), β agency costs, net worth, and business fluctuations. β american economic review 79 ( 1 ) : 14 - 31. bernanke, ben, gertler mark and simon gilchrist ( 1996 ), β the financial accelerator and the flight to quality, β the review of economics and statistics, vol. 78, no 1, pp. 1 - 15. bernanke, ben, gertler mark and simon gilchrist ( 1999 ), β the financial accelerator in a quantitative business cycle framework β in j. b. taylor and m. woodford ( eds. ), handbook of macroeconomics, volume 1. borio, c., b. english and a. filardo ( 2003 ), β a tale of two perspectives : old or new challenges for monetary policy? β, bis working paper no 127. borio, c. and p. lowe ( 2002 ), β asset prices, financial and monetary stability : exploring the nexus β, bis working paper no 114. brainard, w. ( 1967 ), β uncertainty and the effectiveness of policy β, american economic review 57 : 411 - 425. carlstrom, charles, and timothy fuerst ( 1997 ), β agency costs, net worth, and business fluctuations : a computable general equilibrium analysis β, american economic review, 87, pp. 893 - 910. christiano, lawrence, motto roberto and massimo rostagno ( 2007 ), β shocks, structures or policies? a comparison of the ea and the us β, mimeo, european central bank. detken, c. and f. smets ( 2004 ), β asset price booms and monetary policy β, ecb working paper no 364. dupor, w. ( 2001 ), β nominal price versus asset price stabilization β, working paper. the wharton school, pennsylvania. dupor, w. ( 2002 ), β comment on β monetary policy and asset prices β, journal of monetary economics 49 : 99 - 106. faia, | 0.5 |
. why? to promote a wider use of these bonds, and once there is a greater hunger for them, we can launch longer - term issues and thus extend maturity terms and interest rates, and make our system more trustworthy. we said we need a financial system in pesos, with an efficient lender of last resort. in a word, we have for the first time a retaining net that was non - existent when our financial system was in trouble. therefore, we must have a policy of optimum cash requirements to optimize liquidity. at the beginning of my presentation, i said we should encourage the financial system β s raw material, that is, the banks and banking, both in terms of services, which i shall explain right away, and in terms of deposits. we should note that, although the money in circulation in the hands of the general public has increased from 4. 2 to 6. 5 of the gdp, banking services are still not widely used. there is 0. 5 account per inhabitant, while in other countries there are 2. 7 accounts. and this has to do with strengthening institutions, with restoring their credibility, and above all with conferring them more transparency. we must also work, obviously according to fiscal needs, to lift a tax that today is clearly distortive, namely, the tax on bank debits and credits. the blue line shows the 0. 2 % yield of time deposits. this drop in certificates of deposit is undoubtedly accounted for by the tax burden. here we had a negative yield, as shown by the dark blue line, or a very small yield. and the orange line indicates the implicit income tax rate as a result of a tax on bank debits and credits. at present, the income tax thus obtained accounts for 75 %. i am fully aware of the fact that fiscal needs should be our paramount concern, but if we want more savings we must remove dispersions. and this has to be done gradually and jointly with the executive power. if our intention is to have a wider use of banking services, we cannot expect a magic solution. we must remove the tax on bank debits and credits and we must urgently improve transparency. we should provide more and better information, that is, there should be no implicit costs, no productive interest rates, no small print statements deceiving us at the time of requesting a loan, even the shortest - term loans. as to credit cards, we cannot | what has happened with the so - called lebacs. since january 2003 rates have been dropping, while maturity terms have increased. on average, these bills mature approximately in 300 days, having started at less than 100 days. our intention is to gradually extend maturity terms, so that bill auctions may not only show a drop in interest rates. and you have surely been able to assess the outcomes of last week β s first auction under the new authorities. we plan to continue on this path with every auction called by the central bank, that is, we do not want to use the lebacs as an absorption instrument but basically as a reference rate. another of our major goals will be to set what we know as a short - term reference rate. in may this year, owing to tax due dates, especially income tax, many companies had to borrow money from the interbanking market, which led to a significant cash demand. following this, the central bank set a rate for swaps. as you know, swap operations consist in the central bank buying and buying back bonds to borrow or lend money. as way of example, today the central bank has set the so - called passive swaps corridor whereby the central bank borrows money from financial institutions at a 2. 5 % annual rate. it has also set an active swaps corridor with a 3. 5 % cap whereby the central bank lends money to these institutions. market rates have gradually converged toward this corridor. our intention is to use this economic policy tool as a way of converging toward and not just setting this market reference rate. at present, the pubic sector β s deposits in the banco de la nacion and other public banks amount to 30 billion pesos. of the 100 billion pesos deposited in the financial system, a third corresponds to the public sector. since our very first week in office, our board has attempted to make public banks become more active in the swaps market, and in particular that we may reduce the gap in this corridor, today between 3. 5 % and 2. 5 %. during last week, we have seen the banco nacion operate with a narrower corridor, lending money at a 2. 8 % annual rate. this shows that setting a reference rate and working jointly with the other public banks is already yielding fruit. i would now like to go back in history a bit to avoid tags. during the 80s argentina β s monetary policy was hyperexpansive. the central | 1 |
years ahead. the latest ecb staff projections foresee average inflation at 0. 0 % in 2015, rising to 1. 5 % in 2016 and 1. 8 % in 2017. a key factor for a full recovery of the euro area economy and ensuring that inflation does not remain too low for too long will be the extra stimulus that the governing council decided to introduce in january under the ecb β s expanded asset purchase program. this decision was premised on two considerations. first, the momentum supporting the economic recovery was viewed as too weak and fragile to give us sufficient confidence that inflation would return to levels closer to 2 % over a policy relevant medium - term horizon. second, the expansive potential of the monetary policy measures that had been decided between june and october was seen as uncertain. this was because they were largely bis central bankers β speeches dependent on banks β own decision to borrow eurosystem funds and lend them on to their customers. the cumulative uptake under the first two targeted long - term refinancing operations stood at around β¬212. 4 billion. therefore, the monetary impulse had to be reinforced and needed to be quantitatively more predictable and controllable to put the economy and the outlook for price stability on a firmer footing. on 9 march, we started purchasing public - sector securities as part of our expanded asset purchase programme, which also comprises interventions in the abs and covered bond markets. overall, our asset purchases will amount to β¬60 billion per month. the pace of purchases so far puts the overall program on track to reach a total of β¬60 billion in march. at this point in time we see no signs that there will not be enough bonds for us to purchase. feedback from market participants so far suggests that implementation has been very smooth and that market liquidity remains ample. our interventions have accelerated a trend that had been evident since some time. a steady process of re - integration across financial markets and jurisdictions had been under way since the summer of 2012. what is new today, however, is that lower interest rates in capital markets are increasingly being transmitted through the entire financial intermediation chain. lower funding costs for banks have started to influence the cost of borrowing for households and companies. as bank lending rates are being reduced, new investment projects β previously considered unprofitable β become attractive. in the short - run, this should sustain the demand for credit and investment. indeed, the banks covered in our bank lending survey confirm that the easing of lending conditions | banks β health. it also requires banking and market supervisors to resist the temptation to ring - fence liquidity and capital within national boundaries. this is a classic problem of collective action : uncoordinated national reactions to heightened uncertainty could be collectively lethal to the single market for capital. two sets of actions seem to be key in tackling these concerns at their root : one set to strengthen bank balance sheets and another set of actions to break the self - reinforcing loop between bank and sovereign debt risks and move to truly unified european supervision. to strengthen bank balance sheets, first, adequate capital ratios must be reached in the banking system. the eba capital exercise, with eu banks being expected to reach a core tier 1 capital ratio of 9 % by the end of this month, will be an important milestone. regulators should then make sure that the subsequent transition to the basel iii framework does not result in a weakening of the capital buffers. the heterogeneity of capital ratios must also be reduced. the median core tier 1 capital ratio of large euro area banks is not significantly lower than that of their global counterparts. however, the variation in this ratio across institutions is substantially wider in the euro area, introducing asymmetries in banks β access to funding and funding costs. second, leverage in the euro area banking system must be reduced. the aggregate leverage ( asset - to - equity ) ratio of large euro area banks remains comparatively high by international and historical standards. 17 the adverse feedback loop between banks and sovereigns, in which doubts about the solvency of the sovereigns feed doubts about the solvency of the banks, and vice versa, will be broken more readily by the establishment of a true banking union. see, for example, v. acharya and s. viswanathan, β leverage, moral hazard and liquidity β, journal of finance, vol. 66, no 1, 2011 ; f. allen and d. gale, β financial contagion β, journal of political economy, vol. 108, no. 1, 2000 ; and m. brunnermeier and l. h. pedersen, β market liquidity and funding liquidity β, review of financial studies, vol. 22, no 6, 2009. for more information on the deleveraging process in the euro area banking system, see special feature a, financial stability review, ecb, june 2012. bis central bankers β speeches this should include the creation of a pan - euro | 0.5 |
success of islamic finance by allocating resources in having a dedicated subsidiary to drive its islamic banking business forward. the establishment of the islamic subsidiary is a positive step forward in the aspiration of making malaysia as a leading and attractive integrated islamic financial hub. i wish hong leong islamic bank berhad every success in its endeavours. ladies and gentlemen, dengan lafaz bismillahirrahmanirrahim, saya dengan sukacitanya merasmikan pelancaran " hong leong islamic bank berhad ". terima kasih. 2 / 2 | drawn a higher level of foreign participation in the islamic financial markets which has resulted in increased cross - border flows. this has not only contributed to enhancing international financial inter - linkages between economies but it has also contributed towards the more efficient allocation of financial resources across borders. islamic finance in 2008 and beyond remains positive despite the current challenging global financial environment. the viability and competitiveness of islamic finance is derived from several factors. it is from its ability to meet the changing demands of the economy, from its cost competitiveness and from being supported by a well developed legal, regulatory and supervisory framework. but more importantly, are the fundamental shariah requirements of islamic finance that support its viability and stability. shariah is the key pillar of islamic finance from which islamic finance derives its unique characteristics. the shariah injunctions require that islamic financial transactions be accompanied by an underlying productive activity. in islamic finance, there is always a close link between financial and productive flows. moreover, under the risk sharing principle required, islamic financial institutions will share the profit or the loss incurred by the entrepreneur. there is an explicit sharing of risk by the financier and the borrower. this arrangement will thus entail the appropriate due diligence and the integrating of the risks associated with the real investment activity into the financial transaction. in this arrangement, the real activity is expected to generate sufficient wealth to compensate for the risks. in contrast, conventional instruments generally separate such risks from the underlying assets. as a result, risk management and wealth creation may, at times, move in different or even opposite directions. conventional financial instruments also allow for the commoditisation of risks. this has led to its proliferation through multiple layers of leveraging and disproportionate distribution, in turn, which could result in higher systemic risks, thus, increasing the potential for instability in the financial system. in addition, transparency represents a basic tenet underlying all islamic financial transactions. there is an inherent obligation on islamic financial services providers to meet the appropriate standards of transparency. it is from the profit - sharing feature of islamic financial transactions that imposes a high level of disclosure in the financial contract. the accountabilities of the respective parties involved in the transaction are clearly defined in the contract. this transparency also provides a strong incentive for islamic financial institutions to appropriately manage risks. this disclosure allows the market to assign the appropriate risk premiums to the respective companies and thus the potential for the enhanced role of market discipline to take | 0.5 |
economic and monetary union. we live in a rapidly changing world, where the traditional role of the nation - state is being questioned. in my view, the key to maintaining sovereignty in this world is to share more sovereignty by integrating more deeply. this point has been understood for some time in monetary policy β and it is particularly relevant for latvia. by joining the euro area, this country will no longer have a fixed exchange rate, with all the constraints that it entails for monetary policy. it will have a national central bank that participates in decision - making for the entire euro area. governor rimsevics will be taking part in monetary policy - making for the world β s second largest economy. but the crisis has also strengthened the case for sharing sovereignty in other policy areas. national governments have experienced the difficulty of managing cross - border capital flows without a common supervisory policy β a problem with which this country is familiar. they have seen how, without a credible framework for fiscal policies, they can lose effective sovereignty to financial markets. the solution is to complete economic and monetary union β for monetary union to be accompanied by a banking union, a fiscal union, an economic union and ultimately a political bis central bankers β speeches union. this is a vision for the future and it will require much work to implement. but new members can be encouraged that the process is underway, in particular on banking union. on this note, i welcome the vote today by the european parliament on the new european supervisor, the single supervisory mechanism ( ssm ). the ecb and the parliament share a common purpose in ensuring proper accountability arrangements for the ssm, and i fully support the draft agreement we have reached. this agreement is testament to the hard work and commitment of the negotiating team from the parliament β s econ committee. it also reflects the personal efforts of president schulz, to whom i would like to express my particular thanks and appreciation. let me add here that sharing sovereignty, however, does not mean losing national identity. there are many smaller countries β such as malta and luxembourg β that have not changed their individual character within the euro area. at the ecb we have always placed a high value on europe β s cultural diversity : this year, for example, the ecb β s cultural days are dedicated to latvia. conclusion let me conclude. joining the euro area is a historic commitment β to the deeper integration of our continent β and to the mutual prosperity of the different countries that share the single currency. i | euro works β that is, in my view, plain to see. since 1999, the euro area has grown to a community of more than 330 million people. it is the world β s second largest economy, accounting for around a quarter of global exports and more than 15 % of global investment. and the euro has established itself as a strong and stable reserve currency. in that time, the european central bank ( ecb ) has maintained price stability in line with its mandate, despite the most severe crisis since the 1930s. we have defended our currency bis central bankers β speeches against unfounded fears about a break - up of the euro area. all this means that countries that join the euro area today can be confident that its central pillar, its monetary policy, is sound. i understand that there are some concerns here about the changeover to the euro potentially leading to opportunistic price rises. but the latvian authorities are taking measures to prevent this. these measures build on the experience from 17 previous euro changeovers. i call on all those involved to remain attentive to these initiatives. for its part, the ecb will be conducting a communication campaign to ensure that the people of latvia are well informed about the euro coins and banknotes, in particular the security features of the banknotes. ensuring sustainable convergence the second lesson we have learned is that to prosper within monetary union, countries need to ensure sustainable convergence. sustainable convergence means more than meeting a set of nominal targets at a certain point in time. it requires real economic, legal and institutional convergence prior to adopting the euro. and crucially, it requires continued efforts once inside monetary union. the reason that many countries are making painful adjustments today is that once inside the euro area, they allowed themselves to diverge too much. i know the authorities here are aware of the key challenges of maintaining convergence. these include, first of all, avoiding a renewed boom - bust cycle in latvia following euro adoption. this implies that the authorities need to continue with sound fiscal policies, and to ensure that labour cost developments remain conducive to competitiveness. the challenges also include strengthening further the efficiency and effectiveness of institutions in latvia. and finally they include safeguarding the long - run stability of the banking and wider financial sector. i am therefore confident that by keeping the right policy orientation, the ingredients are present for latvia to thrive within the euro area. completing economic and monetary union the third lesson we have learned since 1999 is that we need to complete our | 1 |
christine lagarde : laudatory speech for dr wolfgang schauble laudatory speech by ms christine lagarde, president of the european central bank, for dr wolfgang schauble, at the vdz publishers β night, berlin, 4 november 2019. * * * the english philosopher john stuart mill once observed that β a great statesman is he who knows when to depart from traditions, as well as when to adhere to them. β it is with these words in mind that i would like to celebrate wolfgang β s contribution to public life. you embody what i see as the model of β germany in europe β : the germany that is an implacable defender of its values and a beacon of liberalism and democracy ; but also the germany that is ready to move when needed to uphold the european idea. this event is not about the ecb. it β s not about monetary policy or other economic policies. it β s about you, wolfgang. so i will not talk about monetary policy or anything related to it. i was asked to speak this evening when i was still managing director of the imf, and i was honoured to do so in recognition of our long shared history as colleagues and friends. but the occasion has taken on added meaning in the light of my new role working for europe. there are few who have done so much for europe, over so long a period, as you, wolfgang. i do not intend to use my remarks this evening to recall our many private conversations β they shall remain private β nor your many achievements : we all know what they are. i would like instead to focus on three of the qualities that i have personally witnessed, and that have marked you out as one of the pre - eminent leaders of your generation : your commitment, your rigour and your statesmanship. wolfgang is receiving this award tonight in recognition of his commitment to a unified europe and stable democracy in germany. commitment is a quality that has run like a thread throughout your public life. on this very day 30 years ago, only a few blocks from here, a million people demanded reform, democracy and freedom in the largest demonstration east germany had ever seen. the fall of the berlin wall ushered in a profound transformation of german and european history, and you, as minister of the interior, were at the heart of this process. your commitment to your own country was always matched by a commitment to europe β and you understood that each made the other stronger. you saw immediately | not a simple task. it is not something which can or should be imposed from above, but it can, to a certain extent, be guided. it is a process which must be both evolutionary and spontaneous. its pace cannot be forced. this would be counterproductive. in the end it is a matter of clarifying and further developing elements of a common european culture. this implies articulating and emphasising the many things which europeans already have in common, but also building up more common experiences. such experiences can serve to cement intra - european relations. having a single currency will automatically contribute to this process, not only because of the common banknotes and coins, but also because it will mean dealing with identical issues in all european countries. there are many other areas in addition to politics and economics where this can be done, such as the sciences, the arts, the press, television and so on. we should try to develop debate on european issues at a european level. i attach great importance to explaining our monetary policies at the hearings in the european parliament. monetary policy is conducted from a european perspective and should therefore primarily be explained at a european level. more attention should be paid to european issues. the objectives of european integration should be explained more often and more clearly. the fear that europe is something abstract, remote and threatening to local culture should be taken seriously. however, i do not believe that there necessarily has to be a contradiction between preserving local culture and at the same time further developing a common european culture. on the contrary, they can complement and enrich one another. it is necessary and inevitable that an increasing number of issues be decided at a european level. quite apart from issues relating to the euro, other issues such as those relating to the environment, crime, defence and migration can no longer be considered to be purely national issues. in deciding on what should and should not be discussed on a european level, the principle of subsidiarity should continue to play a guiding role. what can be decided at a lower level should be decided at a lower level. i do not close my eyes to the existence of substantial obstacles to further integration in this broad sense. perhaps the fact that the european union has 11 official languages is the most important one. in a sense it also poses a dilemma in our communications policy. on the one hand, it is very important to reach all european citizens in their own language ; on the other, should we not encourage a situation in which as many europeans | 0.5 |
eli m remolona : welcome message - 2nd digital financial inclusion awards welcome message by mr eli m remolona, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), for the second digital financial inclusion awards ( dfia ) aβ¬ β awarding ceremony, manila, 24 october 2023. * * * citi philippines ceo paul favila ; chairperson of the microfinance council of the philippines gilbert maramba ; founder of card mri aries alip ; fellow members of the national selection committee ; advocates for digital financial inclusion ; our outstanding digital microentrepreneurs and microfinance institutions, special guests, good afternoon and welcome to the bangko sentral ng pilipinas. today, we honor five microfinance institutions and 20 microentrepreneurs under the second digital financial inclusion awards. they have embraced the transformative power of digital technologies to grow their operations and serve their clients. the digital solutions they adopted ranged from e - commerce, social media marketing, and use of ewallets. i can tell you, the national selection committee had a really tough time choosing the finalists. so rich was the pool of nominees. we applaud all the nominees for investing time and resources in digitalization. the bsp values this digital financial inclusion awards. it supports and promotes both microfinance institutions and microentrepreneurs who successfully adopted digitaiization to boost efficiencies and scale up customer services. their initiatives are aligned with the bsp's digital payments transformation roadmap and our national strategy for financial inclusion. under this roadmap, our goal is to convert 50 percent of the total volume of retail payments into digital form and to onboard 70 percent of filipino adults to the formal financial system. so how are we doing? well, the share of digital payment transactions reached 42 percent in 2022 ; account ownership was 56 percent in 2021 ; and 65 percent in 2022. we are gaining ground, but there is still so much more to do. ladies and gentlemen. microenterprises and microfinance improve the lives of so many filipinos, more so when they are digitalized. today's awardees prove this. they are good role models that inspire and inform. i therefore thank our partners from citi, from mcpi and the members of our national selection committee for supporting digital financial inclusion. to our awardees, we thank | and congratulate all of you for your well - deserved recognition. sana ay patuloy na mas dumami pa ang katulad ninyo na matagumpay sa larangan ng digital financial inclusion! 1 / 2 bis - central bankers'speeches maraming salamat at magandang hapon po sa ating lahat! 2 / 2 bis - central bankers'speeches | 1 |
our country β s fundamentals. these episodes lasted for only a limited time, however. another advantage of a flexible swiss franc is that changes in the international monetary system have little bearing on our currency which is largely determined by switzerland β s economic realities. consequently, the launch of the euro - a major event on the monetary scene in recent years - did not lead to the disappearance or the destabilisation of the franc as feared by some. though the euro - for all intents and purposes - is accepted as a means of payment in switzerland, there are not more euros in circulation now than there were french francs or german marks prior to the monetary integration. furthermore, the calm that has characterised the foreign exchange market in europe since the disappearance of the national currencies mitigated the speculative pressures on the franc. our currency is therefore less volatile than before. last but not least, contrary to the pessimistic assumption that the swiss national bank would have to shadow the policy of the european central bank, it was able to set its interest rates according to the needs of the swiss economy. on the whole, our monetary regime passed the test imposed by the change in the european monetary system with flying colours. even though switzerland is a modest player on the international scene it carries more weight than one would imagine. the country β s edge lies in its small size, leaving it no other option than to open up to international trade. moreover, its liberal philosophy and sound financial standing have given it the necessary tools to conduct a policy of openness and to have a strong presence abroad. having chosen the option of free trade and free movement of capital, switzerland is, in many respects, better prepared than others to take advantage of the greater opening of the borders brought about by globalisation. to be sure, this is not an easy ride, as international competition always necessitates painful adjustments, and switzerland is no exception in this respect. when we take stock of the last few years, however, the bottom line looks favourable. we would certainly be in an even better position now, if we had built up a stronger presence in emerging economies. as you can see, contrary to what some people believe, globalisation is not the cause of the weak growth of the swiss economy ; indeed the opposite is true. foreign trade is the engine driving our economy. it has expanded in recent years in step with the global economy. by contrast, our domestic market has stagnated and registered only | g10 recommendations should be implemented in europe. the post - fsap period offers a unique window of opportunity finally, i will devote the last part of my remarks to some reflections on the strategy for financial integration going forward, now that the financial services action plan ( fsap ) is approaching its completion. i believe that there is now an excellent opportunity to devise and engage in a strategy that delivers the full potential of financial integration. but in order to reap this potential, it is essential that a consistent post - fsap strategy is adopted. i see several components in such strategy for public authorities and market participants. let me begin with the role of public authorities. first, it is crucial that authorities implement the fsap measures, which provide the legal infrastructure for a single financial market, in a coherent manner. in this respect, i would highlight the provisions of the new investment services directive, which will provide the single market for financial services with a core legislative framework. furthermore, the lamfalussy process of regulation and supervision, now being extended from the securities field to the banking and insurance sectors, will allow for more flexible and uniform technical regulations. this dynamic process should ultimately produce a genuine common financial legislation and regulation for market players, while respecting the principle of subsidiarity enshrined in the treaty. second, there may be scope for simplifying the current regulatory framework, thereby reducing the corresponding regulatory burden on financial institutions. the implementation of fsap measures and of the the so - called lamfalussy approach should not, in any respect, lead to an additional layer of complex regulation - this would run counter to the spirit of the single market as it would not provide the right incentives for market participants to extend their activities throughout the eu. in this context, i want to recall that a main objective of the lamfalussy process is to allow for more flexible and uniform technical regulations. if adopted ambitiously, such a process could lead to the development of a true eu rulebook to which institutions may refer directly for their cross - border business. third, promoting a robust supervisory and financial stability framework for integrated financial markets. as integration proceeds, financial institutions will increasingly engage in cross - border business. furthermore, this is likely to bring a change in the transmission channels for systemic risk, notably as a result of a possible increase in the risks of cross - border contagion. consequently, it is important that authorities - supervisors and central banks - seek | 0 |
about the outlook? according to the bank β s february forecast, output growth is expected to measure 2Β½ % in 2012 and roughly the same in the following two years. if this forecast materialises, unemployment will decline gradually over the period, to about 5 % in 2014, by which time the slack in the economy is expected to have disappeared. an underlying current account surplus is expected throughout the forecast horizon. according to the forecast, inflation will subside over the course of 2012, approaching the target in 2013 and aligning with it in 2014. these projections are dependent on a number of factors, however, specifically the exchange rate, which is currently below the levels assumed in the forecast. bis central bankers β speeches as so often before, the economic outlook is uncertain, not least because of the global situation. the most recent indicators of private consumption and economic activity in the first quarter are broadly in line with the forecast, and perhaps a bit better. on the other hand, the short - term inflation outlook has deteriorated, and it could take a longer time than previously expected to bring inflation back to target unless the krona appreciates in coming months. according to the forecast, business investment as a share of gdp will be below the historical average throughout the forecast horizon, but the most recent developments, which i mentioned a moment ago, and the process of channelling offshore kronur towards investment could change that somewhat. the outlook for output growth and employment would improve even more, however, if business investment proved stronger. the global economic outlook was very bleak towards the end of 2011, particularly in the euro area. the picture has changed, however, in the first months of 2012. international measures of risk aversion have declined more or less steadily since the winter began. risk premia on debt - ridden euro area countries have fallen since the european central bank offered the banks three - year loans at low interest rates, action has been taken to address the debt problems facing individual countries, and moves have been made to improve the ground rules for the future. this does not mean that the flaws in the design of the eurozone have now been permanently fixed. nonetheless, there are indications that the contraction in the euro area is easing, and other parts of the world are doing better than expected. in essence, the global economy is continuing to grow, and growth could begin anew in the euro area in the second half of this year. but the outlook is uncertain, and the global economic situation is fragile. in | ##ers, irrespective of the system. in this sense there is no fundamental difference between pay - as - you - go systems and funded systems. in a small, open economy, however, the design of the pension system can affect this burden in at least four ways : first, through its effects on the labour participation rates of the elderly ; second, through its effects on the size of the capital stock and thus on productivity of labour ; third, through accumulation of foreign assets that constitute a claim on the output of those economically active in other countries ; and fourth, through contributing to financial sector development, which in turn might result in more efficient allocation of capital. although we see some of these favourable effects rather clearly in the icelandic case, the jury is still out on some of the others. negative incentives for labour participation of the elderly are much less in evidence than in many other countries, as the retirement age is relatively high and the system is mostly neutral vis - a - vis early retirement. however, the effects on the growth rate through higher savings and investment rates have so far been difficult to ascertain, and the national savings rate was unusually low in the build - up to the financial crisis. as regards foreign assets, however, the picture is clear, as the pension funds have indeed built up a very significant stock of these through the years, amounting to 26 % of their total assets at the end of 2007. they amounted to 7 % of total foreign assets and 29 % of foreign securities owned by icelandic residents as recorded in iceland β s international investment position. in addition to shifting part of the future pension burden abroad, these assets proved to be important reserves when iceland faced a sudden stop of capital inflows during the financial crisis. the clearest effects of the accumulation of the pension funds have been on financial market developments, where the funds contributed very significantly to the growth of these markets. at some points, there were even concerns that the funds were becoming too predominant. thus their share of marketable bonds was almost 40 % at the end of 2002. for a while, the overgrowth of the icelandic banks laid any such concerns to rest, but when the dust has settled after their collapse, these concerns might come back. however, at the moment, with capital controls having temporarily stopped further foreign investment by the pension funds, they play an important role in the heretofore relatively easy domestic financing of the large fiscal deficit amounting to 13. 5 % of gdp last year and | 0.5 |
the material for directors β manageable β. the reviews dealing with various performance areas could be put up the supervisory committee of board and a summary of each such review could be put up to the main board. the board β s focus should be devoted more on strategy issues, risk profile, internal control systems, overall performance, etc. the procedure followed for recording of the minutes of the board meetings in banks and financial institutions should be uniform and formalized. banks and financial institutions may adopt two methods for recording the proceedings viz., a summary of key observations and a more detailed recording of the proceedings. Β· it would be desirable if the exposures of a bank to stockbrokers and market - makers as a group, as also exposures to other sensitive sectors, viz., real estate etc. are reported to the board regularly. the disclosures in respect of the progress made in putting in place a progressive risk management system, the risk management policy, strategy followed by the bank, exposures to related entities, the asset classification of such lendings / investments etc. conformity with corporate governance standards etc., be made by banks to the board of directors at regular intervals as prescribed. Β· as regards committees, there could be a supervisory committee of the board in all banks, be the public or private sector, which will work on collective trust and at the same time, without diluting the overall responsibility of the board. their role and responsibilities could include monitoring of the exposures ( credit and investment ) review of the adequacy of risk management process and upgradation thereof, internal control systems and ensuring compliance with the statutory / regulatory framework. the audit committee should, ideally be constituted with independent / non - executive directors and the executive director should only be a permanent invitee. however, in respect of public sector banks, the existing arrangement of including the executive director and nominee directors of government and rbi in the audit committee may continue. the chairman and audit committee need not be confined to the chartered accountant profession but can be a person with knowledge on β finance β or β banking β so as to provide directions and guidance to the audit committee, since the committee not only looks at accounting issues, but also the overall management of the bank. it is desirable to have a nomination committee for appointing independent / nonexecutive directors of banks. in the context of a number of public sector banks issuing capital to the public, a nomination committee of the board may be formed for nomination of directors, representing shareholders | while proceeding with analysis and possible legislative actions, it may be necessary to consider and adopt changes that could be brought about within the existing legislative framework. to this end, governor jalan in his monetary and credit policy statement of october 2001 constituted a consultative group of directors of banks and financial institutions ( chairman dr. a. s. ganguly ) to review the supervisory role of boards of banks and financial institutions and to obtain feedback on the functioning of the boards vis - a - vis compliance, transparency, disclosures, audit committees etc. and make recommendations for making the role of board of directors more effective. the group made its recommendations very recently after a comprehensive review of the existing framework as well as of current practices and benchmarked its recommendations with international best practices as enunciated by the basel committee on banking supervision, as well as of other committees and advisory bodies, to the extent applicable in the indian environment. the report has been put in public domain for a wider debate and its major recommendations are summarized in box 3 : box 3 report of the consultative group of directors of banks / financial institutions Β· on appointment of directors, due diligence of the directors of all banks β be they in public or private sector, should be done in regard to their suitability for the post by way of qualifications and technical expertise. involvement of nomination committee of the board in such an exercise should be seriously considered as a formal process. further, the government while nominating directors on the boards of public sector banks should be guided by certain broad β fit and proper β norms for the directors. the criteria suggested by the bank for international settlements ( bis ) may be suitably adopted for considering β fit and proper β test for bank directors. Β· in the present context of banking becoming more complex and knowledge - based, there is an urgent need for making the boards of banks more contemporarily professional by inducting technical and specially qualified individual. while continuing regulation based representation of sectors like agriculture, ssi, cooperation, etc., the appointment / nomination of independent / non - executive directors to the board of banks ( both public sector and private sector ) should be from a pool of professional and talented people to be prepared and maintained by rbi. any deviation from this procedure by any bank should be with the prior approval of rbi. Β· on the functioning, the independent / non - executive directors should raise in the meetings of the board, critical questions relating to business strategy, important aspects of the functioning of the bank | 1 |
they can be sustained for a time, but not indefinitely. they could be diffused gradually and smoothly. but the transitions to a more sustainable equilibrium could also bring a risk of greater volatility in asset prices, less stability in macroeconomic outcomes, and more uncertainty. this could mean a less benign future environment for u. s. monetary policy. the potential uncertainties posed by these challenges may be more troubling because of confidence engendered by the stability and resilience of the u. s. economy over the past decade. we are in the midst of an unusual dynamic in financial markets, in which low realized volatility in macroeconomic outcomes, low realized credit losses, greater confidence in the near term path of monetary policy, low uncertainty about future inflation and interest rates, rapid changes in the nature of financial intermediation ( role of hedge funds and the change in how credit risk is bought and managed ), and a large increase in the share of global savings that is willing to move across borders, have worked together to bring risk premia down across many asset prices. there is no reliable analytical framework one can use to determine whether we are experiencing an unwelcome or unjustified decline in expected volatility, or whether investors are giving too much weight to the relative stability of the recent past and too little to the uncertainty posed by the challenges ahead. and analysts can point to good fundamental reasons and some plausible theories to support this collective judgment of market participants about low future risk and volatility. but there is much we do not understand about how these transitions ahead will unfold - in fiscal positions, the u. s. external imbalance, and in the exchange rate system and portfolio preferences. the recognition that things that are not sustainable will eventually come to an end does not give us much of a guide to whether the transition will be calm or exciting. these dimensions of the broader context in which we will be making monetary policy in the years ahead put a very important premium on keeping u. s. monetary policy as close to the frontier of credibility as possible. and this suggests we need to continue to examine the case for a measured further evolution in the u. s. monetary policy framework - evolution in the direction of finding ways to provide more clarity about our long term inflation objective, about the underlying forces shaping the federal open market committee's forecast, the dimensions of uncertainty that surround that forecast, and the likely implications for monetary policy, to the extent we are | kazuo ueda : what to know about central bank digital currency remarks by mr kazuo ueda, governor of the bank of japan, at the fintech summit fin / sum 2024, tokyo, 5 march 2024. * * * introduction i am delighted to be given this opportunity to speak to you at the fin / sum 2024. today i will be talking about central bank digital currency, often abbreviated as cbdc. cbdc is a pivotal topic for central banks. regardless, the results of the bank of japan's opinion survey on the general public's views and behavior for september 2023 show that when asked about their familiarity with the term cbdc, less than 20 percent of respondents answered " have read or heard of it, but do not know much about it " while merely 3. 1 percent responded " know about it. " while i am aware that many of those present today may already have a thorough grasp of this subject, i will walk you through the topic in everyday language. differences between cbdc and existing digital payment instruments in japan, a wide array of cashless payment instruments, including credit cards, emoney, and qr code payment, are in use. how do cbdcs differ from such existing digital payment instruments? retail cbdc, assuming a wide range of users, which include individuals and firms, has been explored in many countries, including japan, on the premise that this would align with cash - - in other words, banknotes and coins - - in terms of their roles and functions as a means of payment. the key features of cash would therefore serve as a gateway for considering the differences between cbdc and existing digital payment methods. broadly speaking, there are three such features. first, cash is a direct liability of the central bank. this is in sharp contrast to existing digital payment methods, for which payment is made with liabilities issued by private entities, including banks and payment service providers. second, a cash payment becomes final at the point in time where the payee receives the cash from the payer. put differently, immediately upon receipt of cash the payee can reuse it for other payments. for most digital payment instruments used for consumer - to - business payments, on the other hand, there is a time lag of days before merchants receive the money through a bank transfer or other means. these features bring us to the third point, that is, we use cash on a daily basis and with a sense of | 0 |
incidentally, but significantly, was also the case, in the recent global financial crisis, with large global banks. besides, in india, unlike a company, shareholders / members of a ucb, are generally the debtors of the bank. while this would be an appropriate framework for governance for a cooperative society, which accepts deposits only from members / shareholders, it leads to distortion in the business model when applied to a cooperative bank, which solicits deposits from non - members as well. as majority of the share holders are borrowers in ucbs, the elected management would have an incentive to pursue policies which are more borrower oriented that may not always be in the best interests of depositors. also, unlike in the case of companies, the shares of which are listed on a stock exchange and can change hands without affecting the capital base, in the case of ucbs, the shareholders can withdraw their contribution to capital and shrink the capital of the bank and thereby limit its ability to increase risk weighted assets and expand business. response strategy keeping in view the characteristics of the ucb sector, reserve bank initiated a series of measures to resolve the structural problems and strengthen the banks. in what follows, i set out the initiatives of the reserve bank in dealing with the crisis. a. withholding of new bank and branch licenses licensing norms for ucbs were eased in may 1993 and within 8 years i. e. by june 2004, more than 800 banks mushroomed and close to one third of these newly licensed ucbs became financially weak within a short period of 2 - 3 years. there was, thus, a need to moderate the pace of growth of this sector and it was, therefore, decided in june 2004 to stop issue of licenses for new banks and branches until a suitable framework for regulation and supervision was in place for the already large number of ucbs. b. vision document for ucbs recognizing the systemic risk concerns, reserve bank reviewed the entire gamut of legislative, regulatory and supervisory framework for these banks, and in march 2005, brought out a draft β vision document for ucbs β. the vision document, discussed the characteristics of the sector, analyzed the problems afflicting the banks and proposed the following regulatory and supervisory strategies for dealing with the problems affecting the sector : a ) nuanced and granular approach to supervision and regulation highlighting the heterogeneity of the sector, the vision document observed that the β one size fits all β approach to regulation and supervision of uc | 13. bis central bankers β speeches β’ sector - wise contribution to nsdp across the above mentioned three sectors are furnished in the following chart 9. β’ services sector constituted the highest share in total nsdp of ner followed by agriculture and industry. except for a few years, the share of services sector in total nsdp of ner increased steadily while the share of agriculture declined and that of industry showed mixed trends. section 4 role of governments in providing necessary conditions for growth the role of governments in the following areas would be paramount in providing the necessary conditions for growth, so as to enable the financial system to further galvanise their efforts for development of ner. security : many committees found that security is the most important factor which impedes growth of banking sector in ner. therefore, there is an imperative need to ensure security in the region. infrastructure facilities : for up - scaling financial inclusion efforts, adequate infrastructure facilities such as digital and physical connectivity, uninterrupted power supply etc., are prerequisites. under developed rural areas : it was observed from the banking development indicators viz., number of bank branches, growth in bank credit and deposits of rural ner have been witnessing decelerated trends in the recent years. as mentioned earlier, around 80 per cent of total ne population reside in rural areas. there is an imperative need to have a β special plan β to effectively address the specific issues pertaining to rural areas of ner to provide a fillip to the growth in the area. savings and investment : it is widely held that for long - term economic growth, increase in savings and investments are vital. planning commission, for 12th plan period, estimated state - wise and sector - wise rates of investment ( gross capital formation as a % to gdp ) for ner ( table 8 )., the estimated investment rate for ner is reasonably good and is comparable with national average. however, on examining the savings ( i. e., only bank deposits for which data is available ) of ner, it was observed that there is deceleration in bank deposits since march 2006. for rapid development of ner, state governments and financial sector regulators should work together in enhancing investment and savings in the region, which may in turn boost the levels of growth. bis central bankers β speeches section 5 role of financial sector in spurring growth and expanding financial inclusion given the ground - level position as identified, the role of financial institutions in spurring growth sector - wise and | 0.5 |
increasing transparency will help, much will depend on the liquidity management of clearing members and clients. it is worth noting that in our examination we found that there was little reliable data available on client preparedness for stressed margin call. future work on in this area could : seek to identify enhancements to liquidity preparedness, including liquidity measures for nbfis ; and look into the effectiveness of intermediaries β provision of liquidity to clients during stress, also considering how clearing members can encourage and facilitate greater liquidity preparedness of clients. this is part of the broader issue that i noted at the outset about the ability of non - bank finance to insure against severe but plausible liquidity stress. it is an issue that the fsb should take forward as part of its work programme on enhancing liquidity resilience in the nbfi sector. prompt and transparent margining and, where possible, central clearing are essential to the resilience of the financial system. in times of stress, margin requirements will increase β as i said earlier that is a feature of the system, not a bug. but at the same time we need to do everything possible to ensure that the impact is not unnecessarily pro - cyclical, that market participants have the tools to prepare and manage that impact and that they do so. the march 2020 β dash for cash β has given us a valuable lesson, we should not waste it. 1 ben bernanke has pointed out that panics can be a major cause of credit crunches. reforms that avoid such panic reduce the likelihood that financial stress transmits to real economy stress. 2 fsb ( 2017 ) report on effectiveness of derivatives reforms. 6 / 6 bis central bankers'speeches | a bug in the system, it is a feature. as markets move, losers have to pay variation margin to winners. and as risks grow, initial margin rises to protect the members of a clearing house from the consequences of a future default by other members. this characteristic of margin is unavoidable if we are to ensure that collateralisation keeps pace with risks and counterparty credit risk is minimised. but it is right to try to dampen this dynamic to the extent practicable and to avoid unwarranted procyclicality. against that background, let me set out the findings of the fsb group on margin and the proposed next steps. by bringing together a new extensive set of quantitative data and survey responses from an array of global ccps, clients and intermediaries, we were able to clarify the quantitative picture of the margin dynamics during the β dash for cash β. first, this revealed the scale of the shock on margin call. the total initial margin required by ccps increased by over 70 % ( roughly $ 300 billion ) from the onset of the crisis to its peak in the β dash for cash β period. daily variation margin calls during the period of most acute stress in march 2020 were significantly higher than average flows observed between january and february 2020, increasing by over 500 %, from around $ 25 billion at the onset of the crisis to a peak of around $ 140 billion. to put this into perspective us open - ended funds ( oefs ), which represent around half of the global oef market, saw a similar magnitude of outflows in march, at just under $ 350 billion. second, we identified significant dispersion in the size of initial margin increases across, and within, asset classes. the increases were most pronounced in exchange - traded derivatives ( etd ) products and equity securities. exchange - traded derivatives accounted for two - thirds of the total required across all asset classes, while initial margin collected by ccps clearing cash equities increased by the most in relative terms ( more than 300 % ). the differences we saw in margin dynamics across asset classes are partially explained by differences in the size of the shock experienced in each asset class. some products, such as etd equities, saw unprecedented shocks to market prices and increases in volatility while other etd products, such as metals and agriculture, saw relatively mild shocks relative to historical precedents. in this context it is to be expected that some margin models | 1 |
more negative. the most recent uk β s decision to leave the european union adds another complication to the already bleak global economic outlook. moreover, brexit, which some said has produced a seismic political shock, has shifted the nature of global concerns from heightened vulnerabilities towards a new era of political uncertainty. the previous episode of heightened vulnerabilities were characterized by rising risk of weakening growth, unresolved legacy issues in banks from advanced economies, leveraged and increasingly fragile corporates from emerging markets, and the existence of systemic liquidity. all of these urgently require more balanced and potent policy mix. bis central bankers β speeches now, in the new era of political uncertainty, there seems to a strong link between political uncertainty and market confidence. a political shock results in economic and financial fallout, and has tremendous financial stability implication. therefore, in this new episode, apart from addressing vulnerability, we need also to strengthen the foundations of global financial system. otherwise, there is a likelihood that we will be trapped in a vicious circle, in a way that the policy uncertainty undermining confidence will instill slower and stagnant growth, which will erode political cohesion, making the crisis legacy challenges harder to resolve, which will later induce further increase in policy uncertainty. such new dynamics and concerns have given rise to a new set of policy challenges, not only on how to simultaneously maintain stability and revive growth, but also on how to strengthen the foundations of global financial system. against this backdrop, bank indonesia and the federal reserve bank of new york have decided to co - host a seminar that will look deeper and expand the boundaries of thinking, nurturing, and offering new insights pertaining to these challenges, with the spirit of putting both east and west perspectives on the table. in our opinion, the boundaries would encapsulate three areas. first, pursuing growth objectives after the crisis, where factors impeding the global economy will be discussed, and initiatives to balance structural reform and support for growth will be deliberated. topics surrounding challenges that are unique to small open economies, along with strategies to achieve sustained economic growth, hopefully will make this seminar very relevant and interesting. second, monetary policy tradeoffs in the open economy, where challenges stemming from divergent monetary policies, linkages between economic and financial cycles, dealing with capital flow reversal risks, and new roles of exchange rate in external adjustment, will be discussed. third, achieving financial stability in periods of monetary policy divergence, in which | form of a clear and transparent mechanism pursuant to the respective task and authority of bank indonesia and the police at the central and regional levels referring to prevailing laws and regulations as well as paying due regard to principles of justice, mutual benefit and law. 22. i warmly welcome the signing of this agreement on handling alleged payment system and currency exchange crime as an integral part of our combined efforts to combat various crimes. ladies and gentlemen ; 23. through the signing of this document, we are sure that the future handling of alleged payment system and currency exchange crime will be more effective, thereby bolstering efforts to protect the general public through the creation of a sound and secure payment system and currency exchange industry. 24. the working guidelines will help combine effective communication, intensive coordination and synergic collaboration between bank indonesia, the police and the government and the central and local levels, whilst ensuring all stakeholders maintain effective law enforcement in the payment system and currency exchange industry. 25. in closing, with the confidence that god is always by our side, may he bless our endeavours towards a brighter future. thank you. bis central bankers β speeches | 0.5 |
klaas knot : introduction to the press conference on the financial stability report introductory remarks by mr klaas knot, president of the netherlands bank, at the press conference on the financial stability report, amsterdam, 9 october 2023. * * * good morning everyone and a warm welcome to this press conference on the financial stability report. i would like to start with a brief outline of the key messages from the fsr and i will then be happy to answer your questions. economic outlook first, let me reflect on the economic outlook. since the high inflation peak last autumn, inflation has started to decline, but is expected to remain above 2 % for some time to come. this is why central banks have been tightening monetary policy further over the past year. with 10 rate hikes in 14 months, the ecb has lifted the policy rate from - 0. 5 % to 4. 0 %, which is a fast pace viewed from a historical perspective. rising interest rates have made it more expensive for households and businesses in the netherlands to borrow money. these tighter financial conditions are becoming increasingly evident in the economy, and they are a necessity if we are to bring inflation back down to our 2 % target. as a result, we see economic growth in the netherlands slowing down. at the same time, the labour market is expected to remain tight in the coming years, keeping unemployment low. this persistent tightness is contributing to higher wage growth and the gradual pace at which inflation is normalising. risks inherent in transitioning to higher interest rates the rapid transition to higher interest rates also changes the risks to financial stability. in themselves, the higher rates have a positive impact on the financial system. for example, the increase in bank profits and higher funding ratios at pension funds show that higher interest rates are in principle beneficial for financial institutions. likewise, investors in financial markets seem to have been pricing in risk again recently, reducing their incentives to invest in riskier asset classes. but there is always a flip side : in fact, the transition to higher interest rates may also expose accumulated vulnerabilities and create new risks to financial stability. let me highlight two key examples of such risks, which are also discussed in the financial stability review. first of all, the transition to higher interest rates impairs the sustainability of government debt, as higher rates cause sovereign debt to weigh more heavily on government budgets. this also applies to netherlands, although its government debt is still relatively low. adjustment is needed to ensure future compliance | with fiscal rules and have room to pursue stabilising fiscal policies, such as the support measures implemented during the covid - 19 pandemic and to households as compensation for energy price increases in 2022. i therefore support the 17th fiscal space working group's recommendation to the next cabinet to change the course of fiscal policy. my fellow executive board member olaf sleijpen represented dnb in this working group. 1 / 2 bis - central bankers'speeches in addition, we expect credit risks for banks to increase in the coming period. higher interest rates are driving up refinancing risks, especially for businesses. for example, 56 % of total dutch corporate debt is due to mature or will be subject to an interest rate review within the next two years. these businesses will therefore be facing increasing interest expenses very soon. also, businesses'debt repayment capacity has deteriorated due to high inflation. both developments contribute to the increase in banks'credit risks. furthermore, these risks are reflected in the data with a time lag, making banks vulnerable to potential losses in the future. at the same time, dutch banks enjoy solid capital positions and dnb has taken macroprudential measures in recent years that contribute to their resilience, such as raising the countercyclical capital buffer. it is important now that banks, in designing their capital policies, also consider the increased risks and their future resilience. commercial real estate risks with regard to financial institutions'increasing credit risks, i would like to elaborate in particular on the dutch commercial real estate market. as in other countries, our commercial real estate market is under pressure. for example, transaction values have fallen by 13 % since mid - 2022 due to both cyclical and structural changes. construction and financing costs have gone up due to high inflation and high interest rates. in addition, structural changes, such as the increase in remote working and online shopping, are reducing demand for office and retail space. currently, we do not observe any problems at financial institutions exposed to commercial real estate. at banks, there are no signs of credit risks materialising as yet, but this could change soon if interest rates persistently remain at higher levels. insurers and pension funds are directly exposed to commercial real estate price declines aβ¬ β in fact, market valuations are reflected immediately in their balance sheets. in this issue of the fsr we specifically consider the risks inherent in real estate investment funds, as pension funds and insurers | 1 |
randall s kroszner : protecting consumers in the credit marketplace speech by mr randall s kroszner, member of the board of governors of the us federal reserve system, at the federal reserve bank of cleveland community development policy summit, cleveland, ohio, 11 june 2008. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system β s website. * * * i am delighted to be here today to help open this important conference. i thank my hosts, president pianalto and her staff at the federal reserve bank of cleveland, for the invitation. this year's conference explores a confluence of consumer - related finance issues in the context of the current difficulties in the mortgage markets. in my remarks today, i would like to discuss the key role of consumer credit in our economy and describe how information disclosure and protecting consumers can work to facilitate and promote the efficient functioning of markets for such credit. 1 good information is essential to achieving well - functioning markets. consumers, equipped with the right information at the right time, can make the choices most appropriate to their individual circumstances and desires. for consumers to make the most meaningful use of the relevant information, such information should be accessible and understandable. in turn, businesses rely on consumers through their choices to signal their desires and preferences in order to produce the products that consumers want. if consumers are not well informed, it is difficult for them to be effective in conveying to businesses what they most want and in rewarding those businesses that do produce such products. good information in a marketplace thus not only empowers consumers to make better choices but also helps competition work more effectively to provide the products consumers most desire. there are challenges in ensuring that the appropriate information is provided to help markets function efficiently. product suppliers may not always provide needed information or present it in a format that enables meaningful comparison across competing products. consumers must also have the financial skills to evaluate the information effectively. however, even in the presence of good information, practices can emerge that offer little benefit to consumers and, in some cases, may cause harm. in such cases, improved disclosure alone may be insufficient to address these issues. rules can establish standards that promote increased certainty and restrain abusive practices. at the same time, such rules need to be implemented in a careful and informed manner so that the potential benefits of such rules are not offset by unintended consequences or the imposition of unnecessary costs. the challenge to policymakers is to | reforms and the european commission will review the eu money market fund regulation in 2022. 2 / 3 bis central bankers'speeches the next steps should include enhancing policies for open - ended investment funds and margining practices as well as tackling risks from non - bank leverage. policies for the broader investment fund sector should address liquidity mismatches as a key priority. improvements to margining practices should focus on increasing transparency, reducing excessive margin procyclicality and ensuring that non - banks are better prepared for margin calls. 8 and it is important to understand and tackle the risks associated with leverage in the non - bank financial sector. to monitor and address vulnerabilities arising from the use of leverage, globally consistent leverage metrics are needed. conclusion let me conclude. the non - bank sector β s role in financing the euro area economy has increased significantly over time. in terms of strengthening european capital markets, this is a welcome development. looking ahead, a more comprehensive macroprudential framework will support this role even further : it will help ensure that non - banks are more resilient and, in turn, a more stable source of funding for the real economy in both good times and bad. it should also reduce the need for extraordinary central bank interventions in the future, thereby helping to alleviate concerns related to excessive risk - taking and moral hazard. 1 ecb ( 2021 ), financial stability review, november. 2 work stream on non - bank financial intermediation ( 2021 ), β non - bank financial intermediation in the euro area : implications for monetary policy transmission and key vulnerabilities β, occasional paper series, no 270, ecb, september. 3 ecb ( 2021 ), β the role of financial stability in the ecb β s new monetary policy strategy β, financial stability review, november. 4 financial stability board ( 2020 ), β holistic review of the march market turmoil β, 17 november. 5 see, for example, ecb ( 2019 ), β euro area bond funds continue to expand and increase liquidity risk β, financial stability review, chapter 4, november ; and esrb ( 2019 ), β eu non - bank financial intermediation risk monitor 2019 β, july. 6 boucinha, m. et al. ( 2020 ), β recent stress in money market funds has exposed potential risks for the wider financial system β, financial stability review, ecb, may. 7 financial stability board ( 2021 ), | 0 |
weak investment demand. 7 / 11 bis central bankers'speeches does the marked narrowing of the u. s. current account deficit post - crisis suggest that the united states has been the primary source of downward pressure on global interest rates over the past decade? certainly, if the united states had maintained its previous deficit, interest rates would likely be higher around the world. however, the financial crisis revealed that the u. s. capacity to absorb global savings at the pace observed prior to the crisis was unsustainable. 16 rather, an alternative explanation would be that the sharp decline in global interest rates post - crisis reflects factors that were likely well in train before the financial crisis. the downward trend in interest rates would have been more pronounced earlier in the decade had not elevated, and ultimately unsustainable, borrowing in the united states slowed the decline in interest rates in the years immediately preceding the crisis. this narrative is consistent with empirical evidence that suggests that the slowdowns in global productivity growth and labor force growth, both key factors in the slowing pace of global growth and the downward pressure on interest rates, predate the global financial crisis. 17 it is notable in figure 6 that the euro area has also seen a sizable increase in its current account position post - crisis, suggesting that developments in europe have also played a role in pushing down interest rates. the increase in the euro - area current account in part reflects sharp reversals in the current account deficits of greece, portugal, spain, and ireland β all countries that had witnessed large increases in their deficits during the global saving glut period prior to the crisis, in a pattern similar to that experienced by the united states. however, the euro - area increase also reflects increased surpluses in germany and the netherlands, countries that were already in considerable surplus during the pre - crisis period. what, if anything, can be done about low interest rates? given the potential risks around low interest rates i discussed earlier, including the impact on the effectiveness of monetary policy and financial stability concerns, what should policymakers do to address the problem? 8 / 11 bis central bankers'speeches monetary policy has a role to play. transparent and sound monetary policy can boost confidence in the stability of the growth outlook, an outcome that can in turn alleviate precautionary demand for savings and encourage investment, pushing up the equilibrium interest rate. however, as i have said before β and ben bernanke before me β " monetary policy is not a panacea | interest has declined about 150 basis points in the united states since the financial crisis and is currently about 50 basis points. we must remember, however, that r * is a function and not a constant, and its estimation is subject to a number of assumptions, the modification of which can lead to a wide range of estimates. 2 in an extension of this analysis, shown in figure 3, laubach, williams, and kathryn holston, also a federal reserve colleague, show that the decline in the natural rate of interest is a common feature across a number of foreign economies. 3 the fall in equilibrium interest rates was most pronounced at the time of the financial crisis, but rates have shown little tendency to increase during the long recovery from the crisis. 3 / 11 bis central bankers'speeches how should we think about the decline in equilibrium interest rates? an investment and savings framework there are many factors that could be holding down interest rates, some of which could fade over time, including the effects of quantitative easing in the united states and abroad and a heightened demand for safe assets affecting yields on advanced - economy government securities. i will focus on some of the more enduring factors that could potentially lower the equilibrium interest for some time. in attempting to explain why real interest rates have fallen, a useful starting point is to think of the natural interest rate as the price that equilibrates the economy β s supply of saving with the demand for investment in the long run, when the economy is at full employment. with this framework in mind, low interest rates reflect factors that increase saving, depress investment demand, or both. focusing initially on the united states, i will look at three interrelated factors that are likely contributing to low interest rates : slower trend economic growth, an aging population and demographic developments, and relatively weak investment. i will then discuss global developments and spillovers between countries. but first i would like to interject a quick word on why we as policymakers might be concerned about low interest rates. i highlight three main worries. first, as john maynard keynes discussed in the concluding chapters of the general theory of employment, interest and money, a low equilibrium interest rate increases the risks of falling into a liquidity trap, a situation where the nominal interest rate is stuck, by an effective lower bound, above the rate necessary to bring the economy back to potential. 4 relatedly, but more broadly, low equilibrium interest rates are a key pillar of the secular stagnation hypothesis, which larry summers has | 1 |
committed liquidity facility ( clf ) are in place. 4 even though none of these assets ( and few unrelated rmbs ) are held on the reserve bank β s balance sheet now, the fact that they are eligible for repo means that the bank must always be fully cognisant of the risks these assets carry. this allows us to lend against good collateral in stressed circumstances, a core function of central banks. debelle g ( 2011 ), β the committed liquidity facility β, speech to the apra basel iii implementation workshop 2011, sydney, 23 november. bis central bankers β speeches the information currently required for rmbs repo - eligibility is largely about the core attributes of the security. this includes, for example, the information memorandum, high - level data relating to the asset pools backing the securities and a list of mortgage insurers present in the pool. a aaa credit rating is also required. in part because we felt it was an appropriate time to do so five years after their inclusion on our collateral list, and in part ahead of the introduction of the clf, the bank has been conducting an internal review of its reporting requirements for rmbs. as a result of this review, today the bank is announcing some enhancements in the information requirements for repo - eligibility of rmbs. in a nutshell, these will require that issuers provide the reserve bank and the broader public with more comprehensive and up - to - date information on the securities. while some information on rmbs is generally available in the market, reporting standards can vary significantly across issuers, since there is currently no regulatory standard for rmbs reporting in australia. the available data also tend to be dispersed in a number of different locations, making it difficult to gather. hence, in consultation with the australian securitisation forum ( asf ), we have sought to achieve some uniformity and greater depth in the information reported. broadly speaking, the new information requirements cover both transaction - related data as well as information on the underlying assets, such as anonymised loan - level data. 5 details of the information that will be required at least every quarter on both existing and new rmbs issuance are set out in reporting templates, which are available today on the bank β s website. these templates are aligned with the asf β s current best practice rmbs reporting and disclosure standards. they are also consistent with those developed by the ecb and the bank of england. these reporting | speech review of the bond purchase program michele bullock [ * ] deputy governor bloomberg sydney β 21 september 2022 thank you for the opportunity to talk with you today. i am going to use my time to talk about two issues : the review of our bond purchase program ( bpp ) during the pandemic ; and the bank β s financial statements for 2021 / 22. the two issues are related because, while the bond purchase program was a policy response to extraordinary economic circumstances, it has had big implications for the bank β s balance sheet, profits and capital. i will give you the punch lines up front. in terms of the bpp, the review concludes that it broadly achieved its aims. but one result of the change in the bank β s balance sheet is that the bank will report a substantial accounting loss in its 2021 / 22 annual accounts and, as a consequence, negative equity. this will not, however, affect the bank β s ability to operate effectively or perform its policy functions. and over the next few years the bank will return to positive earnings and to positive equity. the bond purchase program the bpp was introduced in november 2020 as part of the bank β s second package of monetary policy measures in response to the pandemic. it was a complement to the yield target, the term funding facility ( tff ), forward guidance and the very low overnight cash rate. under the program, the bank purchased australian government securities ( ags ) and semi - government securities ( semis ) in the secondary market to lower the structure of interest rates at maturities between five and 10 years. unlike the yield target for three - year bonds, the bpp did not target a particular level of yields. instead, it set a quantity of bonds to be purchased over a set time period. the initial program involved the purchase of $ 100 billion of bonds ( split 80 / 20 between ags and semis ) over six months, at a rate of $ 5 billion a week. the program was extended several times : first, a further $ 100 billion from april to september 2021 at a rate of $ 5 billion a week ; then, from september to november 2021 at a rate of $ 4 billion a week ; and finally, purchases of $ 4 billion a week until mid - february 2022, at which point the program ceased. all up, the bpp resulted in the purchase of $ 281 billion of australian, state and territory government bonds. today, the bank released its internal review of | 0.5 |
' s estimates of the rate of growth of output and the unemployment rate that are sustainable in the long run in the united states, taking into account important influences such as the trend growth rates of productivity and the labor force, improvements in worker education and skills, the efficiency of the labor market at matching workers and jobs, government policies affecting technological development or the labor market, and other factors. the longer - run projections of inflation may be interpreted, in turn, as the rate of inflation that fomc participants see as most consistent with the dual mandate given to it by the congress - - that is, the rate of inflation that promotes maximum sustainable employment while also delivering reasonable price stability. this further extension of the quarterly projections should provide the public a clearer picture of the fomc's policy strategy for promoting maximum employment and price stability over time. also, increased clarity about the fomc's views regarding longer - run inflation should help to better stabilize the public's inflation expectations, thus contributing to keeping actual inflation from rising too high or falling too low. at the time of our last monetary policy report, the federal reserve was confronted with both high inflation and rising unemployment. since that report, however, inflation pressures have receded dramatically while the rise in the unemployment rate has accelerated and financial conditions have deteriorated. in light of these developments, the federal reserve is committed to using all available tools to stimulate economic activity and to improve financial market functioning. toward that end, we have reduced the target for the federal funds rate close to zero and we have established a number of programs to increase the flow of credit to key sectors of the economy. we believe that these actions, combined with the broad range of other fiscal and financial measures being put in place, will contribute to a gradual resumption of economic growth and improvement in labor market conditions in a context of low inflation. we will continue to work closely with the congress and the administration to explore means of fulfilling our mission of promoting maximum employment and price stability. | first time in two decades. in this year β s negotiations, base pay was raised for the second year in a row, and at many firms the increases were larger than last year ( chart 4 ). base pay increases were achieved at more firms than last year and became widespread across industries and firms of different size. as for price setting, an increasing number of firms seem to be able to pass increased costs, including the rise in input prices and personnel expenses, on to sales prices. in addition, it seems that households have started to accept such sales price increases on the back of an increase or prospects for an increase in their wages. there is a variety of evidence that firms β price - hiking behavior has become widespread and sustained since the start of this fiscal year. for example, looking at the items that make up the cpi ( all items less fresh food ), the share of items for which prices rose minus the share of items for which prices fell has risen markedly since the beginning of this fiscal year and recently has reached the highest level since 2000 ( chart 7 ). in addition, price indices compiled by the university of tokyo and hitotsubashi university by aggregating the prices of food and daily necessities also show clear price increases since april this year on a year - on - year basis, and the increases seem to be accelerating. many firms attempted to raise their sales prices at the beginning of last fiscal year, but this coincided with the consumption tax hike, which was followed by a decline in demand. firms therefore were forced to quickly take price rises back. the price changes this year present a clear contrast with those last year. the simultaneous occurrence of base pay increases and price hikes should be regarded as evidence that a positive feedback loop between the increases in employment and wages and the moderate rise in inflation is now in place. given these developments, although annual cpi inflation is likely to be about 0 percent for the time being, with the underlying trend in inflation steadily rising and the negative contribution of the crude oil price decline dissipating, annual cpi inflation will accelerate toward the price stability target of 2 percent. the timing of reaching around 2 percent is projected to be around the first half of fiscal 2016, but it should be noted that the timing could be either earlier or later than the projection, depending on developments in crude oil prices. iii. monetary policy going forward the bank has been pursuing qqe, aiming to achieve a state in which the 2 percent inflation rate is maintained in | 0 |
capital plan, and stress test rules ( pdf ), 83 fed. reg. 18, 160 ( april 25, 2018 ). return to text 3 the capital planning evaluation remains as part of the normal supervisory process for these firms. return to text 3 / 3 bis central bankers'speeches | ##ly and thoughtfully, and avoid the risk that firms will use this new information to engage in transactions that are solely designed to reduce losses in the test without reducing actual risk. firms have indicated that additional disclosure about models would not affect their own stress tests. we expect them to make good on that representation, as the federal reserve β s stress 2 / 3 bis central bankers'speeches test is not, and cannot be, a full picture of a firm β s resiliency in light of its idiosyncratic risks. we are confident that we can address these concerns through the regular examination process, by closely monitoring changes in firms β portfolios and ensuring sufficient capital, controls, and governance in light of the risk characteristics of their activities. qualitative objection i also want to reiterate a point regarding the role of the qualitative objection. the federal reserve eliminated this element of ccar for large and noncomplex firms in 2017, in part because of improvements in risk management at those firms. 3 in my view, the time has come to normalize the ccar qualitative assessment by removing the public objection tool, and continuing to evaluate firms β stress testing practices through normal supervision. while supervisory assessments would continue to center on a firm β s capital plan submissions, examination work would continue on a year - round basis, taking into account the firm β s management of other financial risks, and culminating in a rating of the firm β s capital position and planning. firms with deficient practices would receive supervisory findings through the examination process, and would be at risk of a ratings downgrade or enforcement action if those deficiencies were sufficiently material. conclusion these changes are aimed at preserving the foundation laid over nearly a decade of stress testing experience, including by many of the people in this room. our goal is to bolster the program β s credibility by increasing its transparency, simplicity, and stability, while maintaining the strength of the supervisory and internal stress testing elements that are central to the program today. these adjustments will be coupled with our continued commitment to strong supervision, and our expectation that financial institutions manage their risks and hold sufficient capital to continue operations through times of stress. i look forward to hearing your insights into these changes, and i thank you for your time. 1 see randal k. quarles ( 2018 ), β a new chapter in stress testing, β speech delivered at the brookings institution, washington, dc, november 9. return to text 2 amendments to the regulatory capital, | 1 |
structure. this, along with measures to strengthen large banks, would reduce the likelihood of sifi failure β but could not be relied upon to prevent all failures. would breaking up the largest banks end the need for future bailouts? that is not clear, for lehman brothers, although a large financial institution, was not one of the giants β except that it was connected with a very large number of other banks and financial institutions. similarly, the savings and loan crisis of the 1980s and 1990s was not a tbtf crisis but rather a failure involving many small firms that were behaving unwisely, and in some cases illegally. this case is consistent with the phrase, β too many to fail. β financial panics can be caused by herding and by contagion, as well as by big banks getting into trouble. in short, actively breaking up the largest banks would be a very complex task, with uncertain payoff. the bottom lines the united states is making significant progress in strengthening the financial system and reducing the probability of future financial crises. in particular β’ by raising capital and liquidity ratios for sifis, and through the active use of stress tests, regulators and supervisors have strengthened bank holding companies and thus reduced the probability of future bank failures. β’ work on the use of the resolution mechanisms set out in the dodd - frank act, based on the principle of a single point of entry, holds out the promise of making it possible to resolve banks in difficulty at no direct cost to the taxpayer β and in any event at a lower cost than was hitherto possible. however, work in this area is less advanced than the work on raising capital and liquidity ratios. see footnote 6 above. bis central bankers β speeches β’ although the bcbs and the fsb reached impressively rapid agreement on needed changes in regulation and supervision, progress in agreeing on the resolution of g - sifis and some other aspects of international coordination has been slow. β’ regulators almost everywhere need to do more research on the effectiveness of microprudential and other tools that could be used to deal with macroprudential problems. β’ it will be important to ensure that coordination among different regulators of the financial system is effective and, in particular, will be effective in the event of a crisis. β’ a great deal of progress has been made in dealing with the tbtf problem. while we must continue to work toward ending tbtf or the need for government financial intervention in crises, we should never | amando m tetangco, jr : the strength of retail β in a wider asean economy speech by mr amando m tetangco, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the chamber of thrift banks ( ctb ) annual convention, makati city, 19 march 2014. * * * every year, your industry comes together to exchange views on the prospects for the year ahead. with your theme this year β thrift banks : preparing for 2015 asean integration β, the thrift banking industry is recognizing a development that has quietly evolved through the years and will soon crystalize. asean integration β broadly through the asean financial integration framework or afif and more specifically through the asean banking integration framework or abif β will come to fruition in line with the asean 2020 vision that was enunciated way back in 2007. it is, in this sense, imminent and the chamber is being responsive by preparing for this eventuality. in fact, for this convention, the organizers have lined up experts to tackle different facets of integration. my role this morning is to describe the broad economic landscape, including the challenges and opportunities, that the thrift banking industry currently faces against the backdrop of asean integration. the chamber is being strategic in this way, for clearly, understanding one β s starting point and initial conditions is just as important as defining one β s final destination. the economy at large let me begin therefore with the economy at large. it is tempting to simply cite the array of indicators that show that the macro - economy is strong. in 2013, we again saw the convergence of high growth and stable prices as the country posted a real gross domestic product growth rate of 7. 2 percent amid an inflation of three percent. this is on top of the real gdp growth of 6. 8 percent and a 3. 2 percent inflation rate in 2012. we need to appreciate these numbers not just because they are better than the performance numbers that came out of 2011 ( which were 3. 6 % real gdp growth and 4. 6 % inflation rate ). instead, these are excellent numbers because of the calamities that befell us during the period. 1 on the external front, the balance of payments position was at usd5. 1 billion for 2013. and the gross international reserves at almost 12 months β worth of imports of goods and payments of services continues to provide ample cushion against external vulnerabilities | 0 |
extend my best wishes for successful deliberations during this three - day conference and commend the organisers for their efforts. may the next three days be filled with fruitful exchanges, innovative ideas, and collaborative solutions that would contribute to the process of keeping our financial system resilient, future ready, and crisis resistant. 1 dr sheri marina markose, professor of economics, university of essex, colchester, uk & cbdc academic advisory group, bank of england & uk hm treasury. 2 dr. hiroko oura, head, financial sector assessments and policies division, mission chief, fsap, india, imf, washington dc, usa. 3 through a combination of training programs, workshops, seminars, and conferences, the college equips supervisors with the knowledge, skills, and tools necessary to fulfil their responsibilities effectively. 4 the gross non - performing assets ( gnpa ) ratio for the scheduled commercial banks ( scbs ) was 2. 74 per cent at end march 2024 ( provisional ), down from 3. 87 per cent as on march 31, 2023 and 5. 82 per cent as on march 31, 2022. the capital to risk weighted assets ratio ( crar ) at 16. 8 per cent at end march 2024 is also much above the minimum regulatory requirement. the gnpa ratio of nbfcs was 3. 96 per cent at end march 2024 ( provisional ), down from 5. 03 per cent at end march 2023, and 6. 29 per cent at end march 2022. the capital to risk - weighted asset ratio ( crar ) at 26. 58 per cent at end march 2024 is also well above the minimum regulatory requirement. 5 the erstwhile departments of banking supervision, non - banking supervision and cooperative banking supervision were merged to form a single unified department of supervision. 6 refer paragraph 2 of governor's monetary policy statement dated june 7, 2024 ( https : / / www. rbi. org. in / scripts / bs _ pressreleasedisplay. aspx? prid = 58049 ) 5 / 6 bis - central bankers'speeches 6 / 6 bis - central bankers'speeches | karolina ekholm : some lessons from the financial crisis for monetary policy speech by ms karolina ekholm, deputy governor of the sveriges riksbank, at a meeting, stockholm, 4 december 2009. * * * one question that has been much debated over the past year is to what extent monetary policy has contributed to the financial crisis, which we have not quite seen the end of yet. another β partly related β question is to what extent the policy conducted by central banks in the future should try to counteract potential bubbles 1 building up so that we can ultimately avoid a new dramatic financial crisis with substantial consequences for the real economy. these are the questions i intend to focus on today. one conclusion that can be drawn in the light of the deepest recession in the world economy since the second world war is that it is important to try to counteract, in various ways, bubbles building up that will then risk causing substantial problems in the real economy when they burst. how this should be done, and who should bear the main responsibility for this task, are difficult questions to which there are at present no exact answers. the responsibility for a balanced development of the economy does not rest solely with the central banks ; it also lies with the financial supervisory authorities and the legislators. on the other hand, a central bank like the riksbank has considerable responsibility with regard to managing the consequences of a financial crisis and can therefore also be assumed to have a strong interest in preventing such crises from arising. at the same time, a central bank does not have so many instruments to try to influence developments such as credit growth and asset prices. the policy rate is a fairly blunt instrument in this context. this does not mean that financial indicators are not taken into account in interest rate decisions, which has been the case in sweden on a number of occasions. but there is also reason to consider the possibility of using other tools than the policy rate. in this speech i shall begin by describing the causes behind the crisis. in this context i will explicitly discuss the question of to what extent monetary policy in the early 2000s might have contributed to developments. i shall argue against the opinion that monetary policy was a crucial factor behind the financial crisis. this does not mean, however, that i do not consider there are arguments in favour of central banks being more active when there is a risk of bubbles building up. i shall attempt to develop these arguments here today. a financial crisis with substantial consequences for the real economy the financial | 0 |
in a consistent manner. consistent means constantly following international best practices and accommodating the needs of indonesian people. bis central bankers β speeches distinguished ladies and gentlemen, β challenges of domestic ps β 13. we warmly welcome such positive achievements. however, we observe there are at least 3 ( three ) domestic challenges ahead. first, compared to countries in asean, electronic payment transactions in indonesia are relatively low. with the high number of population in indonesia, there is a huge potential to expand payment system service access in indonesia. 14. therefore, in 2014, bank indonesia has launched non - cash national movement in order to encourage the expansion of electronification. the national movement has a mission to establish a less cash society ( lcs ). 15. in its implementation, bank indonesia involves the central government, which is represented by different ministries, and regional governments to encourage the use of non - cash transactions in the governance and daily transactions by the community. 16. second, with the vast archipelago of indonesia, we observe unequal payment system services. people in remote areas may not experience the benefits of familiar services in big cities. 17. the challenging supporting infrastructure availability, like quality telecommunication network, is key to help service expansion. moreover, we all experience the benefits of quick and easy transactions provided by the latest payment system services. 18. third, we observe that the rapid development of information, communication and technology has security risks. crimes or fraud in online transactions will eventually pose legal and reputation risks to payment system service providers. 19. therefore, we consider that consumer protection aspect must also become our priority. we must seek to do the following, including to increase the system security ; expand consumer care channels to allow quick and easy access ; increase consumer awareness on safe transactions ; and increase supervision of payment system implementation. distinguished ladies and gentlemen, β global & regional ps challenges β 20. in addition to the three challenges, we also face global and regional development requiring close anticipation. as a country with an open economy system, indonesia needs to consistently increase compliance with the international standard in payment system. 21. fulfillment of the international standard, one of which is specified in the principle of market infrastructure ( pfmi ), will help us ensure payment system infrastructure supporting global financial market to have better resilience. then, safety, reliability, and efficiency need continuous attention for improvement. 22. development of international standards is followed with the developing cooperation initiatives between countries to develop a cross border payment system infrastructure. amidst the increasing inter | inefficiency can turn the economy inflationary and not propoor. the subsequent inflation will erode the purchasing power of the poor, which will widen the socio - economic gap. meanwhile, the tight correlation between the inflation rate and structural aspects implies that to successfully undertake a credible disinflation process requires thorough and integrated coordination between all institutions in the government including bank indonesia. generally speaking, such coordination can be conducted by dividing policy direction into three major parts. first is to continuously maintain internal and external rupiah stability through preemptive and prudential monetary principles as well as policies for the money market, banks and the payment system that strive to buttress financial system stability. this first policy direction is the responsibility of bank indonesia and is aimed at dissipating instability risk in the financial sector that can disrupt rupiah stability. second is to maintain fiscal resiliency and sustainability in the long run to prevent the emergence of fiscal domination that could adversely impact the expectations of sun investors towards the prospects of future inflation. this then can disrupt and hamper monetary policy effectiveness in maintaining macroeconomic stability as a whole. third is to improve the structure and infrastructure of the food distribution market and increase the efficiency and productivity of the economy as a whole. 1. 5. regional competitiveness in the era of regional autonomy and globalization ladies and gentlemen, yet another future challenge we face is regional competitiveness in the era of regional autonomy and globalization. the world economic forum ( wef ) reported in their 2006 - 2007 β global competitiveness report β that indonesian competitiveness ranks 50th out of 125 countries ; compared to 69th out of 107 countries in the previous year. despite the obvious improvement that has taken place, indonesia is still considered among the least competitive countries in the asian region. indonesian competitiveness continues to languish behind singapore ( ranked 5th ), japan ( 7th ), malaysia ( 26th ), thailand ( 35th ) and india ( 43rd ). meanwhile, based on an international institute for management development ( imd ) report in the world competitiveness yearbook 2007, indonesian competitiveness was ranked among the two lowest countries surveyed, namely indonesia ranked 54th, whereas venezuela ranked 55th out of the 55 countries sampled. as appears to be common knowledge, increasing economic globalization has made competition amongst countries even tighter. on top of this, tighter global competition directly affects the regional economy, especially in the era of regional autonomy and fiscal decentralization. consequently, the need has arisen for each region in | 0.5 |
jerome powell : brief remarks brief remarks by mr jerome h powell, member of the board of governors of the federal reserve system, at the global finance forum, washington dc, 20 april 2017. * * * thank you for inviting me to speak here today. 1 i will begin by looking back at the global financial crisis and the great recession, which were arriving on the horizon at about this time 10 years ago. for the united states and many other countries, this would turn out to be the most painful economic crisis since the great depression. the fact that we had a severe recession but not another depression is a tribute to the aggressive response of those who were in a position to act at that time. 2 in the event, the financial system avoided collapse but incurred severe damage and proved incapable, for a time, of performing its key functions. that was true of the largest investment and commercial banks, several of which either failed or required taxpayer support to survive. it was also true of the many pieces of the financial market infrastructure whose structural weaknesses contributed to the crisis, such as the triparty repurchase agreement ( repo ) market, the over - thecounter derivative market, and prime money market funds. the financial turmoil caused heavy damage to the real economy. payroll employment declined by almost 9 million ; over 7 million people lost their homes. 3 many young people entered a terrible job market ; research shows that this may adversely affect their careers for many years. many experienced workers who lost their jobs may suffer permanently lower income prospects. 4 the nation faced two big tasks after the crisis. we had to get the economy growing again so people could get back to work and rebuild their financial lives. and we had to return the financial system to good health and address the many structural weaknesses that had become apparent. today, the first of those tasks is well along. we have gone eight years without a subsequent recession - - one of the longest recoveries on record. employment is now almost 7 million jobs higher than its pre - crisis peak, with all of the net gains coming from the private sector. and with unemployment at 4. 5 percent, we are at or close to full employment. but all is not well. although job growth has been strong, gross domestic product has increased only about 2 percent annually since the crisis, held down by the weakest sustained period of labor productivity growth since world war ii. labor productivity - - the increase in output per hour - has increased only 1 / 2 percent per | year since 2011, about a quarter of its post - war average. the productivity slowdown has profound implications for our national well - being. this slowdown is a worldwide phenomenon, so it is likely that there are global forces at work. the slowdown has been associated with weak investment and a decline in output gains from technological innovation. we need a national focus on increasing the sustainable growth rate of our economy. 5 that means investing in our workforce to give them the skills and aptitudes they need to compete in the global economy. it means policies that reward work, and policies that support investment and research. for the most part, these policies are not in the purview of the federal reserve. what about the second goal? as with the economy, we have made great progress toward our goals. today, our financial system is without a doubt far stronger than it was before the crisis. the largest financial institutions now hold much higher levels of higher - quality capital. they hold higher levels of liquidity as well and are much less reliant on runnable short - term funding. they are subject to rigorous, forward - looking capital stress tests that recognize the dynamic nature of financial risks. and they have submitted several rounds of resolution plans that are helping to 1 / 3 bis central bankers'speeches ensure that they could be safely reorganized should all these other safeguards prove insufficient. our financial market infrastructures are also much stronger. the amount of intraday credit extended in the triparty repo market has been drastically reduced. last year, the securities and exchange commission implemented reforms that address weaknesses in the structure of prime money funds. and about 75 percent of interest rate and credit default swaps are now centrally cleared, which allows for greater transparency and more consistent risk management. 6 while the move to central clearing has made the system safer, we need to make sure that the central counterparties have the resources and risk - management practices to withstand plausible but severe shocks. 7 many of the statutory provisions and regulations put in place to effect these changes were novel ; it is not likely that we would have gotten everything exactly right on the first attempt. this is a good time to step back and ask what changes have worked and where adjustments should be made. indeed, along with the other financial regulatory agencies, the federal reserve is contributing to just such an exercise by the treasury department. as i share some of my views on these issues, i should emphasize that i speak for myself and not for my board colleagues or for | 1 |
considered in some important decisions. it was especially emphasized that stakeholders should be involved in the insolvency process. fourth, the stakeholders should have access to necessary information on managing the company. the oecd again revised the five principles in 2004. in this revision, the protection of stakeholders and whistle blowers is emphasized. it, to a larger extent, stresses the rights of employees and creditors. there are three main aspects. first, it clearly states to establish a mechanism that enhances the participation of employees. stakeholders, including individual employees and their representatives, shall be able to freely express their views to the board with respect to any illegal or immoral activities in the company. employees β views and their rights to express the views shall be respected and protected. it shall be ensured that information can flow safely and confidentially to the board. second, corporate governance shall ensure the enhanced participation of employees, so that the employees β special skills can be put to use in the company, benefiting the company directly or indirectly. the examples of employees β participation include increasing representatives of employees in the board, adopting the plan of employee stocks holding and establishing a profit sharing mechanism such as pension contribution. for instance, pension contributions can be pooled into an independent fund and the fund manager shall be independent from the company β s management in terms of business operation. third, it stresses the important role of creditors in corporate governance and external supervision. it also states that effective and efficient liquidation framework and credit rights enforcement mechanism are important supplement to effective corporate governance, ensuring effective protection for the rights of the shareholders. the importance of employees and creditors is further stressed in the new version. china wishes to learn from international experiences and practices in the process of building a socialist market economy with chinese characteristics. it can be said from the point of view of a socialist market economy, china should do better in terms of employees β status and their involvement in managing companies. however, we do not have any established principles or framework related to stakeholders. we will learn by doing and reviewing experiences. why have we not done better compared with many traditional western economies in this aspect? it has to do with the mistakes in the past. for any country learning from the history and past experiences is a very important, though not an easy task, and one that is liable to misunderstanding. an example at hand is the americans β review of the great recession in 1929. the reviews generated different conclusions right after the recession and in the 30 β s and 40 β s | thomas jordan : low interest rates β blessing or curse? summary of a speech by mr thomas jordan, member of the governing board of the swiss national bank, at the delegiertenversammlung des hev schweiz, santis, 19 june 2009. the complete speech can be found in german on the swiss national bank β s website ( www. snb. ch ). * * * monetary policy uses low interest rates to try and stimulate demand as a way of combating the economic crisis. the property market is an important transmission channel in this regard, as low mortgage rates provide direct relief to home owners and tenants in the form of lower interest payments and rents. this provides households with greater room for manoeuvre in consumption and investment. this in turn boosts overall economic demand and economic growth. however, despite these direct positive effects, a low level of interest rates can also pose medium - term risks for the stability of the swiss property market, and hence the financial system. the past has repeatedly shown that prolonged periods of low interest rates can lead to speculation on property markets, and to declining standards in mortgage lending. the challenge in today β s difficult environment is how to boost the economy through low interest rates without creating medium - term risks for the stability of the financial system and the property market. responsible behaviour on the part of home owners, combined with bank discipline when granting loans, can contain these risks. households should buy property only if they would also be able to afford it if interest rates increased. moreover, they should finance their house purchase with a sufficient proportion of equity. equity acts as a cushion, absorbing movements in property prices. in addition, banks should use discipline in lending practices, even in an environment of low interest rates. the prime considerations when granting loans should be the observance of maximum loan - to - value ratios and a conservative valuation of property. | 0 |
##man, the main author of this study. broadly, the asian leadership index demystifies that attributes leaders in asia must develop if they are to engage the people they lead. the asian leadership index does not propose a new leadership model. rather, it identifies a number of areas for behavioural change that are needed based on the attributes that respondents indicated are currently missing in their leaders, reinforced with suggestions on how leaders might move forward with greater influence and impact. in conducting this research, it is hoped that it generates thinking on these leadership issues and contribute towards the development of the new generation of effective leaders in asia. bis central bankers β speeches | zeti akhtar aziz : developing effective leaders in asia speech by dr zeti akhtar aziz, governor of the central bank of malaysia ( bank negara malaysia ), at the launch of the iclif β s asian leadership index, kuala lumpur, 1 april 2014. * * * it is my pleasure to welcome you here this morning for the launch of iclif β s asian leadership index. the asian leadership index, is part of an important stream of global research on the expectations on leaders in today β s world. the world is rapidly changing, and is becoming more challenging. effective leaders must act in full recognition of the fact that their best followers will demand more of them. this is because in many cases their expectations of leaders have shifted in an age where information flows have intensified and where travel has removed all our known boundaries. the asian leadership index is a substantive, broad - based research on asia. the focus on asia is because the region is becoming increasingly more significant in the global landscape. and yet, there exists little, if any, systematic study of leaders doing business in asia. the asian leadership index therefore aims to contribute towards a greater understanding of β what do business leaders in asia need to do to get more energy and commitment from their most important followers? β as part of the study, selected senior leaders and emerging leaders in companies operating in asia were asked to describe what their leaders need to do for them as professionals if they were to participate wholeheartedly with that leader, and be fully invested in their organizations over the longer term. they also indicate what they see as missing from the leaders to whom they report. as leadership is about being able to deliver results even in the most challenging of environment, it is therefore also about generating the drive and energy in the organisation, and thus creating an environment in which the best talent will gravitate to, and contribute with the same energy and drive. in an international environment in which high quality talent is scarce, this aspect of the expectations of leadership becomes important. in essence, leaders need to be supported by high powered and committed teams. the expectations of talent is however not only rapidly evolving but may differ when contextualised to different parts of the world. this study undertaken by iclif provides insights on such expectations of leaders in asia and on the areas that need to be addressed if sustainable impact and influence is to be achieved. what then are the findings of the study? i will leave this for the presentation by kate sweet | 1 |
your kind attention. | october 2019 ( gdp ). " culture. there is a long - established network of production, distribution and consumption of chinese - language pop music, opera and films within the chinese community all around asia. in the 1990s, japanese television dramas became a staple of audiences across east asia. this success encouraged the korean television industry to actively export its own dramas regionally. these developments have resulted in a loosely integrated regional media and cultural industry in east asia which has also helped promote intra - asian tourism and cultural exchange. iii. asia as future with the increasing interconnectedness of the region and its growing economic presence, it is not surprising that there are expectations that asia can and will lead the world. but simply extrapolating from the strong economic performance of recent decades can be misleading. as we well know, economic size alone is not enough to be accepted as a global leader. looking back at history after world war ii and how the major powers have evolved, it clearly shows that it is not just about brute economic or military power. a combination of vision, moral values and respect toward others are also essential. what do we have to do in asia to truly harness the potential of this vast and complex region, so that asia can play an active role at the global stage? asian countries will need to work further to deepen intraregional collaboration based on mutual recognition and respect while acknowledging the diverse nature of this region. specifically, further deepening of economic regional interconnectedness will certainly be necessary. also, a broader perspective to increase joint engagement in the global community on non - economic issues will be important. i would like to touch upon them separately. enhancing regional integration if asia is to take on a global leadership role, this would require the promotion and maintenance of open and flexible economies and markets. the strengthening of asian supply chains would also be essential for enhancement of economic interconnectedness. much has already been achieved on economic integration. for example, in asean, there has been progress in eliminating tariffs, advancing services liberalization, liberalizing and facilitating investment and facilitating skilled labor mobility. however, as shown in chart 3, compared to europe, asia has a lower participation rate in global supply chains. promoting trade liberalization through frameworks such as tpp11 and rcep would be the way forward, especially in an environment where global trade tensions are high. it is important to promote trade not only in goods but also in services. the region is steadily transitioning from being mainly a production area of the world | 1 |
, it is easier for the central bank to support the economy as healthier banks tend to lend more. the worst case, to say it very bluntly, is of a central bank providing liquidity to banks just to buy or carry legacy assets, and the banking sector doesn β t restructure. this was typically the japanese situation in the early 2000s. perhaps paradoxically, a rigorous aqr and stress test helps monetary policy. appropriately treating banks β holdings of sovereign debt according to the risk that they pose to banks β capital makes it unlikely that the banks will use central bank liquidity to excessively increase their exposure to sovereign debt. this is because banks will be wary of the constraints placed on sovereign debt by the stress tests to which they are subject at the same time. therefore, should the procyclical impact of the aqr be significant, then monetary policy would be able to act β without hesitation and being reassured that the side effects of a liquidity injection that we have seen for the 2011 β 2012 operations would be minimised. so how would you assess whether the aqr was procyclical? don β t forget we have our two pillar approach : we analyse the business cycle, but we also look at money and credit. we will see from the second pillar very quickly if the credit situation doesn β t improve. at this stage of the recovery, what we see at the moment is quite normal. the big corporate firms do not have as many constraints as the smes. they have around β¬2trn in excess cash, they can access debt markets. the reluctance to invest comes more from the business confidence side. and if you did act because of the impact of the aqr, what exactly would you do? depending on the situation, the central bank can decide on the most effective way liquidity provision can be provided. there are no restrictions on the way a central bank provides liquidity to the banks via repo, a priori. bis central bankers β speeches you want to reach your price stability objective. at the same time, you want to be sure that when you provide liquidity against adequate collateral, it doesn β t reduce the incentive to restructure the banking sector. and so by having a well - designed comprehensive assessment β like the one we β re preparing now β we are easing the job of the central bank. bis central bankers β speeches | from 1937, in the aftermath of the great depression, when he said : β just as it was advisable for the government to incur debt during the slump, so for the same reasons it is now advisable that they should incline to the opposite policy β. 1 fiscal consolidation and growth are not mutually exclusive. i disagree with the view that reducing public expenditures will hinder economic growth. on the contrary, prudent fiscal management provides the basis for balanced and sustainable growth. stability - orientated fiscal policies will foster confidence among households, entrepreneurs and investors, which will ultimately increase our welfare by creating new jobs. 2. how should we address european modalities of today β s global challenges? i have outlined three key areas for efforts to shape the contours of the post - crisis world β reform of the institutions of global governance, reform of the financial system and reform of public finances. these are global challenges affecting in particular the industrial economies. i would now like to explain how europe specifically is responding to these challenges. an ambitious agenda lies before the continent. it is not only a visionary agenda : it has to be pursued with determination right now. we have to demonstrate the same spirit with which the european union was progressively developed over the past half - century : setting objectives, agreeing deadlines and mobilising the necessary political will within parliaments. europe β s governments are committed to pursue fiscal consolidation. those within the euro area have formally declared that they will take β all measures needed to meet fiscal targets this year and the years ahead in line with excessive deficit procedures β ( euro area heads of state or government declaration of 7 may 2010 ). some of them have made precise additional commitments to accelerate fiscal consolidation and ensure the sustainability of their public finances. fiscal consolidation is being put in place at the same time as we strengthen the resilience of the european banking sector. publication of the detailed results of a harmonised paneuropean stress test is an important step in the right direction. these tests will increase transparency and enhance investors β confidence in europe β s banking sector. they will also contribute to restoring the important intermediation role of the interbank market in channelling funds within europe. 3. where next? so where do we go from here? as i have indicated, collectively as european and global policy - makers, we need to ensure economic recovery and renewed confidence, while reducing fiscal deficits and remaking the financial system into one that supports the real economy. this | 0.5 |
, β macroeconomics with financial frictions : a survey β, nber working paper 18102. bullard, j., ( 2013 ), β the global battle over central bank independence β, presentation at the nabe panel discussion : β federal reserve independence in the aftermath of the financial crisis : should we be worried? β, aea / assa annual meeting, san diego, california, 4 january. da costa, p., ( 2013 ), β central bank independence is a bit like marriage : israel β s fischer β, blog post, macroscope reuters, 18 april, 2013, http : / / blogs. reuters. com / macroscope / 2013 / 04 / 18 / central - bank - independence - is - a - bit - like - marriage - israels - fischer / de carvalho filho, i. e., ( 2011 ), β 28 months later : how inflation targeters outperformed their peers in the great recession β, the b. e. journal of macroeconomics 11 ( 1 ). frankel. j., ( 2012 ), β the death of inflation targeting β, column in vox, 19 june, http : / / www. voxeu. org / article / inflation - targeting - dead - long - live - nominal - gdp - targeting gerlach, s., ( 2013 ) β is inflation targeting passe? β in reichlin, l. and r. baldwin, ( ed. ), β is inflation targeting dead? central banking after the crisis β, centre for economic policy research. goodhart, c. a. e., m. baker and j. ashworth, ( 2013 ), β monetary targetry : might carney make a difference? β, in reichlin, l. and r. baldwin, ( ed. ), β is inflation targeting dead? central banking after the crisis β, centre for economic policy research. imf ( 2013 ), β the dog that didn β t bark : has inflation been muzzled or was it just sleeping? β chapter 3, in the imf world economic outlook, april 2013. king, m., ( 2013 ), β monetary policy : many targets, many instruments. where do we stand? β speech at the imf conference β rethinking macro policy ii : first steps and early lessons β, washington dc, 16 april. krugman, p., ( 2013 ), β missing deflation | allocated for this purpose, such as the policy rate and other potential means. this is one example of the so - called lucas critique, which says that empirical relationships can change if the economic policy changes as the economic policy affect agents β expectations. see da costa ( 2013 ). bis central bankers β speeches inflation targeting let me go on to the other area i intend to discuss today β inflation targeting. as i mentioned earlier, the central banks β independence and inflation targeting can be regarded as inseparable. they are both central parts of the monetary policy framework that was regarded as very successful, at least up until the crisis. independence and inflation targeting can reinforce one another in both good and bad ways. increased independence can contribute to greater credibility, which in turn can make it easier to attain the inflation target. a period of low and stable inflation creates confidence and legitimacy for inflation targeting and increases the political support for independence, and so on. and vice versa, a reduction in confidence in the inflation target may make inflation expectations, and thereby actual inflation, more difficult to control. inflation targeting is then perceived as unsuccessful, the political support for this policy and for central bank independence thus declines, credibility is further undermined, and so on. criticism : inflation targeting could not prevent the crisis and has difficulty getting us out of it inflation targeting has also been questioned after the crisis and also from slightly different starting points. 9 two main types of criticism have been expressed. 10 firstly, some say that inflation targeting prior to the crisis focussed too heavily on its traditional targets, particularly price stability and therefore missed β or perhaps even contributed to β the credit - driven property bubbles that arose in a number of countries. secondly, some say that inflation targeting does not appear particularly suited to helping countries out of a crisis and may even make it more difficult to conduct a sufficiently expansionary policy. it should therefore be replaced with something else. i think that this criticism is rather unfair. as i see it, there was, perhaps, a hope that inflation targeting could prevent financial crises, but one can hardly say that it was part of the deal. the main purpose of inflation targeting has been to supply a credible nominal anchor for the economy. 11 it has succeeded in this purpose. looking at sweden, i think it is quite clear that the introduction of inflation targeting in connection with the crisis in the early 1990s was one of the most important reasons why the swedish economy has developed so well since then. however, financial crises can also arise in environments | 1 |
recent proposal includes the possibility of setting for each bank a time margin for compliance with the mrel requirement, although this margin would be decided on a case - by - case basis by the resolution authority, i. e. the srb, in the case of the banking union. admittedly, setting a relatively long transition period may add complexity to the resolution processes that have to be managed during that period. as stated, current regulations require that resolution funds should only be activated when the institution has absorbed losses for an amount equivalent to 8 % of liabilities. evidently, if the bank did not yet have sufficient loss - absorbing debt instruments because the transition period were not over, the established requirement would only be met if haircuts were imposed on other creditors, such as deposit - holders. while the deposits covered by national guarantee schemes would be excluded from loss - bearing, there is no doubt this step might prove destabilising. thus, in the ongoing revision of the directive, it might be wise to add a flexibility clause in respect of the requirements established for the use of funds external to the banks concerned 8 / 10 in their resolution processes, at least for the duration of the transition period set for the fulfilment of the mrel requirements. lastly, before concluding this section, a remark on the need for coordination among the different banking union authorities. the current regulations and the european commission β s proposals for their revision afford the srb extensive discretion for deciding, case by case, on questions as important as the objective volume of mrel, the nature of the eligible instruments and the transition regime. these decisions interact appreciably with the solvency requirements set by the prudential supervisor and they give shape to a series of regulatory demands that may affect the viability of institutions and the structure of the industry. a fruitful framework of collaboration between the srb and the ssm is thus needed and, specifically, the criteria the srb develops to exercise the discretion afforded it by the regulations should be properly discussed with the prudential authority. 5 final remarks in conclusion, i have referred in my address to the intense work in all jurisdictions to amend the bank crisis management framework so that it strengthens the capacity available to maintain financial stability without this requiring the massive use of public funds, as occurred in the recent financial crisis. the progress made in europe has been considerable, having incorporated the most demanding international standards into the regulations. the new resolution regulations pose most considerable constraints, which are in | ? β’ why save with banks? β’ why borrow within limits? β’ why borrow from banks? β’ why borrow for income generating purposes? β’ why repay loans β’ why repay loans in time? β’ why do you need insurance? β’ why you will need regular stream of income post working life β pension? β’ why you should keep money aside regularly and consistently during your earning life for pension in old age? β’ what is interest? how moneylenders charge very high interest rates? β’ what is the difference between money and credit. one of the primary challenges for improving the effectiveness of financial literacy efforts is to ensure the standardization of the basic messages being conveyed to people. this will help in ensuring consistency in the messages reaching the target audience from various sources and making it more focused and purposeful. i hope that this forum deliberates on this issue and comes up with some useful ideas on the same. for the lower and middle income groups that are participating in financial markets as either savers or borrowers or both, i. e. the financially included, financial literacy is about enhancing their knowledge about the market and about the range of products / services available for meeting various financial goals. for instance, how many people invest in equities? they lack knowledge about how the equity market functions, which gives relatively high returns over a longer time horizon as compared with other kinds of investments. for high net worth bis central bankers β speeches individuals, the education is useful to fetch greater returns from their investments in the market and to avail credit at relatively cheaper rates. but whether saving or investing, the basic lesson that a higher return implies higher risks cannot be lost sight of. people need to be educated to balance their investments in terms of liquidity and risks and that they should not put all eggs in the same basket. while financial literacy for the users of financial services / products is of paramount importance, literacy is also a must for financial service providers. banks, financial institutions and other market players too need to be literate about their risk and return framework. every bank, in order to expand its customer base, needs to understand the requirements of its customers, the market, credit and operational risks involved and returns to be achieved. they need to understand that for their business to survive, their customers must survive and for that, they need to understand the appropriateness of the products themselves to be able to explain it to their customers. besides, the providers of financial services have a vested interest in the spread of financial inclusion and financial literacy | 0 |
reflect before we decide on the shape of a new regulatory system. another reason for reflection is that recent years have seen a natural experiment. some regulatory systems were light touch, others heavy touch, and yet others placed both ownership and regulation of banks in the public sector. yet they all failed to some degree to prevent the accumulation of risks that finally produced the crisis. so it is unlikely that there is a simple answer. any plan for reform should take into account the nature of financial risk. why were so many people misled for so long? and was there an inherent weakness in the structure of modern banking? banks are dangerous institutions. they borrow short and lend long. they create liabilities which promise to be liquid and hold few liquid assets themselves. that though is hugely valuable for the rest of the economy. household savings can be channelled to finance illiquid investment projects while providing access to liquidity for those savers who may need it. but given how risky banks are, it should not be surprising that from time to time they get into trouble. and they have done so regularly since banking began. confidence in a bank can disappear quickly making it vulnerable to a destructive bank run. if a large number of depositors want liquidity at the same time, banks are forced into early liquidation of assets β lowering their value. and, of course, if banks make sufficient unwise loans to borrowers who do not repay, then that can threaten solvency as well. banks can of course take their own actions to ensure that investor confidence is maintained. for example, a visible source of liquidity helps. in the panic of 1906, the founder of what is now the bank of america displayed his gold reserves on the street and offered to convert deposits into gold, creating confidence in his bank at a time when many others failed. forty years ago, the clearing banks in london held around 30 % of their assets in short - term liquid instruments. today that liquid assets ratio is about 1 %. for the major uk banks, almost 25 % of customer loans are now funded by short - term borrowing in wholesale markets. at the turn of the new century it was close to zero. this was the distinctive feature of the contemporary british model of banking. distinctive it may have been ; sensible it was not. hbos and rbs paid the price as the availability of this funding dried up, and not one of the building societies that de - mutualised in the 1980s and 1990s in order to expand beyond the constraints | but otherwise standard rtgs systems, built in the cloud, to enable cross - border payments to settle in central bank money simultaneously : a long - standing policy goal of central banks. this poc was particularly helpful in identifying some of the operational and technical challenges of such synchronisation. our most recent dlt poc, which we are announcing today will be done with chain, is designed to examine a key tradeoff in dlt design. the highly desirable resilience characteristics of dlt require sharing data on the ledger across a number, or all, network participants. but a fully replicated ledger poses clear privacy issues, and may be vulnerable to a cyber attack on whichever is the weakest link. the poc will examine the extent to which dlt based systems can be configured to enable privacy amongst participants, whilst keeping data on a shared ledger : one of the holy grails of dlt design. regtech : data storage and analysis ( 4 pocs ) as central bankers, we have always needed to process, store and analyse data to inform our policy and operational responsibilities. but that need has grown enormously in recent years, reflecting the increased reporting requirements on supervised firms since the financial crisis, greater availability of high frequency and qualitative data from public and private sources, and new policy responsibilities ( eg for macro - prudential supervision ). making sense of such large and diverse data sets is not straightforward. but central banks need to do so to discharge their responsibilities, whilst respecting increasingly demanding data protection requirements. of course regulated firms face a similar challenge marshalling all of these data in the first place β and a sub - branch of fintech, sometimes known as β regtech β, has grown up to facilitate the associated monitoring, compliance and reporting demands. more recently, that term has expanded to cover the use of similar technology on the regulatory side, and a good number of the accelerator β s pocs have been in this space, looking either at data analysis or the more advanced field of machine learning. our first data analysis poc, undertaken with privitar, looked at ways to desensitise mortgage data collected by the bank so they could be shared more widely and used alongside other more aggregated data to draw conclusions about developments in the financial system as a whole. another poc, with enforcd, examined tools allowing the bank β s legal team to draw out common trends in publically available regulatory enforcement actions in order to inform their | 0 |
caleb m fundanga : financial market progress in zambia opening remarks by dr caleb m fundanga, governor of the bank of zambia, at the official launch of the equity capital resources unit trust, lusaka, 21 april 2008. * * * chairperson distinguished ladies and gentlemen, let me at the onset express my gratitude to equity capital resources plc for inviting me to come and officially launch its collective investment scheme which i understand will be called β equity capital resources unit trust β or ecrut in short. this indeed is gratifying to everyone who is anxious to see our financial markets progress. as many of you gathered here already know, the bank of zambia in consultation with various stakeholders initiated and developed the financial sector development plan ( fsdp ) in 2004. the vision of this plan is to have a stable, sound and market - based financial system that supports an efficient mobilisation and allocation of resources. it is therefore pleasing that the introduction of ecrut takes us closer to fulfilling the vision of the fsdp. ladies and gentlemen, am sure you will agree with me that collective investment schemes are an indispensable part of market development with several benefits. one of the primary benefits of collective investment schemes is that small investors can have access to professional investment management. many of our people are not conversant with financial investment matters, yet they are eager to enhance their wealth. many simply do not have the capacity to identify and manage investments that are appropriate to their risk - return appetite. the people of this country are actually willing to put aside some of their earnings into safe and viable investments. however, safety and viability is only assured with professional investment management which can be offered by people like yourselves. ladies and gentlemen, in march 2008, the lusaka stock exchange in partnership with the bank of zambia and the bond exchange of south africa conducted a training and consultative workshop to enhance the zambian bond market. among the outcomes of this workshop was that one of the modes of collecting funds from the so called β small investors β in the economy is through collective investment schemes. collective investment schemes can be beneficial to small investors who may not have enough money to carry out a diversification and proper allocation of their assets. small investor can benefit from diversification techniques usually available only to wealthy investors. with these few benefits in mind, i wish to earnestly appeal to you and other collective investment scheme providers that as you go about doing your business think innovatively about ways you can capture zambia β s many small investors | . think about how you can provide them with an opportunity to invest in a broad range of assets at affordable cost. i have little doubt in my mind that as you take up this challenge, you will be able to create financial stability by being a good investment manager to this segment of investors. i have been informed by the chairman of equity capital resources ( ecr ) plc that the company intends to list ecrut on the stock exchange in the near future. when this commendable intention is achieved, ecrut will be the first collective investment scheme to be publicly traded on the stock exchange in zambia. with the calibre of men and women behind this investment vehicle, i am confident this will be achieved in the required time frame. when that time comes we want to turn back to this day and say β we were part of the birth of ecrut β. the existence of the ecrut shall provide means of resource mobilisation, bringing on board a collection of individual participation in the capital and money markets. this vehicle will facilitate the participation of investors who previously were not capable of participating in highly denominated securities in the financial sector. ladies and gentlemen, before i end my speech, let me quickly touch on an important aspect of collective investment schemes, that is, investor confidence in the managers and the industry itself. i believe by far this is the most important factor in whether a scheme can attract and maintain long - term investors. there must be a strong regulatory framework. whereas there is a strong regulatory body in the securities and exchange commission that vigorously administers the law to protect investors, fund managers must be committed to strong self - regulation and exercise professional ethics to the best interests of investors. this, chairperson, is fundamental. it now gives me great pleasure to officially launch the ecrut scheme. thank you. | 1 |
the state ( repayable advances ) and two schemes implemented by the hellenic development bank β a guarantee scheme and a co - financed interest subsidy scheme for new corporate loans. these are expected to reach an overall loan volume of about β¬13 billion, or 7. 7 % of gdp. they come on top of the broader fiscal package in response to the pandemic, including interest subsidies for existing performing loans, bonds and bank overdrafts, reductions and deferrals of tax and social contributions, and labour market support measures. so far, the ecb β s policy measures and the relevant greek policies have supported bank lending to corporates, which has increased substantially, while credit standards have remained broadly stable. a large net flow of loans β above β¬1 billion β was registered in july, supported in particular by the guarantee scheme of the hellenic development bank. at the same time, greek small and medium - sized enterprises continue to have serious concerns about their lack of access to financing. their financing gap remains high, despite the increased availability of bank loans and the decline in interest rates. in order to underpin the recovery, policy support remains necessary to safeguard the continued supply of credit. looking ahead, it is essential to complete the financial sector reforms needed to support the process of npl reduction and guarantee an adequate supply of credit during the recovery. these reforms include improving the e - auctions framework, revising the insolvency framework, reducing the backlog of pending personal insolvency cases before the courts, and clearing called state guarantees on bank loans. the funding provided by next generation eu is an opportunity for greece 2 / 3 bis central bankers'speeches the funding from next generation eu creates an extraordinary opportunity. for the first time in history, the european union will issue common debt to counter a common shock. this will bring fiscal policy more in tune with monetary policy at the european level, and may represent an important step for european integration : we borrow together to recover from the crisis and to invest in our future. all eu countries will benefit from this common response. but to be effective, european measures require careful planning and decisive action at the national level. in time, the need to buffer the immediate impact of the pandemic will be replaced by the need for investment and reform to support a sustainable recovery. as the national support measures are phased out, a well - planned and coordinated approach will be necessary if we want to avoid cliff effects. policies will have to find the right | jean - claude trichet : interview with il sole 24 ore interview with mr jean - claude trichet, president of the european central bank, in il sole 24 ore, conducted by mr beda romano on 31 august 2011, and published on 2 september 2011. * * * 1. a compatriot of yours, jacques delors, the former president of the european commission, has said in recent days that the euro area is β on the brink of the abyss β. it β s a very pessimistic view, undoubtedly coloured by a sense of disappointment. do you share it? i have great admiration for jacques delors. but let me sum up some of my present observations. first, we have a credible single currency which over the last 12 years has kept its value in terms of price stability in a remarkable way in comparison with the previous national currencies in the last 50 years. the solidity of the currency itself is not disputed and our fellow citizens all over europe are calling on us to continue preserving price stability. second, the euro area, taken as a whole, is in a better position from a fiscal standpoint than other economies. in 2011, the public finance deficit of the euro area should be around 4. 5 % of gdp, while in the united states or japan it will be about 10 % of gdp. but we had a very serious weakness in terms of economic and fiscal governance inside the euro area which has been revealed by the global crisis. 2. well - informed politicians are not hesitating to talk about a possible break - up of the euro area. the weaknesses cannot be denied. the weaknesses have to be corrected. loose fiscal policies and insufficient attention to competitive indicators have not been surveyed rigorously and corrected in time. individually and collectively the european countries have to correct the present situation. individually by adjusting their domestic policies β as all the advanced economies, including the us and japan are called on to do β and collectively by considerably reinforcing their mutual surveillance and their governance. 3. on the subject of governance, there β s a discussion in various quarters about the possibility of creating european bonds. former italian prime minister romano prodi has proposed the creation of a fund guaranteed by the gold reserves of countries that would issue bonds to buy back national debt and make new investments. at this stage, we have the efsf bonds, which are bonds with a european signature. the main message of the ecb governing council to governments is to implement rapidly | 0.5 |
on rational expectations to wage and price dynamics, macroeconomics, econometrics, fiscal policy, and, of course, monetary policy. he has written an impressive number of influential articles in leading journals and important books. it is impossible to summarise his research in a few sentences. therefore, i will limit myself to two topics. the first topic dates back to the second half of the 1970s, when john initiated a research strategy that would have a profound and lasting impact on our profession. it was a time when the new - classical macroeconomists were claiming that monetary policy was powerless when it came to steering the economy. this challenged both the keynesian and the monetarist views. john quickly accepted the new concept of rational expectations. however, he rejected page 2 / 4 the assumption that markets always clear, and that prices and wages are perfectly flexible. his research showed that β as a result of staggered wage contracts β monetary policy, even if anticipated, can be useful for stabilising the economy. this restored the proposition of keynesian and monetarist models that even anticipated changes in money affect the economy. the second topic i would like to highlight is a recurrent theme in john β s research agenda. this is his deep interest in rules for monetary policy. john β s research has always emphasised the importance of rule - like, systematic behaviour for monetary policy. however, by the late 1980s, many people were arguing that efficient rules would have to be very complex, and expressed severe doubts about the practicability of rules for monetary policy. so john decided it was time to write down a workable rule that was consistent with his research. the result was a simple equation to guide interest rate decisions at the fed. the equation related the policy rate to inflation and unemployment. when he presented his rule at a carnegierochester conference in november 1992, he did not regard it as a big deal. it turned out quite differently. his paper, published in 1993, has become one of the most cited works in macroeconomics. the rule became known as the taylor rule. my experience at the snb testifies the importance of the taylor rule. for us, the taylor rule derives its appeal from three features. the first is its simplicity in describing the behaviour of different central banks by estimating the policy reaction to deviations from the inflation target and to the output gap. the second is its quality as a benchmark in assessing the current stance of monetary policy with | philipp hildebrand : the virtues of flexible financial markets - a central banking perspective summary of a speech by mr philipp hildebrand, member of the governing board of the swiss national bank, at the cfa institute annual conference, zurich, 22 may 2006. the complete speech can be found in german on the swiss national bank β s website ( www. snb. ch ) * * * summary rapid technological change and market liberalization have been the driving forces behind the remarkable evolution of global financial markets over the past three decades. the consequences of this development include a geographic rearrangement of global capital markets, a fast pace of product innovation and changes in the nature and composition of financial market participants. the benefits associated with today β s flexible financial markets are manifold. financial markets have become much more efficient in allocating capital. new products enable a better distribution of risks and the liquefaction of previously illiquid assets. they have also increased market transparency. as a result, modern financial markets facilitated innovation and likely enhanced economic growth. moreover, they have contributed to make economies more resilient to shocks. these extensive benefits notwithstanding, modern financial market also entails new risks. these risks tend to elicit calls for increasingly far - reaching regulation. while some regulation may indeed be required to guarantee the integrity of financial markets, the threshold for such regulation should be set high. regulation should only be considered if the objective is abundantly clear and if there is overwhelming evidence that market participants lack the incentives or the capability to adequately manage these risks themselves. rather than seeking regulation, market participants, central banks and regulators should focus on strengthening an already active dialogue with the aim of furthering our understanding of new types of risk associated with modern financial markets. | 0.5 |
- bliley act of 1999, which consolidated and extended the administrative changes that had allowed more extensive affiliations of commercial banks with investment banks, broker - dealers, merchant banks, and other financial firms. by the turn of the century, then, the depression - era cluster of restrictions on commercial banks had been substantially loosened. banks could operate nationally, had few practical restrictions on their ability to pay competitive deposit rates, could conduct a much broader range of activities within their own operations, and could affiliate with virtually any kind of financial firm. meanwhile, of course, financial engineering had been rapidly changing the character of the financial services sector as a whole. securitization and associated derivative instruments were merging capital markets and traditional lending activities, fueling the growth of what has become known as the shadow banking system. as a result, both the asset mix and sources of funding of many banks were shifting, sometimes dramatically. various larger banks were also becoming involved, either directly or through their affiliates, in the full range of activities associated with securitization β including sponsoring and administering special purpose vehicles used in the securitization process. perhaps because the removal of activities and affiliation restrictions occurred in stages, rather than in a single legislative or administrative action, there was no announced new regulatory emphasis to address the changed industry. in practice, however, regulators relied increasingly on capital requirements, accounting rules, and to a lesser extent, limits on bank transactions with their corporate affiliates, to promote the safety and soundness of banking organizations. although they had long used bank capital ratios as a supervisory tool, u. s. bank regulators did not impose explicit minimum capital requirements until the 1980s. in the ensuing quarter century, the attention of banking regulators has been heavily oriented toward elaborating capital requirements to reflect more precisely the particular risks faced by a financial institution β first through the basel i process and more recently through the lengthier and more complex basel ii process. the emphasis on capital measures was reinforced when, following the savings and loan calamity, congress instructed federal banking agencies to use declining capital ratios as the trigger for " prompt, corrective " remedial action that was intended to constrain regulatory forbearance. the proximate reason for the move towards capital requirements in the early 1980s was regulator concern about the decline in capital ratios of the largest banks β a concern reinforced by congress, as it saw some of those large banks facing enormous losses on their loans to foreign countries. at the same time | based on the objectives of the facility. the current repo operations are conducted with only primary dealers and are designed to ensure a consistently ample supply of reserves to the banking system and support better interest rate control. as designed, these repos may have little effect on bank demand for reserves because the repo operations do not provide liquidity against hqla to a wide range of bank counterparties. a facility intended to affect reserve demand may therefore require different design features. - 13 exacerbating the issues i have discussed today. preliminary analysis suggests that changing those inputs to averages may be helpful. if we were to propose that change, it would not alter the stringency of the surcharge. as such, this option is something that we are actively considering. in summary, there are great benefits to safety and soundness and to financial stability for firms holding sufficient buffers of hqla to meet potential outflows in stress. i am not proposing any changes to this basic framework. what i am proposing is that we can potentially improve the efficiency of monetary policy implementation by improving the substitutability of reserves and treasury securities through adjusting our expectations for firms in stress - planning scenarios. there are a variety of approaches we could take, but i think the fed has a role to play. - 14 references bernanke, ben s. ( 2020 ). β the new tools of monetary policy, β presidential address to the american economic association, san diego, calif., january 4, https : / / www. brookings. edu / wpcontent / uploads / 2019 / 12 / bernanke _ assa _ lecture. pdf. board of governors of the federal reserve system ( 2019a ). β minutes of the federal open market committee, june 18 β 19, 2019, β press release, july 10, https : / / www. federalreserve. gov / newsevents / pressreleases / monetary20190710a. htm. β β β ( 2019b ). quarterly report on federal reserve balance sheet developments. washington : board of governors, november, https : / / www. federalreserve. gov / monetarypolicy / files / quarterly _ balance _ sheet _ deve lopments _ report _ 201911. pdf. β β β ( 2020 ). β minutes of the federal open market committee, december 10 β 11, 2019, β press release, january 3, https | 0.5 |
can central bank transparency go too far? β, nber working paper no. 10829, p. 25. in fact, the bank of england would have preferred to act covertly, but the market abuses directive prevented this ( http : / / www. guardian. co. uk / business / 2007 / sep / 21 / 14 ). credit. at the same time, interest rates on risk - free securities such as government notes have declined. the result is a significant increase in the ted spread ( the difference between an uncollateralized interbank loan and the risk free rate of the same maturity ). with the 3 - month libor rising, central banks faced an important monetary policy decision. in countries where the official target rate is a central bank rate, for instance, the euro zone, the 3 - month libor became increasingly disconnected from the official target rate ( typically a repo rate of two weeks or less ). as you can see from graph 1a, the ecb held its official target rate ( the two - week repo rate ) constant and therefore tolerated an increase in the 3month libor. it is currently about 70 bp above the repo rate of the ecb ; this spread is now more than twice as large as it was in the first week of august. the bank of england also held the official rate constant throughout the market turbulence. as you can see from graph 1b, the initial increase of the 3 - month sterling libor was slightly more pronounced than the one for the euro. currently, the difference between the 3 - month libor and the official target rate is roughly equivalent for the two currencies. in the case of switzerland, where the official target rate is the 3 - month libor rate, the emerging risk premium meant that the official target rate was driven higher immediately after the turmoil began in early august. you can see this is graph 1c. due to a significant reduction in the short - term repo rate of the snb, the 3 - month libor has since receded to about the level of the first week of august. as you know, the federal reserve has lowered the fed funds rate in two steps by 75 basis points to a target level of 4. 5 %. as a result and as you can see in graph 1d, after the first cut in the fed funds, the 3 - month libor fell somewhat below the level of august 9. after the second rate cut the 3 - month | in normal times and in times of crisis. let me illustrate this point by a recapitulation of the developments surrounding the bank of england β s liquidity support to northern rock. northern rock had apparently been facing some institutional deposit outflows for a few days in september 2007. but the run on the bank only started when the emergency liquidity assistance of the bank of england became public, incidentally by way of a news report from the bbc. 17 the outflows stopped immediately after the u. k. treasury issued a blanket deposit guarantee. the northern rock case is a reminder of the importance that psychology plays in times of crises. as central banks, we need to consider carefully to what extent instant transparency with regard to liquidity operations may end up being counterproductive. let me add here that this is a very complex issue. i am not arguing that the evolution towards greater transparency in central banking should be reversed. indeed, perhaps we need greater ex ante transparency such as clearly stated conditions and eligibility criteria associated with central bank liquidity provisions. undoubtedly, ex post transparency about potential liquidity support measures must also be guaranteed. but in the midst of a crisis, it may well be beneficial and desirable for central banks to have some flexibility with regard to how they communicate regarding potential liquidity operations. 2. 2. implications of volatile risk premia for the conduct of monetary policy my second tentative lesson directly relates to the conduct of monetary policy. the recent market strains are unusual because confidence or rather the lack of confidence plays such an important role. clearly, there is a great deal of uncertainty regarding valuations of complex credit instruments. moreover and arguably more importantly, banks realize that they are facing or could face large contingent liabilities. they are therefore doing everything they can to protect their balance sheets. in essence, banks are hoarding liquidity and are reluctant to lend money in the interbank market beyond the very short term. as a result, a substantial and highly unusual risk premium has emerged in the interbank market. the risk premium in the interbank market has generally driven up the 3 - month libor which serves as the reference rate for the pricing of georgios chortareas, david stasavage, and gabriel sterne, 2002, β does it pay to be transparent? international evidence from central bank forecasts β, review of the federal reserve bank of st. louis, july / august, 99 - 117. frederic s. mishkin, 2004, β | 1 |
income in net operating income rose significantly in 2006. for some lcbgs with sizeable capital market operations, the share of trading income accounted for nearly half of net operating income in 2006 and corresponded to more than 45 % of their tier 1 capital, as shown in the chart on the right of slide 10. special feature article a looks at the relationship between bank income diversity and systemic risk. it finds that a measure of systemic risk is positively correlated with bank size and the share of trading income, while it is negatively correlated with revenues from ( traditional ) interest income sources. euro area insurance sector in the euro area insurance sector, there was a broad - based improvement in profitability in 2006 ( see the chart on the left of slide 11 ). the positive assessment is further supported by the fact that the profitability of the weaker performers in 2005 also improved in 2006. underlying this improvement was a strengthening of investment income, mainly owing to buoyant stock markets and higher interest rates. moreover, favourable developments in the financial conditions of primary insurers and reinsurers in 2006, together with a greater focus on risk management and risk - adjusted prices, support a positive outlook for the euro area insurance sector as a whole. these positive developments continued to be priced into expected default frequencies ( as shown in the chart on the right of slide 11 ). however, risks and challenges for the sector remain, as greater financial market risks could pose a challenge to the life insurance and non - life insurance sectors. 5. triggering factors for the materialisation of risks and the exposure of vulnerabilities i will now consider some possible factors that could trigger the materialisation of certain risks and the exposure of identified vulnerabilities. an important issue highlighted in the fsr relates to the existing ample financial market liquidity and the prevailing very low risk premia. one possibility is that an abrupt and sharp increase in risk aversion and a loss of confidence could lead to a substantial reduction in financial market liquidity which, as stressed, is currently abundant. such a decline could expose several underlying vulnerabilities and trigger an adverse scenario which could involve : β’ funding liquidity challenges for highly leveraged financial institutions ; β’ unwinding of carry trades and possible unwinding of global imbalances ; β’ increasing credit spreads across the credit quality spectrum ; β’ increased asset price volatility in financial markets more generally ; and β’ reduced bank profitability as a result of lower trading revenues. a second adverse scenario could | concludes that there is some concern that the deteriorating performance of sub - prime rmbs could affect the broader market for structured credit instruments, due to the fact that the concentration of sub - prime mortgage loans as collateral for collateralised debt obligations ( cdos ) is very high. it cannot be ruled out that further poor performance of this type of collateral could trigger rating downgrades of cdo tranches themselves and lead to a reassessment of risk in other segments of structured credit markets. financial market liquidity an overarching theme, pertaining to several sources of risk and vulnerability in the financial markets, is the abundant liquidity characterising global markets. indeed, there appears to be a consensus among market participants that market liquidity has reached unprecedented levels. financial market liquidity is a measure of the ability of market participants to undertake securities transactions without triggering large changes in their prices. the concept of financial market liquidity is distinct from the concept of monetary liquidity, but there can be links between the two. although the measurement of market liquidity is rather complex, symptoms of the abundance of liquidity include high leverage, low yields, low market volatility, narrow credit spreads, and high market turnover. overall, abundant liquidity seems to be intertwined with the β search for yield β which has been discussed in past issues of the fsr and it appears to be dependent on confidence remaining in the smooth functioning of the market. the chart on the left of slide 6 introduces a composite indicator of financial market liquidity in the euro area equity, bond, foreign exchange and credit markets. it is constructed to gauge three different dimensions of market liquidity. the first dimension is tightness, that is the magnitude of risk premiums required by market - makers for holding inventories of securities, and it is measured by the bid - ask spread. the second dimension is depth and resiliency, that is the degree to which the volume of transactions impacts on asset prices, and it is measured by using ratios of asset price movements to transactions. the third dimension relates to liquidity risk premia, that is, the compensation required by investors for the risk that attempts to unwind positions could be challenged by uncertain market conditions in the future. this is measured using yield spreads between securities which are known to have varying degrees of liquidity. the evolution of this indicator over time confirms that financial market liquidity has increased significantly since 2001. it rose sharply in 2003 and 2004 and markets have remained very liquid since then | 1 |
continue to do so in the years ahead. still, there are many unknown factors in this financial sector, as new types of islamic finance transactions have evolved relatively recently. for instance, how does arbitrage between islamic finance transactions and conventional financial transactions take place? with greater presence in the global market, what kind of impact will islamic finance have on the pricing mechanism in the global financial market? the size of cross - border capital flows generated from islamic finance products is growing. how will this impact the stability of the global financial system? i have expressed my view that diversity in the market will bring about stability. however, the rapidly growing modern islamic finance industry has never been exposed to serious stress in the global financial market. stress tolerance can only be acquired through the experience of riding out numerous crises in the financial market and financial system. in this regard, i would like to watch closely developments in islamic finance in the coming years. one of the potential vulnerabilities in the international financial system is the global imbalance problem. there is a huge gap between the deficit in the us current account, and the surplus in the current accounts of asian countries and oil producing countries. the gap has been filled by the smooth flow of a significant amount of capital. in this context, understanding the flow of islamic finance capital originating from oil money has certainly become the key when considering sustainability of the current state of the global economy. on the regulatory front, there are ongoing discussions on how to develop risk management and a regulatory framework to match the rapid expansion of the islamic finance industry in order to maintain stability of the financial system. the key to addressing this issue would be consistency with conventional risk management and regulatory frameworks. this is a matter of great importance for the coexistence of the islamic financial system with conventional financial markets and systems, and for providing beneficial diversity to the global financial system. islamic financial standard setting organizations play an important role in bridging the gap between islamic standards and conventional global standards. such organizations include the ifsb, of which governor zeti served as chairperson last year, and the accounting and auditing organization for islamic financial institutions, which sets accounting standards for islamic finance. to give a few examples, the ifsb has issued the capital adequacy standard and guidance that complement existing global standards for islamic banks. exposure drafts of guiding principles for islamic collective investment scheme and islamic insurance, or takaful, will follow. i look forward to the significant role that these islamic financial standard setting organizations | more modern version β keeping up with the kardashians, a notion that is apparently even more important today in a highly globalised world with a free flow of information. if the joneses or the kardashians are getting a new mercedes, people are bound to like something similar even though just two decades ago they were driving ladas or trabants or polski fiat. so despite the progress achieved so far, citizens will continue to want more. and why shouldn't they? converging to what? since the eu stopped converging, and actually diverged, from the us in mid 1990s the question is should the goal be to converge towards the eu style labour, product and financial markets, or maybe more efficient ones? converging towards the structures that are themselves underperforming might not be a right choice. for example, integration of the cee banking markets with the west european ones through entry of banks into the cee region at an early stage of the transition has certainly being beneficial in bringing better technology and banking culture, as well as facilitating the transfer of capital. however, today, when it is clear that bank - based systems are inferior to more capital market - based ones, and when loan - to - deposit ratios are close to one, the goal should probably be to turn towards developing more efficient structures of the financial markets. how should we, as policymakers, react to this? what are the next steps that we have to take? how much do we know? well, we know that when it comes to standards of living, in the long - run it is all about labour productivity. and labour productivity, in turn, depends on the amount of capital per unit of labour and something that we call total factor productivity ( tfp ) or multifactor productivity. the problem is that both of these components are hard, or impossible, to measure, so we have to estimate them, and that is by no means an easy task. much has been said about the tfp growth in the context of the discussions on the slowdown in the productivity growth, or discussions of the convergence in europe. however, if you try to decompose the data that are used in these discussions, i believe that you'll come to realise that there are serious measurement issues. for example, it is hard to believe that there has been almost no increase in capital stock per worker in romania and at the same time, the country managed to increase its t | 0 |
. your successor has already been found, and probably everyone here in the audience knows him : axel weber. i am convinced that you, mr weber, will fill your new position as president of the cfs ( centre for financial studies ) just as ably and with much skill. your wealth of experience makes you just the right choice for the cfs ( centre for financial studies ), where you will be following in mr issing β s great footsteps. and you are already very familiar with the cfs, as you were its director from 1998 to 2002 and also maintained contact during your tenure as bundesbank president. welcome back, just a few metres away from your old β stomping ground β in frankfurt. welcome home, and here β s to a fruitful working relationship! i am looking forward to exchanging ideas with you. there is no shortage of topics for an exchange of views between the bundesbank and frankfurt β s research institutions. one of them is central bank digital currency ( cbdc ( central bank digital currency ) ), specifically the digital euro. i would like to talk about this in my speech today. there are three aspects which i wish to address. first, the opportunities and risks presented by the digital euro. second, the international dimensions of cbdc ( central bank digital currency ). many central banks across the globe are currently working on this issue. we should take this opportunity and try to make systems compatible across currency zones. and third, i will report on the current status of the digital euro project. the digital euro offers a whole range of opportunities. however, i will begin with the potential economic risks of introducing it. 2 risks and opportunities most of you certainly know what the β digital euro β project entails. the idea is to make a cbdc ( central bank digital currency ) available to individuals and businesses : like euro banknotes but in digital form. alongside cash issued by central banks and β book money β created by commercial banks, the digital euro would constitute an additional form of money. this would then be the third form of money in our current monetary system that consumers can use as a means of payment. the bank for international settlements ( bis ( bank of international settlement ) ) defines a monetary system as β the set of institutions and arrangements that supports monetary exchange. it consists of money and payment systems. β [ 1 ] what quickly emerges from this definition is that a monetary system is a complex entity with many interdependencies. the ability of | and data protection. the governance structure needs to be clarified β who is involved, who decides what? and finally, we shouldn β t endlessly put off making this kind of system operational. cbdc ( central bank digital currency ) could also offer a currency exchange solution by making processes automated, simplified and more transparent. this is another area of use for a wholesale variant of the digital euro, which is limited to a specific group of users. this group of users largely overlaps with institutions that currently already hold an account with the central bank ; in other words, they are primarily commercial banks. for example, it is conceivable for cross - border payments to be processed directly in various currencies as delivery - versus - payment transactions. even as we speak, there is a range of pilot projects [ 3 ] involving smart contracts and liquidity pools that promise significant advantages over traditional correspondent banking business. after this overview, you may share my views on the topic of the interoperability of central bank digital currency : namely that cbdc ( central bank digital currency ) presents a special opportunity to make international payments faster, more cost - effective and more transparent. the achievement of interoperability poses great economic, technical, legal and political challenges. once these can be overcome, the shortcomings of cross - border payments will decline significantly β something we should not leave to volatile crypto - assets or stablecoins in closed ecosystems alone. in this vein, it is all the more important to proceed with great care when conducting studies for a digital euro, and also to take international aspects into account. as i see it, we should exploit the opportunities presented by cbdc ( central bank digital currency ). it has great potential. 4 current project status in the eurosystem, we are currently working to establish how this potential can be harnessed. allow me to give you a brief insight into the current status of the project in the last part of my speech. the initial focus of the work is on using the digital euro within the euro area. should it come to fruition, a digital euro is intended to enable simple payments in everyday life β just like we β re familiar with when we use cash, but in digital form. it should therefore be usable in both retail outlets and when making purchases online. equally, it should be possible to use the digital euro for cashless payments from person to person or payments made between individuals and public authorities. in the eurosystem, we have identified two | 1 |
unlisted investments in renewable energy infrastructure. nbim has a group in place that has begun to seek out opportunities in this sector. we set the same risk and return requirements for the investments under these mandates as for the rest of the fund β s investments. everything we do in the area of ownership is, and must be, a result of an active approach. in our active management, we seek at all times to make the most of analyses we have performed and the knowledge we have acquired over the past 20 years. our internal asset managers closely follow the largest european companies in particular. knowing the companies well puts the fund in position where it is possible to earn excess returns. external management in emerging markets, we benefit greatly from our use of external asset managers. knowledge of and proximity to markets are essential for being able to assess the risk of investments. in view of challenges associated with responsible investment, a passive investment strategy is not really appropriate in these markets. this is an area where active choices must be made. we look at the choice of external asset managers as an investment decision. since 1998, we have invested through 319 different external active equity managers. to retain their mandates, they must show over time that they can identify profitable investments. they must also take responsible investment into account. the fund β s size and breadth enable us to follow up the external asset managers systematically over time. internally, we employ portfolio managers who perform their own analyses and monitor the external asset managers β portfolios. all aspects of the activities of these managers are evaluated to ensure that they meet our requirements and expectations. chart : net relative return. external asset managers we get back much more from external asset managers than we have paid for their services. in the period to 2019, cumulative excess return after costs associated with external mandates has 4 / 5 bis central bankers'speeches been nok 48 billion. the results have exceeded expectations. at the same time, these investments spread the fund β s risk across more markets. external asset managers also help the fund to steer clear of problematic business models and companies and sectors with weak ownership structures. it would have been difficult to achieve without local knowledge. the executive board intends to raise the limit for the external management mandates to 5 percent of the fund next year. conclusion the fund has become larger than anyone could have imagined only a few years ago. how we manage the fund in the best way possible and ensure that its assets benefit current and future generations alike is a question that is more relevant than ever | we conduct more than 3500 meetings with close to 2000 companies in the course of a year. in these discussions, we bring up matters such corporate governance and sustainability that are relevant to the fund β s long - term return. at the same time, our ownership work can also lead to investment decisions. this underpins our ownership work. responsible investment requires active ownership. active management and active ownership are closely related. the bank β s investment management organisation analyses these companies thoroughly, in order to identify long - term investment opportunities, reduce the bank β s exposure to undesirable risk and the like. we use such analyses in order to safeguard the portfolio. there are companies 3 / 5 bis central bankers'speeches where we prefer not to be an owner. if we see that a company has a business model that we do not regard as sustainable, it may lead to divestment. but unlike the ethically justified divestments, these risk - based divestments are justified by purely commercial considerations. all together, the fund has made risk - based divestments of 282 companies since 2012. the first divestments were of palm oil companies, whose activities entail destruction of rainforests. since then, the fund has divested of a number of other companies, where the common denominator has been that we have observed inadequate management of risks such as those related to the environment and climate change, corruption and human rights. chart : return effects of risk - based divestments our experience from this work has been favourable. we exploit the fund β s characteristics, primarily its long - term horizon, to reduce risk and β in any case as it appears today β also to improve the fund β s return. since 2012, risk - based divestments have contributed to increasing the return by an amount equivalent to around 0. 27 percentage point of the value of the fund β s equity portfolio, measured against the benchmark index. this is the equivalent of around nok 7 billion. while risk - based divestments concern companies that we prefer not to invest in, there are other companies that we want more of. these are companies that, in our opinion, provide opportunities for solid returns in the longer term. in the mandate, the ministry of finance has also set a requirement for the bank to establish separate environment - related investment mandates. at the end of 2019, these mandates amounted to nok 79 billion invested in 77 companies and bonds. in 2019, the ministry also decided to permit | 1 |
, processing, marketing, distribution, rural electrification, housing, construction and provision of essential amenities for local communities. even in the medium and large industries and transport sectors, an increasing range of activities could be undertaken on cooperative lines. β 18. over the years, the importance of cooperatives increased well beyond a business form to a more broad based development philosophy to fulfil the common economic aspirations of the poor and disadvantaged. this narrative suggests that growing state faith played a critical role in evolution of cooperatives. cooperatives also driven by the land holding pattern 19. in addition to state policy, the changing pattern of landholding in india aided the spread of cooperatives. bis central bankers β speeches 20. during the 50s and 60s, more than a fourth of the total cultivable land was held by large farmers. by the year 1995 β 96, this picture changed significantly with large farms yielding ground to small and marginal farms whose share increased both by way of number of operational holdings as well as operational area. as per the latest agricultural census ( 2005 β 06 ), small and marginal farmers, having less than 2 hectares of land, accounted for 83 per cent of the total number of operational holdings and 41 per cent of the operated area. it is this class of β small β farmers, operating at the margins β socially as well as financially, with low income base and limited market orientation, vulnerable to climate changes and facing considerable risk in their agricultural operations β that define the profile of the clientele of cooperatives. the average size of loans disbursed by the cooperatives works out to about 30, 000, as against 1, 38, 000 disbursed by the commercial banks ( 2010 ). the difference evidences the nature of the cooperatives and their clients. still they seem to be losing out β problems in the rural cooperative credit system 21. as indicated above, the cooperative movement in india has had the support of state policy and also the landholding pattern. yet, cooperatives seem to be losing out on business share. the market share of rural cooperative banks in india has been continually receding β from 7. 2 per cent in 2001 to 3. 7 per cent in 20102. if the share of cooperatives declines further, they may lose their role as an important player in rural credit. this raises an important policy question. can a process such as the cooperatives be driven entirely as a top down process? isn β t bottom up support a necessary condition for the | sometimes garners large headlines. but from the standpoint of analysis, the β currency β or asset at the center of some of these systems is not backed by other secure assets, has no intrinsic value, is not the liability of a regulated banking institution, and in leading cases, is not the liability of any institution at all. indeed, how to treat and define this new asset is complicated. 3 while these digital currencies may not pose major concerns at their current levels of use, more serious financial stability issues may result if they achieve wide - scale usage. risk management can act as a mitigant, but if the central asset in a payment system cannot be predictably redeemed for the u. s. dollar at a stable exchange rate in times of adversity, the resulting price risk and potential liquidity and credit risk pose a large challenge for the system. during times of crisis, the demand for liquidity can increase significantly, including the demand for the central asset used in settling payments. even private - sector banks and certainly non - banks can have a hard time meeting large - scale demands for extra liquidity at the very time when their balance sheets may be in question. moreover, this inability to meet the demand for extra liquidity can have spillover effects to other areas of the financial system. earlier in our history, the united states frequently witnessed bank runs that severely disrupted financial and economic activity, an example of what can happen when people lose faith in a payment system. in response, congress ultimately introduced both a central bank and deposit insurance programs to help regulate fluctuations in the supply of liquidity in order to keep prices stable. without the backing of a central bank asset and institutional support, it is not clear how a private digital currency at the center of a large - scale payment system would behave, or whether the payment system would be able to function, in times of stress. 3 / 5 bis central bankers'speeches central - bank - issued digital currency given that privately developed digital currencies may raise important financial stability issues tied to the value of the asset, some have argued that central banks should begin to issue their own digital currency as a 21st century analogue to paper currency. i would urge caution, particularly for countries like the united states with highly developed banking systems and ongoing robust demand for physical cash. as a practical matter, i believe that consideration of a central - bank - issued digital currency to the general public would require extensive reviews and consultations about legal issues, as | 0 |
listened to industry feedback on this point and engaged extensively at a european level in relation to it. as a result, we will be converging our approach with other fund domiciles and will shortly update our ucits q & as to clarify the position. in future, the ucits etf identifier can be included at the level of a sub - fund or a share class. this will provide greater clarity for fund managers and investors, particularly where the fund has both listed and unlisted share classes. future let me now turn to the future of etfs. i would like to discuss how technology will factor into the development of the sector and how retail investment can be better harnessed in europe. it is clear that technology will continue to be a big driver of change for the etf sector. as technological advances are made, we should see the etf ecosystem become more efficient. for example, tokenisation is something which has the potential to speed up settlement cycles and increase efficiency and liquidity of trading in assets. in addition to this, there are potential benefits to investors in terms of ease of access to financial products and lower costs. at the central bank, we are supportive of understanding how tokenisation and related technology can bring benefits to both firms and investors. at an international level, engagement is ongoing with policy makers to assess financial asset tokenisation and its associated risks and challenges. we have engaged with the funds industry to explore pathways and the potential of tokenisation for investment funds, in particular to understand how tokenisation will sit within the existing regulatory framework. we look forward to continued engagement with industry on this topic as the sector and the technology evolves. collaboration between industry and policy makers will be essential to moving this forward. advances in digitalisation will also lead to efficiencies and benefits for firms and investors. one of the benefits is that it allows easier access for investors to financial products, in particular retail investors. we have seen a rapid evolution in terms of distribution methods. this opens up possibilities both for managers and for retail investors. managers are gaining access to new target markets, while investors benefit 3 / 6 bis - central bankers'speeches from a multitude of different investment options. any one of us can use our mobile phones to gain immediate access to a large range of different asset classes. and while we acknowledge that there are many benefits to easier retail investment access, it is not without its risks and challenges. we must consider and keep pace with the evolving manner in which | or in different market conditions. β’ capital ratios don β t incorporate the impact on a firm β s ability to generate revenues during stress periods β and thus don β t indicate a firm β s ability to rebuild capital as necessary. β’ so, clearly, stronger capital standards need to be combined with a better ability to anticipate the future β to incorporate a more forward - looking element into assessing the financial strength of a firm. thus, supervisory and risk management tools need to expand to include stress testing β and from this came the supervisory stress test and resulting federal reserve capital rule and the requirements in dodd - frank for stress testing. i think it β s fair to say that the new capital rules will and should change how firms think about risk within their organizations. whether it β s the increases in risk weights of certain types of exposures, or the overall imposition of leverage constraints, the new capital rules are designed to build a more resilient financial system that is better prepared to handle and weather the next crisis. the capital requirements for large banks are supplemented by a liquidity framework. thinking back to the financial crisis it β s fairly clear from the experiences of most firms during that period of time that liquidity was essential in survival. those firms that didn β t have sufficient liquidity suffered greatly. here, too, the basel committee has played an important role in developing and implementing an internationally - agreed - to - framework for enhancing liquidity across large international firms. the new framework currently includes a short - term requirement β the liquidity coverage ratio ( lcr ) and discussions are underway to include a longer - term requirement β the net stable funding ratio ( nsfr ). while capital and liquidity rules for large financial institutions are in the process of being implemented β and significant progress has already been made in bolstering levels of both capital and liquidity in banking organizations β there are still areas within the financial system where additional focus on building resilience continues to evolve. in particular, enhanced risk management standards for financial market utilities have been adopted by international bis central bankers β speeches standard setters and, in the u. s., the agencies have recently proposed new rules to adopt these standards for u. s. firms. among these new standards are expectations that financial market utilities, including those that act as central counterparties ( ccps ), be more resilient to shocks β with a particular focus on enhancing liquidity and liquidity risk management. while ccps reduce aggregate risk, they | 0 |
on the activities of non - banks as a basis to inform more targeted policy measures. the question of how to evolve the role of non - bank financial institutions to continue to contribute in sustainable way to financial inclusion is a complex one. while we can agree that a different approach to regulation from that applied to banks is justified, it cannot be at the expense of protection for financial consumers, and risks to financial stability. this middle ground is what is needed, taking into account the specific context of our own economies. the role of financial education another important strategy for financial inclusion is the enhanced role of financial education. this is not only to encourage greater participation in the mainstream financial system, but also to keep individuals already in the mainstream from being financially excluded in future as a result of changes in the financial landscape. in a recent report by the oecd, a lack of awareness of different types of financial products, low level of confidence and poor knowledge of how products work were identified as barriers to financial inclusion. these factors will become more acute in an increasingly more complex and technology - driven financial system. effective financial education will however, require more innovative approaches, broader partnerships involving the government, educators, and non - governmental organisations collaborating with regulators and the financial industry. the afi network provides an important platform to examine these and other issues. conclusion through the afi platform, we have a unique opportunity to work together to improve lives through financial inclusion and to have an enduring impact on global issues and developments. in this connection, a specific outcome of this forum will be the commitment of afi members to an accord. this accord will build on maya declaration of 2009 to extend the commitment of afi members to take the financial inclusion agenda a step further forward towards achieving the vision of a truly inclusive financial system. let me conclude by expressing on behalf of bank negara malaysia our deep gratitude to her majesty queen maxima for gracing this event. i would also like to thank the distinguished speakers and resource persons who have travelled from various parts of the world to share with us your valuable insights. to all participants, i hope this will be a memorable event, and one that will generate new knowledge and new ideas to spur your own country β s journey to deeper financial inclusion. once again, β selamat datang β to kuala lumpur and thank you for being here. bis central bankers β speeches | related to this is the need to reinforce socially responsible finance, and to ensure that financial systems serves the real economy and to address the new and growing risks of financial exclusion which can result in part of our community to be disenfranchised, particularly, but certainly not only, during periods of financial crises. in this environment, financial inclusion has gained greater prominence as a key priority for the reform and development agenda. the theme of the afi forum this year, β driving policies for optimal impact β, underlines the need for us to have a better understanding of the interactions between the objectives and effects of financial inclusion, financial stability and integrity, and consumer protection policies. this need has become more pronounced with the recent global developments. global prudential standards have been significantly strengthened and are increasingly applied to financial institutions in developing countries. this has heightened the practical challenges faced in implementing these standards in a socio - economic setting where promoting inclusive opportunity is an important objective. the same is also true with stronger standards to combat money laundering to safeguard the integrity of the financial system. in building a bis central bankers β speeches financial system that is resilient against crises and abuse, we cannot neglect the socioeconomic impact of policies pursued. our efforts to build a stronger and more stable financial system would also work to strengthen linkages between finance and development and not to weaken it. consumer protection regulation is also being significantly strengthened in many countries following the global financial crisis. this has been driven in large part by the recognition that an effective consumer protection framework serves not only to protect individuals from excessive risk ; it also has an important role in protecting the financial system from systemic risk. while this has positive spillovers for financial inclusion, more can and must be done to ensure that consumer protection policies are designed to adequately protect vulnerable groups, and ensure that financial innovation is pursued in a responsible manner. to address these issues, we are delighted this year to have the participation of the global standard setting bodies together with members of the afi at this forum. we share a common interest in seeking to lower the barriers to financial inclusion and to create a larger positive impact of policy measures on financial inclusion. an important starting point is for the global standards to reflect financial inclusion perspectives. the standards setters have pointed out that this is supported by the concept of proportionality which underpins the global standards. of great importance is how this is going to be translated into practice. by drawing on the diverse experience of afi members present at this forum, it is hoped that | 1 |
) r = vault cash ( vc ) + bank balances with the central bank ( bdcb ) again to forecast the components total bank reserves ( r ) efficiently, there is need to understand the intricacies of monetary survey sufficiently well, understand the financial environment, know the stance of current monetary policy and the short - term outlook of financial developments. β’ data constraints the data used in forecasting the monetary aggregates are too often not firm, or where firm, data are characterized by breaks in series. such data include those of real gross domestic product ( gdp ), inflation, revenue, expenditure, float items etc. these data series r sometimes are constructed using different base years, making comparisons of series even of the same variable problematic. besides weak data series, there is also the problem of coping with lags in monetary data. the computation of the estimated supply of total reserves ( osr ), on the day of omo market often involves several days lag. this means that to be able to obtain osr, where β t β is the omo market day, the compiler must be able to project both the sources and uses of monetary base, several days prior to the omo market day say osr. the techniques for doing this are yet to be fully developed in all t - 3 waifem constituent countries. β’ determination of public sector borrowing requirement the primary target for omo is the difference between the estimated supply and demand for money under equilibrium conditions. but in arriving at the ultimate target for omo, the excess supply needs to be adjusted to accommodate public sector borrowing requirement in the period. thus there would be need to make the problematic forecasts of government cash revenue and expenditure, including float items. in this regard some of our member countries, notably ghana have taken considerable strides through the application of some appropriate software. β’ capacity for econometric forecasting familiarity with the use of econometric techniques is a sine qua non for liquidity forecasting. too often, waifem has had to run courses in econometric modeling and forecasting in order to bridge these gaps and it has resorted to improved monetary and fiscal policy formulation in the sub - region. ladies and gentlemen, lessons in capacity building needs i have not made any pretensions to proffering exhaustive analysis of the problems of liquidity forecasting. i believe the expert faculty at your disposal will do just that. however, from the presentation thus far, it is clear that | . this was driven in large part by the uptick in us nominal interest rates, which spilled over into the euro area on account of the international linkages between interest rates. a model analysis by the bundesbank found that this was the case, identifying that the key factor driving the upswing in bund yields was an improvement in the economic outlook in the united states. however, macroeconomic prospects brightened in the euro area, too, and this likewise helped drive up bund yields. what is more, market - based inο¬ation expectations in the euro area have moved from their lowest point in march of last year towards our target of below, but close to, 2 %. this is why i consider it important to view interest rate changes in real terms, too β that is, after stripping out inο¬ation expectations. market - based inο¬ation expectations ( 5y5y forward inο¬ation rates ) were recently at just over 1. 5 % and thus actually higher than before the coronavirus crisis. note that these inο¬ation expectations are likely to still be skewed to the downside, [ 4 ] seeing as the bond prices from which they are derived may also include liquidity and risk premia. besides inο¬ation expectations, what these reο¬ect are investor preferences for certain forms of investment. on the whole, funding costs for the non - ο¬nancial sector in the euro area are still at historically low levels. bear in mind, though, that the measures based directly on ο¬nancing terms for enterprises and households only become available with something of a time lag, at which point they may not fully reο¬ect any potential permanent change in the markets. this is why the governing council of the ecb also looked ahead in its latest decision : it saw the risk of the rise in risk - free interest rates and government bond yields in the year to date spilling over into other areas. after all, banks use these interest rates as benchmarks when setting their lending rates. a signiο¬cant and sustained increase in market rates would potentially lead to a premature tightening of ο¬nancing terms. this could put a strain on the economic recovery and set us back as we head towards price stability. that is why the pepp purchases during the second quarter will now be conducted in a way that makes them much more extensive than in the ο¬rst few months of this year. the ecb governing council is thus using the ο¬exibility that the pepp | 0 |
##equacy and liquidity are at exceptionally high levels. the net external borrowing of the country decreased by euro 220 million only in the last quarter of the last year, and by euro 280 million, or by one fourth, over the entire last year. finally, immediately prior to our decision to redesign the monetary instruments, the ministry of finance announced cut of budget expenses by 5 %. to summarize, we face low level of risk in the external and the banking sector, low to moderate level of risk in the public sector, the denar exchange rate is stable, the inflation is lower than in the euro area, and the economic activity decelerates. what would be more suitable in a situation like this than to send signal that there are conditions for enhanced banking activity without jeopardizing the stability? this is exactly the goal of our measures. it is not our intention just to conclude that the credit growth does not develop as expected, and to revise the rate downward all over again. we consider that the credit growth could range around 7 β 8 % without jeopardizing price and financial stability, and we clearly signalize this. bis central bankers β speeches the question is whether the banks will follow our signal? the promptness and intensity of banks β response depend on the power of monetary policy transmission. the recent researches conducted by my coworkers show that the power of monetary policy transmission in our banking system is limited. this was yet another reason to redesign the monetary policy instruments. we hope that the new monetary framework will improve the monetary transmission. otherwise, we will keep on advancing the monetary instruments setup. cb bills are the national bank basic instrument used to absorb excess liquidity by banks. cb bills are not investment vehicles. in many countries there are no cb bills. when the national bank intends to absorb more liquidity it could make the interest rate more attractive for the banks. but, if it considers that it should not sterilize such excess liquidity, it will make the interest rate less attractive or will restrict the amount allowed for the banks to subscribe. distinguished ladies and gentlemen, at this very conference last year, i also said that the national bank will not build its relations with the banks from the position of arrogance. quite contrary, the banks are our partners. therefore, the national bank will keep on informing and consulting with the commercial banks about the regulatory measures. in this respect, presently we analyze the latest request of the banking association concerning the treatment of fore | sabine lautenschlager : the european banking sector β growing together and growing apart speech by ms sabine lautenschlager, member of the executive board of the european central bank and vice - chair of the supervisory board of the single supervisory mechanism, at the lse german symposium, london, 2 march 2017. * * * two major events provide the frame for my speech today. both of them took place in june β one in 2012, the other in 2016. one of them took place in brussels, the other here in the united kingdom. one of them made europe grow together ; the other made europe grow apart. on 28 june 2012 in brussels, the leaders of the eu decided to take banking supervision to the european level and explore the idea of a fully fledged banking union. they took a decisive step towards a more united europe. on 23 june 2016, the people of this country voted to leave the european union. they took a decisive step away from a united europe. both events β while very different in nature β will fundamentally change europe. from the perspective of banks and their supervisors, both events have had and will have a huge impact. let us take a closer look. growing together β european banking supervision in june 2012, the euro area was a bad place to be β if you were an investor, a bank or a country that had lost the trust of the markets. on 1 june that year, the financial times wrote β spain suffers β¬100 billion exodus β. in the days thereafter, its front - page stories focused on ailing portuguese and spanish banks. in mid - june, its headline was β fears rise over eu handling of debt crisis β. by then the markets had driven the bond yields of some euro area countries to new heights. in other words, if the governments of those countries wanted to sell bonds to finance their debt they would have to pay much more. the media started speculating about a break - up of the euro area, as did some politicians. two weeks later though, something had obviously changed. on the last day of june, the financial times, on its front page, said β markets rebound following eu deal β. what had happened? what had happened was that an eu summit had taken place in brussels. there, the leaders of the eu agreed on a package of measures to stabilise the euro area. they decided on a β¬120 billion pact for growth ; they decided that the rescue funds, the european financial stability facility and the european | 0 |
regional integration and capacity development β as you are aware, the common market for eastern and southern africa ( comesa ) regional integration process is progressing well. milestones achieved so far include the establishment of the comesa monetary institute, currently hosted here at the kenya school of monetary studies in recognition of capacity building as one of the key pillars necessary for achieving successful integration. partner central banks have identified the need to revise the frameworks governing hr policies and strategies in line with international best practice. the call for the establishment of an integrated framework for a holistic approach to capacity building among central banks in comesa is therefore a pertinent one. implementation of such an approach will enable regional banks to realize greater economies of scale by taking advantage of regional institutional and human resources. capacity building must, therefore, take a unified approach, with regional central banks coming together to pool resources and take advantage of regional diversity to achieve greater efficiency in organizational performance. 2. performance management and talent development β traditionally, central banks have had a multi - generational workforce with the older segment forming the majority of the workforce. hr managers are therefore faced with the challenge of balancing the demands of the older workforce with that of the younger workforce using recognized management principles. the younger workforce comes ready to take up responsibilities at a lesser age and experience, but with high bargaining power due to their knowledge and skills at hand and techno - savvyness. a clear shift is thus bis central bankers β speeches seen in terms of organizational career commitment to individualized career management. managing this set of people is essential for the growth of any industry but especially for central banks where the composition of the workforce is rapidly changing. the challenge therefore is on the need to develop individuals who have performance potential on the basis of past record and knowledge - based expertise while at the same time tapping into the expertise of the younger generation without compromising staff morale. furthermore, the hired for life mentality of the past is fast becoming obsolete as workers increasingly change employers. hr must therefore place emphasis on proper work - life balance, while at the same time motivating staff through continuous learning opportunities and positive feedback. 3. managing change β organizations are getting more and more technologically oriented. the banking sector particularly, has undergone revolutionary changes enabled by technology. in the central bank of kenya, for example, a number of technological innovations have been implemented. the success of these interventions is no doubt heavily dependent on managing the people issues surrounding the process. in order to realize acceptance at all | liquidity buffers. taking cognizance of the existential threat of climate change and working together with our development partners including the international monetary fund and the european investment bank, we have embarked on our vision of greening the banking sector. towards this end we have issued the draft kenya green finance taxonomy ( kgft ) for public consultation. the kgft will serve as a reference for kenya's transition to being a green economy. on the payments system front, kenya has continued to be a global leader in digital financial services with an elaborate ecosystem. this has greatly expanded access to financial services in kenya from 26 percent in 2006 to 83 percent in 2021. the kenyan economy has also become more cash lite due to the advent of mobile money payments, with currency in circulation as percentage of gdp standing at 2. 1 percent in 2 / 3 bis - central bankers'speeches 2023, way below other countries. in the past year have licensed additional payment service providers ( psps ) and digital credit providers ( dcps ) to provide additional choice and access to kenyans. on cross border payments, the cbk continues to support the east african payments system ( eaps ) and the pan - african payments and settlement system ( papss ). accordingly, cbk signed an agreement with afreximbank to enable kenyan financial institutions to join papss, which will enable them to participate in the continental payment system to spur intra - africa trade. overall, the various measures i have highlighted tonight have contributed significantly to restoring macroeconomic stability. overall inflation rate eased to cbk's target of 5. 0 percent in april 2024 compared to 8. 0 percent in may 2023. this is the lowest overall inflation since october 2020, 43 months ago. in addition, the shilling has appreciated by 17 % against the u. s. dollar since the beginning of 2024, making it the best performing currency globally, against major currencies. the appreciation has led to huge savings in debt service and reduced debt stock in kenya shillings - our shilling denominated debt declined by around 6 percent of gdp within a period of weeks. as i conclude, cbk will continue to build on these gains and reforms to safeguard macroeconomic and financial stability and support the government's economic growth objective. with improved investor confidence and sustained macro - stability, we expect the economy to remain strong in 2024, with growth projected at about 5. 7 percent, supported by agriculture, resili | 0.5 |
##ing low long - term interest rates, the short - term interest rate should be higher in order to achieve appropriate restrictiveness of the monetary policy resulting from the entire yield curve. while it is difficult to assess which hypothesis is correct, central banks, as sailors did in the old days, should apply two iron rules : firstly, frequently determine their position, secondly, use as many waypoints as possible. this means that, especially where new phenomena emerge or there are structural transformations, the monetary policy must not be described using just a few simple indicators, as e. g. inflation and output gap in the taylor rule. monetary policy decisions should rather be a product of a complex analysis of a number of indicators and data and cross - checked with qualitative information. in turn, another federal reserve governor, donald kohn 29, devoted his recent address to the analysis of when and on what conditions the central banks should respond to rapid changes of asset prices. in kohn β s opinion, there are two possible approaches. according to one of them, described as the conventional monetary policy, the central bank focuses on stabilising the inflation, treats changes in asset prices as an exogenous process and does not attempt to influence asset prices whatsoever. the other option, described by kohn as the β extra action policy β, allows for a deviation of current inflation from a level determined as stable in return for improvement of the perspectives of achieving price stability in the future. however, the extra action policy does not mean piercing the speculative bubbles by central banks, and means rather β taking out β of additional insurance against possible negative shocks, which may happen in the future. in kohn β s opinion, the extra action policy may be run very rarely and only where the three conditions are met : β’ the central bank must be able to identify asset bubbles in a timely manner and high certainty as to the correctness of analysis conclusions ; β’ there must be a high probability that a slight tightening of the monetary policy will be able to stand against the speculative activity on a given assets market ; β’ the expected improvement of the future economic situation resulting from a smaller speculative bubble must be significant and higher than the costs incurred by the economy in the aftermath of running the extra action policy. to recapitulate this train of thought, kohn was very sceptical whether the three above - mentioned conditions can be sufficiently met ; however, he did not preclude that in the future, the understanding of economic processes will improve as | the use of payment cards will be more efficient, as consumers will be able to use the same card for all euro payments. this will reduce the necessity for people to carry cash. innovative services can be offered to consumers irrespective of national borders. the long - term goal of the banking industry is that the sepa payment instruments will only be used in electronic form. payments can then be easily combined with other e - services in the case of both individual and corporate clients. these include e - invoicing, mobile or internet payment initiation, airline e - tickets, credit advice or e - reconciliation. as a consequence, consumers will spend less time handling payments. everything will be easier, faster and cheaper... in the long term. payment cards are becoming a favourite payment instrument with consumers, and are increasingly replacing cheques and cash payments. the use of cards is thus expected to grow in the future. thanks to the creation of a single euro payments area, acquirers will be able to process all sepacompliant card payments, even across borders. in the sepa environment, merchants will be able to choose any card payment processing entity in the euro ; this will increase competition and reduce costs. point - of - sale terminals in the euro area will become increasingly standardised. as a consequence, there will be a wider choice of terminal providers, and merchants will be able to accept a wider range of cards with a single terminal. the increased competition between payment card systems should also drive down fees. this is a vision of anticipated benefits for an integrated europe, but the questions i would like to ask the panelists and all of you today are as follows : will sepa reinforce the competitiveness of polish entrepreneurs? ; how fast should we act? ; what roles are there to be played and who should play them so as to ensure the success of the polish economy, enterprises and consumers in the sepa era? it seems to me that these are the key questions to be answered now so that forum sepa polska could develop, in the months to come, an optimal strategy for launching new payment products in the polish market. let β s also have a look at our own local situation. by providing new payment instruments and euro area - wide infrastructures, sepa will ensure that banks expand their business and compete on a euro area level, as any bank can offer its services more easily to any individual in the euro area. banks can also expand their business by offering their customers | 0.5 |
, as you can see, architects need a mix of different abilities, a magic combination of art and science. thanks to this combination, architectural works of art have become a cultural symbol of europe over the years, as demonstrated for instance by the illustrations on our bank notes. similarly, a complex, but nonetheless useful, institutional architecture has characterised european integration. assessing this institutional architecture will require the same architectural skills as those originally needed to set it up. therefore, i would like to wish you today an open and constructive discussion combining both scientific method and the visionary perception that characterised some of the most influential european artists. | the legislature considered that, in a small country like ours, whose human and material resources are bound to be limited, the way to achieve significant reinforcement of the resources allocated to financial stability is to develop substantial synergy between the various institutions concerned, in order to achieve the maximum economies of scale and to take the resources thus released and reallocate them to the basic functions of each institution. the law of 2 august 2002 provides that the rules governing the arrangements for pooling resources must be set out in a protocol concluded between the institutions concerned and approved by the king. without waiting for the official inauguration of the fsc, its members have agreed on a framework for exploiting synergy and have submitted proposals to the minister for achieving greater cooperation in regard to prudential policy and various support activities. the fsc has also set up a number of priority projects for the coming months, in particular the launch of a national coordination initiative on the subject of business continuity, which will take account, in particular, of the lessons which can be drawn from the events of 11 september 2001. in conclusion, i would simply say that this new committee and the far more historic institutions from which it emanates are firmly resolved that they will actively seek the solutions best suited to the general interest in the field entrusted to them, namely the field of financial stability. | 0.5 |
ahmet ismaili : cybersecurity in the banking industry speech by mr ahmet ismaili, governor of the central bank of the republic of kosovo, at the conference " cybersecurity in the banking industry ", co - organised by the kosovo banking association and the albanian association of banks, pristina, 25 october 2023. * * * dear mr balija, chief executive officer of the kosovo banking association dear mr brumbulli, secretary general of the albanian association of banks dear mr bakkal, chairman of the board of directors of the kosovo banking association dear, mrs hoxha, senior investment officer at finance in motion ( efse ) dear members of bank associations dear board members dear panellists and attendees i am pleased to greet and welcome you all to the " cybersecurity in the banking industry " conference, co - organized by the kosovo banking association and the albanian association of banks. the very fact that we have co - organization shows the excellent cooperation between the banking sectors of our two countries, but also the approach to the common challenge, which knows no borders. therefore, my participation here today also aims to convey such a message of coordination and joint efforts to address these risks, as one of the most complex challenges of the time for the financial industry and beyond. we are witnessing the time that the financial system is changing quite quickly and is being transformed. digitization on the one hand has influenced the improvement of access to services as well as their quality, which means that in the field of payments, services are being carried out continuously and are available worldwide. but, on the other hand, the main risks related to the introduction of information technology that enables banking and financial services have increased and constitute a threat to be handled with care. they include strategic and reputational risk, operational risk, cyber risk and compliance risk. the cyber threat continues to evolve and become more complex amid continued digitization, increased third - party dependencies, and geopolitical tensions. the rapid pace of technological advancement imposes the need for continuous monitoring of emerging trends and their possible impacts on the operations of financial institutions. 1 / 3 bis - central bankers'speeches therefore, strengthening cyber security in the financial sector is a priority for financial stability, and not only that. its influence extends to national security. the republic of kosovo, through the national security strategy, has determined the responsibilities and duties of the institutions for cyber security and critical infrastructure, from the coordination of legal and strategic | through investor's screening mechanism, given the current geostrategic risks. finally, we remind you that addressing cyber risks requires close cooperation between different authorities, with an emphasis on the state authorities responsible for cyber security at the state level. the cbk remains committed to coordinating and sharing information with other regulators, relevant public authorities such as those for data protection, consumer protection, competition and national security institutions. at the same time, also in the international aspect, with international institutions, regulators of the countries of the region, other institutions, with the aim of coordination and a more stable platform to successfully face these risks and achieve our objectives. we wish you fruitful discussions in the following panels, and we welcome the recommendations resulting from these professional discussions. thank you! 3 / 3 bis - central bankers'speeches | 1 |
, amounting to 3. 7 % of gdp the budget deficit was almost halved last year, while the current account deficit was cut by one fifth and was fully covered by foreign direct investment. in addition, the public often debates whether the noticeable fall in bank lending rates and the cost of government borrowing is attributable more to the monetary easing of the national bank of serbia or the european central bank. i will give you nothing but facts. the fall in dinar lending rates began in september 2013, after the national bank of serbia initiated a cycle of key policy rate cuts in may that is also their lowest level on record. and these are the facts. lower interest rates also reflect competition among banks which increased, inter alia, as the national bank of serbia made sure that citizens have access to transparent information on lending terms offered by different banks. during the same period, though lesser than that for dinar loans, a decline was recorded for interest rates on euro loans ( by 2. 8 pp, to 4. 4 % in december ), which is by all means due to the european central bank β s monetary accommodation and the consequent fall in euribor. there is no doubt however that this is also a result of serbia β s better macroeconomic performances and lower risk premium, and hence lower cost of borrowing for both government and private sector. bis central bankers β speeches after cutting the key policy rate in its february meeting, the executive board particularly underlined the expectation that further monetary policy easing will be followed by a further recovery of lending activity, which will contribute to investment. the 1. 8 % credit growth in 2015, in the face of maturing of rsd 110 bln worth of subsidized loans, was beyond our expectations. new investment loans were 2. 5 times higher than in 2014, while a significant rise was recorded also for loans that were refinanced under much more favourable terms. we expect positive tendencies in the credit market to continue in 2016. ladies and gentlemen, dear guests, what is certain, despite numerous uncertainties in the international environment, is that we will maintain monetary and financial stability and thus, give a full contribution to sustainable economic recovery and prosperity of our country. i now give the floor to ana ivkovid to present the key messages from the february inflation report. bis central bankers β speeches | ben broadbent : the monetary policy committee β s forecasts and the yield curve β predictions versus promises speech by mr ben broadbent, deputy governor for monetary policy of the bank of england, at reuters, london, 18 november 2015. * * * i would like to thank clare macallan for research assistance and i am grateful for helpful comments from other colleagues. the views expressed are my own and do not necessarily reflect those of the bank of england or other members of the monetary policy committee. good morning! the previous governor of the bank, mervyn king, once referred to what he called the β rich seam β of mpc communication. rich or not, it β s certainly a wide seam : mpc members each give several speeches a year ; we publish minutes of every meeting, now supplemented with a monetary policy summary ; every quarter we publish a 50 - page inflation report that summarises the mpc β s collective view of the economic outlook and includes our latest forecasts ; every report is followed by a session in front of parliament β s treasury committee. yet, from all this, the outside world seems increasingly interested in only one particular nugget : the mpc β s central inflation forecast two years ahead. this forecast is derived assuming that interest rates follow the path priced into financial markets. comparing the two, commentators often make very precise inferences from the mpc β s projections about future policy. when it β s above the 2 % target, our two - year forecast is said to indicate that interest rates will rise faster than the market expects ; a sub - 2 % forecast is said to mean the opposite. recently, given the intense focus on the prospective date of the next rate change, this simple inference has been refined even further : as long as the forecast is close to 2 %, this must mean the mpc is β endorsing β not just the general shape of the market path of interest rates but the particular β lift - off β point it seems to imply. broad inferences of this sort may well be reasonable. but you shouldn β t push them too far. this morning i want to explain why. the most important problem is that, even if a particular path of interest rates results uniquely in only one central inflation forecast, given all our other assumptions, the opposite does not hold true : you can get to the same two - year forecast with lots of other paths as well. that β s because changes in interest rates have at least some impact | 0 |
offered to their corporate customers. however, over the years, we have noticed that for some insurance brokers, fa activities and revenue from the advisory business have eclipsed that of their core insurance broking business. mas is concerned that insurance brokers may not have sufficient management expertise and compliance capability to oversee and manage the fa portion of their business. lowering distribution costs our fourth key thrust is to lower the cost of distribution, so that we can keep the overall cost of life insurance products affordable for singaporeans. direct sales of simple products the online channel is one of the ways in which we can lower distribution costs. we have seen the use of direct sales via the internet for the distribution of general insurance products such as travel insurance and motor insurance. why not life insurance? the industry could explore the use of the internet as an alternative distribution channel to offer life insurance to consumers at competitive prices. online distribution will also mean that products will have to be simplified. simple term life insurance via the internet could be a good way to help lower cost and make affordable insurance protection more readily available to a wider population. and simple term life insurance is sometimes all that a person needs to protect against risk. mas would like to see the sale of simple term life insurance products through the internet. bis central bankers β speeches commission - based remuneration and distribution structure but customised financial advice is still required for the more complicated insurance plans, tailored to suit individual and family needs and circumstances, and for those who want to supplement their term life insurance. to lower costs for such products, we must address some of the underlying inefficiencies in our remuneration and distribution structure. fair will fundamentally review the commission - based remuneration and distribution structure. in singapore, insurance products are distributed through insurance agencies, banks, and financial advisory firms. the premiums for these insurance products include charges that cover mortality risk, as well as various expenses incurred by the insurer, such as distribution and management expenses. a substantial proportion of the premium in the earlier years goes to paying for distribution expenses. over the life of a policy, this cost can account for as much as 8 % of the total premiums paid. a key driver of this cost is the multi - tier distribution structure that is common in singapore β s insurance companies and large fa firms. the commission - based, multi - tier distribution structure involves representatives in the upper tiers having a share of the commissions earned by lower - tier representatives who provide insurance and financial advice | representatives bis central bankers β speeches product knowledge of fa representatives we have introduced new examination modules to ensure that fa representatives have sufficient knowledge of the wide and complex range of investment and insurance products currently available in the market. most firms and fa representatives understand and support the need to raise knowledge and skill levels through a set of common examinations. some representatives have questioned why they need to pass these new exams when all they sell are simple products. mas takes the view that a good financial adviser should be able to explain the advantages and disadvantages and the risks of competing products β both simple and complex. the reality is that consumers today are faced with a wide range of choices. for example, a consumer wishing to invest and buy insurance protection has a few options. he may consider a participating policy or a regular premium investment - linked policy or simply purchase an insurance term policy and invest separately. he could build a portfolio of just plain vanilla stocks and bonds or include etfs and futures or simply buy unit trusts. each option has its own set of risk - return and cost considerations. the increasingly educated consumer will expect his representative to help him make sense of the complexity of the products and their suitability, even if he eventually settles on simple life insurance and investment products. some other fa representatives feel that their academic qualifications are sufficient and should allow them an exemption from the exams. but consumers should have some assurance that the qualifications of the fa representatives meet a common standard. the examinations are industry - certified, and set a common standard and benchmark for fa representatives. it is important that all representatives, even those who have been in the industry for many years, stay abreast of latest market developments and products. only then can they provide holistic advice and comprehensive recommendations on what to buy, and β more importantly β what not to buy. but we understand the concerns that some representatives have raised. mas is prepared to adjust its requirements subject to the companies putting in place proper controls to ensure that only simple products are sold by the selected fa representatives who do not take the new examinations. entry requirements for fa representatives next, as part of fair, mas will review the minimum level of qualifications that we expect of our fa representatives, to ensure they stay relevant to the needs and expectations of consumers. the current entry requirement for fa representatives is four gce β o β level passes. it is clearly not in keeping with singapore β s rising educational levels, the increasing complexity of products, and higher expectations from a more literate and sophisticated public. | 1 |
jaime caruana : making diligent preparations for basel ii opening remarks by mr jaime caruana, governor of the bank of spain and chairman of the basel committee on banking supervision, at the thirteenth international conference of banking supervisors ( icbs ), madrid, 22 - 23 september 2004. * 1. * * welcome and overview distinguished guests and friends : as the governor of the bank of spain, it is my pleasure to serve as your host at the thirteenth international conference of banking supervisors here in madrid. i am also privileged to serve in a second capacity at this event as chairman of the basel committee on banking supervision. in that regard, it is my honour to launch our dialogue on the two main themes selected for this conference. as you know, the committee reached agreement on an historic revision of the international capital framework just this past june. so naturally an important focus for this conference will be on preparing for its implementation. in addition, because basel ii relies increasingly on the quantification of risk exposures to understand a bank β s risk profile, it is more important than ever before to look behind the numbers and into the rules that define how exposures are measured. the second day of our conference will be devoted to the emerging issues in accounting and their relevance to banking supervision. i am indebted to the secretariat of the basle committee, the staff of the bis, as well as to my colleagues at the bank of spain, for choosing speakers who will encourage a lively conversation on these two themes. in my own remarks this morning, i would like to open with some thoughts first on the implications of β basel ii β for banking supervision worldwide. while much has been said about its sophistication, i believe that many have overlooked key principles in basel ii that are relevant to all supervisors and all banks in all markets. in that regard, it is important to remember that basel ii β s success depends on a broad range of other preparations and measures that we undertake to strengthen safety and soundness ; in the second part of my remarks, i will offer some views on the other mechanisms, that lie at the heart of a sound system of supervision more generally. as i will mention, many of our safety and soundness goals are more easily achieved when supervisors apply these mechanisms more consistently : this makes it critical for the basel committee to continue to expand its ties and seek greater cooperation with the broader supervisory community. finally, i would like to close with some brief thoughts on the rules that govern | we ascribe to developing and maintaining safe and sound control structures. a risk - focused approach thereby creates implicit incentives for bank management to understand and to find better ways to control its risks. what results is not just a more proactive risk management function, but also a greater commitment to sound corporate governance across the bank. 2. 2 second trend : incorporate incentives into supervision basel ii recognises this result and goes one step further by creating not just implicit but also explicit economic incentives for banks to improve the quality of their risk management. the inclusion of incentives directly in the regulatory framework represents the second important trend in supervision. the proper use of incentives can help to align a bank β s objectives more closely with public policy goals of safety and soundness. in recent years, supervisors have begun to move more generally toward a system of supervision that encourages prudent risk - taking through the offering of incentives rather than simply enforcing compliance with rigid rules. internationally, the 1996 market risk amendment to the existing basel accord represented the first time that banks received explicit capital benefits for developing more sophisticated measures of risk, in that case market risk. basel ii continues this trend by extending incentives to the treatment of credit risk and operational risk. 2. 3 basel ii embraces both trends by stepping back a bit from basel ii β s formulas, we can see that the new capital framework builds on two important trends to incorporate a new philosophy for banking supervision. it combines a riskfocused approach to supervision with incentives for prudent risk - taking into a coherent policy objective that seeks to promote adequate capitalisation. by incorporating in all three of its pillars clear incentives for banks to improve their management of risk, basel ii reinforces management β s focus on control structures. β’ for example, in basel ii β s minimum capital requirements - or pillar 1 - regulatory capital charges are aligned more closely to a bank β s own measures of risk. this creates immediate incentives for banks to improve those measures. β’ likewise, pillar 2 - supervisory review - emphasises that responsibility for evaluating capital adequacy lies with a bank β s management. supervisors will review and respond to those internal assessments, thereby creating incentives for banks to evaluate their exposures thoroughly and to plan their capital strategies carefully. β’ finally, pillar 3 - market discipline - seeks to make a bank β s risk profile more transparent to outside investors and market participants. this should better enable the market to reward banks that take a responsible approach to risk management and penalise those that do not | 1 |
system. the exchanges where cryptos are bought and sold are where the β new β and the β old β financial systems overlap, and where we will focus our supervisory efforts. conclusion you still have a full schedule ahead, and i β d like to have some time at the end for questions, so now i β ll conclude. i have tried to highlight some possible benefits of dlt and blockchain for the financial system. the technology is nascent, yet there are several interesting use cases that signify its potential. central banks are keeping a close eye on new developments, and many of them are experimenting themselves. they also do this to assess and monitor risks stemming from new technologies. we should be especially vigilant about developments in cryptos. while they, too, could represent opportunities, there are considerable risks both for individual investors and in time, possibly the financial system at large. an appropriate regulatory response should be formulated, commensurate with these risks. central banks and regulators need to find the right balance between seizing the benefits of technological innovation on one hand, and coping with possible new risks on the other. for us, blockchain β s evolution in the financial system is ultimately a balancing act. | - block approach. this allows countries to use its common global baseline β and also be able to build on that baseline to develop national approaches to suit individual circumstances and priorities. this will provide jurisdictions with the flexibility to be more ambitious and go further or faster if they wish. at the same time, the common baseline will allow interoperability of approaches. disclosures are important for investors β financial decision - making but have wider importance too. they will provide necessary information on the progress being made by firms towards the transition, which is important to investors, but also to a wider set of stakeholders. such disclosures must provide the information needed to assess the credibility of private sector commitment and action. the second building block is data. firm - level disclosures are essential, but are not the only data we g y need. we also need macro - level data to help us determine which sectors of the economy are most at risk. we need government data. for example, on the policy plans to curb emissions and their effects. we need data on underlying climate risks, for instance on the frequency and severity of extreme weather events. finally, to fully understand the systemic perspective, we will also need data to assess the degree to which climate - related risks might be transferred, amplified or mitigated by different financial sectors. such data provide the raw material for the third building block of the fsb roadmap β vulnerabilities analysis. to examine vulnerabilities from a long - term, forward - looking perspective, it is critical to further develop scenario analysis, making use of the common ngfs climate scenarios. at the same time, we need to devise simpler indicators that can help identify the build - up of vulnerabilities. this is a key part of the fsb β s work on integrating climate - related risks into its broader financial stability surveillance framework. improving our vulnerabilities analysis, in turn, forms the basis for the final block of our roadmap β regulatory and supervisory practices and tools. sectoral standard - setters are doing important work already, by developing tools in their individual sectors. the fsb β s contribution is to help bind this work together by promoting consistency and effectiveness of approaches across sectors and countries. in april, we issued a consultation report on supervisory and regulatory approaches to climate - related risks. this report takes a cross - sector, cross - border perspective. it sets out high level recommendations on regulatory and supervisory data. here the issb β s | 0.5 |
likely to be prolonged and thereby continue to impart an upward impulse to global food, energy, and commodity prices. this will in turn feed into global consumer price inflation in the months ahead. the inflation story in singapore is not too different from the global story. as in the major economies, inflation in singapore started edging up towards the end of last year on the back of a strong recovery in demand. the singapore economy grew by a robust 7. 6 % in 2021 and the labour market returned to full employment. core inflation edged up progressively over the course of last year, from 0. 2 % in q1 to 1. 7 % in q4, as spare capacity was absorbed. the growth momentum has slowed this year but the economy remains on track to come in within the lower half of the 3 - 5 % gdp growth forecast. in h1 2022, growth has continued and broadened across sectors, coming in at 4. 4 % on a year - on - year basis. the economy is currently 6 % above its pre - pandemic levels. the output gap is positive at 0. 6 % of potential gdp, meaning the economy is operating slightly above its underlying capacity. the external - oriented sectors such as manufacturing and financial services are facing some headwinds in light of weaker growth prospects in the global economy. but the domestic - oriented and travel - related sectors are performing strongly, benefitting from the easing of mobility and travel restrictions here and in the region. the labour market has tightened and wage growth is running ahead of productivity gains. the seasonally adjusted resident unemployment rate has declined to 3. 0 %, the lowest rate since end - 2018. yet, total employment is still 2. 5 % below the pre - pandemic level β mainly because singapore lost 15 % of its non - resident workforce since december 2019. job vacancies are at record high levels with broad based increases across sectors. the vacancy - to - unemployment ratio is at its highest level since 1998. resident wages have risen by an average 6. 2 % year - on - year over the past three quarters, running slightly ahead of real productivity growth of 5. 5 %. imported inflation reflecting supply disruptions caused by the russia - ukraine war has significantly added to price pressures. import prices facing singapore have surged by 27 % in may this year, compared to the same period last year. about 80 % of this was contributed by higher oil and food prices. this step - up in energy and food | policy to directly dampen inflation. singapore β s monetary policy is centred on managing the exchange rate of the singapore dollar. when inflationary pressures build up, mas allows the trade - weighted exchange rate to appreciate faster. a stronger exchange rate helps to directly reduce imported inflation as well as restrain export demand, providing relief to labour market pressures. mas has been proactive in tightening monetary policy in response to rising inflationary pressures, tightening policy four times in the last nine months. in october 2021, mas slightly increased the rate of appreciation of the trade - weighted exchange rate policy band as a pre - emptive move when core inflation picked up from 0. 7 % in q2 2021 to 1. 1 % in july - august 2021. mas was among the earlier central banks in the world to begin normalising monetary policy. in january 2022, mas added slightly to the rate of appreciation of the policy band in an off - cycle move to lean against gathering inflation momentum. this was before the outbreak of war between russia and ukraine. in april 2022, mas re - centred upwards the exchange rate policy band and further increased its rate of appreciation. this was in view of a fresh impulse to inflation arising from shocks to global commodity prices and supply chains in the wake of the russia - ukraine war. and last week, in another off - cycle move, mas again re - centred upwards the exchange rate policy band to lean against price pressures becoming more persistent. the appreciation of the exchange rate to - date has begun to restrain inflation. the trade - weighted exchange rate has appreciated by close to 4 % compared with the beginning of october last year, acting as a filter against rising import prices. domestic consumer prices have not risen by the same extent as that in the major advanced economies or global commodity prices. year - to - date, the us and eurozone have seen inflation rising to record highs of 8. 2 % and 6. 8 % respectively. singapore β s headline inflation has been 5. 0 % year - to - date. the effects of mas β four monetary policy tightening moves are still working their way through the economy and will continue to dampen inflation over the next 12 months. the appreciation of the exchange rate is estimated to dampen core inflation by 0. 9 % points in h2 2022. over 2022 - 23, the four tightening moves to - date is estimated to restrain core inflation by an average of 1. 2 % points each year. but monetary policy should be applied in a balanced | 1 |
carolyn wilkins : panel remarks for round table discussion at the 21st conference of montreal panel remarks by ms carolyn wilkins, senior deputy governor of the bank of canada, for round table discussion at the 21st conference of montreal : international economic forum of the americas, montreal, quebec, 8 june 2015. * * * introduction thank you for the invitation to be here today. i β m honoured to be part of this panel. it β s been more than seven years since the global financial crisis began, and we β re still coping with its aftermath. one of the consequences of the crisis has been a disruption of financial globalization. global capital flows β to give just one measure β have fallen by more than half from their pre - crisis peak of over us $ 8 trillion. 1 i β ll spend a few minutes on why we β re seeing this fragmentation. i β ll then offer my views on what we should do to realize the full benefits of financial globalization and manage the risks associated with it. causes of fragmentation the retreat from financial globalization that we β ve seen reflects cyclical economic forces, such as the slowdown of global trade and investment. it also reflects structural adjustments, including the deleveraging undertaken by banks to repair their balance sheets and respond to regulatory changes. none of this should come as a surprise, given what we β ve been through. on the cyclical side, the crisis has cost the world economy as much as us $ 10 trillion in lost output, or almost 15 per cent of production. global trade slowed, as did the demand for the international financial services that support it. the share of trade in gdp fell after the crisis, reversing some of the 20 - percentage - point increase over the two decades that preceded it. 2 on the structural side, financial institutions that experienced losses during the crisis had to repair their balance sheets by scaling back their lending β not only at home but especially internationally. trade, commodities and infrastructure financing were particularly hard hit. since the crisis, banks have more than doubled the amount of common equity capital they hold. while doing this, banks have tended to focus on their home market and the best ways to allocate capital in the new environment. rules such as anti - money laundering and counter terrorism financing laws may also be altering the terrain. financial institutions have also had to respond to regulatory changes. for example, derivatives dealers appear to be doing more business with domestic counterparties in part because of more stringent, and sometimes inconsistent, rules. 3 while the | level of cross - the institute of international finance, β financial globalization : maximizing benefits, containing risks β december 2014. m. francis and l. morel, β the slowdown in global trade β, bank of canada review ( spring 2015 ) : 13 β 25. s. o β malia, β no answer yet to cross - border concerns β, international swaps and derivatives association, 11 may 2015. bis central bankers β speeches border activity in this area is still robust, one study finds that regulatory changes can explain roughly half of the drop in cross - border claims since before the crisis. 4 to put things in perspective, total foreign banking claims measured as a share of global gdp have fallen by one - third since 2008, to 39 per cent at the end of 2014. 5 this fragmentation is of concern to people like me, who believe that open global financial markets are generally a good thing for economies because they facilitate the most efficient allocation of capital and boost growth. at the same time, the crisis taught us that integrated markets also entail risks that need to be properly managed. we know that, unchecked, financial globalization could increase procyclicality and make financial cycles larger. 6 in other words, booms and busts could become more frequent and more destabilizing. and it β s possible that international financial flows were inflated by excessive growth in finance relative to global gdp. 7 so authorities have to find the right balance between encouraging globalization and guarding against its risks. getting the right balance progress is being made globally. we have put in place a framework to better manage the risks that come with financial globalization through reforms agreed to by g - 20 leaders. the basel committee on banking supervision has established new rules for banks, and the financial stability board ( fsb ) published its key attributes of effective resolution regimes for financial institutions. these are big steps in the right direction. some of these reforms have been substantially implemented. i β m talking about the basel iii rules, which impose more stringent standards on capital and liquidity and a surcharge for systemically important banks, and the principles for financial market infrastructures, which establish higher standards for central counterparties and other systemically important infrastructures. a level playing field on this is supported by peer reviews conducted by the fsb to ensure consistent implementation in different countries. at the national level, recovery and resolution regimes are being introduced to further protect taxpayers and minimize systemic disruption in the event that a domestic systemically | 1 |
. once again output contracted and unemployment rose sharply ( chart 2 ). a third and final bout of rising inflation and falling output occurred in the early 1990s, with the unemployment rate once again rising above 10 %. on average, inflation in the 1970s was around 13 % and 7. 5 % in the 1980s. the uk macroeconomic framework why was it that output and inflation were so volatile then and why has economic performance improved so much in the past 10 years? these questions are vital as we face more uncertain times ahead and to ensure that we avoid repeating the mistakes of the past. i would point to three main factors. there have been changes to the structure of the uk economy that have made it more flexible and adaptable. labour market reforms enacted over the past twenty - five years have led to a more flexible workforce. unemployment has fallen without generating unsustainable growth in wages, and hence inflation. and in recent years the role of migrant labour has been important in easing the bottlenecks and skill shortages in what was otherwise an undoubtedly tight labour market. firms have been able to adjust and adapt to events more quickly and that has produced less volatility in output, employment and inflation for the economy as a whole. with economic growth expected to slow over the coming year pressures in the labour market are likely to ease, reducing the demand for migrant labour, and possibly beginning to reverse recent strong inflows. a second fundamental change has been to the monetary policy framework. the experience of those three recessions and bursts of inflation has led to a settled consensus that monetary policy should be directed at controlling inflation and that there is no long - run trade off between inflation and output growth. this consensus has been embedded by transferring interest rate decisions to an independent bank of england, with a clearly defined inflation target of 2 % measured by annual cpi inflation. that has helped build confidence that if inflation does move away from target, we on the monetary policy committee will act to ensure that it returns to target in the medium term. that confidence should ensure that it has only deviated by more than 1 percentage point from that average on 4 occasions. to put this in context, in the preceding 3 decades stretching back to the 1960s, annual gdp growth deviated from its 10 year average by more than 1 percentage point about half of the time ( about 20 quarters in each 10 year period ). employers and employees are less likely to adjust their prices and wages to a surprise movement in inflation. in other words, their expectation | around two years, when the present sharp rises in energy and food prices will have dropped out of the cpi inflation rate. we judge that in order for inflation to return to target it will be necessary for economic growth to slow this year, reducing the pressure on supply capacity of the economy and dampening increases in prices and wages. but the risks to both the upside and downside remain large and the mpc will continue to make its judgement about the appropriate level of bank rate month by month. the next year is not going to be comfortable for anyone and we already hear calls to change the system, the target, and our focus on inflation. but the new framework and the independence of the bank was designed for difficult times as well as for plain sailing. i hope we can look to you and other businesses for support in doing what is needed to bring inflation back to target. | 1 |
last decade or more. a third problem relates to data. historical data are subject to measurement error and are also revised after publication. in a number of instances we don β t have a consistent series going back far enough to ensure a more reliable estimate of the parameters. in addition, some variables, such as the wealth or expectations variables, have to be proxied. inflation expectations are central to the inflation formation process, yet modelling inflation expectations is a major challenge. while misspecified models, bad methods and inaccurate data are often blamed for serious forecast errors, david hendry argues that they are not the main cause of systematic mistakes. rather it is the unanticipated large changes or shocks within the forecast period that are the primary source of errors. these are totally unpredictable or idiosyncratic events that we simply cannot predict, and in these instances the fault then lies in not rapidly adjusting the forecasts once they become inconsistent with the exogenous shock. when shocks occur, the best we can do is to adjust our forecasts accordingly. this is why we should be constantly monitoring new developments. there are instances where the risks to the forecast may be known but are unquantifiable. the current round of financial market volatility is a case in point. although it was not a totally unpredictable shock, the timing was always uncertain and we still don β t know what the ultimate impact will be. lawrence meyer, a former federal reserve governor, in commenting on the federal reserve β s reactions to the financial market turbulence, said that the recent shift in policy stance β tells us how difficult it is to translate financial turbulence into macroeconomic forecast. β a model - based forecast is only as good as the key assumptions that it is based on. in the forecasting process of the bank, a lot of time and effort is dedicated to the process of deciding on the exogenous assumptions of the model. staff at various levels make inputs, but ultimately, about two to three weeks in advance of the mpc meeting, the mpc members meet to finalise the assumptions. making assumptions about exogenous variables is an important component of the forecasting process. but it is not always easy. take for example the international oil price for example. it is one of the most important exogenous assumptions in our model and we have to formulate a view of the price over the coming three years. unpredictable geopolitical events, hurricanes etc., will surprise us over the | t t mboweni : artistic science or scientific art? β the role of forecasting in monetary policy formulation address by mr t t mboweni, governor of the south african reserve bank, at the reuters economist of the year award, johannesburg, 6 september 2007. * * * honoured guests, ladies and gentlemen 1. introduction it is said that there are two kinds of economists : those who cannot forecast, and those who don β t know that they cannot forecast. we have to be thick - skinned to be economists as we are often the butt of jokes. apparently there are more jokes about economists than any other profession, except perhaps lawyers. it would appear that the negative perceptions that are held about economists can be blamed to a large extent on economic forecasters who, we are told, have accurately forecast eight of the last three recessions. but forecasting is not always a joke, and the quality of the contestants of the reuters economist of the year competition is testament to that. forecasting is a serious and integral part of economic life. any decision, whether an investment decision or a policy decision, or in fact any decision in life that involves taking a view on the future, has to be made on the basis of some forecast. so if we regard forecasting as a joke, then the joke is on us. unfortunately we do not have perfect foresight and therefore we will never be able to forecast perfectly. the best we can do is to strive to create forecasting models that are close approximations of reality which in turn provides a coherent and disciplined framework for making decisions. in my comments to you this morning, i will discuss the role of forecasting and how we use forecasts in the monetary policy decision - making process. 2. models and forecasts there are different ways we can go about generating forecasts. although there may be some forecasters who engage in pure guesswork or thumb - sucking, most forecasters would be informed by models with varying degrees of sophistication. these could vary from simple extrapolation of the past, to analysing current developments and assessing their implications for the future, to a more complex dynamic stochastic general equilibrium model, which is the latest fad among model builders. forecasting success, however, is not guaranteed by the level of sophistication of the model. the type of model we use would, to some extent, depend on the time horizon that we are interested in, as different models are better suited to | 1 |
sufficiently. it β s a lack of collective vigilance, but also of solidarity, because warning a neighbour that their internal imbalances risk doing them no good, that β s what solidarity is. in the same way, governments can be inspired by reforms which have proven successful in other countries : why not benefit from that collective richness? have the member states, notably france, gone far enough in respect of structural reforms? the efforts undertaken are going in the right direction, but it β s no easy task. the countries of the euro area are facing a double challenge : preparing for the future by investing particularly in the digital economy, big data and the environmental transition, while managing the burden of the past, namely, public and private debts. their room for manoeuvre is therefore limited, and the factors supporting growth in the euro area today, the favourable financing conditions, cheap energy and the weakness of the euro, are by nature temporary. to secure the future, the measures that are likely to increase productivity and labour market participation have to be emphasised from now on. the ecb started its programme for purchasing public and private debt ( quantitative easing ) in march. is it working? the first months have been encouraging : contrary to what some were saying, we have had no difficulty finding assets to buy, indicators of the inflation expectations are showing signs of recovery, lending to non - financial corporations is trending upwards, the recovery trajectory is there to be seen and we expect inflation to move back towards 2 %. but we are only at the start of these asset purchases, which we plan to maintain until september 2016, and in any case until we see a sustained adjustment in the path of inflation, in line with our objective. it would be quite premature to start talking about the end of this programme. bis central bankers β speeches | ##130 billion. we have taken care that our actions are never a replacement for the political decision - making process. that people are turning to the central bank on issues that demand a political rather than technical response reveals a serious weakness in the institutional functioning of the euro area. this weakness fuels excessive expectations concerning the ecb. what is the nature of this dysfunction? if proof were needed, the summit of 12 july provided an example : the 19 government leaders of the euro area were shut away for 17 hours to discuss the details of measures expected of a country that makes up less than 2 % of the region β s gdp. the decision - making mechanism at the heart of the monetary union does not work well. it is based on an intergovernmental principle that is no longer appropriate. each of the leaders considers public opinion in his or bis central bankers β speeches her own country, and his or her own country alone. as a result, the compromises reached are unlikely to be the best outcome for the euro area as a whole, but instead represent the greatest common denominator between the member countries. further, they are the result of never - ending negotiations that increase uncertainty. the five months of negotiation on greece have come at a significant economic and financial cost. there is an urgent need to abandon this intergovernmental process in favour of a process of shared decision - making based on votes and democratic legitimacy. so, in short, you are calling for a form of economic governance at the heart of the euro area, which implies further transfers of sovereignty. do member countries really want this? one thing is certain : if this issue is not addressed, starting today, the monetary union will face the same type of crisis again and again. the greek crisis has let the genie out of the bottle regarding countries leaving the euro area, and it will not be easy to put it back in again. how to proceed? by understanding that replacing the intergovernmental process with shared decision - making will not diminish the sovereignty of member countries. on the contrary, it will provide more room for the political dimension by ensuring shared responsibility that will enhance mutual trust. today the ecb functions on the following principle : the governing council has a discussion, it then votes if necessary, before moving on to something else. and that works! take as an example the implementation of the european fiscal framework, which has become complex and opaque. if there were european fiscal instruments that were discussed within a β ministry of finance | 1 |
##s in financial markets and seldom perform the shock absorption role that is central to traditional macroeconomic analysis. gabaix and maggiori ( 2015 ). β international liquidity and exchange rate dynamics β, quarterly journal of economics, 1369 - 140. [ 6 ] β implications of usd dominance on capital flows and financial stability in emes β, special feature 1, mas β financial stability review, dec 2020. [ 7 ] williams j, ( 2016 ), β measuring the natural rate of interest : international trends and determinants β, journal of international economics 108, s59 - s75 [ 8 ] finger et al ( 2019 ), β facing the tides : managing capital flows in asia β, imf asia and pacific department paper series no. 19 / 17. other studies find that some central banks β monetary policy space has been eroded by capital flows even under floating rate regimes. rey ( 2016 ), β international channels of transmission of monetary policy and the mundellian trilemma β, nber working paper series, working paper 21852 ; and miranda - agrippino and rey ( 2020 ), β us monetary policy and the global financial cycle β, review of economic studies, volume 87, issue 6, november 2020. [ 9 ] mano, r and sgherri, s ( 2020 ), β one shock, many policy responses β, imf working paper, wp / 20 / 10. [ 10 ] menon, r ( 2014 ), " getting in all the cracks or targeting the cracks? securing financial stability in the post - crisis era, " opening remarks at the asian monetary policy forum, 24 may. Β© 2021, government of singapore. | not seen for 15 years. this was a matter for concern, as there was a risk that such a level would alter households β inflation expectations, potentially leading to a sharp rise in nominal wages at year - end and resulting in a certain stickiness of inflation. however, these two elements behind the recent rise in inflation have since reversed. first, oil prices collapsed, falling below the usd 50 mark in mid - november after peaking at usd 145 in early july. the plummeting oil price can be explained both by a drop in global demand as a result of the economic slowdown we have just described, and by the unwinding of speculative positions. second, the swiss economy will soon be operating below potential, and we will see a renewed rise in unemployment. this situation will have a moderating effect on both price and wage - setting behaviour. thus, we are now forecasting β as the graph presentation will show in just a moment β that inflation will decline almost continuously throughout 2009. despite the interest rate cuts made since october and the cut announced today, inflation will remain low in 2010 and 2011. as of now, and for the current forecast horizon, upside and downside inflation risks have become symmetrical. monetary policy decision we have just explained the rationale behind our recent monetary policy : first, the global economic situation has worsened, which will hit the swiss economy as from this quarter, and in particular next year. by contrast, the inflation outlook has improved appreciably. this has increased the snb β s room for manoeuvre. finally, there is a risk that the financial crisis will cause a deterioration in financing conditions for the economy as a whole. these are the considerations that have prompted today β s decision to cut the three - month libor target range by another 50 basis points. given the expected deterioration in the swiss economy and the imponderables linked to the long and variable monetary policy transmission lags, a further rate cut appears appropriate. with this action we are reducing, to the extent possible, the risk of an even more pronounced economic downturn. inflation forecast chart how has our inflation forecast been revised? the dashed red curve on the chart represents the new forecast. it covers the period from the fourth quarter of 2008 to the third quarter of 2011, and maps the future development of inflation on the assumption that the three - month libor remains unchanged at 0. 5 % over the forecasting period. for purposes of comparison, the dash - dotted green curve | 0 |
business correspondents ( bc ) to be employed ; coverage of unbanked villages with population above 2000 as also other unbanked villages with population below 2000 through branches / bcs / other modes ; no - frill accounts opened including through bc - ict ; kisan credit cards ( kcc ) and general credit cards ( gcc ) ; and other specific products designed by them to cater to the financially excluded segments. banks were advised to integrate board approved fips with their business plans and to include the criteria on financial inclusion as a parameter in the performance evaluation of their staff. the implementation of these plans is being closely monitored by the reserve bank. vii. measures specific to ucbs : ucbs have been advised to step up their financial inclusion efforts by utilizing appropriate technology. certain other measures such as enhancing maximum limits on unsecured loans and advances, revising credit limits permitted for individual housing loans, extension of area of operations for ucbs, permitting lending to shgs and jlgs and permitting the use of bcs have been undertaken to further the financial inclusion drive. untapped potential for the ucbs β financial inclusion the client profile of ucbs today predominantly consists of priority sector segments viz. small business establishments, ssi, retail traders, self - employed etc., who would not, normally, find it easy to access commercial banks. the priority sector loans of the sector are today at 46 % as against the prescribed target of 40 %. nearly 90 % of the loan accounts of the sector are less than rs five lakh in value. to this extent, ucbs are already into financial inclusion. however, there remains a huge hidden potential waiting to be tapped. given the large number of small urban co - operative banks, and with 271 districts not having any presence of ucbs, there exists a huge potential for ucbs to increase their spread and business and also participate in the national mission of financial inclusion. given their respective sizes, it may well appear to be a david vs. goliath contest as ucbs need to compete with larger commercial banks in vying for the unbanked pie. however, there exists a distinct first mover advantage which the ucbs have, in addition to their vast customer base. ucbs need to capitalise on this advantage, else their potential customers will be covered by the commercial and regional rural banks and ucbs will lose a good business opportunity. initially, it may appear that taking banking services to the sections constituting the β | be to devise innovative programmes of financial literacy targeted towards women. in this context, it would be useful to study successful experiments from ngos such as self - employed women β s association ( sewa ) which has started a financial counselling training service for poor self - employed women, including training for trainers, and identify how these one - off successes can be replicated on a larger scale in a cost effective way. financial inclusion will act as a source of empowerment and allow people to participate more effectively in the economic and social process. banking on the poor could turn out to be a rich banking proposition. financial inclusion is a win - win opportunity for the poor, for the banks and for the nation. urban co - operative banks have a duty to rise up to meet these aspirations, convert the perceived weakness into exciting opportunities and facilitate inclusive growth. i wish the cosmos bank the very best in their financial inclusion initiatives. thank you. references : 1. chakrabarty, k. c. ( 2011 ), β financial inclusion β a road india needs to travel β, article published in www. livemint. com on oct 22, 2011 2. rangarajan, c. ( 2008 ), report of the committee on financial inclusion 3. status of microfinance in india : 2010 β 11, nabard bis central bankers β speeches | 1 |
jens weidmann : central bank communication as an instrument of monetary policy lecture by dr jens weidmann, president of the deutsche bundesbank and chairman of the board of directors of the bank for international settlements, at the centre for european economic research, mannheim, 2 may 2018. * * * 1 introductory remarks professor wambach, ladies and gentlemen i would first like to thank you very much for inviting me to speak here at the centre for european economic research as part of the β first - hand information on economic policy β series of lectures. when i hear the phrases β economic policy β and β hand β, i can β t help but think of harry truman β s famous demand for a one - handed economist. by always assessing everything β on the one hand... on the other hand β, the economists clearly got on the then us president β s nerves. in this case, it goes without saying that β first - hand information on economic policy β has little to do with β one - handed β economists. no, β first - hand β in this sense means β directly from decision - makers β. with that definition in mind, as bundesbank president and member of the ecb governing council, i should obviously talk about monetary policy. it has now been seven years since i delivered my first speech as bundesbank president, and i have given a few more in the meantime. i haven β t been keeping count, but the database of public speeches on the bundesbank website now contains more than 150 entries. not all of my speeches, but a large number of them, are partially or even primarily about matters of monetary policy. speeches have become a vital means of communication for monetary policy decision - makers. the six members of the ecb executive board alone have given 150 public speeches over the past year. and speeches are just one means of communication. other channels of central bank communication are interviews, press conferences, and regular publications of reports. close attention is paid, in particular, to the ecb president β s introductory statement at the beginning of the press conferences following ecb governing council monetary policy meetings. ecb watchers scrutinise every word. changes in communication are very keenly noticed and analysed. and it is not only what is said but also what is left unsaid that can send a message. β one cannot not communicate. β from that perspective, this well - known quote by communication theorist paul watzlawick also applies | has made it easier to pursue an expansionary fiscal policy. this is partly because the interest costs for government loans are very low. i mentioned earlier that an expansionary monetary policy lowers government interest costs. however, the biggest effect on interest costs comes from this trend decline in real interest rates. importantly, it is also this factor that has driven central banks β policy rates downwards. another key effect of the low interest rate, which also speaks in favour of fiscal policy, is that more public investments will become profitable. a renewed discussion of the possibilities of fiscal policy in recent years, the low interest rate has given rise to a renewed discussion of fiscal policy in the research community. the reason for this is the observation that the interest rate is lower than growth in the economy. 13 when the government can borrow at a very low interest rate, the debt burden as a share of gdp does not need to increase, provided the economy grows at a sufficient pace. in other words, public finances can show a deficit for a period without it being necessary to raise taxes to address this. growth is enough to ensure that the debt ratio improves without any tightening. it is not only the relationship between the interest rate and economic growth that is important in this context, but also the level of interest rates as such. in several developed economies, long - term interest rates are now close to zero or are even negative, or have recently been so. this means that private actors are willing to lend long - term to the state without any significant compensation, or are even willing to pay to lend. this can, without exaggerating, be described as a pretty generous offer. it is not very difficult to imagine that it is possible to find areas in which public investment may be needed and where the funds borrowed to implement that investment may well have a positive return because the cost is very low or negative. why this has not happened to a greater extent than has been the case is not entirely easy to understand. one probable explanation is that many countries have put in place rules to prevent or counteract increased borrowing. the reasons for 13 see, for example, blanchard ( 2019 ), who also notes β possibly somewhat surprisingly β that the tendency for growth to exceed the risk - free interest rate is not a new phenomenon. a summary of the changed view of the role of fiscal policy is available in lagerwall ( 2019 ). 8 this are good if we look at past negative experiences. however, if this is the explanation, it is natural | 0 |
germany and other countries almost a week ago, many people have asked how this affects the riksbank β s actions. as stated already on several occasions, the answer is : not much as long as the conditions for inflation have not changed. the riksbank targets inflation and it is this target that guides policy. in view of what has happened in the past month, there is reason, finally, to highlight a couple of points in the report. the first is that monetary policy is being conducted against the background of an economic upswing. a gradual increase in capacity utilisation is therefore probable. sweden does not differ from germany in that particular respect. the other point is the diminished risk of a development that is appreciably weaker than in the main scenario ; this assessment is supported by the latest statistics. in the light of the rising activity, the main difficulty in assessing future inflation currently lies in an uncertainty about developments on the supply side, wage formation in particular. it is difficult to foresee how the swedish economy will react to a broad economic upswing. it is therefore important, not least on that account, to analyse incoming information. | will help to influence african, caribbean and pacific governments in their advocacy for innovative sources of development finance to be a front - burner issue on the international economic agenda. ladies and gentlemen, it is no secret that small vulnerable economies in the caribbean have grappled with external shocks of varying magnitudes and duration over the past two decades. these shocks include a compression of aid flows, dismantling of preferential trade arrangements for sugar and bananas, interventions related to anti - money laundering and combating the financing of terrorism. more recently, the caribbean has been gradually recovering from the shock of the global financial crisis, which originated in the united states and spread to europe, the region β s two closest trading and investment partners. the untold story, however, is that the combined influence of these multiple shocks has led to a dramatic and fundamental shift in the composition of external financing flows to the caribbean. bis central bankers β speeches in my respectful view, the most significant change in the regional pattern of external resource flows stemmed from the sharp compression in official development assistance ( oda ). flows of oda to many caribbean countries began falling in the 1990s, as donors redirected their aid priorities to the newly emerging commonwealth of independent states and the least developed countries. this is certainly ironic because the eighth mdg recognizes that developing countries require more generous development aid to have the best chances of reducing poverty and accelerating development within the stipulated 15 year timeframe. faced with declining aid resources, many caribbean governments resorted to more expensive commercial borrowing to bridge their funding gaps. this, combined with the growing inability of regional governments to generate high enough primary fiscal surpluses for debt servicing, contributed to a large public debt overhang. gross public debt in the caribbean climbed rapidly from 65 percent of gdp in 1998 to a peak of almost 100 percent of gdp in 2002, before falling to a still elevated 80 percent of gdp in 2012. the accumulation of public debt was even faster in the eastern caribbean, moving from just over 60 percent of gdp in 1998 to a high of almost 120 percent of gdp in 2004, before falling to 95 percent of gdp in 2012. generally, a public debt ratio of over 90 percent of gdp is considered exceptionally high. by this measure, four countries in the caribbean are projected to hold exceptionally high public debt in 2013 : jamaica ( 140 percent ), st. kitts & nevis ( 139 percent ), grenada ( 109 percent ), and antigua & barbuda ( 93 percent ). another six | 0 |
because it was seen as a prerequisite for restoring mutual trust among countries after the sovereign debt bis central bankers β speeches crisis. but mistrust has remained. on the crucial issue of bank resolution, after long and tiresome negotiations it has been decided that sharing the cost of a banking crisis among all the eurozone countries is not for now ; it is foreseen as the final step in a process lasting many years, and in any case it will involve private funds only ( the single resolution fund, financed by all the eurozone banks ). the use of money from the taxpayers of countries other than the one where the bank β s head office is located has been ruled out β contrary to the original intention ( anyhow, the use of national public money is in general forbidden by state aid rules ). as to the sdis, it was first postponed to an indefinite future ; more recently, a proposal has been presented by the european commission, but envisaging the same manyyear process before reaching a mutualisation such as the one established for the single resolution fund. the cmu, needless to say, is a totally different endeavour. still, overcoming the variety of national habits and interests will be a formidable task, the inherent difficulty of which must not be underestimated if we want cmu eventually to succeed. references european commission, 2015, action plan on building a capital markets union, http : / / ec. europa. eu / finance / capital - markets - union / index _ en. htm # action - plan. danielsson, j., et al., 2015, europe β s proposed capital markets union : disruption will drive investment and innovation, http : / / www. voxeu. org / article / europe - s - proposed - capital - marketsunion. juncker, j - c, 2014, a new start for europe : my agenda for jobs, growth, fairness and democratic change, opening statement in the european parliament plenary session, strasbourg, 15 july, http : / / ec. europa. eu / priorities / docs / pg _ en. pdf. langfield, s., pagano, m., 2015, β bank bias in europe : effects on systemic risk and growth β, ecb working paper series, 1797, may, https : / / www. ecb. europa. eu / pub / pdf / scpwps / ecbwp1797. en. pdf rossi, s. | nature and have their origin in defaults, must necessarily involve not only the technical authorities but also the political authorities because they may require interventions that, directly or indirectly, have a cost for the public purse. modern and efficient regulation provides protection for the weak and at the same time fosters competition. it is an essential instrument for promoting the growth of the economy. partly in response to traumatic events, parliament and the government have laid the foundations for a far - reaching reform that will affect basic aspects of the framework of rules governing finance. the work must be completed. legislation in the pipeline will provide an opportunity to do so. the bank of italy β s collaboration is unstinting. | 0.5 |
meet the capital needs of the psbs under basel iii norms particularly since the projections are based on minimum requirements. we also have to remember that pillar ii assessment has not taken off effectively / fully as of now. the psbs will have to chart out a clear capital raising plan over the next five years. the psbs should actively consider several options including, non - voting rights share capital, differential voting rights share capital, golden voting rights share capital, etc. bis central bankers β speeches b. secondly, there is a need to reflect on the holding company structure in respect of the psbs. the nayak committee recommendations in the matter look at the bank investment company structure from the limited perspective / single angle of separating the goi investments from the psbs. there are deeper ramifications on this aspect and the whole issue must be looked at from multiple dimensions including that of the financial stability perspective. the suggestions made in the shyamala gopinath report on the bank holding company structure need to be given a serious consideration. the objective must be threefold β i ) help reduce capital requirement impact on the goi ii ) financial stability perspective, and iii ) strengthening corporate governance by reducing government influence and interference ; c. thirdly, the performance appraisal system ( pas ) needs a complete revamp. currently the pas makes no meaningful distinction between individuals for identifying or deploying talent, skills and / or specialisation ; nor does it guide determining compensation. the system needs reshaping so as to serve as the mainstay for evaluating employees β performance, assessing compensation and developing leadership. d. fourthly, the public sector banks ( psbs ) have hardly any meaningful participation in the financial markets, i. e in the bcd instruments. this restricts / curtails the financial market development. a selected set of foreign banks and the new private sector banks dominate the financial markets in india. psbs need to engage proactively, especially, in the derivative instruments for hedging their risks. treasury function is relatively weak in psbs. well established and robust treasury is a must for the purpose ; they must build up specialisation and should have sufficient number of specialists. the vigilance aspect on treasury losses / losses from transactions will need to be rationalised just as in other areas of psb operations. e. fifthly, the psbs should have a relook on their portfolios. currently, their portfolio share in advances to agriculture, industries, services | β systemic risk β specifically is the danger that a failure of one financial business may infect other, otherwise healthy, businesses. this could happen in either of two ways : first through the direct financial exposures which tie firms together like mountaineers, so that if one falls off the rock face others are pulled off too ; and second, by contagious panic which sweeps everyone off the mountain side like an avalanche. β another facet of systemic risks arises in the context of the build up of widespread imbalances in the system and could, inter alia, take the form of credit booms, build up of similar third party exposures, and of maturity and leverage mismatches. when these imbalances unravel, as they must at some stage, they adversely affect a large section of the financial system. the more similar the imbalances across institutions, the greater will be the systemic impact of the β correction β. evolution of systemic risks while the recent global financial crisis has brought the concept of systemic risks to the centre stage, one only has to look back into the history of financial crises to appreciate the fact that each of these crises were triggered by systemic disturbances in one form or the other. but while the concept of systemic risks is not new, the concept has evolved over the decades, growing in complexity and becoming more pervasive over time. till the mid - 1980s, systemic risks essentially related to systemic disturbances that arose from bank lending and affected the banking sector. over the years, different dimensions of systemic risk were revealed as markets grew and became more integrated ; banks β reliance β defining systemic risks β, darryll hendricks, pew financial reform project. β the new lady of threadneedle street β, vital topic lecture at the manchester business school, e. a. j. george, governor, bank of england, 1998. bis central bankers β speeches on funding markets grew ; financial intermediation spread from banks to non - banking financial companies ; financial and technological innovation fostered the growth of markets for derivatives and structured products ; and market infrastructure developed with the introduction of multilateral netting, central counterparty arrangements, etc. the concept of systemic risk concomitantly broadened along several dimensions to include non - banks along with banks ; to include different kinds of financial activities and exposures in addition to traditional lending and to focus on interdependencies between market participants as well as their exposures to common risk factors, including institutions β reliance on core parts | 0.5 |
in the us and eu financial markets as trading moves to electronic platforms. 23. in asia, there is room for our financial markets to embrace greater β electronification β of trading, notwithstanding our smaller markets. to illustrate, an estimated 80 % of trades are bis central bankers β speeches executed in electronic platforms in developed country fx markets, whereas 85 % of fx trades in asia are still executed by voice. a reduction in transaction costs can promote greater liquidity for asian asset classes, and broaden participation from investors including retail traders. iii. growing regional and international role of the rmb 24. let me go on to the third theme i wanted to talk about, which is that of rmb internationalisation, and how this will shape asia β s financial markets development. 25. the status quo will not last. currently, only 0. 6 % of global payments are settled in rmb, vastly below china β s share of global trade ( 10 % ) or investment flows. there is clearly room for growth. 26. in the long run, if we envisage china with deep and liquid capital markets, and a largely liberalised capital account, the rmb market will potentially play a transformational role in asian finance. for now, even with limited convertibility, there is considerable potential for greater use of the rmb. the economic fundamentals are driving this. besides china β s growing share of global trade, there is a rapidly growing trade between china and the rest of the asian region, and especially asean. further, china β s foreign direct investments are expanding strongly, especially into asian markets. outbound foreign direct investment ( fdi ) from china has increased almost seven - fold in the last seven years ( to us $ 77 billion in 20123 ), and is expected to expand further in the coming decade. a growing part of this fdi is expected to be rmb - denominated, and this too will contribute to greater offshore use of the rmb. 27. the overseas expansion of chinese corporates will be reinforced by the growing presence of mainland chinese banks as they grow their regional and international presence. in singapore, we extended qualifying full bank ( qfb ) privileges to bank of china and icbc as part of the china - singapore fta. both banks are growing their singapore operations as southeast asian hubs. we are also seeing interest from other chinese financial institutions. 28. the re - denomination of china β s trading flows in rmb will allow asian corporate and | ashraf mahmood wathra : the importance of financial inclusion in pakistan speech by mr ashraf mahmood wathra, as acting governor of the state bank of pakistan, at the bank alfalah mobile commerce conference 2014, karachi, 13 march 2014. * * * assalam - o - aalaikum and good morning it is my great pleasure to join you at the international conference & exhibition on mobile commerce in pakistan, and share with you some of my thoughts on this important subject. i must congratulate the organizers and sponsors for their efforts in bringing together the stakeholders of mobile banking eco - system at one platform. being a regulator of banking sector, sbp believes that financial exclusion is hindering our fellow citizens in availing economic and business opportunities. today, there are an estimated 2. 5 billion adult people worldwide who do not have access to formal financial services. according to world bank β s global findex survey, almost 80 percent of those living within incomes of less than $ 2 per day are financially excluded. pakistan is a country of over 180 million people living in geographically diverse areas. our branch network of almost 12, 700 is insufficient to serve the millions of unbanked masses. banks operating in pakistan are hosting only 35 million customer accounts including 3. 5 million accounts opened by branchless banking providers. despite phenomenal spread of banking business in pakistan, we have a long way to go to achieve digital financial inclusion in the country. given the complexities and challenges of limited financial access in the country, state bank of pakistan has adopted a multi - pronged and long - term strategy to address financial exclusion through structured policy & regulatory actions, and market - development interventions. our program initiatives have been catalysing the market developments and fostering market ecosystem to especially promote innovative ways of doing banking business. as we all know that people around the world increasingly use technology and communication networks to live, work, socialize and remain informed and entertained through the use of online services via personal devices like pcs, smartphones and computer tablets. therefore online and other - off - branch modes of doing banking transactions have reduced the hassle of visiting a conventional bank branch to a considerable extent. ladies & gentlemen, pakistan is amongst the pioneers of mobile / branchless banking in the developing world. our branchless banking framework and models have achieved worldwide recognition and remarkable success in a short span of four and a half years. this could not have been possible without an effective and enabling regulatory regime, dynamic | 0 |
lagging due to slow access to vaccine and binding constraints on policy support. multilateralism will lose credibility if it fails to ensure equitable access to vaccine across countries. if we can secure the health and immunity of the poor, we would have made a great leap towards inclusive growth. global co - operation remains vital for rapid progress on this front. 19. needless to add that inclusive growth in the post pandemic world will require cooperation and participation of all stake holders. in india, collaborative effort of various stakeholders is helping accomplish a seemingly difficult task of accelerating the pace of vaccination. the private sector is developing and manufacturing the vaccines ; the union government is centrally procuring and supplying it ; and the state governments are delivering and administering it in every nook and corner of the country. india is now administering a record of about one crore doses of the vaccine every day across all segments of the population. 20. a major challenge to inclusiveness in the post pandemic world would come from the fillip to automation provided by the pandemic itself. greater automation would lead to overall productivity gain, but it may also lead to slack in the labour market. such a scenario calls for significant skilling / training of our workforce. we also need to guard against any emergence of β digital divide β as digitisation gains speed after the pandemic. further, the need for professional human resources trained in science, technology, engineering and mathematics ( stem ) is rising briskly. major technology - based firms have expressed their intention to hire many new professionals with skills in these areas. in the short - term, the supply of such a workforce cannot be increased by the traditional educational system, and thus there is a need for close involvement of corporates in the design and implementation of courses suitable to the changing industrial landscape. 21. as we recover, we must deal with the legacies of the crisis and create conditions for strong, inclusive and sustainable growth. limiting the damage that the crisis inflicted was just the first step ; our endeavour should be to ensure durable and sustainable growth in the post - pandemic future. restoring durability of private consumption, which has remained historically the mainstay of aggregate demand, will be crucial going forward. more importantly, sustainable growth should entail building on macro fundamentals via medium term investments, sound financial systems and structural reforms. towards this objective, a big push to investment in healthcare, education, innovation, physical and digital infrastructure will be required. | we should also continue with further reforms in labour and product markets to encourage competition and dynamism and to benefit from pandemic induced opportunities. the production linked incentive ( pli ) scheme announced by the government for certain sectors is an important initiative to boost the manufacturing sector. it is necessary that the sectors and companies which benefit from this scheme utilise this opportunity to further improve their efficiency and competitiveness. in other words, the gains from the scheme should be durable and not one off. 22. again, for growth to be sustainable, a transition towards greener future will remain critical. the need for clean and efficient energy systems, disaster resilient infrastructure, and environmental sustainability cannot be overemphasised. due consideration should be given to individual country roadmaps keeping in mind country - specific features and their stage of development while adopting policies towards climate resilience. conclusion 23. on the whole, while the pandemic has created enormous challenges, it can also act as an inflection point to alter the course of development. enhanced adoption of technology will give impetus to productivity, growth and income. leveraging technology in implementing government 4 / 5 bis central bankers'speeches schemes, training and skill development programme for the unemployed, promoting women friendly work atmosphere and supporting education of the poor and marginalized sections would be areas of focus as we embark on our journey beyond covid - 19. income and job creation with digitalisation and innovation can bring about a new age of prosperity for a large number of people. 24. many of us have grown up reading mahatma gandhi β s talisman5 in text books β β i will give you a talisman. whenever you are in doubt β¦ recall the face of the poorest and the weakest man whom you may have seen and ask yourself if the step you contemplate is going to be of any use to him. will he gain anything by it? will it restore him to a control over his own life and destiny? β as we strive to build a stronger and resilient india, this pearl of wisdom that we learnt long ago remains as relevant even today. thank you. stay safe. namaskar! 1 pib press release β key declaration on climate change to be signed at the india ceo forum on climate change β dated 4th november 2020. 2 roadmap for ethanol blending in india 2020 - 25, government of india, june 2021. 3 pib press release β eepc celebrates 50th year of engineering | 1 |
, there appears to be a general consensus that business cycles have converged to some extent over the past decade or two. as a central banker, i am naturally interested in inflation differentials, and these are certainly lower now than they were 10 or 20 years ago. for example, inflation rates among current euro area members ranged from 21 % in italy to 5 % in germany in the last quarter of 1980. by the second quarter of this year the range was only 3Β½ percentage points. naturally, divergences do remain, and these reflect a number of factors. some divergence is due to a process of convergence as countries catch up to euro area averages, the well - known balassa - samuelson effect. this effect explains how productivity growth during a catch - up process can result in higher inflation without undermining competitiveness. country - specific policies, including fiscal policy and regulation, also result in divergences. finally, countries have different industrial or sectoral concentrations. differences in the economic performance of various sectors will therefore be reflected in cross - country divergences. these factors are not going to disappear immediately, but may diminish as price and income levels converge and through continued deepening of the internal market. however, we cannot be sure how rapidly they will diminish, nor can we be certain what level of divergence will be normal in the long run. in addition, the process of convergence will not necessarily be continuous. for example, inflation differentials have widened a little over the last year or two, although they remain much smaller than they were a decade ago. for small areas within a monetary union, a common monetary policy does have some specific implications. small countries have little influence on the euro area inflation rate, which is a weighted average of national inflation rates. if inflation rates in those small countries diverge from the euro area average, that has relatively little impact on the overall monetary policy stance for the euro area. consequently, it is possible for smaller countries to temporarily have growth rates and inflation rates that differ from those that would result from a national monetary policy aimed at maintaining price stability at the country level. large countries could also be in this position. if inflation is well above the euro area average in one country, but below it in another, monetary policy may not contribute to narrowing the divergences. where such divergences are not the result of catching - up processes, national economic cycles could potentially become more pronounced. some euro area countries are arguably in | although the uae is well developed when it comes to financial inclusion, there are still unbanked sectors of the society and under banked geographical areas within the uae. therefore, we need to provide the infrastructure necessary for banks and other financial institutions to provide their services including credit, to all sectors of the society and in all bis central bankers β speeches geographical regions within the uae. this will be achieved, sometimes, through using electronic systems. 2 ) sme financing : we believe that sme financing will become more difficult when new global regulations are implemented, therefore, we have to find ways and means to improve sme financing outside the banking system. at the moment, the uae is looking at experiences of other jurisdictions and recently we have at a gcc banking conference which was held at the beginning of this month, discussed the experience of korea. we are also looking at the experiences of italy and malaysia. we believe that sme financing is very important for job creation. our region in particular will need to create more jobs in the future, due to relatively young population. 3 ) domestic debt market : the development of a domestic debt market is, in my view, of a national priority. companies, particularly large private companies and gres, need an alternative to bank lending. it is a more reliable source of funding and it is less costly for large corporations. banks also would need instruments of the domestic debt market to fulfill the requirements of basel 3 regarding liquidity ratios. as local debt markets are at an infancy stage in many countries in the region, this would make it difficult for banks to hold highquality liquid debt instruments as β preemptive β liquidity buffers against early signs of stress as required by basel 3. therefore, it is necessary for the uae now to expedite the issuance of the public debt law and to set up the needed market infrastructure, as a first step on the way to a vibrant domestic debt market. excellencies ladies & gentlemen with this i come to the end of my speech, but before i close, i would like to thank the basel committee on banking supervision ( bcbs ), the fsi of bis and the amf, for holding this important high level meeting here in abu dhabi, uae. i wish you all a successful meeting. thank you for your attention β¦ bis central bankers β speeches | 0 |
conclude, allow me to further urge microfinance and other financial institutions to continue revising their interest rates and charges in tandem with the movements in key macroeconomic indicators such as inflation. i am conscious to the fact that all microfinance institutions are in business and are therefore expected to make profits. however, making super profits at the expense of the poor and vulnerable is regressive to economic development. there is a need to make financial services more affordable to the majority of our people as well as small enterprises in order to expand their operations, employ more people, and thereby provide an impetus to significantly reduce poverty levels in the country. let me, once again, extend my gratitude to microfinance transparency and the association of microfinance institutions of zambia for inviting me to officiate at this launch of the transparent pricing initiative in zambia. it is now my honour and privilege to declare the workshop on transparent pricing officially opened. i thank you for your attention. bis central bankers β speeches | an important part in making europe fit for the global challenges that the former chancellor has been analysing for many years. thank you for your attention. bis central bankers β speeches | 0 |
, the real economy and real estate prices : all things considered, an exceedingly severe scenario. as far as german institutions β profits are concerned, this extreme scenario would have a considerable impact. pre - tax results would fall into negative territory for almost half of the small and medium - sized banks. the average annual profit of the small and medium - sized institutions would drop by 91 % at its most extreme. the big banks would be affected, too : in particular, they would suffer losses in their trading business and need to increase risk provisioning in their lending business. owing to good capitalisation, however, none of the large institutions would run into difficulties. in light of the extreme scenario, that β s a gratifying outcome for the stability of germany β s banking sector. 5. conclusion ladies and gentlemen, allow me to conclude by reiterating the four main points of my speech. first, the first year of european banking supervision went smoothly. of course there are still a few things that we can improve upon, but we β re working on them. bis central bankers β speeches second, many of the items on the basel committee β s reform agenda have been ticked off, and the entire list is expected to be finished by the end of next year. the bundesbank is committed to regulatory certainty, since it enables banks to plan for the long term on a robust basis. third, german banks have further increased their stability β capital ratios have continued to climb ; leveraging is down further. fourth, german banks are suffering from persistent low earnings. although the low - interest - rate environment is not yet making itself felt in this regard, looking to the medium to long - term future, however, small and medium - sized institutions in particular look set to feel the pinch. ladies and gentlemen, germany β s banking sector has become much more stable since the crisis, but some major challenges still need to be tackled β the low - interest - rate environment and weak earnings, to name but two. these are challenges that banks must overcome in order to assure their stability and profitability. thank you very much. bis central bankers β speeches | , against the backdrop of declining total assets. even aggregate net interest income in 2014, at euro90. 4 billion, was euro4. 1 billion up on the year. and even the credit cooperatives and savings banks, which depend comparatively heavily on interest business, were able last year to increase further both operating income and net interest income. this they succeeded in doing by expanding credit business on the asset side of the balance sheet and by shifting financing on the liability side to transferable deposits bearing a lower rate of interest. yet both measures could easily lead to risks for the financial system. with regard to credit business, we do not currently see the savings banks and credit cooperatives loosening their lending standards, which would engender greater risk. nevertheless, banks β interest rate risk has increased significantly because loan maturities were expanded at the same time as lending was increased. we have seen the so - called basel coefficient, which is a measure of a bank β s interest rate risk, rise almost continuously since 2011. with regard to german banks, i see three dangers. first, the currently good net measurement gains and losses could return to more normal levels if the economy falters. second, banks could be forced to correct their optimistic projections of administrative spending. third, plans to increase net fee and commission income could prove unfeasible. these three things could additionally weigh on the net profits of all banks and savings banks. and of course no look at the future would be complete without a stress test. to avoid any confusion, let my begin by saying that we calculated this stress test for our financial stability review ( fsr ) on the basis of figures available to us ; the banks themselves were not involved. it is therefore not to be compared with the stress test carried out in 2014 as part of the comprehensive assessment, nor is it to be compared with the pan - european stress test which the european banking authority ( eba ) will carry out in 2016. in addition, a number of aspects were not taken into consideration in our fsr stress test β banks β liquidity risks and negative feedback loops between the banking sector and the real economy, to name but two. however, this β small β stress test, too, produced a couple of interesting findings. we analysed how the simultaneous occurrence of various macroeconomic shocks over the next three years might affect the german banking system. to this end, we assumed a sudden rise in short - term interest rates and a sharp fall in stock prices | 1 |
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