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stephen s poloz : release of the monetary policy report opening statement by mr stephen s poloz, governor of the bank of canada, at the press conference following the release of the monetary policy report, ottawa, ontario, 30 october 2019. * * * good morning. senior deputy governor wilkins and i are pleased to be here to answer your questions about today β s interest rate announcement and our monetary policy report ( mpr ). before turning to your questions, let me first offer some insight into governing council β s deliberations. not surprisingly, the worsening global situation was the primary issue. economic forecasts have been marked down further in most countries, largely as a consequence of the escalation of trade actions and uncertainty around what may be next. heightened uncertainty about future trade policies is directly reducing business investment, and there is a risk that this will spread to households as well. these consequences can be buffered through easier monetary policy, and many central banks have recently eased in response. however, we need to remember that tariffs and trade restrictions will work over time to permanently reduce potential output everywhere, while raising the prices of consumer goods β a stagflationary scenario. monetary policy can only do so much about these elements of the shock. canada is not immune to these global developments. in fact, canada was one of the first countries to feel the effects of trade policy uncertainty, since nafta was the first target of the trump administration. indeed, this uncertainty has been weighing on investment in canada for the past three years. these were important headwinds preventing canadian interest rates from rising by as much as us rates did during 2017 β 18. nevertheless, as other economies feel a growing impact from the trade war, there are second - round impacts on canada through weaker exports and lower commodity prices. in today β s updated projections, we are forecasting both exports and business investment to contract in the second half of this year and to recover only moderately in the next two years. we can see a wide range of indicators pointing to these effects β in manufacturing, mining and rail transportation β in our business outlook survey and in the quarterly reports of bellwether global companies. while we have had these secondary effects in our forecast for some time, and increased them in our latest projection, these are mostly judgment - based, and the situation could worsen. accordingly, we present a deeper analysis of this downside risk in today β s mpr, in box 3. let me just note | and central bank autonomy 22. the much prized autonomy of central banks has come under assault post - crisis with an influential view gaining ground that one of the principal causes of the crisis was the unbridled autonomy of central banks. the standard argument for central bank autonomy is that autonomy enhances the credibility of the central bank β s inflation management credentials. monetary policy typically acts with a lag, and price stability therefore has to be viewed in a medium term perspective. having autonomy frees the central bank from the pressure of responding to short - term developments, deviating from its inflation target and thereby compromising its medium term inflation goals. even as the importance of central bank autonomy in monetary policy is now broadly accepted, there is a growing view that central bank decision making has to become transparent and that central bankers have to be more accountable for the outcomes of their decisions. 23. with central banks assuming increasing responsibility for financial stability, the autonomy question has acquired an additional dimension and greater urgency. the main apprehension is that a formalized mechanism for coordination between the government and the central bank for financial stability will alter the level, content, process and frequency of interaction between the two, and over time this will erode the autonomy of the central bank. it is argued that it will be difficult to keep monetary policy and policies for financial stability strictly apart, and a formal forum for coordination would facilitate β spillover β into monetary policy. bis central bankers β speeches 24. this issue is non - trivial, and can become quite contentious in maturing economies where institutions for checks and balances are not ingrained. nevertheless, it is not an insurmountable problem. it is possible to build and respect chinese walls between decision making for monetary policy and decision making for financial stability. in the us for example, the fomc ( federal open markets committee ) is responsible for monetary policy decisions while the board of governors of the federal reserve is responsible for financial stability decisions. countries like brazil and sweden have a different model β they aim at extracting synergies between monetary and financial stability decisions through a single board. 25. the burden of my argument therefore is that with sensitivity and understanding on both sides and through appropriate institutional mechanisms, it is possible to ensure that a central bank is able to effectively discharge its financial stability responsibility without compromising its autonomy. indian position on the issue of financial stability 26. where do we in india stand on this issue of financial stability? historically, the reserve bank has played an important role in | 0 |
##ly challenging environment, as well as on the cbc's own initiatives, acting proactively and fostering enhancement within the financial sector. linked to this, i would like to briefly provide an overview of the'international headquartering'trend in cyprus. international company headquartering has traditionally been a strategic decision influenced by factors such as tax benefits, access to key markets and infrastructure facilities. 4 / 5 bis - central bankers'speeches in cyprus, foreign direct investments, as a result of the inflow of a large number of foreign companies, contributed to the strengthening of economic activity in 2022. in particular, it has supported the inflow and expansion of operations of companies, mainly in the information and communication technologies sector. the contribution of headquartering to gdp growth has doubled, from 0. 7 percent in 2021 to 1. 3 percent in 2022. however, we should bear in mind that with the rise of the digital era, the emphasis on physical location is waning. talent acquisition, a crucial component for a company's success, is no longer confined by geographical boundaries. this shift is further intensified by the growing number of digital nomads, professionals who operate remotely and are not tethered to a specific location. these professionals prioritize flexibility, connectivity and work - life balance, and as a result organizations are rethinking their traditional operations model in order to attract this pool of global talent. the intertwining of company headquartering strategies, with the allure of remote work opportunities, showcases the evolving landscape of the modern business world. let me now conclude, innovation in the financial sector has become a crucial necessity. it enables contactless banking, it offers financial services'employees the possibility to work remotely, and provides a customer oriented efficient product. undoubtedly, technological advancement comes with challenges and risks. these risks need to be effectively managed and regulated, so that financial sector participants and their customers reap the benefits of such technological advancement. let me assure you of the central bank of cyprus'support to all efforts that point towards the direction of technological advancement and of our readiness to contribute within the framework of our legal mandate. 5 / 5 bis - central bankers'speeches | that of economic growth because of the worsening of the terms of trade. 2. in the labor market, the trend of improvement will be maintained with a private - sectorled increase in the number of persons employed and a fall in the unemployment rate. having said that, the degree of improvement in qualitative terms will be checked somewhat by the feebleness of large businesses in the creation of what are seen as β decent jobs β 9. 3. consumer prices are expected to stay on a rising track for quite some time, carrying over from the 3 1 / 2 % level for this quarter. even as the number of persons employed in the private sector increased by a total of 382, 000 running up to october of this year, that of large corporations decreased by 49, 000. demand pressures are being built up from the sustained rise in economic activity and international commodity prices, wages and rental charges are all on the rise. the accelerated upward trend of chinese wages and prices may also act as a cost push factor for domestic prices by way of higher import prices. expected inflation, which has been on the rise since the beginning of this year, will affect prices after some time lag. 4. the current account will retain its underlying surplus but the scale of this surplus is seen to shrink owing to the expansion of imports drawn in by the strengthened recovery momentum of domestic demand. the ratio of the current account surplus to gdp will drop from this year β s 3 % level to below 2. 0 % but above 1. 5 % in 2011. 5. these economic forecasts for 2011 are attended by a considerable degree of uncertainty. domestically, there are the geopolitical risks following the north korean attack on yeonpyeongdo. externally, the unknowns include the sovereign debt problems of the euro area, price instability in china, and the direction of the us fed β s monetary policy post - qe2. policy tasks 1. while the korean economy will stay on a solid growth track in 2011, political initiatives should be directed toward raising the living conditions of the public at large including the boosting of purchasing power by way of price stability and the creation of β decent jobs β, given the persistent gap between public perceptions of the level of economic activity and the actual numbers. 2. great care must be taken to avoid an enfeebling influence on the domestic financial and foreign exchange markets and on real economic activity from the eurozone debt problems, chinese inflation and the fed β s monetary | 0 |
holding a substantial portfolio. as argued by freddie's ceo at that time, by financing mortgages with mortgage - backed securities sold to investors, freddie avoided interest rate risks and thus could keep mortgages flowing when depository institutions were suffering an interest rate squeeze. 7 freddie's message changed after 1989 when it became owned by private shareholders and it began to exploit the risk - adjusted profit - making potential of a larger portfolio. * * * the creation of mortgage - backed securities for public markets is the appropriate and effective domain of the gses. deep and liquid markets for mortgages are made using mortgage - backed securities that are held solely by investors rather than the gses. fannie's and freddie's purchases of their own or each other's mortgage - backed securities with their market - subsidized debt do not contribute usefully spreads averaged 148 basis points in 1997 and 280 basis points in 2003. see andreas lehnert, wayne passmore, and shane sherlund ( 2005 ), " gses, mortgage rates, and secondary market activities, " board of governors of the federal reserve, finance and economic discussion series 2005 - 7, january. press reports indicate that during a recent open conference call, freddie mac said it is poised to start growing its portfolio again. for example, see " freddie earnings fell sharply in 2004 ; but gse sees growth potential and rising market share in 2005, " inside mbs & abs, april 1, 2005, page 4. leland c. brendsel, government - sponsored enterprises, hearing before the subcommittee on oversight of the committee on ways and means, house of representatives, the 101st congress, september 28, 1989. to mortgage - market liquidity, to the enhancement of capital markets in the united states, or to the lowering of mortgages rates for homeowners. the bulk of the gses'portfolio growth over the past decade has occurred mainly through the acquisition of their own mortgage - backed securities - which reflect the aaa - rating of pools of home mortgages. as i indicated earlier, holding their own securities in portfolio often yielded fannie and freddie subsidized annual returns on equity of more than 25 percent, far in excess of the returns to purely private financial institutions from holding such securities. * * * limiting the systemic risks associated with gses would require that their portfolio holdings be significantly smaller. at the same time, reducing portfolios would have only a modest effect on financial markets. currently, these portfolio | 5 march 2018 the new challenges facing central banks colegio de ingenieros de caminos luis m. linde governor let me begin by thanking the school of civil engineering for inviting me to inaugurate this cycle of meetings with regulatory agencies. many thanks to the president of the school, its management board and all of you for being here today. the international financial crisis that began in 2007 has given rise to various changes and to the emergence of new challenges. central banks are, today, in a rather different and novel situation compared with where we were before the crisis some 10 years back, and we are affected by a debate about our functions in the economy and the thrust of our policies. in the past decade central banks have increased monetary stimuli manifold and there have been deep - seated changes in the monetary and regulatory policy objectives and instruments implemented. we are now emerging from the crisis and this is raising even more the profile of the debate on the role central banks should play and whether the policies pursued in recent years should be maintained, or progressively abandoned, and at what speed and to what extent either alternative should be taken. the challenges facing central banks can be grouped in three areas : first, what is being labelled as the β new normal β in the macroeconomy and its implications for monetary policy ; second, the challenge for financial regulation policies ; and third, the new challenges posed by financial innovation and the new technologies. the impact of the crisis on monetary policy but before addressing these challenges, i think it might be useful to take a short step back to remember where we have come from. we can only understand today β s challenges if we bear in mind the changes, often far - reaching, that have come about in central banks in response to the crisis. the global financial crisis came about following a build - up of bubbles in the advanced economies, mainly in the financial and real estate sectors, a process to which easy financing conditions proved conducive in a setting in which risks were not appropriately priced. in any event, what was surprising was the intensity and global nature of the crisis that broke in 2008. given highly integrated financial markets and complex interconnections, instability spread rapidly, leading to the most serious financial crisis since the second world war. in the european union the crisis was, moreover, exacerbated by a double - dip recession, which has prolonged the recovery period and has also revealed the weakness of the euro area β s institutional framework. the crisis also left | 0 |
providing evidence for their economic impact on albania. despite these figures, their future prospective is yet unclear. the integration of albanians into their host countries, their economic and financial situation and other similar reasons have a negative impact in the long term. our analyses and assessments show that the difficult economic situation the developed economies have been experiencing, expressed in the economic slowdown, unemployment growth and increase of inflation, has also provided its impact on the performance of remittances which have grown less this year relative to the previous years. empirical studies of the bank of albania show that the cease of these flows would put our consumption model and the long - term balance of the external sector of the economy in the difficult position. our concern related to the household budget stands in the fact that the behaviour model we adopt at a household level can also affect the behaviour model of given regions. the albanian economy has by and large made evident progress, detaching itself from the ida country group. macroeconomic indicators have for a relatively long period been positive and stable. however, beyond the nationwide average indicators, detailed statistics by regions indicate that welfare in mountain areas has progressed at slower rates relative to the other regions. according to world bank assessments, an average resident in the mountain area has 12 % less per capita real consumption than the average resident in tirana, while in 2002 this figure was 9 %. according to the same source, the average rural coast resident has 34 % higher per capita consumption than the average mountain rural resident. generally, poverty has a strong positive relation with the family size and a negative relation with age and education. in contrast, the district of kukes has great potentials for more prosperity in this area. first, your district is distinguished for its rare natural beauty and diversity from the mountain and ethnographic tourism viewpoint. the opening of the border with kosovo in particular has provided us with real opportunities to perceive the northern alps as a single complex with their continuity to kosovo and why not to montenegro. i think the completed airport, which could very well be used for the transportation of winter sports fanatics, is another strong point. it is the local authorities β task, to undertake in co - operation with the local stakeholders projects and feasibility studies, which in a later time may be submitted and presented to the central authorities or the specialized international operators. i would like to inform you that at the moment, their interest is overwhelming and concrete. time is ripe for you to increase the marketing of these potentials and point out their strong | ardian fullani : the banking system β promoter of economic development speech by mr ardian fullani, governor of the bank of albania, at the regional meeting β the banking system β promoter of economic development β, kukes, 12 september 2008. * * * dear governor, dear mayor of kukes municipality, dear mayor of prizren municipality, dear mr. uldedaj, dear mr. basha, dear participants, i am delighted to be here today and there are many good reasons why i was looking forward to this gathering. for the second time within a relatively short period of time i see this gigantic engineering work growing every day and taking its final shape. every single person visiting the road segment reshen β kalimash understands that what they have in front of them is an extraordinary engineering, civil, useful, far - sighted and patriotic work. similarly, my return to kukes after quite a long time has surprised me. there is now a completed airport, cross - border activity has intensified, the climate is extraordinary and soon this town will turn into a city with modern infrastructure. numerous opportunities are ahead of you. your cleverness stands in perceiving them and making use of them cleverly in order to enhance the opportunities of the kukes community and the north - east region. the other reason for making me feel delighted is the presence of my kosovar counterpart, mr. hashim rexhepi. this meeting is of special significance. the central bank of the republic of kosovo is now growing and consolidating day after day under the management of an albanian professional unlike some time ago when the management of the central bank was the task of a foreign central banker. meetings of this kind are now turning into a tradition. after holding similar meetings in korca, gjirokastra, shkodra and saranda we are now being introduced with a new reality of the north - east region, and i believe that the town of kukes plays a key role in this area. through these regional meetings we aim to be in touch with the economic and financial reality of different regions in albania. given the weather, cultural, social, geographical, demographic, objective and subjective characteristics, each region has different economic and social development opportunities and levels. from this viewpoint, we aim to fully be acquainted with these specific characteristics, identify all the financial and natural resources, formulate β recipes β and other advice which would help in making more rational use of them. beyond what i previously | 1 |
of insurers in singapore has been set up. mas is now developing risk profiles for each singapore - based insurer. we have devised a five - step " supervisory ladder of intervention ", and will use it to classify insurers according to their risk rating. the five steps range from " normal " to " viability at risk " and terminally, " winding up or closure ". insurers assessed to be on the more critical steps will receive more stringent and intrusive supervisory actions. mas draws the analogy between the risk classification of an insurance firm and the medical assessment of a patient's health. if an insurer is classified as being on the " viability at risk " step, it will probably be admitted to mas'intensive care unit. however, mas is not regulating for a no - failure regime. we encourage industry consolidation. in today's competitive environment, size brings financial strength and facilitates diversification on both sides of the balance sheet. but it is not possible, and also not desirable, to operate on the basis that we will never, under any circumstances, allow a financial institution to fail. that way lies moral hazard. improving corporate governance and internal controls a risk - based supervisory approach relies heavily on the strength of company leadership and management. corporate governance is thus critical. mas expects the board of directors to provide clear strategic leadership and set consistent corporate values. management teams must operationalise these strategies while upholding the spirit of the corporate values. given the nature of the insurance business, corporate values need to be guided by risk management concerns. what is the company's risk appetite? what should be its risk tolerance limits? what is the level of risk management skills in the company? how profitable is the underwriting of various classes of risks? apart from answering to shareholder interests, the board of directors and management also have a fiduciary duty to their policy - holders. sound internal risk management and controls are needed to protect policy - holders'interests. currently, our regulations oblige the appointed actuary to take responsibility for monitoring the financial soundness of life insurance companies. but the board and management cannot just sit back and rely on the actuaries. board and management themselves must acquire a better awareness and understanding of actuarial assessment. we need to set clear expectations of the role that the board and management play, in ensuring the financial soundness of their companies. mas will work with industry and professional associations to set out guidelines for this important | mario draghi : modernisation of the global financial architecture β global financial stability remarks by mr mario draghi, governor of the bank of italy and chairman of the financial stability board, before the committee on economic and monetary affairs of the european parliament, brussels, 17 march 2010. * * * thank you very much for having invited me to take part in this important debate between european and national parliaments. international and regional cooperation and national political leadership are essential complements for achieving global financial reforms ; and the debate in this committee is really helpful for that purpose. it is ultimately national and regional legislatures, accountable to their voters, that must decide and implement reforms. the strains in the global financial system have eased considerably in the last twelve months : the banks are once again raising funds, asset write - downs have diminished. nevertheless, elements of fragility are still present in various parts of the financial system and risks, mainly related to the deterioration of traditional loan books, the bunching of refinancing needs in the next few years, and to new sources of risk such as sovereign risk. it is essential that we can count, in the years to come, on a fully restored ability of the banking sector to perform its essential tasks in the economy. we have come a long way towards strengthening the financial system since this crisis began. but we have hard work ahead of us to finish up. in my remarks, i will focus mainly on these forward challenges. but let me start by taking stock of where we have gotten to. three things have been important in getting us to where we are now : first, the recognition that, in a closely integrated system, we all sit in the same boat ; second, the leadership of the g20 process, in which the eu has played an important role, in agreeing objectives and timelines for substantial reform ; and third, the establishment of mechanisms, such as the fsb, to hasten and coordinate the policy development needed to meet these objectives. when i say we have gotten far, i am speaking to an unprecedented amount of international dialogue and co - operation on important financial system issues, and the resulting substantive changes that either have or are about to come into place. while many issues remain to be resolved, in europe, in the us and elsewhere, we are, collectively, fundamentally reshaping the framework for systemic financial oversight : first, top - down, system - wide oversight arrangements are being put in place at the national, regional and international level. these | 0 |
reserve bank is of the view that in moving to new technologies, merchants and consumers should continue to have a choice of debit card network. rules or policies of any scheme that have the effect of removing choice will reduce competition and result in rising costs to merchants. the bank will be looking closely at developments in the debit card market to ensure that, as far as possible, there is a level playing field for the alternative debit schemes. we will also work with the accc as necessary to identify and address any anti - competitive behaviour. in the specific case of least cost routing, we would not want to see the benefits to competition from this innovation thwarted by issuers taking eftpos off dual - network cards. conclusion competition is important in payments. it delivers better customer experiences, more convenience and innovative products. but as networks, collaboration is also often required. the development of the npp and recent work on addressing fraud in card payment systems are good examples of where participants that are normally competitors have cooperated to ultimately deliver better outcomes for australian consumers and merchants. these collaborative efforts, however, are not without their challenges. as the payments system regulator, the reserve bank remains willing to engage with industry and facilitate collaboration where this is in the public interest. Β© reserve bank of australia, 2001 β 2019. all rights reserved. https : / / www. rba. gov. au / speeches / 2019 / sp - ag - 2019 - 05 - 16. html 8 / 8 | philip lowe : remarks at reserve bank board dinner remarks by mr philip lowe, governor of the reserve bank of australia, at the reserve bank board dinner, adelaide, 1 may 2018. * * * good evening. it is great to be back in adelaide today. on behalf of the reserve bank board, i want to warmly thank you all for joining us at this community dinner. these dinners provide an opportunity for you to hear directly from the members of the reserve bank board and for us to hear from you about how things are here in south australia. so, welcome. i would like to begin by paying tribute to kathryn fagg. kathryn β s five - year term on the board comes to an end next week and so today was her final meeting. over those five years, kathryn has made an outstanding contribution to the board β s deliberations, drawing on her extensive experience in many different industries. kathryn has also served as chair of the board β s audit committee and has been the board β s representative on the board of note printing australia limited. she has carried out these roles, not only to the highest professional standards, but also with the greatest humanity. kathryn, you are going to be missed by your many friends and admirers at the reserve bank. as you are aware, at our meeting today, the board kept the cash rate unchanged at 1Β½ per cent. it has been at this level since august 2016 β that is for 21 months β which is the longest period without a change. i sometimes read that the board β s job has become very easy : we just meet and do nothing. no doubt, the board members here tonight will tell you a different story. they will assure you that each month when we meet, we diligently assess the pulse of the australian economy. we also deliberate carefully over what setting of monetary policy will best deliver low and stable inflation in australia. as we conduct those deliberations, we are conscious that our ultimate objective is enhancing the economic prosperity and welfare of the australian people. this objective has been part of the reserve bank act since it was written in 1959. such a broad objective became unfashionable in most central banking circles around the world over recent decades. but in my view, it is an important part of the australian policy framework and it has more than stood the test of time. at today β s meeting, when we measured the pulse of the australian economy, we assessed it to be stronger than a year ago. business conditions | 0.5 |
for kenya : infrastructure bond program and the plan by the government to issue a euro bond in the current financial year also signifies that the domestic market has matured over time and gained confidence from both local and foreign investors. this is evidenced by the stable country β s credit rating and an attractive environment for investors. 5. automation of primary market processes : in an effort to enhance efficiency and safety of its operations, the central bank launched the t - 24 system in all its operations in april 2012. i would like to thank the stakeholders for being patient while the bank was experiencing challenges leading to the implementation of the new system. going forward the bank is working towards providing internet banking bis central bankers β speeches which will allow for services such as : online bidding faster dissemination of auction results and statements for government securities. 6. competitiveness at auctions : the use of an auction - based method in the issuance of government securities over the years has promoted price discovery and competitive prices at the primary market which is a key ingredient for the secondary market. 7. kenya government bond index : in october 2012, the nairobi securities exchange ( nse ) launched the ftse nse kenya shilling government bond index as a benchmark tool for measuring market performance. this was a great step in market development because the market now has the benefit of further opening up to the rest of the world and increasing kenya β s financial sector competitiveness. ladies and gentlemen, as you all know our success has not been without challenges along the way. just to mention a few, the slow pace of reforms particularly in the secondary market has promoted market illiquidity and hampered faster growth. but above all, economic vibrancy has been constrained by shocks in both the domestic and international environment beyond our control and this has at times affected the momentum of our market development. i wish to emphasize that a well - developed and proper functioning financial market is critical to economies all over the world as it enhances effectiveness of monetary policy, cushions the economy against external vulnerabilities while mobilizing long term financing for public and private sector development. therefore, the development of a robust financial market is not only a priority of the central bank of kenya but for every stakeholder in this market to embrace. towards this objective i urge all the stakeholders to continue to build a competitive bond market that supports the country β s development agenda under vision 2030. in cognizance with today β s theme of β taking kenya β s bond market to the next | njuguna ndung β u : mefmi fellows department programme speech by prof njuguna ndung β u, governor of the central bank of kenya and chairman of the mefmi executive committee, during the 2007 mefmi fellows graduation & accreditation ceremony, harare, 31 july 2007. * * * your excellencies, governor reserve bank of zimbabwe, dr. gideon gono, executive director of mefmi, dr. ellias ngalande, distinguished invited guests, graduated and accredited fellows, ladies and gentlemen, 1. it is indeed a great honour and privilege for me to be here and witness this memorable occasion as we confer mefmi fellows in recognition of their hard work. congratulations to you all the graduated and accredited fellows! this occasion is especially memorable because of the presence of our distinguished guests ; the financial cooperating partners. your excellencies once more, you are very welcome to the mefmi family. ladies and gentlemen : allow me, on behalf of the board and indeed on my own behalf, to thank you for accepting to come to bear testimony to one of the significant outputs of mefmi. let me assure you of mefmi β s commitment in pursuing its objectives and ideals of building sustainable capacity in the region as affirmed by its leadership. i wish also to acknowledge the great hospitality the institute continues to receive from the governor of the reserve bank of zimbabwe, dr. gideon gono that enables us to convene effectively in harare. your presence here today, honourable governor, further demonstrates the very commitment you have for the intended success of mefmi. 2. ladies and gentlemen : mefmi fellows development programme was conceived as a flagship to address the capacity needs of the region in terms of the development of local and regional expertise. specifically the programme was set up to meet the following objectives : ( i ) to develop a critical mass of regional expertise in the priority areas of sovereign debt, macroeconomic and financial management, as a means to gaining sustainable and self - generating capacity ; ( ii ) to create sustainable regional capacity for delivery of mefmi capacity building products and services to answer the concerns about sustainability of the institute β s activities ; and ( iii ) to create regional capacity for complementing mefmi β s capacity building efforts at in - house level in mefmi member states β institutions. the fellows who have graduated today have gone through an intensive programme of customized training, professional exposure to renowned institutions | 0.5 |
##iculation of eu fiscal rules is the fiscal compact ( or treaty on stability, governance and co - ordination, tsgc ), which requires countries to ensure convergence with their respective mtos. it introduces a more explicit budget rule, whereby all states must strive for budgetary balance and achieve a structural deficit of no more than β 0. 5 % of gdp. 13 in addition, member states are henceforth required to reduce the excess of their debt over 60 % of gdp by an average of 1 / 20th per annum. importantly, the fiscal compact requires that both budget rules must be implemented in national law, preferably in the constitution, that compliance is monitored by independent institutions and that an automatic correction mechanism is put in place to correct divergences from these rules. it is interesting to note in passing that many of these developments in the fiscal sphere β the introduction of numerical objectives for deficits and debt, written down in law, and with some involvement of independent monitors β that limit governments β ability to run large deficits are similar to changes introduced to monetary policy frameworks in recent years. thus, by now it is common for the legal acts that govern central banks to indicate that price stability is the overriding objective for monetary policy and to define it in numerical terms. moreover, through the adoption of high levels of transparency, central banks have made it easier for outside observers to monitor their conduct of policy. 4. 2 regulations concerning the ecb the treaty on the functioning of the european union contains two articles intended to promote monetary stability. this is achieved by removing any risk of pressure from national governments to force central banks to finance fiscal imbalances. specifically, article 123 prohibits β overdraft facilities or any other type of credit facility with the european central bank or with the central banks of the member states β¦ in favour of β¦ central governments, regional, local or other public authorities β and β the purchase directly from them by the this ceiling excludes one - off measures and cyclical effects. bis central bankers β speeches european central bank or national central banks of debt instruments. β furthermore, article 124 prohibits any measure, not based on prudential considerations, that grants central governments, regional, local or other public authorities privileged access to financial institutions. however, these articles do not prohibit the ecb from operating in financial markets by buying or selling marketable instruments, including government debt. 14 that is of course natural. in pursuing their statutory objectives central banks operate in a range of financial markets, particularly | fiscal adjustments in oecd countries, β nber working paper 5214. abbas, s. m. a, n. belhocine, a. el - ganainy and m. horton ( 2011 ), β historical patterns of public debt β evidence from a new database, β imf economic review, 59 ( 4 ) 717 β 742. blochliger, h. d. h. song and d. sutherland ( 2012 ) β fiscal consolidation part iv : case studies of large fiscal consolidation episodes, β oecd economic department working paper no. 434. cecchetti, s. m. monanty and f. zampoli ( 2011 ), β the real effects of debt, β bis working paper no. 352. checherita, c. and p. rother ( 2010 ), β the impact of high and growing government debt on economic growth : an empirical investigation for the euro area, β ecb working paper no. 1237. catao, l. and m. e. toronnes ( 2003 ), β fiscal deficits and inflation, β imf working paper wp / 03 / 65. dornbusch, r. and s. fischer ( 1986 ), β stopping hyperinflation past and present, β weltwirtschaftliches archiv, january, 1 β 47. giavazzi, f. and m. pagano ( 1990 ), β can severe fiscal consolidations be expansionary? tales of two small european countries, β nber macro annual, vol 5. kumar, m. s. and j. woo ( 2010 ), β public debt and growth, β imf working paper 10 / 174. mckinnon, r. ( 1973 ), β money and capital in economic development, β washington dc, brookings institute. reinhart, c. and k. rogoff ( 2010 ), β debt and growth revisited, β vox eu. reinhart, c. v. reinhart and k. rogoff ( 2012 ), β debt overhangs ; past and present, β nber working paper no. 18015. reinhart, c. m. and m. b. sbrancia ( 2011 ), β the liquidation of government debt, β nber working paper 16893. sargent, t. j. ( 1982 ), β the ends of four big inflations, β in inflation ; causes and effects, | 1 |
s the least efficient. german banks have a cost - income ratio of 73 %, which is much higher than that of the rest of the euro area. and while other countries have cut the number of banks by almost a quarter following the financial and economic crisis in order to reduce overcapacity, the corresponding figure for germany was only 10 %. 4 traditional business models under review the current low interest rate environment has not just revealed weaknesses among banks, it has also called into question the traditional business models of insurance companies and pension funds. 3 / 5 bis central bankers'speeches for many insurers in germany, guaranteed returns have become an issue. in the current market environment, it is becoming increasingly difficult to achieve the guaranteed interest rates of 4 % that were commonplace in contracts concluded in the mid - 1990s. the german ministry of finance has reduced the guaranteed interest rate for the current year from 1. 25 % to 0. 9 %. many insurance companies are now increasingly turning to unit - linked products. in addition, new regulatory requirements are increasing the demand for safe assets. german government bonds alone are yielding negative returns on maturities of up to seven years. against this backdrop, discussions are under way as to what can be done to counter this shortage of safe assets. one suggestion is that market participants create a new kind of safe asset, known as european safe bonds ( esbies ) 5, consisting of the senior tranche of a portfolio of existing bonds from different euro area countries. the advantage here would be that no joint liability would exist, as is the case in other proposals of this kind. from a purely academic perspective, this is certainly an interesting idea. but it would be difficult to counter the public β s assumption that this would be a surreptitious mutualisation of sovereign debt. the political desire to introduce esbies in the near future is likely to be very limited. i therefore don β t see this proposal as being part of the operational agenda but rather as a subject for long - term study. outlook let me conclude. weakening global growth and a generally lower natural interest rate are demanding very low, sometimes negative, market rates so that investment and consumption become more attractive. in the medium term we are thereby aiming to get inflation back to a level in line with our mandate to ensure price stability of below, but close to, 2 %. without our measures, the euro area economy would probably have slipped back into recession, with the risk of fully fledged deflation. we had | natural interest rate, i. e. the real rate of interest in which savings and investments are in equilibrium in an economy operating at its potential, where there is neither upward nor downward pressure on inflation. in the current environment, the ecb has brought the market rate below the level of the natural rate. the key rate since march last year has been at zero and the rate on the deposit facility at β 0. 4 %. had we not done this, constant nominal interest rates amid falling inflation rates would have led to higher real interest rates and undermined anaemic growth even more. this would have significantly increased the risk of deflation. this is just as harmful as accelerating inflation. as walter eucken said : β deflation distorts the price framework just as much. β 1 1 / 5 bis central bankers'speeches thus, price stability for the ecb means that we have to protect european citizens not only from inflation rates that are too high, but also from a deflationary spiral. this is reflected in our quantitative definition of price stability : an inflation rate of below, but close to, 2 % in the medium term. we therefore acted in order to abide by this symmetrical mandate on price stability. but we are aware that we cannot lower our interest rates to an unlimited extent. 2 as from a certain level, it becomes more attractive to keep cash β despite the associated costs β than to pay negative interest rates. and even if this point has not yet been reached, we are bearing in mind that further rate cuts into negative territory may have non - linear effects. the reactions of people in extremis cannot be anticipated. but we can also influence market interest rates in other ways. thus, for example, with our asset purchases we have pushed the yield curve down. and by offering targeted longer - term refinancing on favourable terms which reward additional lending, we have made it possible for banks to cut their interest rates, a move which has led to increased lending. all these measures in recent years have contributed to the economic recovery in the euro area. thus, both the demand for, and supply of, credit is rising. in the real economy, too, positive surprises have predominated recently. the growth rate in the fourth quarter of last year rose to 0. 5 %. in the euro area, the seasonally adjusted unemployment rate fell to 9. 6 % in december. in november it was 0. 1 percentage point higher and in december of the | 1 |
movements. it is, however, an entirely different matter to go beyond today β s problem - oriented cooperation in international bodies, as is being sought in proposals to establish a more formalised exchange rate regime based, for instance, on target zones. these suggestions have remained dry runs, and i assume they will probably remain so in the future. under the present conditions of deregulated financial markets and free movement of capital, there are only three ways such systems can work to begin with - either : β there is already a strong convergence of the real economy and of anti - inflationary policy between the partners, causing parities to naturally remain in existence β on their own β, so to speak. this convergence has rarely existed within the triad over a relatively lengthy period of time. at the moment, the structural differences between america, japan and continental europe are becoming more evident. β or, the countries are otherwise willing to change parities quickly, as unobtrusively as possible and in a forward - looking manner. however, experience has shown that such systems tend to be β too little, too late β. β a third possibility is to subordinate other internal economic policy targets almost completely to the exchange rate. but this probably only makes sense if carried out by a small country with strong external trade links and if it is desired that external trade links exercise a disciplinary effect on policy. however, none of these considerations make a stronger exchange rate management in the tripolar world realistic today. ii managing a tripolar world : there is still another facet to this topic. it is also about the monetary policy of those countries which are not part of one of the three poles but which have to define their relationship to these three poles somehow. as regards the european countries, some of them are reassessing their positions towards the monetary union or are making considerable progress in the convergence process. a case in point is greece, which was recently able to carry out a realignment rather unobtrusively. at the eu summit in helsinki, important preliminary decisions on the enlargement of the eu were taken. i assume that those countries will use the euro as a beacon to guide their monetary policy over the long term. upon accession to the eu they will automatically become β member states with a derogation β, the maastricht treaty β s term for those eu countries not yet participating in monetary union. the emerging economies, too, must define their position in the currency triad. how do they intend to fix | 30 / 09 / 2020 introductory panel statement | deutsche bundesbank introductory panel statement speech at the institute for monetary and financial stability β ecb and its watchers xxi conference β 30. 09. 2020 | frankfurt am main | jens weidmann 1 introduction 2 christian noyer 3 jordi gali 4 helmut siekmann 1 introduction chere christine, good morning ladies and gentlemen, i am delighted to moderate the ο¬rst debate today. dear volker, thank you very much for your invitation and for organising this conference as a hybrid event. in times like these, we are becoming more and more experienced in communicating virtually. nevertheless, there is always a lingering sense of uncertainty about whether the technical set - up will work properly. before our single monetary policy started, there may also have been doubts about whether the eurosystem could fulο¬l its mandate to maintain price stability. looking back now β on more than 21 years of monetary policy and also β ecb watching β β the eurosystem has delivered on the promise made to the people of europe to keep prices stable. this has been a truly remarkable success. one key element in this has been the clarity of the mandate itself. in late 1998, the ecb β s ο¬rst president, wim duisenberg, outlined the strategy for the single monetary policy in a speech. he started from his conviction that, by maintaining price stability, β monetary policy makes the https : / / www. bundesbank. de / en / press / speeches / introductory - panel - statement - 846034 1 / 5 30 / 09 / 2020 introductory panel statement | deutsche bundesbank greatest possible contribution towards raising the standard of living of europe β s citizens and improving growth and employment prospects β. [ 1 ] this fundamental tenet also inspired the european treaties, which enshrine price stability as our primary objective. so to answer the question raised in the title of our session : the mandate needs no modiο¬cation when viewed from this perspective. at any rate, the eurosystem takes its mandate as a given. and our actions will continue to be geared towards achieving our overriding objective of price stability. however, the treaties are silent on how to deο¬ne or measure price stability. nor do they specify a reaction function for monetary policy or a hierarchy of instruments needed to ensure price stability. nor do they tell us how to communicate with the public. choices like these constitute the monetary policy strategy. given the profound changes | 0.5 |
mario draghi : ecb press conference β introductory statement introductory statement by mr mario draghi, president of the european central bank, and mr vitor constancio, vice - president of the european central bank, frankfurt am main, 8 september 2016. * * * ladies and gentlemen, the vice - president and i are very pleased to welcome you to our press conference. we will now report on the outcome of today β s meeting of the governing council, which was also attended by the commission vice - president, mr dombrovskis. based on our regular economic and monetary analyses, we decided to keep the key ecb interest rates unchanged. we continue to expect them to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases. regarding non - standard monetary policy measures, we confirm that the monthly asset purchases of β¬80 billion are intended to run until the end of march 2017, or beyond, if necessary, and in any case until the governing council sees a sustained adjustment in the path of inflation consistent with its inflation aim. today, we assessed the economic and monetary data which had become available since our last meeting and discussed the new ecb staff macroeconomic projections. overall, while the available evidence so far suggests resilience of the euro area economy to the continuing global economic and political uncertainty, our baseline scenario remains subject to downside risks. our comprehensive policy measures continue to ensure supportive financing conditions and underpin the momentum of the euro area economic recovery. as a result, we continue to expect real gdp to grow at a moderate but steady pace and euro area inflation to rise gradually over the coming months, in line with the path already implied in our june 2016 staff projections. the governing council will continue to monitor economic and financial market developments very closely. we will preserve the very substantial amount of monetary support that is embedded in our staff projections and that is necessary to secure a return of inflation to levels below, but close to, 2 % over the medium term. if warranted, we will act by using all the instruments available within our mandate. meanwhile, the governing council tasked the relevant committees to evaluate the options that ensure a smooth implementation of our purchase programme. let me now explain our assessment in greater detail, starting with the economic analysis. euro area real gdp increased by 0. 3 %, quarter on quarter, in the second quarter of 2016, after 0. 5 % in the first quarter. incoming data point to ongoing growth | mario draghi : ecb press conference β introductory statement introductory statement by mr mario draghi, president of the european central bank, and mr vitor constancio, vice - president of the european central bank, frankfurt am main, 2 august 2012. * * * ladies and gentlemen, the vice - president and i are very pleased to welcome you to our press conference. we will now report on the outcome of today β s meeting of the governing council, which was also attended by the commission vice - president, mr rehn. based on our regular economic and monetary analyses, we decided to keep the key ecb interest rates unchanged, following the decrease of 25 basis points in july. as we said a month ago, inflation should decline further in the course of 2012 and be below 2 % again in 2013. consistent with this picture, the underlying pace of monetary expansion remains subdued. inflation expectations for the euro area economy continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2 % over the medium term. at the same time, economic growth in the euro area remains weak, with the ongoing tensions in financial markets and heightened uncertainty weighing on confidence and sentiment. a further intensification of financial market tensions has the potential to affect the balance of risks for both growth and inflation on the downside. the governing council extensively discussed the policy options to address the severe malfunctioning in the price formation process in the bond markets of euro area countries. exceptionally high risk premia are observed in government bond prices in several countries and financial fragmentation hinders the effective working of monetary policy. risk premia that are related to fears of the reversibility of the euro are unacceptable, and they need to be addressed in a fundamental manner. the euro is irreversible. in order to create the fundamental conditions for such risk premia to disappear, policymakers in the euro area need to push ahead with fiscal consolidation, structural reform and european institution - building with great determination. as implementation takes time and financial markets often only adjust once success becomes clearly visible, governments must stand ready to activate the efsf / esm in the bond market when exceptional financial market circumstances and risks to financial stability exist β with strict and effective conditionality in line with the established guidelines. the adherence of governments to their commitments and the fulfilment by the efsf / esm of their role are necessary conditions. the governing council, within its mandate to maintain price stability | 0.5 |
: occupation, family, and gender, β journal of economic perspectives 35 ( summer 2021 ) : 3 β 24, https : / / www. aeaweb. org / articles? id = 10. 1257 / jep. 35. 3. 3. this is one reason why female unemployment rose dramatically in comparison to male unemployment during the spring of 2020. women β s labor participation declined as the pandemic affected their ability to participate in the workforce. the lockdowns and layoffs in response to covid disrupted daycare centers, schools, and other organized childcare, which continue in some areas even today. traditional family supports, like extended family and grandparents, were also limited due to concerns about the virus and social distancing. another factor was that caregiving responsibilities increased significantly during the pandemic, especially for women, including those who were participating in the workforce. balancing work and family obligations has long been the reality for women. studies have shown that women spend about twice as much time caring for and helping with children than men, and there is a significant disparity in many families where both men and women work. even before the pandemic, most working mothers said they came home to a β second shift β of work. the pandemic served to amplify those family responsibilities, and i don β t think it is surprising that as a result women dropped out of the workforce at a higher rate than explained by industry - mix and labor dynamics. even more striking, the data show that while labor force exits increased for all women, they increased by more among women living with children under the age of six. 4 we saw more exits by single mothers and mothers with lower earnings at the beginning of the pandemic, perhaps because they were less able to find alternative childcare arrangements. even now, as childcare centers have reopened, worker shortages and related cost increases are limiting the number of children who can be cared for at each facility. higher childcare costs impact single katherine lim and mike zabek, β women's labor force exits during covid - 19 : differences by motherhood, race, and ethnicity, β finance and economics discussion series 2021 - 067 ( washington : washington : board of governors of the federal reserve system, 2021 ). https : / / doi. org / 10. 17016 / feds. 2021. 067. and lower - income mothers disproportionately. therefore, i see a risk that | be that users forget about the risks. people often complain about tedious authentication procedures, about having to memorise passwords and pins, about having to generate transaction - specific codes, etc. they would rather payments were quicker and easier. but there is a trade - off between convenience and risk. and of course, people also complain if, as a result of this risk, they are subject to fraud or breaches of data confidentiality. in order to maintain confidence in payments and trust in the currency, the eurosystem has to make sure that the right balance is struck between convenience and security. the digitalisation of retail payments services means that security requirements need to be adapted and enhanced. however, innovation brought by digitalisation should not be seen as the enemy of security. on the contrary, it can actually enhance security, as has been demonstrated by the introduction of the technical standard emv 4 for cards. in the design of security features, authorities and payment service providers are well - advised to bear in mind the users β need for convenience and the proportionality of the security requirements. if the security features related to a payment service are perceived as being too cumbersome, users will seek ways to circumvent them β or reject the service. conclusion to conclude, allow me to summarise the three main messages that i would like you to take home from my speech today. first, i hope that i managed to explain that for the eurosystem, the main focus as regards retail payments innovation is on pan - european retail payment solutions in euro. we should take advantage of the harmonisation and integration already achieved with the sepa project in working towards innovative payment solutions, be they instant payments, mobile payments or other payment - related services. this does not mean that we should ignore global developments or prevent local or regional initiatives from emerging. i would like to emphasise, however, that we should avoid the development of non - interoperable silo solutions. rather, the harmonisation of standards and business rules, pan - european reachability, interoperability and a harmonised legal framework are the foundations on which innovative payment solutions should be based. second, i would like to underline that the market for innovative retail payment services needs to be based on a level playing field. hurdles preventing new service providers from entering the market must be avoided. the eurosystem welcomes innovation and new market faces. at the same time, all entities providing payment services to end users should be licensed | 0 |
companies face an increasing need for financing. this scenario calls for taking the initiative and introducing comprehensive approaches to bolster this segment β s resilience and to incentivize it to extend more financing, which would guarantee sufficient cash flow across economic sectors and guarantee recovery through a comprehensive and integrated approach. in light of all of the above, the cbk had since march 2020 started to use its policy instruments to strengthen the sector β s resilience and to enable it to play a bigger role throughout this crisis ; initiating macro - prudential measures and reducing regulatory requirements, thus expanding banks β lending capacity to the range of kd 8 - 9 billion. it also dropped the interest rate to a historical low of 1. 5 %, which reduces the cost of financing for entities granted such support and stimulates economic growth. as a result of these steps, the banking sector now has high liquidity levels and maneuvering capacity that enable it to fulfill its duty as financial intermediary. central bank of kuwait - public ΨΉΨ§Ω
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Ψ±ΩΨ²Ω the role of the government : the role of the government takes on an even greater importance amid the current conditions. the lockdown measures caused an unprecedented shock to both supply and demand, this coincided with a sharp decline in oil prices that brought down government revenues. the committee was therefore keen to provide maximum support to guarantee that the economy keeps running, while simultaneously reducing cost to public funds to a minimum, through the proper allocation of resources and reliance on measures that have the biggest impact with the least cost possible. among these measures was drawing up a government financing support and guarantee scheme, which was presented to the council of ministers by the committee on 5 june 2020. government financing support and guarantee scheme : the committee forwarded a proposed government financing support and guarantee scheme to the council of ministers to decide and take appropriate action in this respect. the proposal was drawn up after consideration and examination of 35 examples of such schemes from around the world, and examining the stimulus packages that are being implemented worldwide which come to the value of usd 11 trillion, almost 15 % of gross global product so far. the result of the examination was that supporting concessional financing and guarantees accounted for 40 % of total global stimulus packages. three main elements were found to be essential for the success of any financing support system in meeting its objective effectively and in timely manner. first : banks must possess and have access to sufficient cash flow and | improve their operational resilience by strengthening their ability to respond to and recover from cyber - attacks. at a minimum, mitigating cyber threats would require effective collaboration between regulators and the industry, adequate contingency and central bank of kuwait - public ΨΉΨ§Ω
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Ψ±ΩΨ²Ω recovery plans by banks and sound security practices by all participants of financial market infrastructure. in kuwait, we are in the process of putting in place an advanced platform for effective information sharing about cyber threats that can later be used at the regional level. supervisors in this regard can leverage cpmi - iosco guidance that calls for β resilience by design β, encouraging to incorporate sound security features in the system right from its earliest stage of conceptualization. this approach will help address the potential cyber compromises that could stem from banks β dependence on legacy technologies. to help strengthen cyber resilience of financial institutions, financial stability board ( fsb ) is currently working on β identifying practices to help financial institutions recover from and respond to cyber incidents β. next year, they are planning to release a toolkit of effective practices that banking industry can use in improving operational resilience against cyber threats. coping with climate change the second emerging issue warranting our close attention is climate change. according to un estimates, around 60 million people were affected by extreme weather events in 2018 alone. and within this year, we have witnessed the damaging impact of wildfire in california, hurricane in bahamas, cyclone in bangladesh and typhoon in japan. thankfully, the issue of climate change, after languishing on margins for years, has finally caught policy makers β attention. as victor hugo once said, β nothing is as powerful as an idea whose time has come β. it seems that time has finally come for the climate change to receive the attention it deserves. climate risks stem both from climate shocks like floods, hurricanes and other severe weather events as well as from trends such as warming temperatures, melting glaciers and rising sea levels. broadly speaking, these weather developments pose two types of risks to the financial sector ; physical and transition. increasing severity and frequency of extreme weather events could pose serious physical risks by damaging the assets that constitute banks β exposures. additionally, natural disasters can damage public infrastructure and destroy livelihood, hurting economic activity in general. on the other hand, transition risk stems from the economic impact of a shift to a lowcarbon economy. factors like development of environment - friendly technologies, | 0.5 |
on returning inflation to our 2 percent objective. meeting our dual mandate also depends on maintaining financial stability. the fed β s commitment to both our dual mandate and financial stability encourages the international community to hold and use dollars. the wide use of the dollar globally can also pose financial stability challenges that can materially affect households, businesses, and markets. for that reason, the federal reserve has played a key role in promoting financial stability and supporting the use of dollars internationally through our liquidity facilities. the central bank liquidity swap lines provide foreign central banks with the capacity to deliver u. s. dollar funding to institutions in their jurisdictions. and the foreign and international monetary authorities ( fima ) repo facility allows approved fima account holders the option to temporarily exchange their u. s. treasury securities held by the federal reserve for u. s. dollars. these facilities serve as liquidity backstops so that holders of dollar assets and participants in dollar funding markets can be confident that strains will be eased when these markets come under stress. that assurance, in turn, mitigates the effect of such strains on the flow of credit to u. s. households and businesses. both facilities enhance the standing of the dollar as the dominant global currency. the swap lines were extensively used during the global financial crisis, the 2011 euro - area debt crisis, and the financial turmoil at the outset of the covid - 19 pandemic in 2020. the paper on central bank swap lines presented yesterday by gerardo ferrara, philippe mueller, ganesh viswanath - natraj, and junxuan wang provides novel micro - - 3level evidence on the usefulness of swap lines in providing cross - border liquidity to support the real economy. looking forward, rapid changes are taking place in the global monetary system that may affect the international role of the dollar in the future. most major economies already have or are in the process of developing instant, 24 / 7 payments. our own fednow service will be coming online in 2023. and in light of the tremendous growth in crypto - assets and stablecoins, the federal reserve is examining whether a u. s. central bank digital currency ( cbdc ) would improve on an already safe and efficient domestic payments system. as the fed β s white paper on this topic notes, a u. s. cbdc could also potentially help maintain the dollar β s international standing. 2 as we consider feedback from the paper, we will be thinking not just about the current | for release on delivery 8 : 45 a. m. edt june 17, 2022 welcoming remarks remarks by jerome h. powell chair board of governors of the federal reserve system at β international roles of the u. s. dollar, β a research conference sponsored by the federal reserve board washington, dc june 17, 2022 good morning, and welcome to the inaugural conference on the international roles of the u. s. dollar. thank you all for participating and for lending your expertise on this important topic. this conference marks the first use of our new martin conference center, which i hope you enjoy. the international financial and monetary system that emerged after world war ii has been defined by the centrality of the dollar. it is the world β s reserve currency and the most widely used for payments and investments. as outlined in recent work by board staff, this global preeminence has been supported by the depth and liquidity of u. s. financial markets, the size and strength of the u. s. economy, its stability and openness to trade and capital flows, and international trust in u. s. institutions and the rule of law. 1 professor barry eichengreen will expand on some of these themes later this morning. the dollar β s international role holds multiple benefits. for the united states, it lowers transaction fees and borrowing costs for u. s. households, businesses, and the government. its ubiquity helps contain uncertainty and, relatedly, the cost of hedging for domestic households and businesses. for foreign economies, the wide use of the dollar allows borrowers to have access to a broad pool of lenders and investors, which reduces their funding and transaction costs. the benefits of the dollar as the dominant reserve currency have generated an extensive academic literature. yesterday β s paper on the treasury market by alexandra tabova and frank warnock extends that work in meaningful ways. see carol bertaut, bastian von beschwitz, and stephanie curcuru ( 2021 ), β the international role of the u. s. dollar, β feds note ( washington : board of governors of the federal reserve system, october 6 ), https : / / doi. org / 10. 17016 / 2380 - 7172. 2998. - 2the federal reserve β s strong commitment to our price stability mandate contributes to the widespread confidence in the dollar as a store of value. to that end, my colleagues and i are acutely focused | 1 |
2009 ), β new evidence on the interest rate effects of budget deficits and debt, β journal of the european economic association, vol. 7 ( june ), pp. 858 β 85 ; and joseph w. gruber and steven b. kamin ( 2012 ), β fiscal positions and government bond yields in oecd countries, β journal of money, credit and banking, vol. 44 ( december ), pp. 1563 β 87. bis central bankers β speeches borrow in euros. the united states borrows in its own currency β the world β s primary reserve currency. that difference is crucial for investors, along with the fact that the united states economy remains the world β s largest and most productive. the united kingdom and japan are also high - debt countries that borrow in their own currencies ; neither shows any detectable rate increase, let alone a nonlinear one. these countries present a serious problem for the authors β case. of course, the united states is not exempt from concerns about the potential long - term effects of an unsustainable fiscal path. there is almost certainly a level of debt at which the united states would be at risk of an interest rate spike. however, we should expect that level to be substantially above one identified based on the experience of smaller euro - zone nations. the argument also has a serious timing problem. the federal reserve β s balance sheet likely will be normalized by late this decade, before the federal debt - to - gdp ratio even increases materially from today β s level. under the reasonable projection mentioned above, the debt - to - gdp ratio will remain roughly stable until 2020 before rising significantly in the next decade. 8 that β s not a favorable longer - term forecast, all the more so because it is importantly the result of demographic changes that have been expected for decades. but the forecast doesn β t support the authors β claim that fears of fiscal dominance could materialize in the united states within the next five to seven years, during the period when the fed is normalizing its balance sheet. no current market signal suggests that the united states is near the point of losing the market β s confidence. in my view, nothing in the congressional budget office debt forecasts or the authors β empirical findings provides grounds for such an event during this decade. the market has every reason to believe β and apparently still does believe β that the united states will continue the difficult task of fiscal consolidation until the job is done. terribly difficult fiscal adjustments | janet l yellen : semiannual monetary policy report to the congress testimony by ms janet l yellen, chair of the board of governors of the federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington dc, 24 february 2015. * * * chairman shelby, ranking member brown, and members of the committee, i am pleased to present the federal reserve β s semiannual monetary policy report to the congress. in my remarks today, i will discuss the current economic situation and outlook before turning to monetary policy. current economic situation and outlook since my appearance before this committee last july, the employment situation in the united states has been improving along many dimensions. the unemployment rate now stands at 5. 7 percent, down from just over 6 percent last summer and from 10 percent at its peak in late 2009. the average pace of monthly job gains picked up from about 240, 000 per month during the first half of last year to 280, 000 per month during the second half, and employment rose 260, 000 in january. in addition, long - term unemployment has declined substantially, fewer workers are reporting that they can find only part - time work when they would prefer full - time employment, and the pace of quits β often regarded as a barometer of worker confidence in labor market opportunities β has recovered nearly to its pre - recession level. however, the labor force participation rate is lower than most estimates of its trend, and wage growth remains sluggish, suggesting that some cyclical weakness persists. in short, considerable progress has been achieved in the recovery of the labor market, though room for further improvement remains. at the same time that the labor market situation has improved, domestic spending and production have been increasing at a solid rate. real gross domestic product ( gdp ) is now estimated to have increased at a 3 β 3 / 4 percent annual rate during the second half of last year. while gdp growth is not anticipated to be sustained at that pace, it is expected to be strong enough to result in a further gradual decline in the unemployment rate. consumer spending has been lifted by the improvement in the labor market as well as by the increase in household purchasing power resulting from the sharp drop in oil prices. however, housing construction continues to lag ; activity remains well below levels we judge could be supported in the longer run by population growth and the likely rate of household formation. despite the overall improvement in the u. s. economy and the u. | 0.5 |
##ening demand since we began the ecb's rate hiking cycle in july 2022. we raised interest rates consistently to avoid sudden shifts in expected inflation and to constrain the propagation of the inflation shock through price - wage dynamics. subsequently, headline inflation in the euro area is now at 2. 4 % and projected to reach our target next year. underlying inflation, neutralised from energy and food prices, is still slightly higher at 2. 7 %, but it is likewise projected to reach our target next year. thanks to this disinflationary process, inflation is converging to our 2 % target in a sustained way, and the time is thus ripe in june to ease the monetary policy stance and start cutting rates. this obviously assumes that the disinflationary trend will continue and there will be no further setbacks in the geopolitical situation and energy prices. going forward, in the ecb governing council we will continue to follow a datadependent and meeting - by - meeting approach when determining the pertinent policy stance. we will set our rates based on our analysis of the inflation outlook, the dynamics of underlying inflation and the strength of monetary transmission. and we are not pre - committing to any rate path. with declining inflation and delayed economic growth, we are continuously assessing what our policy stance in this context should be. without prejudging our primary objective of price stability, we also need to avoid a stance that unduly delays the closing of the negative output gap. economic activity in the euro area, 2007 - 2026 ( slide 5 ) before concluding, let me next say a few words about exceptional uncertainty and how to deal with it in monetary policy decision - making. first, when projections include unusual risks, we should not rely solely on a baseline projection and fan charts around it, but also consider alternative scenarios, as stated by ben bernanke in his recent review of the bank of england's economic forecasting. our experience in the eurosystem demonstrates that scenarios are useful in analysing and communicating risks around the baseline during the times of exceptional shocks. second, it is important to use a wide variety of economic indicators. for example, using a range of measures for underlying inflation and wages has been very useful in assessing how broad - based current inflation is and how durable the disinflationary process is ( ecb ( 2021 ) ). third, the effect of uncertainty on policymaking should not be limited only | to our interpretation of economic data. one way to deal with uncertainty is to choose an appropriate degree of gradualism in policy decisions. according to the so - called " brainard principle " ( introduced in brainard 1967 ), increased uncertainty would warrant a more gradual response. 3 / 5 bis - central bankers'speeches there is a recent case in point on applying this principle. noting the accelerating inflation in the winter of 2021 - 2022, many of us policymakers would have been ready to raise the rates in march 2022. however, russia's illegal, brutal invasion to ukraine on 24 february 2022 both turned us back to the era of raw geopolitics and created a massive cloud of uncertainty over europe's economy. at least my initial assumption then was that it would probably have serious stagflationary consequences β i. e. both hitting growth and generating inflation, " back to the 70s ". in that context, it made sense to take a timeout and once the clouds had somewhat cleared choose the policy stance. β this context should be taken into account in all post - mortems of the recent polycrises years. more recently, however, some have argued for a strong policy response when there is a lot of uncertainty, especially about future inflation. 3 this can be seen as a risk management approach to policymaking, where we aim at guarding against the worst outcomes. for instance, during the recent inflation cycle, when inflation started to accelerate, it was important to unwind the accommodative monetary policy stance fast to guard against the danger of de - anchoring of inflation expectations. this guided us in the ecb governing council to decide on consistent rate hikes since july 2022. what can we conclude from the last two examples? judgment matters. in other words, while advances in economics have enabled us to gain a much better understanding of the macroeconomy and price dynamics, human judgment is still necessary especially in the critical moments when elevated uncertainty dominates and several options are open. in science we trust, but the art of monetary policy cannot still be replaced by artificial intelligence β at least in the foreseeable future! to summarize, uncertainties in price dynamics have indeed challenged our policymaking. the silver lining is that we have gained a lot of understanding about the appropriate policy responses in these circumstances. for me, this has above all highlighted the crucial role of inflation expectations in the making of monetary policy, as well as the | 1 |
or to stand in quiet contemplation in front of a caravaggio painting at the stadel. 4. turning to the ecb cultural days : how did the idea come about and what is the connection between culture and central banking? i have always felt that there is a profound link between the european union and its cultural identity. i trust this belief is widely shared by ecb staff and our executive board, governing council and general council. when i became president of the ecb, i was very happy to see that this initiative had already been launched by my predecessor, wim duisenberg. i was determined to give it renewed impetus. the event can be seen from three different angles. from the perspective of the ecb β s staff and the 27 national central banks of the european system of central banks, it is a way of celebrating all the national cultures and being proud of them. for frankfurt and the rhinemain region as a whole, it is a way of appealing to a large, cosmopolitan audience. for europe as a whole, it is an occasion to celebrate cultural unity and diversity under the auspices of one of its major institutions, the ecb. i should mention that the ecb and the national central bank co - organising the cultural days β this year banca nationala a romaniei β benefit from the remarkable support of the city of frankfurt and other active sponsors, whom i would like to thank for their contributions. | area, monetary policy normalisation is taking place in challenging economic circumstances. risk - free interest rates are being raised globally in an environment characterised by a series of large adverse supply shocks that weaken growth and investment and that may weigh on the productive capacity of the euro area economy. risks of a destabilisation of inflation expectations substantially deteriorate the trade - off facing monetary policy. over recent days, concerns about the extent of monetary policy tightening needed to restore price stability have grown stronger. the increase in sovereign risk premia has accelerated, liquidity conditions have become more challenging, and daily changes in bond yields have increased ( slide 10 ). the spread of the euro area gdp - weighted yield over the equivalent overnight indexed swap ( ois ) rate, which is a useful summary measure to assess the policy transmission, has also moved up, and sovereign yields stand notably above their 2020 lows ( slide 11 ). as a result, some borrowers have seen significantly larger changes in financing conditions than others since the start of the year. such changes in financing conditions may constitute an impairment in the transmission of monetary policy that requires close monitoring. what is important in this environment is that investors have a clear understanding that monetary policy can and should respond to a disorderly repricing of risk premia that impairs the transmission of monetary policy and poses a threat to price stability. in december of last year, we made clear that we would not tolerate price adjustments that would undermine the transmission of our monetary policy. in our monetary policy statement, we declared that, within our mandate, under stressed conditions, flexibility will remain an element of monetary policy whenever threats to monetary policy transmission jeopardise the attainment of price stability. this commitment can be put into practice within a very short period of time if we conclude that policy transmission is at risk. in that case, reinvestments from maturing securities under the pepp can be adjusted flexibly across time, asset classes and jurisdictions. while the flexible allocation of pepp reinvestments is one way to address fragmentation, our commitment is stronger than any specific instrument. our commitment to the euro is our antifragmentation tool. this commitment has no limits. and our track record of stepping in when needed backs up this commitment. how we ultimately react to risks of fragmentation will firmly depend on the situation we are facing. we have shown in the past that we can adapt flexibly and quickly to the specific circumstances. while the omt required strict conditional | 0.5 |
be achieved in an orderly way only through an agreement between creditors and debtors. other forms of constrained action, on the creditor or on the debtor side, are bound to lead to litigations and produce disorderly effects on financial markets. in this respect, the adoption of collective action clauses by the euro area member states would make it easier for creditors and debtors to agree on a fair burdensharing. this was the conclusion of the discussions in the context of the imf and can be further explored at european level. another way to prevent market participants from being bailed out is to use the funds made available from the official support mechanism to purchase debt on the secondary market, at the prevailing market discount, rather than reimbursing the maturing debt at the nominal value. in this way holders of debt instruments willing to sell would have to accept the market haircut. this possibility is envisaged in the ecb β s proposals. to conclude, the european union is a community of law, subscribed to by the member states in which pacta sunt servanda. this refers to all the pacts, starting from fiscal discipline in the member states to the commitment of the member states to pay their debts. in my view, we have to be very careful in considering exemptions, such as providing the possibility for countries to unilaterally modifying the value of their debt contracts. the euro, and its underlying institutional construction, is about respect for the law. if any changes are to be made, they should be to strengthen these principles rather than to provide exemptions β dangerous exemptions which could undermine the stability and cohesion of the whole union. thank you for your attention. chart 1 : tensions in euro area selected intra - euro area spreads against germany ( 10y ) source : bloomberg chart 2 : tensions in euro area selected government credit default swaps ( 5y ) source : bloomberg chart 3 : dysfunction in the bond markets daily change in bond prices ; in percent source : bloomberg. note : on 10 may, change in bond prices rose to + 35 % for greece and + 14 % for portugal. chart 4 : credit risk of eu banking system source : bloomberg | and monetary union. in addition, growth should not be pursued at all costs, and certainly not on the back of unsustainable policies leading to debt overhang and macroeconomic imbalances, which inevitably lead to costly an expression borrowed from s. collignon ( 2004 ). vive la republique europeenne! editions de la martiniere. quoted by j. - c. trichet in β building europe, building institutions β, speech delivered on receiving the karlspreis in aachen, 2 june 2011. incidentally, an increasing body of literature emphasises the importance of economic β culture β on economic outcomes. see for instance s. butzer, c. jordan and l. stracca ( 2013 ). macroeconomic imbalances, a question of trust? ecb working paper series, no 1584 / august 2013. see also y. algan and p. cahuc ( 2007 ), la societe de defiance. comment le modele social francais s β autodetruit. editions rue d β ulm. bis central bankers β speeches adjustments in terms of activity, employment and social protection. at the same time, risktaking must be at the service of entrepreneurship, not of financial speculation. common values imply exemplary institutions. this is true in terms of ethics ; in this respect, eu institutions in general and the ecb in particular have enacted strict codes of conduct for their staff members and senior executives. this is also true in terms of offering equal opportunities and promoting diversity. in the words of jorge semprun, β europe cannot be based on the exclusion of diversity ; it must be built on the essential unity of diversity β. 16 the ecb has recently launched an initiative to promote gender diversity, including detailed targets at management level. these efforts would be significantly complemented if member states were also to promote this diversity in the ecb β s top decision - making body, the governing council β which consists solely of men. a second pillar should be european cohesion from the domestic perspective, cohesion entails having a common understanding of fairness and showing solidarity. cohesion also β and notably β means clarifying the rights and responsibilities between member countries so that it is based on mutual trust. it also implies that member states should submit to stronger fiscal, economic and financial governance. once trust is established, the social contract between member countries β solidity with solidarity β can be expressed in a variety of ways. one way is by having public | 0.5 |
may emerge in the consultation. we want to shorten the period of uncertainty as much as possible. accordingly, after making any appropriate refinements ( for example, in relation to first time buyers, and to the potential future use of private mortgage insurance as floated in the consultation paper ), we will move quickly to confirm the parameters of the standing regime. almost all of the discussions that i have participated in at this committee over the past few years have naturally focused on the banks, but of course this is only one element of the central bank β s mandate and it is worth reminding that almost 9 out of 10 staff of the central bank are actually engaged in numerous tasks other than the prudential supervision of banks. ( there are, of course, other aspects of banking oversight that staff deals with, such as the consumer protection and conduct of business aspects of bank regulation ). indeed, the microprudential banking supervisory decision making now largely passes under the control of the eu single supervisory mechanism ( ssm ), which came into operation on november 4. the ssm does not, however, mean less work for us, but rather more work, inasmuch as the procedures of the ssm require a further expansion of our bank supervisory staff as well as a reorganisation of their function. indeed, after three years during which staffing levels have not risen, the central bank now needs to increase staff numbers again, not just because of ssm, but also because of the additional complexity of new international regulations covering non - bank financial services ( which form the heart of the ifsc ), new rules on bank resolution and other new mandates. ( much of the costs here are recovered from the industry ; indeed all regulatory costs could be so recovered, instead of having the effect of eating into the central bank β s surplus income to be transferred to the exchequer ; and the central bank has suggested this to successive governments. ) having already absorbed a sizable increase in staffing during 2010 β 11, we are currently engaged in an extensive review of our internal organisation to ensure the conditions for steady improvements in the effectiveness of our work, which relates to essential matters which, especially when they work well, are not obviously visible to the general public. the review is examining a range of issues including internal structures, career paths and internal processes. i expect significant beneficial changes to both organisational structures and practices within the central bank as a result of the review. our effectiveness will be enhanced by our carefully designed and efficient headquarters building at | private notes which served as currency, and they often had a monopoly over such note issue. β 8 money is a symbol of stability and central banks play an important role in maintaining this stability. it may be obvious but it β s worth saying : the stability of money plays a critical role in the stability of society. the role of money ( as a store of value, a unit of account and a medium of exchange ) is also an important instrument in how we connect with each other, through trade, commerce, and our everyday interactions and hence in building social capital. in more recent history, the later wave of central banks were established at the turn of the 20th century and brought together the many instruments that people were using for currency and to provide financial stability. 9 while central banks at this time were constrained by the gold standard, they β learned to act as lenders of last resort in times of financial stress β when events like bad harvests, defaults by railroads, or wars precipitated a scramble for liquidity ( in which depositors ran to their banks and tried to convert their deposits into cash ). β 10 as we chart the history of central banks, we can see their critical role providing stability, both monetary and financial. i will discuss considerations beyond monetary and financial stability later in my remarks. one point i would like to reiterate now is who central banks serve. this is an important anchor when thinking about the role of central banks in building ( or rebuilding ) social capital. since becoming governor of the central bank of ireland, a guiding principle for me has been a phrase from the original legislation establishing the central bank of ireland in 1942. echoing the state β s constitution, it stated that the central bank β s β constant and predominant aim shall be the welfare of the people as a whole β. 11 but i will return to that later. institutions matter taking a step back, if social capital is ultimately about how we connect with one another, it β s clear that institutions matter for building social capital. and central banks, as important institutions of the state, play a critical role. in fact, i suggest that central banks are part of an institutional ecosystem that is interconnected, notwithstanding that the individual components may act independently. we do not act in a vacuum, and we should not confuse independence with isolation. douglass north defined institutions as the β humanly devised constraints that structure political, economic and social interactions β. 12 economists from adam smith, to ronald coase, man | 0.5 |
2021 money and banking conference online seminars macroeconomic conditions, growth and income distribution. underlying problems of the global economy and lessons from the pandemic november 03rd, 10th, 17th & 24th www. bcra. gob. ar closing remarks from the 2021 mbc miguel angel pesce governor, central bank of argentina it is time to close the 2021 edition of the bcra β s money and banking conference, which consisted in online seminars, as in 2020, because of the covid - 19 pandemic. the presentations delivered these past few weeks have been stimulating indeed. speakers have discussed the lessons learned from the pandemic, the problems that still exist, and the structural challenges in relation to the macroeconomy, distribution and growth from different viewpoints and based on various experiences. a significant part of the discussion focused on the relationship between fiscal policy, growth and inequality. speakers have highlighted how the exceptional conditions resulting from the covid - 19 pandemic have led to some kind of β change of eras β, evidencing both the inability of purely neoliberal policies to solve the crisis, and the need for structural reforms aiming at inclusive, sustainable growth. although the pandemic has globally pushed the tolerance threshold for fiscal deficit to new levels, following this agenda of economic recovery in the medium and long term without compromising fiscal sustainability poses some challenges. moreover, it has been stated that the increase in public spending, which has turned out to be effective amid the economic emergency, should be reconsidered in terms of composition in the long term. in this regard, the importance of channeling public spending into education, childcare, health and social assistance has been highlighted, given the long - term benefits for society as a whole, along with a potential, positive impact on productivity. we have also discussed the role of monetary and financial policies in sustainable economic development with social inclusion. emphasis has been placed on the negative effects of macroeconomic instability on inequality, and the manner in which the latter deepens recession. the challenges faced by central banks when implementing policies that may help to mitigate the impact of the economic cycle on inequality have also been underscored. as it reduces marginal propensity to consume, inequality weakens the channels of monetary policy transmission onto aggregate demand. at the same time, low - income sectors face increased restrictions in access to credit, even at lower interest rates. finally, trade - offs that may pose dilemmas in monetary policy have also | been highlighted. in particular, although the rate reduction may have a positive impact on aggregate demand and employment, and therefore, reduce inequality, it also leads to an increase in the price of assets which are generally held by the wealthiest sectors, thus increasing inequality. focusing on emerging countries, we have discussed the limits that a hierarchy of currencies at a global level imposes on central banks. the most evident sign of this are the functions of money that the dollar has served globally ( unit of account and denomination of debt, means of payment and store of value ). thus, the focus has been the asymmetrical internationalization of emerging countries β currencies. that is to say, global ( bank and non - bank ) investors have taken risks in those currencies, but their liabilities continue to be mostly denominated in dollars. this usually causes considerable exchange rate fluctuation regardless of the local macroeconomic conditions, and leads to harder structural limits imposed by a shortage of foreign currency, with negative consequences on long - term growth. smoothing cycles is necessary for macroeconomic stability and development, making a managed floating exchange rate system, along with macroprudential regulations, controls on capital flows and international cooperation mechanisms inevitable. from a rather microeconomic perspective, the role of local financial institutions β especially public development banks β has been underscored, as they may boost structural change through productive financing in sectors with high social return in the long term, and which usually access less - than - optimal financing through traditional commercial banks because of the uncertainty lying behind this type of investments. the challenges inherent to the management of these public institutions have been analyzed, as their goal is other than maximizing profit. however, they may not overlook the impact of their measures on net worth, and must achieve some level of profitability to reinvest their earnings. another topic discussed was the difficulty in laying down appropriate regulatory frameworks for this type of institutions to account for the natural bias in terms of risk β because of long - term loans β and concentration β as they finance largescale investment projects β in their portfolio of assets. at the conference, speakers have also talked about the need to rethink the role of central banks given the challenges posed by the pandemic. we agreed that, as central banks of emerging countries, we face greater difficulties than our counterparts in advanced economies on account of structural problems and less leeway in monetary policy. this compels us to respond to global shocks | 1 |
data producer, the bank of italy has always strived to make its statistics available to the widest possible audience. we already share some data with researchers and other institutions, while protecting confidentiality. we have also started to design a research data centre that will provide a safe haven for processing different kinds of microdata. the number of possible applications of big data for central banks is huge, but some are critical. the financial services sector handles sensitive information about individuals and firms. more data available in digital format makes life easier for analysts but increases exposure to security breaches. as more services go online, data ubiquity, and hence data security, are proving to be a major challenge for both private companies and central banks. financial operators are able to gather massive amounts of data about customers and visitors, which are then analysed to generate insights into buying behaviour. some of this data is personal, and deserves to be protected against inappropriate use. that is a goal that the whole of society must pursue. another important aspect of these innovative technologies is financial stability. new entries have arrived in the landscape of financial services ; fintech is a portmanteau word meaning any application of digital technologies to finance. under this label we can include both giants of the digital world wanting to enter the financial market and tiny start - ups whose ambition is to erode the market power of the incumbents. all this is beneficial to competition and productivity in the financial industry, provided that the new entrants are properly supervised. technology can help to innovate financial products and services currently provided by the traditional industry to the benefit of consumers. however, given all the well - known interconnections between operators in the market, the repercussions of technological innovation on the system β s stability are not clear. public institutions like central banks and other financial supervisory authorities should examine the matter carefully. the bank of italy has created an internal multidisciplinary team on big data, machine learning and artificial intelligence. the team includes economists, statisticians and computer scientists from different departments, working in close cooperation with the information technology department. ivass, the insurance supervisory authority working under the umbrella of the bank of italy, has opened a regulatory sandbox for some aspects of fintech / insurtech. to conclude, i am confident this conference will be an important occasion to review the most recent findings on big data econometrics and its application to national institutions, in particular central banks, and | and exchange traded segments of the currency futures market. it is generally understood that exchange traded currency futures, rather than being used by the real sector are mostly being driven by speculative interests. currently, the liquidity in exchange traded market is confined to very short - term. if such products are to be positioned as a credible hedging products then the liquidity has to extend beyond short - term. these issues need to be addressed going forward for development of a deep and liquid currency derivatives market for hedging currency risks. use of options while there is increasing interest amongst end - users in using currency options, not many banks in india have scaled up their expertise in this area and the option activity remains confined to just a few banks. this prevents development of an active options market. it is necessary that banks enhance the necessary skill - sets in this product which has been catching the attention of the end - users. while this will give a fillip to market development, the end - users β hedging needs will also be met in a more competitive environment. liberalization of net open position limits ( nopl ) of banks another important area is the net open position limits ( nopl ) of banks. large open forex positions have systemic risk implications and need to be monitored closely. however, relaxation in these limits is essential to deepen the currency market as excessive restriction on speculation hinders the development of the market. thus, a fine balance has to be maintained between the need to minimize risk and deepen the forex market in india. data collected by rbi reveals that, at least in the last few months, banks have healthy bidirectional views on rupee ( in contrast to general unidirectional bias ), which have helped promote healthy markets. polling for financial benchmarks rbi has already chalked out a programme to move over to trade - based financial benchmarks from a polling - based system in a gradual and non - disruptive manner. in the last few months, stung by the regulatory actions abroad, many banks have shown a great amount of reluctance to participate in the polling process in india. it needs to be recognized and borne in mind that that the move from a polling based system to trade - based system is a carefully calibrated process and cannot be accelerated at the cost of bringing the system to disruption. bis central bankers β speeches it is, therefore, necessary, in the interests of market integrity, for the active players to continue to participate in the polling process till | 0 |
bank credit in an easier and cheaper way than before. 45. we β re also looking to apply new technologies to addressing long - standing pain points in banking. take international remittances for example. the process is currently slow and costly. along with the bank of thailand, the hkma initiated a central bank digital currency project for cross - border payments that has now been joined by the central banks of the united arab emirates and china. this β m - cbdc bridge β project is exploring the potential of using blockchain technology to facilitate real - time cross - border payments, which could reduce costs and enhance transparency for users. cbdcs have a range of promising applications and, together with our partner central banks, we want to be at the forefront of this development. enhancing the platform 46. we understand that a supportive regulatory environment matters a great deal to the providers and users of financial services. that β s why the hkma and other financial regulators are working closely with the government to keep enhancing the attractiveness of the hong kong platform. we keep our market infrastructure, legal framework, regulatory regime and tax system under constant review to make sure that they are business - friendly, forward - looking and competitive. 47. in recent years, we β ve been undertaking reforms that provide modern legal structures catering to the evolving needs of the asset management industry. and we are revising our tax code to make it more competitive for a wide range of financial services, including corporate treasury activities, the fund industry, private equity and wealth management. closing remarks 48. ladies and gentlemen, i started my speech with the question why hong kong is irreplaceable. in the past 15 minutes or so i highlighted the strength of hong kong β s ecosystem as an international financial centre, the scale of opportunity ahead and the actions we are taking to maintain our competitiveness. i hope you will agree with me that hong kong β s exceptional resilience under recent pressure reinforces β rather than calls into question β its long - term future as a global financial hub. 49. the legal profession has an important role to play in this journey, and i look forward to our continued close collaboration. 50. thank you. 5 / 5 bis central bankers'speeches | thrive in 2020, thanks to the secondary listings by home - coming mainland corporates and ipos by new economy companies. 33. but hong kong is much more than a capital - raising gateway for chinese firms. today, mainland institutions and individuals use hong kong to put their capital to work. southbound flows from the mainland to hong kong through the stock connect schemes rose by 128 per cent last year. 34. the volume of capital flowing from the mainland into hong kong is set to grow further. very soon, we will be launching a wealth management connect scheme. this next connect will ultimately offer customers across the greater bay area access to hong kong β s world - leading 3 / 5 bis central bankers'speeches wealth management services. we are also in discussion with our mainland counterparts about launching southbound trading under bond connect. 35. both of these developments will create great opportunities for hong kong as a financial centre. but we will not stop there. china β s economic growth and wealth generation, as well as global investors β increasing appetite for rmb - denominated assets, all point towards a bigger role for hong kong. our city can intermediate financial flows between the mainland and the rest of the world for decades to come. at the hkma, we are continuously working towards new policy breakthroughs that can strengthen hong kong β s ability to do that. opportunity β going green 36. the china opportunity for hong kong is compelling. but hong kong must also lead the other trends shaping the future of finance. and in my view, at the top of the global financial agenda are : sustainable finance and technology. and that is where the hkma, in its market development role, is focusing its efforts. 37. to meet the paris agreement climate change target, the world needs to transition to net - zero carbon emissions by 2050. that will cost an estimated one to two trillion us dollars a year, making sustainability one of the biggest drivers of capital flows in the decades ahead. 38. in hong kong, we are determined to be at the forefront of this transition. first, the government has set a net - zero emissions target by 2050, in line with developed economies globally. we are also integrating sustainability into our exchange fund investments and banking system. and the hkma is co - operating with other regulators to green our financial system by setting supervisory expectations, encouraging climate disclosure, and building industry capacity. in fact, hong kong is the first asian jurisdiction that has committed to comply with the recommendations of the task force on | 1 |
ΓΈystein olsen : management of the government pension fund global introductory statement by mr ΓΈystein olsen, governor of norges bank ( central bank of norway ), at the hearing before the standing committee on finance and economic affairs of the storting, oslo, 3 may 2021. * * * please note that the text below may differ from the actual address. i would like to thank the committee for the invitation to speak on the bank β s management of the government pension fund global ( gpfg ). norges bank manages the gpfg with the objective of achieving the highest possible return over time within the limits of the investment mandate defined by the ministry of finance. the gpfg is to be managed within an adequate control and risk management framework and in a responsible and efficient manner with a high degree of transparency. the gpfg is managed to track the benchmark index fairly closely, ie the return largely tracks the return on the benchmark index. the benchmark index is defined by the ministry of finance and endorsed by the storting. however, even though norges bank closely tracks the gpfg β s benchmark index, many large and small choices have to be made every day. these choices are based on a clear mandate from the authorities and a well thought - out investment strategy. the year 2020 was a special year for us all, including the gpfg. as for many others, working conditions during the covid - 19 pandemic have been demanding. the rapid spread of the pandemic in march 2020 also led to wide, abrupt swings in financial markets. the global composite equity index fell by 20 percent in 22 days. however, markets recovered rapidly, and by the second quarter the gpfg had posted one of its best ever quarterly results. for the year as a whole, the gpfg β s investments posted an overall return of 10. 9 percent before management costs. the return was 0. 27 percentage point higher than the return on the benchmark index the gpfg β s performance is measured against. the executive board is pleased that a solid excess return was achieved in a turbulent year. the positive trend has continued, and the return on the gpfg in the first quarter of 2021 was 4 percent. the gpfg β s performance must be assessed over time. the executive board is satisfied that the return over time has also been good. the substantial market fluctuations in 2020 nevertheless serve as a reminder that the return on | ##listed renewable energy infrastructure, ie a 50 percent stake in the world β s next largest offshore wind farm off the dutch coast. unlisted renewable energy infrastructure is still a relatively new area for norges bank. we intend to build up the portfolio gradually, primarily through investments in wind and solar power. we will prioritise investments that contribute to improving the overall risk - return tradeoff in the gpfg. management of the gpfg is to be cost - efficient, and the executive board monitors cost developments closely. earlier this month, norges bank announced a revised strategy describing how we will fulfil the investment mandate ahead. the strategy plan expresses our ambitions and our overall aim of achieving the highest possible return after costs. our ambitions are high. as they should be. nonetheless, we still aim to be a small, flexible and cost - efficient organisation. 2 / 2 bis central bankers'speeches | 1 |
m r pridiyathorn devakula : how the central bank sees monetary policy in the new world economic environment speech by mr m r pridiyathorn devakula, governor of the bank of thailand, made at the shangri - la hotel, bangkok, 29 november 2001. * * * your excellencies distinguished guests ladies and gentlemen, introduction i would like to thank the thailand board of investment, the department of export promotion and tourism, as well as the nation group for inviting me to speak at this conference. i believe that it is important in these times of increased global uncertainty for the bank of thailand to share with you and the public our assessment of the current economic situation and outlook, as well as our thinking on the future course of monetary policy. the opportunity to do so today is therefore timely and greatly appreciated. in short, today i would like to discuss what i see as the challenges facing thailand in the period ahead and what we, at the bank of thailand, are prepared to do to meet those challenges. in so doing, i will briefly review the progress of the past few months, and say a few words on the appropriate policy mix which needs to be implemented to help steer the thai economy through these difficult times. the new world environment let me begin by outlining two key aspects of the current world economic environment that i think are important. the first one is more fundamental and concerns the closer degree of financial and economic integration between countries. globalization of the world economy has been driven by a variety of forces including rising trade in goods, increased international capital flows, greater technological spillovers, and growing labor mobility. while these factors have brought about a more efficient allocation of resources across national borders and facilitated higher growth and development across countries, they have also created a world environment in which shocks have become more global in nature and where crisis in one country can easily affect others. the end product of greater international economic interdependencies, especially in financial markets, is therefore the enhancement of the underlying international business cycle linkages. which brings me to the second aspect of the world economic environment that i would like to touch on today. this aspect concerns the immediate state of the world economy. the globalization of information technology ( it ) production has meant that the correction of the unsustainable boom in it spending has had a particularly widespread impact on the world economy. all the major industrialized countries are experiencing a synchronized slowdown in their business cycles, adversely affecting countries in the asian | has become more stable, our real effective exchange rate continues to be competitive, the level of international reserves remains at a comfortable level, with reserves to short - term debt ratio as high as 140 %, and inflationary pressures are well contained - headline inflation for the third quarter stood at 1. 5 percent year on year, while core inflation remained well below target at 1. 6 percent. with a firmer position on macroeconomic stability, the economy is expected to grow by around 1. 3 - 1. 8 percent this year. however, the economic recovery process remains fragile and is now being undermined by the weakening global environment as well as declining consumer confidence. looking to the future : more to be done going forward, i believe we are faced with significant challenges. unfortunately the most pressing concern also happens to be one that we have the least control of, that is the external demand. with uncertainty regarding the timing of economic recovery in the united states, japan still having to undergo real and arduous reforms, and europe not yet stepping up as the locomotive engine for the resumption of world growth, prospects for an export led rebound remains clouded. with these regions together constituting over 52 percent of the market share for thai products, exports in 2001 are expected to fall in value by approximately 6 percent compared to last year. assuming an economic rebound in the us, japan, and europe by mid - 2002, exports should grow by around 3 - 5 percent in 2002. real gdp growth is projected to be between 1 - 3 percent in 2002. against the backdrop of increased uncertainty and weak external demand, safeguarding our economic recovery will require steady resolve, more reliance on domestic demand, and a supportive set of measures and reform. the main challenge for local authorities is to ensure proper coordination of fiscal and monetary policies as well as the acceleration of structural reforms efforts in the banking and corporate sector to facilitate a pickup in domestic demand, enhance confidence, and bolster foreign investment. mr. bosworth did mention yesterday that to resolve the crisis, bad loans must be placed in asset management companies and then amcs must get rid of them. this is one of the top priority policies of this government. almost all npls of government banks have been transferred to amcs, and all multi - creditor npls of private commercial banks have been transferred to the tamc. and we will speed up our effort to clear them out. however, please be informed that when similar financial crises occurred in the us in 1982, | 1 |
customer, rather than simply posting higher numbers in branches or bank accounts opened, has to be part of our efforts. we need a frugal, trustworthy, and effective indian model for financial inclusion. our measure of success should be the jobs that are created, not by giving government subsidies or protections to labour - intensive industries or sectors but by developing a facilitating, though competitive, environment that will result in the emergence of the best solutions. this i would suggest the way forward for meeting our dream of financial inclusion. some of the measures are already in pipeline. we are awaiting the forthcoming recommendations of the dr. nachiket mor committee, the dr. sambamurthy bis central bankers β speeches committee will also guide us how to expand mobile banking in india through encrypted sms based funds transfer in any type of handset. so in sum while several challenges do present themselves they catty within them the core of opportunities which will spur development impulses and lead to growth with equity. thank you for a patient hearing. bis central bankers β speeches bis central bankers β speeches | deepali pant joshi : financial inclusion β journey so far and road ahead speech by dr deepali pant joshi, executive director of the reserve bank of india, at the mint conclave on β financial inclusion β, mumbai, 28 november 2013. * * * assistance provided by shri ajay kumar misra, gm, smt. sushma vij, dgm, and smt. mruga m paranjape, manager is gratefully acknowledged. 1. mr tamal bandopadhyay deputy managing director, mr sukumar, editor mint, distinguished guests ladies and gentlemen at the very outset let me say that i am extremely happy to be here with you this beautiful evening and thank the editor mint for having me here, to share with you the rbi perspectives on the financial inclusion. i extend warm congratulations to mint on celebrating a decade of engagement with these issues which concern us all. 2. dr. raghuram rajan, has powerfully enunciated that there is a need for broad based diversified growth lading to rapid reduction in poverty. reserve bank plans its developmental initiatives over the next few quarters on five pillars, one important pillar is of financial inclusion i. e. β expanding access to finance to small and medium enterprises, the unorganized sector, the poor, and remote and underserved areas of the country through technology, new business practices, and new organizational structures ; that is, we need financial inclusion. β 3. the expectations of poor people from the financial system are principally ease of access, security and safety of deposits, low transaction costs, convenient operating time, minimum paper work, ability to transact easily effect frequent deposits, avail quick and easy access to credit and other products including remittances suitable to their income streams and consumption patterns. the provision of uncomplicated, small, affordable products can help bring low income families into the formal financial sector. low - income households in the informal or subsistence economy often have to borrow from friends, family or usurious moneylenders. they have little awareness and practically no access to financial services that could protect their financial resources in exigent circumstances such as illness, property damage or death of the primary breadwinner. taking into account their seasonal inflow of income from agricultural operations, migration from one place to another seasonal and irregular work availability and income, the existing financial system needs to be designed to suit their requirements and to be more responsive to their needs. the mainstream | 1 |
number enrolled in school, and those who may lack the necessary skills or face other barriers to taking jobs. the rise in the average workweek since early 1996 suggests employers are having increasingly greater difficulty fitting the millions who want a job into available job slots. if the pace of job creation continues, the pressures on wages and other costs of hiring increasing numbers of such individuals could escalate more rapidly. to be sure, there remain an additional 34 million in the working - age population ( age 16 - 64 ) who say they do not want a job. presumably, some of these early retirees, students, or homemakers might be attracted to the job market if it became sufficiently rewarding. however, making it attractive enough could also involve upward pressures in real wages that would trigger renewed price pressures, undermining the expansion. thus, there would seem to be emerging constraints on potential labor input. even before we reach the ultimate limit of sustainable labor supply growth, the economy β s ability to expand employment at the recent rate should rapidly diminish. the availability of unemployed labor could no longer add to growth, irrespective of the degree of slack in physical facilities at that time. simply adding new facilities will not increase production unless output per worker improves. such improvements are possible if worker skills increase, but such gains come slowly through improved education and on - the - job training. they are also possible as capital substitutes for labor, but are limited by the state of technology. more significant advances require technological breakthroughs. at the cutting edge of technology, where america finds itself, major improvements cannot be produced on demand. new ideas that matter are hard won. the economic outlook as i noted, the recent performance of the labor markets suggests that the economy was on an unsustainable track. unless aggregate demand increases more slowly than it has in recent years - - more in line with trends in the supply of labor and productivity - - imbalances will emerge. we do not know, however, at what point pressures would develop - - or indeed whether the economy is already close to that point. fortunately, the very rapid growth of demand over the winter has eased recently. to an extent this easing seems to reflect some falloff in growth of demand for consumer durables and for inventories to a pace more in line with moderate expansion in income. but some of the recent slower growth could simply be a product of abnormal weather patterns, which contributed to a first - quarter surge in output and weakened the | second quarter, in which case the underlying trend could be somewhat higher than suggested by the second - quarter data alone. certainly, business and consumer confidence remains high and financial conditions are supportive of growth. particularly notable is the run - up in stock market wealth, the full effects of which apparently have not been reflected in overall demand, but might yet be. monetary policymakers, balancing these various forces, forecast a continuation of less rapid growth in coming quarters. for 1997 as a whole, the central tendency of their forecasts has real gdp growing 3 to 3ΒΌ percent. this would be much more brisk than was anticipated in february, and the upward revision to this estimate largely reflects the unexpectedly strong first quarter. the central tendency of monetary policymakers β projections is that real gdp will expand 2 to 2Β½ percent in 1998. this pace of expansion is expected to keep the unemployment rate close to its current low level. we are reasonably confident that inflation will be quite modest for 1997 as a whole. the central tendency of the forecasts is that consumer prices will rise only 2ΒΌ to 2Β½ percent this year. this would be a significantly better outcome than the 2ΒΎ to 3 percent cpi inflation foreseen in february. federal open market committee members do see higher rates of inflation next year. the central tendency of the projections is that cpi inflation will be 2Β½ to 3 percent in 1998 - - a little above the expectation for this year. however, much of this increase is presumed to result from the absence of temporary factors that are holding down inflation this year. in particular, the favorable movements in food and energy prices of 1997 are unlikely to be repeated, and non - oil import prices may not continue to decline. while it is possible that better productivity trends and subdued wage growth will continue to help damp the increases in business costs associated with tight labor markets, this is a situation that the federal reserve plans to monitor closely. i have no doubt that the current stance of policy - - characterized by a nominal federal funds rate around 5Β½ percent - - will need to be changed at some point to foster sustainable growth and low inflation. adjustments in the policy instrument in response to new information are a necessary and, i should like to emphasize, routine aspect of responsible policy making. for the present, as i indicated, demand growth does appear to have moderated, but whether that moderation will be sufficient to avoid putting additional pressures on resources is an open question. with considerable momentum behind the expansion and labor market utilization rates unusually | 1 |
fund managers are usually given slightly more freedom, in terms of credit and currency allocations for example, than internal portfolio managers. our external fund management programme is also aimed at diversifying reserves into asset classes which we do not have the required resources to manage internally, in terms of both systems and human capital. this includes specialist asset classes such as corporate bonds, asset - backed securities and mortgage - backed securities. in line with our most recent saa review, which started in 2016, we also decided on a different approach to enhance the way in which we selected our external fund managers. this time around, we decided to focus more intensely on the value proposition and value - add the fund manager presented on a specific investment mandate. while the final selection was based on the value proposition in managing a specific mandate, capacity building remained a key consideration in our fund manager selection. page 8 of 13 we have maintained our three - stage selection process. in the first step, a β request for information β is used to survey the landscape of fund managers and to identify those fund managers that have sufficient experience in the required asset classes as well as in the management of central - bank portfolios. the second stage, which takes the form of a β request for proposal β, is considerably more detailed. here, we conduct an indepth investigation of fund manager suitability with regards to organisational capabilities in areas such as risk management and organisational stability. we also request participants to select the mandate or mandates which suit their strongest skill set. importantly, we ask them to submit detailed performance track records in those areas. these track records are then analysed in detail by our risk managers. the subsequently shortlisted candidates are asked to present only on the mandates that they had proposed as their strongest and where we felt, given their track record, they could add the most value. in the panel interviews, the candidates are asked to present their value proposition in their respective mandate in very specific terms, and also to comment on and commit to an outperformance target within a proposed risk limit. this approach has been followed to enhance the efficiency of our selection process and to expose ourselves to those managers who have real and verifiable specialities. this is important not only in terms of optimising performance, but also in terms of skills transfer between the external fund managers and ourselves. the south african reserve bank β s current strategic asset allocation framework as i β ve mentioned, the most recent appointment of external fund managers was concluded with | ; or reduce the cost of producing the cash, while at the same time enhancing the security and durability of the currency. a new challenge for central banks is the requirement that all key business areas should be included in effective contingency plans. high profile incidents around the world have highlighted the importance of central banks having in place, considered and tested plans, to deal with outages due to everything from supplier problems to natural disasters. generally, central banks source their banknotes from one, or a small number of international companies. currency managers need to weigh - up the importance of price against considerations, such as time of delivery, quantity of order and quality of product. they also need to consider if more than one supplier for, say ink, could be beneficial for operational risk concerns. procurement from external suppliers is expensive, complex and may span several years. as with any outsourcing arrangement, production and quality, a standard needs to be monitored. the impact of technical innovations for the distribution of cash or payment mechanisms is developing at a rapid pace, especially for the under - banked. the use of mobile phone technology to transfer money is becoming a popular method due to efficiency and the lower cost associated with this payment mechanism. a further consideration by central banks is the cost that security features add to the banknote production process. we all appreciate the need for security features to avoid the counterfeiting of banknotes, but the question is at what cost and whether these costs can be optimised? these issues will be presented and debated upon during the next few days by all the participants and hopefully assist central banks with their deliberations in this regard. the objective is, through the diverse nature of attendees at this conference, to improve the understanding of the issues for those involved in providing and managing banknotes ; coins and other secure documents and at the same time improving the understanding of the consumers β needs by the suppliers. the conference has set out to achieve this with a mixture of presentations, workshops and panel discussions that touch on the latest developments and technologies in the industry and allow adequate time for discussion and dialogue. you are all encouraged to seek answers by asking questions and discussing the issues. the overall aim is to improve understanding through education β africa has some catching - up to do, compared with the rest of the world. this is our attempt to start that ball rolling strongly in the field of banknotes, coins, id and other security documents and to position this great continent as a producer, as well | 0.5 |
. for example, according to the global competitiveness index in the area of corporate governance based on the latest world economic forum report, we are at 23rd compared to indonesia which is at 57th, the philippines at 100th, and vietnam at 104th. it is the area that we have done quite well and our firms are certainly, compared to 20 years ago, much more professional and transparent in character. in terms of ease of doing business, i am sure many of you heard from the world bank that our ranking has improved steadily. back in 2016, we ranked at 46th in terms of the overall ease of doing business, while the latest ranking, we are up to 21st. page 7 of 11 this is not to say that it is that easy for you to do business already and certainly there are rooms for improvement. one of the important things holding us back is the excessive, cumbersome, and inconsistent regulations issued by different government agencies. i am sure that this is no surprise to you when you have to deal with the agencies ; you go here for one thing, then go to another place, face another regulation, and the two are not consistent. there is a very clear priority for the government to resolve this issue by, despite being almost a cliche, providing the one - stop facilitation service. so that businesses and investors, both foreign and thai, do not have to go through all numerous government agencies each with their own cumbersome and often conflicting laws and regulations. currently, the government β s efforts in regulatory guillotine are underway, however, the speed obviously needs to be accelerated, otherwise, it is really hard to improve the business climate in our real ease of doing business. the final reason why thailand remains a great place to do business is that there are some new trends that will help mitigate some of the long - term structural weaknesses in the thai economy which are holding us back. what are some of these? first, automation and our demographics ; automation is coming very strongly in thailand, maybe to some lesser degree in other countries in the region. however, looking forward, the costs of automation would come down and the benefits are clear. with the covid19 that has brought lockdowns, everybody sees the need for automation to avoid the work interruptions and relying less on human workers. this will help mitigate one of the long - term structural weaknesses in thailand of poor demographics. thailand, like japan, is a country that is aging very rapidly as our | prasarn trairatvorakul : outlook for thailand at a time of economic uncertainty speech by dr prasarn trairatvorakul, governor of the bank of thailand, at the thomson reuters forum, bangkok, 21 february 2012. * * * distinguished guests, ladies and gentlemen, it is my pleasure to be the keynote speaker at this thomson reuters forum. this is a special opportunity for me to share my views on the β outlook for thailand at a time of economic uncertainty. β at the outset, i would like to highlight that the thai economic outlook for 2012 is likely to be strong in terms of projected gdp growth while pressure on inflation should be well - contained. having said that, i know that all of you, especially those in financial markets, are well aware that in today β s fast - paced world we cannot be complacent. positive outlooks, such as the one i just described, may change quickly. today, my speech will focus on laying out the challenges, my assessment of the challenges, and our policy options going forward. first, let us turn to the challenges. last year 2011 was a year of regaining poise and balance for monetary policy. one year ago, the global recovery had started to gain traction. capital flows had begun to stabilize and became less uni - directional. the balance of risks had started to shift away from growth to inflation. as a result, the bank of thailand ( bot ), and indeed, the majority of central banks in the region, normalized interest rates throughout most of the year. but that was one year ago. and one year can be a long time. therefore, the need to focus on ensuring macroeconomic stability can never be taken for granted. this year thailand faces challenges from both within and without. on the internal front, the main challenge is the flood β more specifically, how to ensure domestic recovery and restoration after the flood. the extent of the damage inflicted by the flood in the last quarter of 2011 was larger than expected and disrupted agricultural and manufacturing supply - chains in the flooded areas. as a result, the economy grew by 0. 1 percent in 2011. the economy is projected to rebound in 2012, growing by 4. 9 percent, boosted by private and public spending for post - flood restoration. in 2013, economic growth is projected to gather momentum, expanding by 5. 6 percent. the bank of thailand is confident that the economy continues to be supported by strong fundamentals. let me | 0.5 |
. that is easy to say, but devilishly tough to achieve. knowledge sharing is difficult even within a homogeneous organization. sharing information and expertise across separate and independent organizations is even harder. but it is critical if we are to succeed. the rcmp's creation of the strategic priority of economic integrity is a tremendous step towards achieving that goal, for two reasons. first, this initiative is the vehicle by which your internal resources can be mobilized. the imets are an excellent example of this and i'm confident that the icets will be, too. second, this initiative will become the conduit for sharing knowledge, information, and resources with other partners, including the bank of canada. through a well - organized partnership, we can succeed in our goal of enhancing and preserving the economic integrity of our country. on behalf of the bank of canada - and i'm sure that i speak for securities commissions and other market regulators on this - let me say that we appreciate your efforts, and that you have our full and enthusiastic support. conclusion everybody in this room is committed to making canadians secure, in their homes, in their communities, and in their business and working lives. as we do so, it is imperative that we continually remind ourselves that crime extends beyond the physical. economic crime is harder to investigate and to prosecute. but it is every bit as damaging to the well - being of canadians, and it is just as important to fight it with all of our effort. that's why i applaud your decision to make economic integrity a strategic priority. and i renew the bank of canada's commitment to work together with the rcmp and all enforcement agencies to help make the canadian economy a safer place for investors, for businesses, and for all of our fellow citizens. | , is dampening economic sentiment, notably in the manufacturing sector. in this environment, inflationary pressures remain muted and indicators of inflation expectations have declined. therefore, a significant degree of monetary stimulus continues to be necessary to ensure that financial conditions remain very favourable and support the euro area expansion, the ongoing build - up of domestic price pressures and, thus, headline inflation developments over the medium term. let me now explain our assessment in greater detail, starting with the economic analysis. following a rise of 0. 2 % in the fourth quarter of 2018, euro area real gdp increased by 0. 4 %, quarter on quarter, in the first quarter of 2019. incoming economic data and survey information continue to point to somewhat slower growth in the second and third quarters of this year. this mainly reflects the ongoing weakness in international trade in an environment of prolonged global uncertainties, which are particularly affecting the euro area manufacturing sector. at the same time, activity levels in the services and construction sectors are resilient and the labour market is still improving. looking ahead, the euro area expansion will continue to be supported by favourable financing conditions, further employment gains and rising wages, the mildly expansionary euro area fiscal stance and the ongoing β albeit somewhat slower β growth in 1 / 3 bis central bankers'speeches global activity. the risks surrounding the euro area growth outlook remain tilted to the downside, reflecting the prolonged presence of uncertainties, related to geopolitical factors, the rising threat of protectionism, and vulnerabilities in emerging markets. euro area annual hicp inflation increased to 1. 3 % in june 2019, from 1. 2 % in may, as higher hicp inflation excluding food and energy more than offset lower energy price inflation. on the basis of current futures prices for oil, headline inflation is likely to decline over the coming months, before rising again towards the end of the year. looking through the recent volatility due to temporary factors, measures of underlying inflation remain generally muted. indicators of inflation expectations have declined. while labour cost pressures have strengthened and broadened amid high levels of capacity utilisation and tightening labour markets, the passthrough of cost pressures to inflation is taking longer than previously anticipated. over the medium term underlying inflation is expected to increase, supported by our monetary policy measures, the ongoing economic expansion and stronger wage growth. turning to the monetary analysis, broad money ( m3 ) growth stood at 4. 5 % in june 2019, after 4. 8 % in may | 0 |
bank of japan β s monthly report of recent economic and financial developments1 bank of japan, communication, 16 / 02 / 99. the bank β s view2 the economic deterioration in japan has become moderate against the background of the increase in public investment. business fixed investment has been declining significantly. as for housing investment, housing starts are bottoming out but remain at a low level. recovery in private consumption has been weak on the whole, although partial improvement in sales of goods has been observed. meanwhile, net exports ( exports minus imports ) basically remain on a gradually increasing trend, and public investment is increasing considerably. reflecting this development of final demand and the continued progress in inventory adjustments, industrial production, which had been on a downtrend, is leveling off. corporate profits continue to decline. employment and household income conditions are still deteriorating as the unemployment rate is at a historically high level, and winter bonuses have decreased significantly. conditions in corporate finance are currently improving, but firms apparently cannot remove their anxiety about the availability of funds in the future. consequently, corporate and household sentiment remains cautious, and a recovery has not yet been observed in private demand. as for the future developments, the increase in public investment is likely to underpin the economy toward the first half of fiscal 1999 with the implementation of the government β s economic measures. furthermore, the bank β s monetary and financial measures and the government β s measures to alleviate the credit crunch will continue to be in effect. nevertheless, an immediate self - sustained recovery in private demand is hardly expected, since corporate profits and household income are still deteriorating and the constraints from corporate finance are likely to persist for some time due to cautious lending attitudes of private banks. moreover, attention should be paid to ( 1 ) the effects of the continued appreciation of the yen since autumn 1998 ; ( 2 ) those of the recent rise in long - term interest rates ; and ( 3 ) the uncertainty in financial and economic developments abroad. to lead japan β s economy into a steady recovery, it is important to prepare an environment where firms and households can regain confidence in japan β s economic future by, for instance, promptly restoring the stability of the financial system. with regard to prices, reflecting the large output gap, domestic wholesale prices are on a downtrend, and corporate service prices are weakening. consumer prices have increased above the previous year β s level due to the rise in prices of perishables. excluding this temporary effect, consumer prices basically remain weak. as for the | outlook, although public investment is expected to increase, distinct narrowing in the output gap is hardly expected toward the first half of 1999, as private demand is likely to remain sluggish. furthermore, the decline in wages and the appreciation of the yen since autumn 1998 are likely to continue exerting downward pressure on prices. hence, prices are expected to remain on a downtrend. this report was written based on data and information available when the bank of japan monetary policy meeting was held on february 12, 1999. the bank β s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on february 12, as the basis of monetary policy decisions. in the financial markets, the japan premium and euro - yen interest rates ( both on three - month contracts ) remain stable despite the approach of the fiscal year - end. this reflects the abatement of the market β s anxiety about liquidity and credit risks of japanese banks against the background of the bank of japan β s maintenance of a decisive stance on easy monetary policy as well as the formulation of the framework to restore the stability of japan β s financial system. yields on japanese government bonds have risen again reflecting the market β s concern over the prospective expansion of fiscal deficits. in the foreign exchange market, the trend has been toward a higher yen. stock prices continue to be weak. considering that these developments can be a hindrance to an economic recovery, their ensuing developments require close attention. with regard to corporate finance, credit demand for economic activities remains weak, as a result of the significant decrease in business fixed investment. firms β moves to increase their on - hand liquidity in the face of difficult fund - raising conditions are gradually settling down. although private banks have basically retained their cautious lending stance, they continue to actively utilize the credit guarantee system. as a result, the previously tightened credit conditions are easing somewhat. nevertheless, private banks and capital market participants are still cautious of corporate credit risk, and thus firms with relatively low credit ratings remain under severe fund - raising conditions. the situation continues to warrant careful monitoring, particularly with regard to how corporate finance develops toward the end of the fiscal year. * * * | 1 |
problems. i believe that training β combined with the excellent education in economics i got at berkeley β helped me to better diagnose what was going wrong in 2007 and 2008, and how the federal reserve could be most effective in our response to the crisis. economic and monetary policy outlook turning to the economic outlook, the damage wrought by hurricanes harvey, irma, and maria has imposed immeasurable hardship on many. and, the damage will undoubtedly disrupt commerce for some time. however, these effects are likely to be relatively modest in the context of the national economy. natural disasters tend to depress economic activity initially, but once the recovery and reconstruction efforts get underway in earnest, such disasters actually serve to lift economic activity. looking beyond the storm effects β which will make interpreting near - term economic data releases more difficult β the economy remains on a trajectory of slightly above - trend growth at 1 / 7 bis central bankers'speeches about 2 percent, and the fundamentals supporting continued expansion are generally quite favorable. low unemployment, sturdy job gains ( recognizing the near - term negative impact of the storms ), and rising wages ( even at a pace below previous expansions ) are lifting personal income. household wealth has been boosted by rising home and equity prices, and household debt has been growing relatively slowly, contributing to a healthy household balance sheet. thus, consumer spending should continue to advance in coming quarters. business fixed investment outlays are also likely to continue to rise. with the supply of labor tightening, there are greater incentives for businesses to invest in labor - saving technologies. investment spending should also benefit from a better international outlook and the improvement in u. s. trade competitiveness caused by the dollar β s recent weakness. the softer dollar and solid growth abroad also suggest that the trade sector will no longer be a significant drag on economic growth. turning to the outlook for inflation, i have been surprised by the persistence of the shortfall from the fomc β s 2 percent long - run objective. while some of this year β s shortfall can be explained by one - off factors β such as the sharp fall in prices for cellular phone service β its persistence suggests that more fundamental structural changes may also be playing a role. these include the increased ability of prospective buyers to compare prices across different sellers quickly and easily, the shift in retail sales to online channels of distribution from traditional brick - and - mortar stores, and the consequences of these changes on brand loyalty and business pricing power. over the coming months, | ##ivity in determining aid recipients. with the wide - spread inclusion of governance criteria in aid conditionality, there is a measure of stress imposed on recipient countries, which generally lack the capacity to pursue the wide range of reforms required, the urgency of some of which have been called into question by some informed observers. some critics see a more sinister dimension in the governance discourse, claiming that the whole purpose of the approach is to create in the developing countries the state - market relationships typical of western neo - liberal systems. this is seen as exploitation by the donor community of developing countries'need for investment, aid and debt relief, to create conditions that will facilitate their infiltration by globalised financial interests. the following statement in the july 2004 issue of south bulletin is typical of this perspective : β whence this striking paradox, inherent in good governance, of calls going out from the international organisations to national governments that these latter adopt, indeed β appropriate β, neo - liberal economic policies imposed from without while the globalised financial markets dispossess them of their sovereignty and insinuate themselves into the countries'ownership structure of capital β. the controversy continues on the link between governance and development, and while its proponents claim strong empirical evidence for it, there is strong assertion of the contrary, or at least agnostic, view in other quarters. it would seem that the jury is still out on this debate. aspects of governance in sierra leone the principal donor institutions in sierra leone, as in most developing countries, are the world bank, and the imf. donor support programmes coordinated by the world bank are provided within the framework of the bank β s country assistance strategy and the poverty reduction strategy paper. following implementation of an interim poverty reduction strategy paper, the bank approved a full poverty reduction strategy paper for sierra leone in february 2005, covering the period 2006 β 2009. the major instrumentality for fund assistance to sierra leone is the poverty reduction and growth facility ( prgf ). a successor arrangement under this facility was agreed with sierra leone in 2006, covering the period 2006 - 2008. it is important to stress that in their country intervention, the imf and world bank liaise with major players in the donor community and, to a greater extent than not, their programmes define the parameters for entry by other donors into the country β s assistance programme. consequently, although the overall assistance package usually involves inputs by a number of other parties, including the african development bank, bilateral donors and other donor agencies, the content and direction | 0 |
declines up to that point, the bank's balance sheet will still be at least twice as large as what it was just prior to the pandemic. it will decline gradually thereafter, with bond maturities of between $ 35 billion and $ 45 billion every year for some time. 7 / 11 23 / 05 / 2022, 13 : 03 from qe to qt β the next phase in the reserve bank's bond purchase program | speeches | rba graph 5 one of the consequences of the bank's bond purchase program, and other policy measures adopted in response to the pandemic, is the abundance of exchange settlement ( es ) balances. [ 5 ] these are held by commercial banks ( and other financial institutions ) at the reserve bank and are used to settle transactions between banks. banks can also lend them to others in the overnight cash market, with those transactions determining the cash rate. as expected, the abundance of es balances led to a noticeable decline in the demand to trade cash overnight. it has also been unsurprising that the cash rate has traded slightly below the cash rate target since late - march 2020 ( graph 6 ). while es balances will decline as the various monetary policy measures adopted during the pandemic unwind, as discussed, that process will take a number of years. 8 / 11 23 / 05 / 2022, 13 : 03 from qe to qt β the next phase in the reserve bank's bond purchase program | speeches | rba graph 6 recently, the board considered options to reduce es balances more quickly. [ 6 ] if we were to do that, banks would have more of an incentive to borrow funds overnight, since their es balances would once more become relatively scarce. hence, such a change would encourage more trading in the overnight cash market, with the cash rate trading closer to, and eventually around, the cash rate target. however, the benefits of reducing es balances quickly were judged to be modest compared with the risks, including the potential to create volatility in a range of financial markets. moreover, while the abundance of es balances affects the behaviour of the cash rate relative to the cash rate target, it does not impair the ability of the bank to achieve the desired stance of monetary policy via adjustments to the cash rate target and the rate paid on es balances. in particular, because es balances will remain abundant for some time, the cash rate will tend to be | 23 / 05 / 2022, 13 : 03 from qe to qt β the next phase in the reserve bank's bond purchase program | speeches | rba speech from qe to qt β the next phase in the reserve bank's bond purchase program christopher kent [ * ] assistant governor ( financial markets ) kanganews dcm summit sydney β 23 may 2022 introduction it is great to be here in person. last year at this event, i discussed the bank's term funding facility ( tff ). today, i'm going to focus on the bank's bond purchase program. at its meeting earlier this month, as well as raising the cash rate target, the board decided not to reinvest the proceeds from bonds as they mature from the bank's portfolio. this signals the next phase in the bond purchase program. the initial phase in which the bank built up its stock of bond holdings is often referred to as β quantitative easing β, or qe for short. that phase ended in february this year. we have now entered the phase known as β quantitative tightening β, or qt. by allowing our bond holdings to gradually diminish over time as they mature, the initial stimulatory effects of those holdings β namely, downward pressure on government bond yields and the australian dollar exchange rate β will gradually unwind. in my presentation today, i'll explain the reasoning behind the decision to begin qt. i'll then discuss some of the implications of qt for financial conditions, and explore what it means for the bank's balance sheet and the operation of monetary policy through the cash rate. but first, i'll briefly recap the qe phase of the program. background the bank introduced the bond purchase program in november 2020 to provide additional support to the australian economy in the early and still very uncertain stage of its economic recovery from the covid - 19 shock. this was a new element to the package of policy measures adopted at the outset of the pandemic. the very low cash rate target was already anchoring the front end of the yield 1 / 11 23 / 05 / 2022, 13 : 03 from qe to qt β the next phase in the reserve bank's bond purchase program | speeches | rba curve. the bank's forward commitment on the cash rate and the three - year bond yield target were tying down the yield curve a few years out. in this context, the bond | 1 |
benoit cΕure : interview with radio classique interview with mr benoit cΕure, member of the executive board of the european central bank, and radio classique, conducted by mr nicolas pierron on 23 january 2017. * * * mario draghi, president of the european central bank, is to be investigated by the ombudsman of the european union, following a complaint from an ngo. he is suspected of entrusting the private sector with insider information in the context of a group called the g30. how do you respond to these allegations? the mere fact that those questions are being asked shows that we are transparent, since all meetings of the members of the executive board of the ecb with representatives of the private sector, whether bankers or not, are made public. as a matter of fact, my calendar, my diary, is published every month on the ecb β s website. as for the substance of your question, for us to be able to understand what is happening in the economy we have to meet private sector actors, including bankers. and yet, this has to be done in a transparent way, which is the case with the g30. so this won β t go any further? the ombudsman of the european union is pursuing the matter, she β s doing her job and we shall see what she has to say. but the same ombudsman, ms o β reilly, acknowledged that the ecb had made significant progress in its transparency and its communication policy, notably with the publication of the minutes of governing council decisions and also, as i said, with the publication of our calendars. so the ecb has made great efforts to be more transparent and to make its contacts with the private sector public. this is not a matter of pride, it β s completely normal. donald trump was sworn in on friday in the united states. his programme includes a sizeable fiscal stimulus, which is already pushing up interest rates in the us, bond rates. will this have an impact on europe? it is undoubtedly too early to judge the decisions of the new administration as it is only just beginning, but i would draw two conclusions. the first is that it is very important for us that financial conditions in the euro area remain appropriate for the euro area economy, i. e. that the euro area is protected from external financial shocks. for example, the rise in long - term interest rates observed since the end of last year has had a fairly | . beyond all these aspects that are usual in respect to supervisory authorities, there are two other points i would like to underline. the first refers to the so - called early intervention powers as they are foreseen in the draft directive about bank resolution that should be approved in the near future and long before the ssm will start operating. these early intervention are vast in what concerns the governance and scope of activity of institutions bis central bankers β speeches that start to have problems that can lead them to a point of non - viability. as such, these powers are related to what is usually called β prompt corrective action β regarding problematic banks and can be applied before the bank is delivered to the resolution authority. another important competence conferred upon the ecb as the centre of the ssm concern the macro - prudential instruments to be possibly applied both to the euro - area financial system as a whole or to individual countries. these powers are shared with national authorities that can also take measures in this field but it is nevertheless another essential element of the proposal. the crisis has shown that supervising the micro - prudential risks at individual banks separately is not sufficient and that macro - and micro - risks can actually be mutually reinforcing. involvement of non - euro area member states a third important feature of the ssm relates to the preservation and deepening of the single market, particularly the fact that national competent authorities of non - euro area member states have an option to participate in the ssm. they can participate through establishing a close cooperation with the ecb. by giving non - euro area member states full membership and voting rights in the supervisory body, the body responsible for the preparation of decisions on supervisory matters, they are placed on an equal footing with euro - area member states. however, as the ecb governing council is the ultimate the decision - making body of the ecb, its role in the ssm is reduced to the possibility of accepting of accepting or rejecting the decisions of the supervisory board. at the same time, a system integrating a mediation panel is foreseen in the regulation in case of divergences that may involve a noneuro area member state. all these mechanisms were accepted at the level of the council by all governments which seems to indicate that we might see an extension of the ssm well beyond the euro area. separation of monetary and supervisory functions, while benefiting from synergies a final feature of the ssm regulation i would like to highlight relates to the principle | 0.5 |
to mitigating the disruptive effects of trade is to adopt policies and programs aimed at easing the transition of displaced workers into new jobs and increasing the adaptability and skills of the labor force more generally. many suggestions for such policies have been made. currently, the government's principal program for helping workers displaced by trade is the trade adjustment assistance program, which is up for renewal before the congress this year. as now structured, the program offers up to two and a half years of job training, allowances for job search and the economic importance of physical proximity is the underlying reason that people and businesses are willing to pay high rents and other costs to live in or near major cities, where they can be near large numbers of other people and businesses that have related expertise and interests. another type of service in which the united states has a strong export position is higher education. in 2005 - 06, u. s. institutions of higher learning trained nearly 600, 000 foreign students, of whom about half were studying for graduate and professional degrees. many foreign students who study in the united states spend at least some time here subsequently, adding their skills to those of the domestic workforce ( institute of international education, 2006 ). mann ( 2006, pp. 140 - 41 ) analyzes changes from 1999 to 2004. updating the analysis with 2005 data from the bureau of labor statistics does not change these results. some of the low - wage occupations, such as data entry and word processing, may have lost jobs to automation rather than outsourcing. relocation, income support for eligible workers, and health insurance assistance for some. elements of other proposals being discussed ( kletzer and rosen, 2006 ; kling, 2006 ; mann 2003, 2004 ) include job - training tax credits and wage insurance, which would help offset pay cuts that often occur when displaced workers change jobs. another approach is to focus on establishing policies that reduce the cost to workers of changing jobs, for example, by increasing the portability of pensions or health insurance between employers. as new technologies expand the range of occupations that may be subject to international competition, measures to assist affected workers become all the more important. it would not be appropriate for me to endorse specific programs ; that is the prerogative of the congress. however, i can safely predict that these and other policy proposals to address concerns about worker displacement will be the subject of active debate in coming years. more generally, investing in education and training would help young people entering the | one data set which is harmonised but lacks coverage. and there is another one which reflects high coverage but lacks harmonisation. iii feasibility constraints i think we have to tackle these and other harmonisation gaps. furthermore, there is no doubt that the availability of reliable statistical data for financial stability purposes is not yet complete. we are faced with data gaps. there are, however, practical difficulties with regard to gathering additional, and more detailed, statistical data. one possibility to reduce these difficulties is to consider whether more data from commercial data providers could be purchased. however, the scope may not be sufficient as the focus of private providers is on financial market data. in addition, this option could turn out to be quite costly. another option might be to consider extending the statistics produced under the stewardship of the escb in the field of money and banking statistics. however, a good sense of proportion is necessary when deciding on new harmonised statistical requirements. there is a common understanding that producing statistics is a costly matter, in particular from the viewpoint of the data suppliers. any new statistical reporting will place an increased burden on the reporters and strain their resources. and let β s not forget that central bank statisticians and data reporters anyway have to cope with a whole bunch of new challenges. examples are the enlargement of the european union, any potential enlargement of the european monetary union, the change in accounting rules, and, last but not least, the requirement of calculating new indices and indicators for banking supervision purposes under the basle ii regime. given all these tasks, it is absolutely essential to set priorities. the highest priority should be attributed to closing data gaps with regard to essential indicators for financial stability such as statistics on the securitisation of bank loans. in order to narrow the data gap in this area we should use existing data with sufficient coverage from other sources. an obvious example is the biannual information by the bis on derivative instruments which is collected from a small number of leading market players, which covers still 80 % of the overall market volume. at the same time, we have to check whether existing statistical surveys could be discontinued in exchange for any new data requirements. for example, regionally disaggregated balance sheet data of banks in germany no longer have analytical relevance because of euro - area membership. in order to keep the costs within strict limits, statisticians may find it helpful to determine the extent to which one and the same data source might serve different analytical purposes | 0 |
svein gjedrem : wealth management in a public setting introductory statement by mr svein gjedrem, governor of norges bank ( central bank of norway ), to panel discussion on β problems of plenty? challenges and opportunities from the accumulation of large exchange reserves and windfall revenue β, arranged as part of the seminar program of the 2006 annual meetings of the imf and the world bank, singapore, 18 september 2006. please note that the text below may differ slightly from the actual presentation. * * * 1. thank you for this opportunity to discuss the challenges that arise when managing financial wealth in a public sector environment. norges bank now has eight to ten years of experience of this task, and i shall try to describe in brief the strategies adopted by norges bank, and what we believe we have learned. 2. we have a large amount of money under management. our foreign reserves are probably larger than needed for financial stability and monetary policy operations. but the most important fund is the government pension fund, formerly the petroleum fund. we have been responsible for managing that fund since its inception in 1996, and it has been a major task for us since 1998. 3. the value of the petroleum resources in the north sea is currently estimated at about usd 700 billion. the government receives the bulk of the revenues generated from petroleum extraction as sales revenues and taxes. the government channels these revenues into the pension fund as financial assets. annual spending from the fund is subject to a spending rule, whereby the government commits to limit spending. over time spending should not exceed the estimated expected real return on the fund β s investments, set at 4 per cent per year. this implies that the fund is expected to become a permanent savings account. 4. at the outset, there was already an investment management operation in the bank, for the foreign reserves. but when it became clear in 1997 that the pension fund would be growing fast, we decided to set up a separate management unit, now called norges bank investment management ( nbim ). our challenge was to build a business organisation within a traditional civil service culture. the new unit recruited investment professionals from outside the bank as well as people from the existing reserve management operations. nbim was explicitly defined as a business unit, which should be different from the rest of the central bank in many respects. to avoid any suspicion that nbim would benefit from proprietary central bank information, the new unit was placed completely outside the decision - making processes | currency ( cbdc ) : in addition to taking an active part in the work on a potential euro retail cbdc, as early as 2020 we launched a series of twelve experiments on a wholesale cbdc, both for payments and securities settlement. the first nine experiments have been very valuable, and the three experiments underway focus on cross - border payments and tokenised asset settlement. 4 we are keen to pursue our long - standing partnership with commercial banks, to reconcile innovation and security. to conclude, this stay in new york is also the opportunity for me to point out that the statue of liberty, which so forcefully embodies our common values, is the fruit of a tight cooperation between france and america. let this fruitful cooperation carry on throughout the 21st century ; we will be happy to welcome you in paris. i thank you for your attention, and will now leave the floor to olivier vigna, deputy ceo of paris europlace. 1 ecb, macroeconomic projections, 16 march 2023 2 eurostat flash estimate, 31 march 2023 3 bloomberg, 22 march 2023 4 an updated report will be published by the banque de france within next months. you can already refer to our report published in november 2021 for the key findings from our first nine experiments. 3 / 3 bis - central bankers'speeches | 0 |
derville rowland : building trust in central banks and regulatory authorities remarks by ms derville rowland, deputy governor of the central bank of ireland, at the department of public expenditure and reform's annual management conference, dublin, 18 july 2024. * * * good morning everybody. it is a genuine pleasure to be here, to say a few words, but also β much more importantly β to listen and learn. as i will note shortly, we have closely studied the oecd's excellent work, undertaken in conjunction with the department of public expenditure and reform, on drivers of trust in government, as detailed just now by the last presenter. and it strikes me that, through the public service transformation framework, the department of public expenditure and reform is leading the way on one of the key drivers β by delivering demonstrably better public services for citizens. 1 on the issue of trust specifically, i oversee a programme of work in the central bank β open & engaged β that seeks to enhance our engagement with external stakeholders, demonstrate increased transparency and accountability and, in turn, increase trust. it's important i emphasise that i am not an expert in the topic of trust. rather, we are working closely with persons who are experts, seeking to understand what truly drives trust in central banks and regulatory bodies β a question which is relatively underdeveloped in the research literature. i will give a brief overview of the work we are undertaking, the issues we are considering, and our intended outcomes. some of you might recognise what i hold in my hand. currency is one of the central bank's statutory functions, managing the supply of official tender, issuing new notes and destroying old and damaged ones. this is a block of shredded euro notes β about β¬30, 000 worth of notes, give or take. if i were patrick kielty, i'd say there was one for everybody in the audience β but of course, this money is utterly useless in its shredded form. by contrast, a β¬10 note, can be used to buy β¬10 worth of goods or services. the question is why. of course, it's intact β but that's only the starting point. it's just a piece of cotton - fibre paper, after all β albeit one made with special inks and security features. 2 money works because people believe its value will be honoured. in short, it works on trust. 1 / 4 bis - central bankers'speeches and that trust under | with the public β be it a public or private body ; be it the central bank or one of the firms we regulate β the core requirements is to do its job well, serve the public well, and demonstrate as much in an open, transparent and engaged way. 2 / 4 bis - central bankers'speeches which brings me to our updated communications & engagement strategy, and open & engaged charter. our communications & engagement strategy places a much greater emphasis on engagement with external stakeholders. we were influenced greatly by the iap2 ( international association for public participation ) spectrum of citizen engagement, as cited in the department's own work on this issue. 7 at one end of the spectrum, as you know, is " telling " β one - way communication of key messages. historically, the central bank was good at that. we were not so good as you moved further up the spectrum towards genuine two - way engagement β listening as well as telling, and accepting informed views when and where relevant. we had made progress on this since the lessons of the financial crisis, and the communications & engagement strategy seeks to build on this progress. it has four key pillars, namely : culture - we emphasise our communications and engagement culture, working with our people to drive enhanced engagement. dialogue - we emphasise dialogue in our communications and engagement activities. we actively listen, and, where appropriate, reflect community perspectives in our work. reach - we expand our reach and impact by building relations with a wider range of stakeholders, including the public, participants in the real economy, our international peers. insight - we measure the impact and outcomes of our communications and engagement. we adjust and improve based on what we learn. the strategy is rooted in the premise that communication and engagement is a task for the whole bank, guided by our values. we have distilled the strategy into a one - page open & engaged charter β effectively our commitment to our stakeholders. as the governor has noted, " we're seeking to understand and be understood ". implementation of the strategy and charter are still in relative infancy. but we hope β and expect β that our stakeholders will see and feel the change in our engagement in the time ahead. so we seek to deliver on our mandate β and we seek to engage effectively on it β and in doing so, demonstrate trustworthiness. the key question is, will that deliver on our objective of building trust? let's be clear : collectively, we are fighting incredible headwinds on this | 1 |
denis beau : opportunities and challenges of the tokenisation of finance introductory statement by mr denis beau, first deputy governor of the bank of france, at the european and american chamber of commerce event, new york city, 17 january 2023. * * * digitalisation is far from being new in the financial sector, but tokenisation based on dlts may be a new turn. in my initial remarks i would like to explain why, at the banque de france and the acpr, from the standpoint of our financial stability mandate, we have a strong interest in the development of tokenised finance, and how it impacts the policy tools we use to fulfil our mandate. i / the tokenisation of finance is of prime interest for two main reasons : 1 / it is part of the significant transformation drivers of our financial landscape indeed, digital technologies are profoundly transforming finance, ushering in a wave of new players at the crossroads of it and finance, digital assets in new, tokenised form - usually referred to as crypto - assets, for investment and settlement, and new exchange and settlement infrastructures. their combination is translating in activities and services that first swept into the payment sector and are now spreading more broadly. among them, so - called decentralised finance, defi, is emerging as a crypto - based alternative to traditional finance where the provision of services is disintermediated and their governance decentralised, and is enabled notably by permissionless blockchains, smart contracts and decentralised applications ( dapps ). for the time being the crypto ecosystem is by very far not large enough to threaten the dominant role of mainstream finance. but this may evolve going forward, if we look beyond the current setbacks faced by the sector. so we consider that it is important to keep an eye on it. 2 / the second reason for our interest is the two - sided impact the tokenisation of finance might have on the functioning of our financial system, both in terms of efficiency and stability. from an efficiency perspective, a case in point is the recourse to dlt which underpins the development of tokenised finance. it has actually a largely recognised potential to enhance transparency, with a better tracking of transactions and ownership, but also cost - efficiency and availability around the clock. but it brings also a risk of fragmentation of processes, if the underlying blockchains are not interoperable and cannot also smoothly interact with legacy, centralised, clearing, settlement | of the increased resilience it will bring to the financial sector. it is therefore particularly important that all those involved are well prepared and this afternoon's thematic workshop, run by teams from the acpr and the amf, will provide all those concerned with answers to any questions they may have. * * * i will conclude with a quote from benjamin franklin : β there are many ways not to succeed, but the surest way is never to take risks. β fintechs know well how to take risks and in doing so, they also enable the financial sector as a whole to innovate and adapt to technological change. nevertheless, dangers relating to these changes must be known and controlled, so we also need to forge a successful alliance between innovators and regulators. you can count on our commitment to this objective. thank you for your attention. page 6 of 5 villeroy de galhau ( f. ), fintechs : at the forefront of β new frontiers β, opening address of the 4th acpr - amf fintech forum β paris, 16 october 2023. ii france fintech, half - yearly report, 2024 iii europe's markets in crypto - assets ( mica ) regulation iv eu regulation of 30 may 2022 setting up a pilot regime for market infrastructures based on distributed ledger technology. v villeroy de galhau ( f. ), innovation by central banks : the sooner the better, speech delivered at the bis innovation summit β 6 may 2024 vi eu ai act vii through workshops organised with banks and insurers, techsprints that bring together fintechs, data scientists and more traditional players, and research. viii directive ( eu ) 2015 / 2366 relating to payment services. ix framework for financial data access, ( fida ). x villeroy de galhau ( f. ), big techs in finance : a bildungsroman that is far from over, speech at the bis conference, 9 february 2023. xi le developpement des big techs dans le secteur financier : quels risques, quelles reponses reglementaires?, acpr study published on 14 october 2024. i | 0.5 |
shows our assessment of the range of possible final outturns for four - quarter gdp growth rates for the past six years. the current vintage of official gdp growth data is shown by the green line. the centre of the darkest purple band of the fan reflects our view of the most likely path once the revisions process is complete β a β backcast β, if you like. the fan around this path indicates the uncertainty around this projection, with a 9 in 10 chance of the eventual outturn lying somewhere inside it. the width of this fan is based on the historical experience of data revisions. the fan becomes progressively narrower the further back in time one goes, reflecting the reduced incidence of revisions for more distant periods. for the recent past, the most likely path for the mature estimates of growth lies above the current vintage of data, reflecting our judgement that the business surveys and the past history of revisions together make it somewhat more likely that the official estimates for this period will in future be revised up, rather than down. i hope that this gives you a sense of the use we make of business surveys, and business intelligence more generally, in making our regular assessment of the state of the economy each month, before taking our decision on the appropriate level of bank rate. the timeliness of this information is particularly important at the current juncture, when the economic climate is changing rapidly. the global and uk economies have been subject to two large shocks of uncertain magnitude, duration and impact. the first is the continuing de - leveraging in the banking system and the attendant squeeze on the terms and availability of credit. the second is the fairly relentless rise in commodity prices, especially that of oil, driven in part by the robust growth in demand in the emerging economies. these two shocks both depress output growth, though they have divergent effects on inflation. in our may inflation report, our central expectation was for four - quarter gdp growth to slow markedly through this year, reflecting both subdued real income growth and tighter credit supply ( see chart 7, which also includes the same backcast information as chart 6 ). it was then expected to gradually recover through 2009 as credit conditions slowly improved. the corresponding projection for cpi inflation is shown in chart 8 ( note that no uncertainty is shown for the past, as the data for cpi inflation are rarely revised ). our central projection was for inflation to continue to rise during the second half of this year to a peak close to 4 % and then β assuming that oil prices stabilised β | , private consumption or excessive housing investment. to put it bluntly, some euroarea countries were living beyond their means prior to the crisis. to make matters worse, the bursting of the property price bubble in countries such as ireland and spain shook the banking system, which had helped to finance the construction boom on a large scale. negative feedback effects of government support measures included a drastic deterioration in public finances, which intensified the banking crises in these countries even further. this was because banks held sizeable amounts of bonds from their own countries. this sovereign - bank nexus is a particularity of the euro crisis, in which troubled banks and ailing states mutually dragged each other down further and further. above all, this episode shows how quickly the risk assessment of the market participants can change. this is partly because the fundamentals had worsened, but also because the overblown expectations were corrected and have now been reversed. one of the main issues debated by regulators after the crises was therefore how buffers can be created to make the banking system more resistant, not only to such turnarounds in sentiment but also to adverse developments in general, by ensuring a more solid liquidity position or a more robust financing structure. moreover, the severing of the unhealthy ties between sovereigns and banks is still seen by many - and rightly so - as an urgent necessity. at first, however, controversial emergency measures were taken to prevent the crisis from spreading throughout the euro area : in april 2010, greece, which had become heavily indebted, was practically unable to obtain any further loans on the capital markets and had to ask the other 4 / 13 bis central bankers'speeches countries in the euro area for financial assistance. together with the imf, the donor countries provided fiscal support to the ailing country and, as you all know, this was not the only β financial assistance package β that greece was to receive. following this ad hoc measure, the euro - area member states drew up a rescue package to be made available to all countries, which was initially temporary but later became a permanent fixture. a total of five countries ( ireland, portugal, greece, spain and cyprus ) received financial assistance from this fund. in doing so, the euro - area member states, for all practical purposes, established a kind of joint liability. this, in itself, increased the incentive for these countries to run up debt. to prevent this from happening, the esm rescue package may only be activated as a | 0 |
for consumer price index ( cpi ) inflation from the survey of professional forecasters ticked up in february, this measure remained at essentially the same value that has prevailed since 1998. as for inflation compensation derived from spreads between yields on nominal and inflationindexed treasury securities ( known as treasury inflation - protected securities, or tips ), the implied rate of inflation compensation from five years ahead to ten years ahead ( the socalled five - to - ten - year - forward rate ) has risen somewhat since the beginning of the year. does this rise in forward inflation compensation indicate that long - run inflation expectations have risen by a similar amount? my best guess is that much of the rise in inflation compensation reflects other factors. to begin, recall that inflation compensation measured by using tips yields is not the same thing as inflation expectations. rather, movements in inflation compensation reflect not only changes in inflation expectations, but also changes in an inflation risk premium and in the relative liquidity of tips and similar maturity nominal treasuries. 3 to see that these components are distinct, recall that during the period of heightened concerns about deflation in 2003 and 2004, forward inflation compensation rose substantially to an unusually high level amid concerns about an unwelcome fall in inflation ; that earlier episode, in particular, underscores the fact that we must be careful in using the forward rates of inflation compensation as a gauge of long - run inflation expectations. to see this distinction another way, consider a scenario in which inflation uncertainty increased but inflation expectations for additional background, see gurkaynak, sack, and wright ( 2008 ). they discuss the decomposition of inflation compensation into these distinct components and argue that far - forward rates of inflation compensation are too volatile to be pure measures of long - run inflation expectations. did not. in that case, the midpoint of inflation expectations would remain the same, but the range around the midpoint would increase. turning specifically to the recent experience, consider the sequence of one - year - forward rates of inflation compensation β that is, decompose ten - year inflation compensation into a sequence of one - year - forward rates. the one - year - forward rate ending about five years from now has moved up, but the forward rate ending in ten years has climbed more than twice as much. this pattern suggests an important role for factors other than rising long - run inflation expectations in explaining recent movements in inflation compensation as one might suppose that any tendency toward higher inflation would be expected to show through within five | i would note the possibility of a feedback loop between financial market disruptions and deterioration in the real economy that i have emphasized in previous speeches ( mishkin, 2008a, 2008b ). because economic downturns typically result in even greater uncertainty about asset values, such episodes may trigger an adverse feedback loop whereby financial disruptions cause investment and consumer spending to decline, which, in turn, causes economic activity to contract. such a contraction then increases uncertainty about the value of assets, and, as a result, the financial disruption worsens. this development then causes economic activity to contract further in a perverse cycle. inflation and inflation dynamics let me turn now to inflation and inflation dynamics. over the twelve months ended in january, the price index for total personal consumption expenditures ( pce ) rose 3. 7 percent, up from 2. 1 percent during the comparable period twelve months earlier. recently, headline inflation has been pushed higher by sizable increases in food and energy prices ; crude oil prices have surged, and food prices have risen significantly, reflecting strong global demand in general as well as hefty demand in particular for corn for use in ethanol production. even excluding food and energy, recent readings on inflation also have been elevated, although over the past year core pce prices decelerated a touch from 2. 4 percent to 2. 2 percent. the recent observations on core inflation suggest that higher energy costs and the lower exchange value of the dollar may have been sources of upward pressure on core inflation. however, the recent bump up in inflation also likely reflected a reversal of unusually low readings earlier last year for apparel, prescription drugs, and so - called nonmarket items in the index, and the contribution of these items to core inflation is likely to wane. in my view, long - run inflation dynamics are influenced importantly both by prospects for the future balance of aggregate supply and demand, as well as by longer - run inflation expectations ( mishkin, 2007a ). by a range of measures, longer - run inflation expectations appear to have remained reasonably well contained even as recent readings on headline inflation have been elevated. the median expectation of inflation five to ten years ahead in the reuters / university of michigan survey stands in the middle of the range that has been evident over the past couple of years, although the expectation for year - ahead inflation from this same survey has moved up recently, presumably in response to the higher rates of actual inflation. in addition, although the measure of long - run expectations | 1 |
axel a weber : 6th bundesbank lecture welcoming remarks by professor axel a weber, president of the deutsche bundesbank, at the 6th bundesbank lecture, berlin, 4 september 2009. * * * introduction ladies and gentlemen, i am very pleased to welcome you to this year β s bundesbank lecture here in the very heart of berlin. i am particularly grateful that dominique strauss - kahn, managing director of the imf, will be our speaker. my special welcome to dominique and thanks for accepting our invitation. it is an honour to have you here. let me now say a few words regarding both this event and our speaker for today. on the event the bundesbank lecture series has two objectives : first, to provide a high - level forum for public debate on economic and monetary policy issues. second, to raise the bundesbank β s profile in the german capital. today β s gathering marks the 6th anniversary of the lecture series, which started in 2004. the previous speakers were : alan greenspan, jean - claude trichet, tommaso padoaschioppa, ben bernanke and mario draghi. on the subject the financial crisis has been the dominant topic for more than two years now. since the crisis intensified last september, policymakers have been fighting it on many fronts. β’ central banks have acted through massive interest rate cuts and an extremely largescale provision of liquidity, but also through recourse to unconventional measures. β’ national governments have initiated substantial fiscal stimulus packages and bank rescue measures. these extensive efforts are having stabilising effects on the financial markets and the real economy. the global recession is bottoming - out, and strains in banking and financial markets are abating. nonetheless, huge uncertainties remain. the crisis is not yet over and there will, in all likelihood, be further tests ahead. however, as forward - looking decision - makers, we are well advised to take a step back and consider the longer term as well. in this context, i would like to stress two issues : β’ first, we need to reform the financial market architecture to make markets more resilient and less prone to speculative exuberance. in order to achieve this, we have to use the current political momentum. β’ second, credible exit strategies will be needed at the right moment all around the globe. both issues represent important preconditions for a return to sustainable growth and price stability. the issue of credible exit strategies includes winding down | excessive liquidity and rebuilding fiscal balances : without a doubt, fiscal stimuli and bank rescue measures were warranted, but they have markedly increased debt. a substantial fiscal consolidation is needed in order to maintain confidence in fiscal sustainability β all the more so as demographic challenges are looming. in addition, we have to step up efforts to rebalance economic growth. the global recession and the financial crisis may have dampened the level and / or growth rate of potential output, in which case structural reforms have a role to play. so far, the measures i have listed are based on national policies β even though they concern many countries. but there is also a truly international aspect, namely reducing global imbalances. these constituted an integral part of the global pattern of low interest rates and large capital inflows, particularly into the usa. reducing such imbalances implies the continued implementation of policies that redistribute the pattern of global demand, including exchange rate issues, such as the choice of exchange rate regimes and reserve currencies. hence, there is no time for complacency and policy responses to the crisis should not lose momentum! the imf is working hard on several fronts to help its members combat the crisis. it closely tracks economic and financial developments worldwide, analyses risks and gives policy advice to countries and regions. it has significantly expanded lending to assist emes and low - income economies hit by the crisis. it is also intensifying its collaboration with the fsb ( which brings together central banks, supervisory bodies and international financial institutions ) in order to provide an early warning of macroeconomic and financial risks and the actions needed to address them. in a nutshell, in doing so, the imf aims to foster global cooperation, to secure a stable international monetary system and financial stability, and to promote high employment and sustainable economic growth. the current crisis highlights that an international body like the imf is an indispensable part of the international structures which exist for economic analysis, cooperation and coordination. on dominique strauss - kahn dominique strauss - kahn has been the managing director of the imf since november 2007. this position β together with his economic, political and international expertise β makes him an excellent speaker on the global financial and economic crisis. prior to assuming office at the imf, he was a long - time member of the french national assembly. he served both as minister of economy, finance and industry ( 1997 - 1999 ) and as minister of industry and international trade ( 1991 | 1 |
terms of investment in this area. dear colleagues, the new reality has also led to tectonic shifts in the eu economic policy. 3 / 4 bis central bankers'speeches the creation of the eu recovery fund is a historic step towards european economic integration and financial solidarity. the fund earmarks nearly β¬2. 5 billion in grants for lithuania. the resources of the fund will be distributed in the light of the objectives elevated in europe to the top political level : digitalisation and the green deal. the creation of the fund also implies a historic opportunity for us. targeted use of the fund β s resources will not only let us contribute to the european cause. the objectives set by europe provide a good compass if we want to lay a new foundation for a more rapid long - term growth of lithuania β s economy. that is why i mentioned in the beginning of my speech that the issue of investment and innovation is, indeed, timely. we are witnessing structural changes and new plans for investment that can alter the reality of our economic life for decades ahead. today β s discussion has brought together a large number of competent professionals from lithuania and abroad. i believe that our conversation can provide an impetus to make better use of the emerging opportunities. lithuania, meanwhile, begins a new political cycle and, perhaps, some of the ideas that will be put forward will resonate with decision makers. thank you for your attention and i wish you a meaningful discussion. 4 / 4 bis central bankers'speeches | firm conviction that macroprudential policy is an effective tool in curbing systemic risk. let me go back here once again to the lessons of the great recession. it showed us that microprudential regulation and supervision alone are not enough to safeguard the financial system. it became evident that boom - and - bust cycles in asset prices required additional instruments. the crisis was therefore a catalyst for the rise of macroprudential policies β including in lithuania, which was hit particularly hard by the boom - and - bust cycle. house prices dropped sharply, by 30 % in 2009, which was the second worst drop in the entire eu. the housing market crash went hand - in - hand with the broad - based economic downturn β the crisis wiped out almost 15 % of lithuania β s output that same year. i think the magnitude of the shock made us learn our lesson. in post - crisis years, lithuania has been eager to find an effective combination of macroprudential policy measures. in 2011, we were among the first in the eu to introduce responsible lending regulations and establish restrictions on lending standards for housing loans, namely loan - to - value, debt - service - toincome, and loan maturity. moreover, macroprudential capital buffers were introduced as soon as they became available in the european regulation from 2015. to prepare against potential shocks in the future, the counter - cyclical capital buffer rate in lithuania had been raised up to 0. 5 % in 2017 and to 1 % in 2018. all combined, lithuania features one of the most comprehensive sets of macroprudential policy measures in the eu. this makes us a very good case to examine β in practice β the effectiveness of the macroprudential policy framework under extreme covid - 19 conditions. prior to this year, critics would say that our macroprudential set - up was perhaps too wideranging and excessive. but this crisis showed, i believe, that our policy stance was the right one. crucially, it helped prevent a deterioration of lending standards and the build - up of systemic risk in the run up to the covid - 19 shock. the stock of loans to households and house prices were growing in line with gdp and household income. this contributed to the decrease in the nonperforming loan ratio β from as much as 20 % in 2010 to only 1. 7 % in the first quarter of 2020. banks were making profit while maintaining solid capital buffers. as a result | 0.5 |
interact with expected future variables is a challenge that has been featuring prominently in both academic discussion and monetary policy practice in recent years. accordingly, the book by michael woodford β interest and prices β, which is cited frequently nowadays, characterizes the practice of central banking mainly as the management of expectations. this is an aspect of which g. l. s. shackle was already well aware, as we shall see later. having said that monetary policy does have an influence on a variety of interest rates it is not clear a priori whether certain levels of these rates are β adequate β in the sense that they represent prudent monetary policy. this brings me to my second point, the information content of interest rates. inferring the current monetary policy stance from prevailing interest rates requires some sort of benchmark. ideally, this would be a reference level β depending on current economic conditions β with which some particular interest rate could be compared, the difference between the two then measuring how loose or tight monetary policy is. for such a benchmark to be useful for the monetary policy decision - making process, it should satisfy certain criteria, including the following three. β’ first, that benchmark rate should be based on sound theoretical foundations. this would allow a meaningful interpretation of its behaviour and the driving forces behind it. β’ second, the difference between some particular interest rate and this benchmark rate should ideally be a summary variable reflecting the overall pressure on inflation. if this is not possible, it should, at least, contain some predictive power for future inflation. β’ third, the benchmark should be readily computable from observable economic data. ideally, this criterion includes the requirement that these data should be available with sufficient precision at the time they are needed. actually, there is an economic variable which is often claimed to provide such a benchmark role : the natural real rate of interest on which i will focus in this talk. i will start with wicksell β s notion of the natural rate, followed by a presentation of its definition and role in today β s monetary macroeconomics. after that, i will focus on approaches to measuring the natural real rate of interest ( nri ) and its usefulness for the practice of monetary policy. at the end of my remarks, i will try to judge whether the natural rate is able to satisfy all or some of the criteria i have listed. wicksell β s concept of the natural rate of interest the concept of a natural rate of interest | . the situation in the euro area is improving and the end of the crisis is coming closer. however, there is no time for complacency. risks remain, among them reform fatigue and the side - effects of low interest rates. thus, we must continue our efforts to put the euro area back on a sound footing. recently, ecb president mario draghi said that 2012 and 2013 were years of stabilisation for the euro area and that 2014 and 2015 may be years of recovery. if we continue down the path of reform, his expectation will prove correct. but as i said at the beginning, the world has become closely interconnected and so, too, have risks and problems. the prolonged period of low interest rates is as much a global problem as it is a european one. and one thing is certain : interest rates will rise again at some point. however, managing this turnaround will prove a formidable challenge. the recent turbulence in emerging markets made this very clear. but in the end, it was domestic problems and a lack of progress in reforms that made some emerging markets vulnerable. to restore investors β confidence, they should address bis central bankers β speeches domestic vulnerabilities. this might also help to bring down the exchange rate of the euro, as part of its increase was due to capital being reallocated from emerging markets to the euro area. although the turbulence in emerging markets does not have the potential to derail the global recovery it shows how sensitive markets are at the moment. there is still considerable scope for negative confidence shocks. returning to economic prosperity and financial stability requires policy - makers with a stability - oriented mind set β something i do not have to emphasise here at the β bundesbank of the united states β. it also calls for mutual understanding and trustful cooperation β qualities that are promoted by institutions such as the american council on germany. i am confident that we will eventually be able to leave the times of downs, busts and turmoil behind us. and that we will finally bring an end to this seemingly endless crisis. thank you very much. bis central bankers β speeches | 0.5 |
or capital. the fact that the euro area is not considered as a single jurisdiction may result in applying higher capital buffers to euro area g - sibs. while the institutional underpinnings of the banking union do not yet meet the requirements of a genuine single financial market, the creation of the ssm has been a leap forward in the establishment of a coherent regulatory framework. one of the first priorities of the supervisory board has been to promote integration through harmonized implementation of options and national discretions ( onds ), thereby evening the level playing field in the euro area. regarding liquidity requirements, the single supervisory board can grant waivers at national as well as cross - border level on a case - by - case basis. in the current institutional context, where the free flow of liquidity within the same banking group but across border could be impeded, a prudent supervisory approach has led the ecb β s supervisory board to still maintain a floor on the liquidity requirements of significant subsidiaries. overall, the banking landscape still resembles too much a collection of banking systems highly exposed to their domestic economies, with limited cross - border private risk - sharing. at the same time, one should recognise that the banking union is both an objective and a process of fundamental structural changes in the euro area β s financial architecture. the next steps are 1 / 2 bis central bankers'speeches clearly set out in the ecofin roadmap to complete the banking union. it is now urgent to agree on an ambitious timetable for its implementation. 2 / 2 bis central bankers'speeches | peter praet : it is urgent to agree on an ambitious timetable for completing the banking union contribution of mr peter praet, member of the executive board of the european central bank, for the magazine of the eurofi conference in malta ( 5 - 7 april 2017 ), 4 april 2017. * * * in less than half a decade, the eu moved from decentralized banking supervision and resolution to the single supervisory mechanism and the single resolution mechanism, based on the single rulebook. this is part of an overarching effort to create a sound institutional framework for financial integration in europe. there still are a number of legal, institutional and political problems to overcome before a european bank can operate in the banking union as it operates in its domestic market. several dimensions need to be taken into account in institutional design. first, private risksharing. the financial system is a private risk sharing device, but we have learned the lessons from the financial crisis in terms of budgetary costs, when excessive risk - taking by the private sector was eventually borne by the public sector. not to revert to the old world of implicit government guarantees for risky behaviour of financial institutions entails making banks equally liable across countries for the amount of risk they want to take into their respective balance sheet. the general principle of the new european rules such as the bank recovery and resolution directive is to absorb bank losses by bailing - in shareholders and uninsured creditors. the new rules contain sufficient flexibility to deal with exceptional situations where public money may be required to ensure financial stability. second, public risk sharing. a certain level of public risk sharing is necessary to create confidence in the overall financial system. even wellcapitalised banks can fall victim to runs and contagion. this is why central banks act as lender of last resort and fiscal backstops should be in place to ensure trust in the stability of the financial sector. in the banking union, both supervisory responsibility and the fiscal backstop need to be at european level, to underpin durably confidence in the area - wide financial system. just as necessary is the establishment of a european deposit insurance system ( edis ). the current situation, where supervision is common, but the consequences of potential bank failures are still predominantly national, should not last. in such an incomplete framework, national considerations inevitably continue to affect supervisory decisions. this is not without consequences for the incentives for banks to become more european. concrete examples include a lack of fungibility of liquidity | 1 |
. however, due to its monetary policy mandate, the snb β s investment policy is subject to certain restrictions. it has to be designed in a way that helps the snb fulfil its mandate. to a certain degree, the function of our investment policy is to serve monetary policy. what does this mean exactly? objectives in applying its investment policy, the snb has two main objectives. the first is to ensure that its balance sheet can be used at any time for monetary policy purposes. investment policy may not restrict monetary policy in terms of either a possible expansion or a possible reduction of the balance sheet. the investment universe must be designed in such a way that we are able to purchase foreign currency and invest it quickly when necessary. but we must also be able to sell the investments again quickly if monetary policy requires it. the second objective of investment policy is to ensure that the currency reserves preserve their value over the long term. currency reserves serve to build confidence. they are used not just to overcome, but to also to prevent potential crises. currency reserves allow us to intervene in the market if the swiss franc weakens. moreover, irrespective of such extreme situations, we have to manage our currency reserves in the best interests of the country and thus make investments that retain their real value over the long term. implementation so, we pursue two objectives with our investment policy β ensuring the availability of the balance sheet for monetary policy purposes and preserving the value of our currency reserves. page 4 / 10 in order to achieve these two objectives, the snb β s investment policy is guided by a number of criteria. in addition, it has to meet two important requirements. let β s start with these requirements. first, we cannot hedge currency risks against the swiss franc. such hedging transactions would trigger additional demand for swiss francs, thereby increasing upward pressure on the currency. this would run counter to our current monetary policy, which is geared at reducing pressure on the swiss franc. second, in implementing our investment policy, we aim for minimal market impact. this is the fundamental distinction between investment policy and monetary policy. monetary policy measures are deliberately targeted to change market prices. they are intended to nudge monetary conditions in switzerland β interest rates or swiss franc exchange rates β in the desired direction. by contrast, the snb β s investment activity should not trigger any price changes. for this reason, when investing, we always take into account the absorption capacity of the markets. when | our currency reserves has grown. as a result, the balance sheet is more exposed than before to the volatility of the page 6 / 10 financial markets, especially to exchange rate fluctuations. we cannot hedge against these fluctuations because this would lead to an appreciation of the swiss franc. losses, therefore, cannot always be ruled out. what implications does this have? occasional losses, however substantial, are not fundamentally a problem for our monetary policy. as a central bank, we could still operate even if our equity capital were to become negative for a certain period. nevertheless, this is something we are determined to avoid. our policy on provisions and the profit distribution agreement are therefore geared towards ensuring a sound capital base. concluding remarks ladies and gentlemen, to end my speech, let me summarise my main points. we are maintaining our expansionary monetary policy. inflation in switzerland is still low. production capacity continues to be underutilised and the swiss franc remains significantly overvalued. many companies are still facing strong pressure to adapt. the negative interest rate and our willingness to intervene in the foreign exchange market remain necessary to ensure appropriate monetary conditions. these measures reduce pressure on the swiss franc and support economic activity, thereby stabilising price developments. we will continue to exploit our monetary policy latitude where necessary in order to guarantee price stability and support the economy. in so doing, we carefully weigh up the costs and benefits of possible measures. our investment policy ensures that we retain our room for manoeuvre in the implementation of monetary policy, even with an expanding balance sheet. at the same time, we invest the currency reserves with maximum value preservation and minimum market impact. a growing balance sheet, however, inevitably leads to greater fluctuations in annual results : increasing both absolute potential profit and absolute potential loss. it is therefore vitally important that we ensure a sound capital base through our policy on provisions and our profit distribution agreement. overall, the snb continues to face major challenges. we are experiencing an unusually long period filled with difficult tasks and decisions. so let me conclude by taking this opportunity, also on behalf of my governing board colleagues, fritz zurbrugg and andrea maechler, to thank our employees for their hard work and dedication. we also thank you, our shareholders, for your loyalty to the snb and your faithful support. let me also thank our young guests from the kantonsschule solothurn and the gymnase cantonal de nyon for their | 1 |
##u and sander tordoir for their contributions to this article. i remain solely responsible for the opinions contained herein. 2 see standard eurobarometer 88, which was carried out by the european commission between 5 and 19 november 2017. 3 see reinhart, c. and rogoff, k. ( 2009 ), this time is different : eight centuries of financial folly, princeton university press. 4 see jaumotte, f. et al. ( 2013 ), β rising income inequality : technology, or trade and financial globalization? β, imf economic review, vol. 61 ( 2 ), pp. 271 - 309. 5 see oecd ( 2012 ), employment outlook 2012. 6 see devereux, m. et al. ( 2008 ), β do countries compete over corporate tax rates? β, journal of public economics, vol. 92 ( 5 - 6 ), pp. 1210 - 1235. 7 the former represents a textbook view of international trade, whereby gains from trade are unevenly distributed ( e. g. between skilled and unskilled workers ) but can be fully equalised by means of lump sum transfers. for an example of the latter view, see rodrik, d. ( 2017 ), β too late to compensate free trade β s losers β, project syndicate, 11 april. 8 see also bourguignon, f. ( 2016 ), β inequality and globalization β, foreign affairs, january / february, pp. 11 - 15. 9 see jaumotte, f. et al. ( 2013 ), op. cit. 6 / 7 bis central bankers'speeches 10 see baldwin, r. ( 2016 ), the great convergence : information technology and the new globalization, belknap press : an imprint of harvard university press. 11 see badinger, h. ( 2005 ), β growth effects of economic integration : evidence from the eu member states β, review of world economics, vol. 141, no 1, pp. 50 - 78. 12 see rueda - cantuche, j. m. and sousa, n. ( 2016 ), β eu exports to the world : overview of effects on employment and income β, dg trade chief economist notes, issue 1, european commission, february. 13 see chopin, t. ( 2017 ), β defending europe to defend real sovereignty β, policy paper no 194, notre europe β jacques delors institute and robert schuman foundation | all asset portfolios at every moment. that would not be the case if all financial markets would obey to the canons of perfect competition, would process information with full efficiency and would not be subject to overshooting, herd behaviour and price misalignments during significant periods of time. as this does not correspond to the real world, full fair value tends to create what has been dubbed as β artificial volatility β in a company β s earnings, particularly in the case of financial institutions. when profits are artificially inflated, this may lead to higher dividends and bonuses based on the recognition of unrealised gains. the undesirable side effect of such payments would be an effective depletion of capital ; a capital cushion that might be needed at a later stage when the markets correct. in some cases fair value accounting may provide information that is in my view outright wrong even for investors. consider the recent example of a swiss bank. the bank β s recently published first quarter results was only sfr 44m bis central bankers β speeches because the bank had to recognise losses in the range of sfr 1. 5 bn from an improvement in its own creditworthiness that raised the value of its own debt securities. presumably the opposite occurred in some previous year, meaning recognition of profits, when it may have suffered a decrease in its rating. it is doubtful that this, in my view, distorted information provides the right incentives for proper risk management and can indeed be considered to be β useful β, which is a stated objective that accounting should meet in line with the iasb β s conceptual framework. from a financial stability perspective, the impact of β short - termism β and volatility of accounting information can be very detrimental as both may aggravate pro - cyclicality. this means more severe downturns and more acute building up of risks, resulting in a misallocation of resources that lead to an overall welfare loss for society. this is also consistent with the findings of a recent paper by the federal reserve bank of boston1 which also concluded that implementing fair value accounting more broadly may not necessarily provide financial statement users with more transparent and useful reporting. additionally, it stressed that financial stability may be negatively impacted by fair value accounting due to the interconnectedness of financial institutions, markets and the broader economy. the second example where accounting seems to have an impact on market dynamics and cyclicality within the financial system is the provisioning or impairment methodology the main criticism of the β incurred | 0.5 |
do more with fewer workers. investing in capital is one way to do it : with more machinery and equipment, workers can produce more. strategic investments can lead to innovation and technological progress that make machines and processes more efficient. better organization can also play an important role. firms can use the pool of workers more effectively, and workers and managers can improve their performance through education and training. with populations aging in advanced economies, the relative importance of various economies will change and so will the tastes and needs of an aging population. this will require structural adjustments. successful businesses will look ahead and see where new markets are developing β both at home and abroad β and where gaps are in terms of products and services. 6 workers will need to adapt to the changing demands for their skills and gain the qualifications necessary to thrive in a new economy. ultimately, this is about being more productive β also a recurring theme for the bank of canada and others. 7 finding the elusive cure for canada β s lagging productivity remains a pressing concern, and the demographic challenge makes it even more imperative. to put things in perspective, as much as two - thirds of the average income loss due to the absence of adjustment to aging β the 20 per cent figure i mentioned earlier β could be regained if productivity grew at a rate close to its average over the past 50 years, instead of at the anaemic rate experienced over the past decade. but investing more, to increase capital or to boost productivity, will require other adjustments as well. more resources will need to be put aside to finance these investments. as individuals and families understand the challenges of aging, they may realize how much more savings they will need to maintain their standard of living throughout retirement. in this regard, improving financial literacy can help promote these adjustments, through a better understanding of financial products and the important role of private savings. it will also be crucial to ensure that pension funds, and the financial system more generally, channel these savings into long - term productive investments. mark carney, β exporting in a post - crisis world β ( speech to the greater kitchener - waterloo chamber of commerce, waterloo, ontario, 2 april 2012 ). for a literature review, see b. fay and r. dion, β understanding productivity : a review of recent technical research, β discussion paper no. 2008 - 3, bank of canada, 2008. see also m. carney, β the virtue of productivity in a wicked world β ( speech to the ottawa economics association, ottawa, ontario | , 24 march 2010 ). see also t. macklem, β canada β s competitive imperative : investing in productivity gains β ( speech to productivity alberta, edmonton, alberta, 1 february 2011 ). bis central bankers β speeches some of the adjustments will happen naturally. for instance, shrinking labour input will put upward pressure on wages. higher wages might provide greater incentives for workers to acquire more education and training. scarcity of labour and lower costs of capital might offer greater incentives for firms to invest and increase productivity. but none of these challenges will be resolved magically by themselves and something will definitely have to give. implications for monetary policy it is not the bank of canada β s role to determine the extent of adjustments needed from each of us β government or private sector, households or businesses, current or future generations. this depends on our values and goals as a society and this is something that canadians will have to decide on collectively. so what is the bank β s role here? monetary policy cannot, of course, directly influence the aging process or its impact on the canadian economy. but monetary policy can facilitate the necessary adjustments to aging by contributing to a stable and predictable economic and financial environment. in this regard, one of the bank of canada β s main contributions is to deliver low, stable and predictable inflation. this promotes growth, mitigates economic cycles and protects the purchasing power of money. it makes it easier for consumers and businesses to manage their finances and to plan ahead. the stability of the financial system is also essential. as the painful lessons of other countries have demonstrated in recent years, price stability is no guarantee of financial stability, and a financial crisis can significantly hamper a country β s ability to deal with challenges such as an aging population. this is why the bank is contributing to and supporting the g - 20 agenda for financial reform. this is also why canadian authorities, including the bank, will need to remain as vigilant as they have been in the past to the possibility of financial imbalances developing. to maintain price stability and support the adjustments to aging across the economy over time, the bank itself will also have to adjust. that is because demographics affect the way in which we seek to achieve our objectives, most directly in influencing the potential of the economy β the level of activity at which the economy can operate without creating inflationary pressures. monetary policy cannot influence this long - run speed limit. it must obey it. this is why the bank needs to assess, through analysis and | 1 |
eddie yue : keynote speech - international conference on central bank digital currencies and payment systems keynote speech by mr eddie yue, chief executive of the hong kong monetary authority, at the international conference on central bank digital currencies and payment systems, hong kong, 11 april 2024. * * * kar yan [ tam, dean and chair professor, school of business and management, hkust ], dong [ he, deputy director, monetary and capital markets department, imf ], friends and distinguished guests, good morning. introduction welcome to today's conference and a very warm welcome to those who have joined us from overseas. i would like to spend the next 15 minutes to share my thoughts on central bank digital currencies, or cbdcs, and what it means for the future of money and payment systems. throughout history, the evolution of money and its institutional foundations have closely followed the advancements in technology. today, we are witnessing a significant shift in how we view and use money in our increasingly digital world. the way we make payments is changing, with a decline in cash transactions and a growing trend towards digital payments for goods and services. the developments in the online space are even more interesting, with an explosion of new asset classes and transaction protocols. in response, some 130 central banks have been conducting research on cbdcs as an advanced representation of central bank money for the digital economy. the hkma is an early mover in this respect, having started cbdc explorations since 2017 with project lionrock, which has since evolved into project mbridge, one of the more advanced explorations of a multi - cbdc platform globally. digital money in the tokenisation era a key technique that has underpinned and enabled this continued innovation is tokenisation, a process of transforming the rights to an asset into a digital token, represented on say a blockchain. this technique has the potential to enable the interweaving of money and assets, whether in the physical or digital world. this could in turn lead to a major shift in the way we perceive and interact with money and assets. the hkma is well aware of how emerging technologies and innovations like tokenisation can potentially enhance the efficiency, transparency, and security of the transactions for financial assets. we have, for example, assisted the government in issuing two series of tokenised green bonds in the past two years. 1 / 6 bis - central bankers'speeches we have also been working closely with the industry to | mr. carse looks at the importance of the euro for hong kong speech by the deputy chief executive of the hong kong monetary authority, mr. david carse, at a seminar on the euro, held in hong kong on 9 / 11 / 98. introduction ladies and gentlemen, i am very pleased to be here this morning to speak at this seminar on the euro organized by the vocational training council in conjunction with the british consulate - general and the hong kong institute of bankers. with the introduction of the euro less than two months away, this is obviously a good time to hold such a seminar. it is also fitting to hold it in hong kong where our fixed exchange rate system gives us a natural sympathy for its logical extension, the single currency. we are fortunate to have a number of experts on the euro here today to give us the benefit of their views, including my former colleague from the bank of england, john townend. my role in the seminar is to say a few words on the importance of the euro for hong kong. i will also take the opportunity to brief you on some of the regulatory steps which we have been taking to prepare for the euro. the introduction of the euro is a truly momentous change in the global economic and financial landscape. it is not simply a change of currency for the participating countries, though that in itself is a major event. rather, it is a crucial step in the economic and monetary integration of the european union ( β eu β ) countries and the creation of the single market. this change will involve 300 million consumers, 16 % of world gdp and 29 % of world trade. this demonstrates why the euro is an important event for hong kong. as the uk chancellor of the exchequer recently made clear, we are now living in a global economy, in which each economy can directly affect the prospects of every other. where the economy concerned is the size of the eu, its potential to affect other economies - for good or bad - is without question. this is reinforced by the existing trade and financial links between hong kong and the eu countries : β’ the eu ranks 3rd among hong kong β s trading partners in the world ; β’ in the first eight months of this year, the eu accounted for hk $ 245 billion or 13. 2 % of hong kong β s total trade - much of this represents entrepot trade between the eu and mainland china ; β’ the eu is the largest external investor in hong kong, accounting for over hk $ 200 billion or 34 % | 0.5 |
macroprudential policy has further supported the resilience of the financial system in europe. as part of its mandate, the esrb assesses systemic risks in the eu, and, where appropriate, issues warnings and recommendations. slide 4 : key risks for eu financial stability in our recent systemic risk assessment, we conclude that while disinflation in the eu is on track, financial stability risks remain elevated amid heightened geopolitical risks and the still fragile recovery of the eu economy. in the latest ecb projection, growth outlook was revised down, and the risks to the growth outlook are tilted to the downside. in particular, we have to be aware of both the direct and indirect impacts of current geopolitical risks on the eu financial system. geopolitical events may directly impact financial markets by increasing volatility, affecting capital flows, exchange rates, and credit spreads. indirectly, they can disrupt global trade and increase commodity prices, challenging households and businesses in the eu. in the financial markets, the risk appetite has been unusually strong, especially in the context of high macro - financial uncertainty. the abrupt, albeit short - lived, market correction in early august showed how sensitive this can be. if repeated, the vulnerabilities in the non - bank sector could amplify adverse market dynamics. moreover, vulnerabilities in the banking sector could resurface, especially if the first two risks were to materialise. this would increase credit risks and tighten funding conditions at the same time. in any case, it continues to be essential to maintain the resilience of the eu financial system. ensuring adequate resilience and effective but flexible regulation is one building block in promoting european competitiveness, along the lines of the recent report by mario draghi. as part of the efforts for more investment and higher productivity, it is crucial to advance the savings and investment union β or the excapital market union β and to complete the banking union. slide 5 : esrb's members reflect on its future β atc survey fifteen years ago, the global financial crisis revealed weaknesses in eu banking supervision. it was clear that major changes to financial supervision were necessary to help prevent and mitigate future crises. thus, commission president jose manuel barroso set up an independent high level group on financial supervision in the eu to make recommendations on strengthening european supervisory arrangements, covering all financial sectors. the high level group, chaired by jacques de larosiere, was given a very broad mandate | those for the banks. this is important not only for financial stability, but also for ensuring a solid basis for the saving and investment union. let me underline the critical importance of data β access to data, better use of data β in the analysis of non - banks. to understand the systemic risks related to nbfis, we simply need better data to be able to identify and map the vulnerabilities and interconnections. only once that's done, we will be able to capitalize on more advanced methods, such as system wide stress - testing, to locate the vulnerabilities in the system. our future challenges include not only the complexity of the evolving financial system, but also the increased speed of its operations. due to digitalisation, financial operations are becoming ever faster. it will be even more important that the esrb is able to perform risk analysis and policy evaluations in a timely manner. dear friends, slide 6 : three priorities in the way we work before concluding, i'd like to highlight three priorities for the way we work in the coming years that i find critical for the esrb. we should : 1. enhance our analytical capacity by making better use of data and research. 2. bring into use new analysis methods and technologies. 3. 4 / 6 bis - central bankers'speeches 3. focus on our core activities. let me just elaborate on these a little more. slide 7 : analysis based on data and research β a key priority 1. active development of data analytics and research - driven analysis is nothing new at the esrb as such. but i firmly believe that the importance of analysis which is based on data and research cannot be overemphasized in our times, where disinformation is being used as a weapon. in today's world, there is a great risk that genuine information will be crowded out. data is the gold or oil of our digital world today β it is a valuable resource and a necessary basis for high - level analysis. following the global financial crisis, the reporting requirements for financial operators were increased. financial supervisors and central banks consequently also have a duty to use the new data effectively and efficiently. the challenge for the esrb is that not all relevant data are readily available to it. the rules governing the esrb's access to data can be broadly divided into two types : ex ante access, whereby the esrb has access to data on a regular, ongoing basis, as soon | 1 |
β entered the lexicon of modern central banking. for those few who are unaware, section 13 ( 3 ) was added to the federal reserve act during the great depression. it gave the board of governors broad authority to permit a reserve bank to lend in exigent and unusual circumstances provided that the reserve bank was secured to its satisfaction. prior to the crisis, section 13 ( 3 ) loans had last been made during the depression, to such enterprises as a typewriter manufacturer and a vegetable grower. 4 fed policy makers and their advisors pulled section 13 ( 3 ) back off the shelf, perhaps brushing some metaphorical dust off its cover. in 2008, loans made pursuant to section 13 ( 3 ) facilitated jpmorgan chase β s purchase of bear stearns. loans under 13 ( 3 ) also prevented the potentially catastrophic failure of american international group ( aig ). innovations under 13 ( 3 ) also underpinned many of the fed β s broad - based facilities to provide market liquidity. the fed created a variety of facilities under 13 ( 3 ), giving rise to an alphabet soup of new acronyms. 5 those facilities provided liquidity to different segments of our economy, ranging from primary dealers to issuers of commercial paper. their broader purpose, however, was to facilitate the availability of credit to businesses and households through on - lending. not all of the fed β s responses involved lending, either under section 13 ( 3 ) or at the discount window. on the supervisory side, the federal reserve β s supervisory capital assessment program ( scap ) ( the β stress test β of the 19 largest us financial institutions ) addressed uncertainty about their ability to weather additional losses. the results were disclosed publicly in a significant departure from standard practice to keep supervisory information confidential. transparency, as well as the availability of a government backstop, encouraged confidence in us institutions. of course, the fed β s actions did not happen in a vacuum, but rather in the context of other actions taken by other regulators and congress. perhaps most notably, in october 2008, congress passed the emergency economic stabilization act. that statute allowed, among other things, treasury to create the troubled asset relief program to inject capital into financial institutions. in addition, the federal deposit insurance corporation expanded its guarantees of bank liabilities under the temporary liquidity guarantee program. the federal housing finance agency placed fannie mae and freddie mac into conservatorship. non - us authorities responded to crises in their own jurisdictions. and really this | that may be worth reassessing. one place to start is with regulations pertaining to smaller banks. people of all political stripes tend to agree that congress and regulators should reassess the effect that regulations have had on these firms and whether such regulations are commensurate with their level of risk. for these smaller banks, whose failure will not directly inflict large costs or stress on the broader financial system, the regulatory and compliance requirements should be reconsidered. indeed, banking agencies have announced many proposals for small banks, 11 including one that would simplify the capital rules for such banks consistent with their risk. 12 with respect to systemically important firms, i think it would be terribly myopic to forget the crisis. there have been a number of different types of changes proposed with respect to these firms. today, i β d like to focus on the proposals relating to resolution regimes. congress established ola when memories of lehman brothers β failure were fresh. it bears repeating that congress did so after facing the terrifying realization that the lack of a credible 4 / 6 bis central bankers'speeches resolution mechanism for dealing with failing systemic firms left only bad choices, such as lending into a run, bailout, or the collapse of the financial system. over the past several years, there have been efforts in congress to repeal ola and create a new, bespoke process for systemically important firms under the bankruptcy code. that process would largely mimic many of the features of the fdic β s single point of entry strategy intended for use in an ola proceeding. those efforts have picked up steam this year with the passing of two different bills in the house of representatives. 13 from my perspective, there are attractive aspects to both ola and the bankruptcy code. ola is largely an administrative process that has the benefit of agility. it is administered by the fdic, which will already have insight into the institution though the living will process. the fdic also communicates with foreign regulators regarding systemically important firms. ola has particular advantages in the context of a cross - border resolution, which means in this day and age the resolution of pretty much any systemically important institution. us regulators have established relationships with their foreign counterparts, and resolution processes similar to ola now exist in many globally important financial centers. this familiarity can facilitate crossborder cooperation and coordination in the event of a failure of a systemically important institution, and stem competing insolvency proceedings in multiple jurisdictions and | 1 |
after we have successfully concluded this current programme at the end of january 2013. bis central bankers β speeches the ecb will coordinate the programme from frankfurt am main and has dispatched a resident programme coordinator who will remain in belgrade until it is completed. the national central banks have identified their respective experts on supervision, foreign exchange reserve management and payment systems, to give just a few examples. the national bank of serbia has also made very strong commitments, assigning substantive resources to the programme and its coordination. i wish all the experts and managers involved success in achieving the ambitious targets of this two - year central bank cooperation programme. many thanks and good luck to you all. bis central bankers β speeches | 1939 concept of β secular stagnation β with interest rates staying permanently at lower levels and economic activity remaining subdued. there are many such examples. for instance, our imperfect understanding of the current slope of the phillips curve and the trends in productivity is one of the reasons why the ecb has been reluctant to complement its forward guidance with numerical triggers. i do not share this pessimism but i think it is of great importance to understand to what extent this development is driven by long - term forces, such as demographic changes or lower potential growth, and to what extent it is driven by medium - term forces, such as changes in risk aversion and the perceptions of macroeconomic risks in the wake of the recent crisis. frictions and rationality institutional details and frictions, both on the side of market participants and regulatory institutions, have an impact which is difficult to detect in normal periods. interbank markets, for instance, used to be seen by academics as a somewhat dull topic before the crisis, so that little was known about their functioning. both in europe and in the united states, they have been at the centre of recent policy debates, generating a welcome crop of new research, to which mars has been contributing. the dominant β rational expectations β modelling paradigm in economic research postulates strong assumptions about human decision - making, implying, for instance, that economic agents are always able to assign sensible probabilities to alternative outcomes. clearly, this characterisation of human decision - making stands in stark contrast to our own recent experience. we need to understand how panics and bubbles can emerge from psychological biases. the nobel prize co - awarded to robert shiller last year will certainly encourage more research in this direction. while much progress has been made on studying notions such as knightian uncertainty, sentiment, confidence or sunspots, more work is probably needed before they can be part of our standard modelling toolbox. a challenge is of course to come up with tested and robust behavioural theories. another important departure from rationality that is of key practical concern is how simple behavioural rules adopted by market participants in normal times can lead to entirely different outcomes or even to market meltdowns in crisis periods. agent - based models are a promising way to look at these problems, but they need to be developed in close cooperation with practitioners and policy - makers to take the proper behavioural rules as inputs. on both issues, what policy - makers need above all is more work integrating these approaches into richer | 0.5 |
andreas dombret : facing up to the original sin - experiences of establishing a local currency bond market opening remarks by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the " local currency bond markets " conference, pretoria, 8 march 2018. * * * 1. introduction dear governor lesetja kganyago dear deputy governor daniel mminele ladies and gentlemen i am very honoured to be here today at the conference centre of the south african reserve bank ( sarb ) in pretoria. this conference is another symbol for the close partnership between the sarb and the bundesbank. this partnership, together with our joint chairmanship of the g20 africa advisory group, gave the impetus for this event. the africa advisory group coordinates the g20 β compact with africa β initiative that aims at promoting inclusive growth and investment in africa. i am convinced that this conference on local currency bond markets will provide valuable insights on how the initiative β s goals can be reached. let me start with a reminder of why we are all here today. true, we have come to talk about local currency bond markets. but why are they important for a country β s financial system? time and again, throughout the history of economic development, emerging economies have given in to the temptation to over - borrow abroad, which often gives rise to a significant currency mismatch on their aggregate balance sheets. risky borrowing in foreign currencies can be tempting because it is often cheaper than raising funds at home β last but not least as foreign creditors accept lower interest rates when the exchange rate risk is born by the debtor. in blunt terms, over - borrowing abroad is called the β original sin β of an emerging currency because β although it comes at low cost in good times β it may cause serious damage to the economy when there is an abrupt currency shift. in contrast, the existence of a functioning local currency bond market can lower financing costs at home and thereby provide the incentive to reduce foreign currency exposure. in the face of volatile global capital flows, it can therefore help making emerging economies crisis - proof. what is more, sound local currency bond markets support the development of a country β s financial sector and can channel foreign capital into an emerging economy, a valuable source of long - term financing for both the government and the private sector. now, some of you may be thinking : why is a german discussing these issues β given that german sovereign bonds count internationally as β safe haven β investments and are | euro area exports should continue to benefit from strong world economic growth. accordingly, we expect continued relatively moderate economic growth in the euro area in 2005 and 2006, as reflected in the ecb staff projections published earlier this month, which are broadly in line with available forecasts from international and private sector organisations. nevertheless, the outlook for economic activity continues to be surrounded by uncertainties. on the external side, high and volatile oil prices and persistent global imbalances pose downside risks to growth. as regards exchange rates, we confirm our position β expressed when the euro rose sharply β that such moves are unwelcome and undesirable for economic growth. on the domestic side, there are uncertainties surrounding the evolution of private consumption, while the favourable financing conditions and the recovery in corporate earnings could lead to higher investment growth than is currently projected. turning to price developments, the evolution of oil prices and increases in indirect taxes and administered prices have had a significant impact on consumer price inflation in the course of last year. for 2004 as a whole, annual hicp inflation was 2. 1 %. more recently, the annual inflation rate declined quite substantially, falling to 1. 9 % in january from 2. 4 % in december, largely a result of base effects from developments in indirect taxes and administered prices in some countries. eurostat β s flash estimate of annual hicp inflation in february was 2. 0 %. in the coming months, annual inflation rates are likely to fluctuate around 2 %. looking further ahead, there is still little evidence that stronger underlying domestic inflationary pressures are building up in the euro area. wage increases have remained moderate over recent quarters and this trend should continue in the context of moderate economic growth. accordingly, the ecb staff projections put average annual hicp inflation between 1. 6 % and 2. 2 % in 2005 and between 1. 0 % and 2. 2 % in 2006, broadly unchanged from the eurosystem staff projections published in december. this is consistent with forecasts recently released by international and private sector organisations. however, risks to price stability over the medium term remain on the upside, requiring continued vigilance. such risks continue to be associated mainly with oil price developments, uncertainty regarding future increases in indirect taxes and administered prices, and potential second - round effects stemming from wage and price - setting behaviour. in this respect, developments in long - term inflation expectations need to be monitored closely. our monetary analysis also calls for vigilance regarding | 0 |
effective, but may even turn out to be counterproductive. and there are two reasons for that : 1. given that the sovereign - bank nexus works in two directions, any argument about alleuropean responsibility for deposits is off the mark. how is the euro area community, represented by european supervisors, supposed to assume responsibility for bank failure and give access to funds if they did not have an instrument in place to address sovereign risk beforehand? 2. with additional safety nets in place, incentives to act prudently and responsibly decline. also, these safety nets will make reforms of high - priority issues less pressing. this argument is valid not only for edis, but also for reforms of other mechanisms functioning as safety nets in order to stabilise the financial sector or the economy, like the esm. maintaining reform pressure and reducing risks before establishing a common safety net certainly extends beyond eliminating current privileges for sovereign bonds in banking regulation. it pertains to all excessive risks currently identified in national banking systems. allow me to comment on one of these risk categories later in my speech, namely on large amounts of nonperforming - loans in banks in several member states. these remarks do not mean that i am dead set against a reform of deposit insurance. i am talking about putting the reforms in the right sequence. so my first point is that if we want to improve the structural design of the euro area, we need to address the sovereign - bank nexus β amongst other things β before we create a european deposit insurance scheme. in other words : let β s do first things first. 2. no painless way out my second proposition is this : however we seek to rectify an imperfect financial architecture, it won β t be painless. overhauling the less - than - ideal statics of a financial construction isn β t a simple task, as you see ; it won β t happen soon, and it will involve stress. but there is no easy alternative to it. this can be seen if you take a look at discussions surrounding what are known as sovereign bond - backed securities, or sbbs for short. there is no question that this financial instrument is interesting from an academic point of view. but are they interesting as a policy option given the weaknesses of our current financial architecture? some proponents have argued that sbbs could serve as a helpful financing tool, for example because they could automatically diversify sovereign risk and at the same time β supposedly β involve no collective risks | whatsoever for the european community ( even in times of financial stress ), i am not convinced, however. in order for sbbs to function properly, quite a number of factors have to be considered. for example, collective risks which might emerge due to bridge financing or also guarantees need to be precluded. but i won β t go into all the constructional details. let me jump straight to the key argument with respect to the sovereign - bank - nexus : sbbs will not function without the aforementioned reforms of sovereign exposures in the regulatory rules for banks. so this is a necessary precondition. given the current privileges for sovereign bonds in capital requirements calculations of banks, they have strong incentives to buy these bonds directly. for sbbs, there would not be any such regulatory privileges and thus a market for sbbs would not emerge. 3 / 6 bis central bankers'speeches now some have called for a comparable privilege of sbbs in banking regulation. but this is no option, either : if we want regulation to be risk - adequate β which means it needs to take into account the non - zero risk of government default β this has to pertain to any financing instrument for sovereigns, including sbbs. otherwise we would have merely relocated financial stability risks. these securities, then, do not offer an easy way out. 3. more than rules : rigorously target high - priority risks sometimes it seems that all that representatives from german institutions have to say about europe is that it needs to adhere to a strong set of rules, and that rules need to ensure that those who are in control of risks and opportunities also bear the consequences. i have two things to say about this. to start out with : i am a strong proponent of these ideas. as abstract as they may sound in a speech, a lot of empirical evidence and day - to - day wisdom went into them. the second is : europe β s future does indeed require more than a well - balanced architecture. in the following, i will concentrate on those other fields. first and foremost, we have to rigorously target the risks we are already aware of. and those who are familiar with ssm supervisory priorities will know that i am about to speak on the issue of non - performing loans, or npls for short. my point here is this. the european supervisors should, in my view, not hesitate to vigorously pursue this issue and to address it as soon as possible. not only because it remains a threat to the | 1 |
it seems obvious that there is no universal standard β or β magic number β that is out there. what is clear though is that as you make your decisions on what you deem is the right size for you, you must continue to be guided by the bsp β s regulations on the appropriate governance structures and risk management frameworks. in the process of determining the scale and scope of your operations, it is my hope that you will be able to deliver the needed financial services to your clients at reasonable terms β just as it has been envisioned in the rural banks act. what the future brings rural banks must remember that you are yourselves stakeholders in the community. you are, in effect, a financial consumer β as an institution and as individuals β in the community that your bank also operates as a financial provider. as i close, i want to inform you that the bsp has spearheaded the formulation of a national strategy for financial inclusion, the national strategy for financial inclusion ( nsfi ). we are set to launch this in july this year. it β s a multi - sectoral endeavor that sets out the coherent framework on how all our efforts, those of the public sector and the private sector, can be closely and systematically coordinated to bring about financial inclusion that leads to broadbased and inclusive growth. rural banks are an integral part of that strategy. it is a great opportunity. i urge you to closely engage with us on this grand endeavor. friends, change is everywhere and perhaps none more so than in the present times. you talk of a β new vision β because we need to accept that there is a new normal in banking. it is still very much a business activity but one which is held to a very high social standard. this important qualification is necessary to protect the financial consumer from conflicts of interest, to instill corporate governance standards, to enforce global best practices for managing risks and ultimately, to sustain public trust. we have seen during the global crisis what a banking market becomes in jurisdictions where public trust becomes eroded. it would be an over - simplification to argue that their problems are unique and could not arise in asia or in the philippines. these problems have not manifested themselves here because we took early steps to prevent the build - up in risk and we continue to invest in a regulatory environment that nurtures your creativity as product providers while mitigating the ill effects of unwarranted risks. there is a need for β one direction β to strengthen commonality in purpose in addressing | international agreement known as basel iii, which establishes minimum standards for internationally active banks around the world ; the united states, however, has gone even further to raise capital requirements for the largest firms. third, large firms are now required to show that they can continue to operate safely and serve their customers in stressful conditions similar to those that occurred during the crisis, an exercise known as stress testing. fourth, under the dodd - frank wall street reform and consumer protection act ( dodd - frank act ), congress authorized a new regime, known as β resolution, β to manage the failure of large firms in an orderly manner and reduce the chances that such a failure would threaten financial stability. the congress empowered the fed and the federal deposit insurance corporation ( fdic ) to require large firms to develop resolution plans. the fifth and final regulatory change i want to mention is that the dodd - frank act also gave the federal reserve more explicit responsibilities for safeguarding financial stability. as applied to large institutions, more stringent capital requirements and the other regulatory changes i have just described are intended to promote the stability of the financial system. in addition, to address the fragmentation of responsibility for financial stability across different agencies, the fed is part of a new interagency body, the financial stability oversight council, which helps u. s. regulators work together more effectively to better promote the stability of the financial system. enhanced supervision along with the additional tools provided by these regulatory changes, the federal reserve has fortified its supervision of large financial institutions. we significantly enhanced the manner by which we assess whether these firms have sufficient capital and liquidity and are meeting new regulatory requirements in this area. we have substantially raised our expectations for how well the firms we supervise should be managing their risks, maintaining internal controls, and exercising governance. and we have reorganized our supervision of large financial institutions to increase the quality, consistency, and range of perspectives brought to bear on supervisory strategy and decisionmaking. one of the most important enhancements to large bank supervision since the financial crisis is our assessment of whether large institutions are holding enough capital to deal with stressful financial conditions. the program includes stress testing and a yearly review of how firms are planning their future capital needs. 7 the latest results will be disclosed in the coming days. capital stress testing for banks is not new but the federal reserve has employed it much more extensively since the crisis. 8 using information on a bank β s finances and operations, these tests gauge how a firm β s capital position would be affected by | 0 |
in addressing the deficiencies identified in the mer. technical compliance with the fatf recommendations, however, is not sufficient. mauritius must also demonstrate that its aml / cft systems and measures are effective. the fight against financial crime and aml / cft is one that requires the involvement of all stakeholders. as a means of fostering closer collaboration amongst local authorities, two new mous were signed on 19 september 2018 among the financial services commission ( fsc ), bank of mauritius and financial intelligence unit ( fiu ) on the one hand, and the fsc, fiu and independent commission against commission, on the other hand. these two tripartite mous add to the gamut of existing bilateral and multilateral mous. in terms of coordinated actions with foreign authorities, we have, as of date, signed memoranda of understanding with some 17 supervisory authorities for sharing of information and collaborative actions. the bank of mauritius has also enhanced its internal supervisory framework on aml / cft by setting up a dedicated aml / cft team. we have upgraded the aml / cft off - site monitoring supervisory toolkit through a revision of reporting requirements by banks. further, with technical assistance from the world bank, we are implementing a risk - based supervisory framework which includes a separate module for ml / ft risk. significant progress has been achieved and we expect to conduct a series of pilot run exercises shortly to test the frameworks. banks, on their part, are expected to migrate to risk - based internal audit framework to complement the risk - based supervisory framework. concurrently, the bank of mauritius is working towards implementing a central kyc registry to facilitate the kyc procedure of banks. ladies and gentlemen, you will appreciate that no matter how elaborate, effective and comprehensive our regulatory and supervisory framework is, there will always be some element of residual risk that has to be managed by banks. let me also underscore that the fight for a clean and attractive international financial centre like ours is the concern of one and all, and is an ongoing process. your input is and will remain valuable as we continue to modernize our regulatory framework. we shall continue to work towards a financial system that is as safe as possible. you will remain a privileged partner in that process as we cannot achieve anything of substance without your cooperation. we look forward to continued collaboration with all of you as usual. with this final thought, i hope that by the end of today β s academy, we will have | and efficiency gains. 23 based on deloitte β s report released in september 2016 titled β connecting global fintech : hub review 2016 β. 6 / 7 bis central bankers'speeches 7 / 7 bis central bankers'speeches | 0 |
are kept in check and productivity enhancements are achieved. the role of chartered accountants from the above it is clear that we face many challenges in the years ahead of us. the global recovery may continue to take several years before output gaps are closed. domestically we have significant structural challenges to overcome, but i believe that all of us, including the accounting profession, have an important role to play in this regard. the profession can make a tangible contribution towards ensuring that our businesses and public sectors are appropriately capacitated to deal with their many challenges, using the bis central bankers β speeches skills and knowledge that members acquire during their academic and practical training, including analytical capability, professionalism, integrity, understanding complexity, etc. it is also important that members of the profession respond positively to the call of public service. members should not merely become service providers to the public sector, they should also join the ranks of the public service in order to address the shortage of skills within that sector. in this context, they have much to contribute to root out corruption, design monitoring and early warning systems so as to ensure improved service delivery, institute controls that would minimise instances of wasteful and fruitless expenditure, and design reports so that politicians, officials, and other stakeholders have access to accurate and timely information. this should contribute to improved decision - making and policy outcomes. in time, the baton will pass to you and you will assume leadership positions both within the professional service firms, but also in the private and the public sectors. i do hope that you will do your best to strive to uphold not only the professional and ethical standards that is expected of you, but that you would in fact improve it further and ensure that in the process you tirelessly work towards both transforming the profession but also ensuring that it grows in an inclusive way. conclusion in order for us as a nation to move forward it is important that we all own up to the responsibility that we have to ensure that south africa reaches its full potential and, that it thrives and succeeds at all levels. as newly qualified chartered accountants many of you have a particular contribution to make to improve our competitiveness and performance, both domestically and within the global context and in that way help to improve the lives of all our people. once again, allow me to congratulate you on your outstanding achievement and be assured that we will be closely watching your progress. i thank you. bis central bankers β speeches | to the 1. 2 per cent recorded in the third quarter. despite this improvement, the growth rate continues to remain significantly below the potential output growth rate of 3. 5 per cent. the manufacturing sector recorded a robust growth rate of 5 per cent in the final quarter of 2012. however, the primary sector contracted for a second successive quarter and this remains a matter of some concern. although the primary sector have shrunk significantly in the last three decades and now contribute less than 12 per cent to gdp, the agricultural and mining sectors remain important due to their significant contribution to exports, and hence the balance of payments situation. these sectors furthermore have relatively higher labour absorption rates. the picture is however not only doom and gloom. south africa β s growth rates are expected to increase to 2. 7 per cent in 2013 and to 3. 7 per cent in 2014. while seemingly not very robust growth rates, it is important that these are considered against the challenging global economic climate. the current account deficit widened in 2012, to an average of 6. 3 per cent of gdp compared to 3. 4 per cent of gdp in the prior year. south africa β s trade volumes in 2012 declined to below pre - crisis levels β resulting in the largest deficit since 2008. export volumes have unfortunately not responded fully to the significant rise in export prices which have more than doubled over the last decade. the deterioration in south africa β s international trade has in turn acted as a drag on domestic economic growth. recent analysis by the south african reserve bank shows that south africa β s export performance has been affected by, inter alia, the following factors : ( i ) the decline in the contribution of the gold mining sector ; ( ii ) binding constraints related to infrastructure bottlenecks ; ( iii ) skills shortages and mismatch ; ( iv ) competition from low - cost production bases which are export oriented in many emerging market economies ; and ( v ) sluggish growth in south africa β s key trading partners. if we therefore wish to remedy the current account deficit in the longer term we would need to address these factors comprehensively. it is therefore clear that we would need to undertake significant structural adjustments, improve skills and human development, and labour productivity to name but a few in our quest to grow exports and in the process contribute towards lowering unemployment levels. the recent depreciation in the exchange rate provides an opportunity for south african exporters to become more competitive. however, a sustainable improvement in competitiveness requires that cost pressures | 1 |
zeti akhtar aziz : advancing women β s leadership in public life speech by dr zeti akhtar aziz, governor of the central bank of malaysia, at the women in leadership forum β power sharing in the public sector β, kuala lumpur, 22 february 2011. * * * introduction in this twenty - first century, it is human capital rather than physical capital that will define performance and progress. women represent half of the world population and therefore half the potential resource that can drive such performance. this is reinforced by the more recent trend that increasingly, the majority of those with college education are women. increasingly therefore, this group represents a more significant resource potential that can rise to leadership positions. in emerging economies, where such high powered talent is scarce, gender has not been of an issue. women have risen to leadership positions based on their merits and capabilities. women in malaysia have certainly made significant strides in their participation in all segments of the malaysian economy and have demonstrated their ability to lead and to succeed in both the public and private sectors. it is my honour to be here today to speak at this women in leadership forum on the topic on β advancing women β s leadership in public life : power sharing in the public sector β. in asia, in particular, women have risen to key positions and have been given the opportunity to contribute to the nation β s progress and development. in an age of greater demands for performance and in an environment of increased scrutiny and transparency, the transition to such leadership positions has not been based on gender. indeed, it is based on the capability as administrators, policy makers and thought leaders. power sharing is therefore the shared power to contribute to the nation rather than on the power that is wielded. my presentation today will therefore start on the role of the public sector and its accountabilities before discussing women and leadership in the public sector, its challenges and some strategies for success. accountabilities of the public sector the role and accountabilities of the public sector differs markedly from the private sector. unlike in the private sector, financial measures are generally not the indicator of the performance of agencies in the public sector. in addition, actions taken by the public sector have far reaching implications on the economic well being of the public at large and entire spectrum of businesses. such actions may even have implications on other countries given the greater international interdependence that prevails in the current environment. the responsibility and accountability is therefore immense. history has shown that | required, however, with regard to the time horizon over which this is realized. " 8 that might involve extending the usual horizon for achieving the inflation target in response to an asset - price shock, in return for greater financial, economic, and inflation stability over a somewhat longer horizon. the challenge would lie in making such judgment calls, calls that become even more difficult for an open economy such as ours when the asset - price shock comes from abroad. here, our flexible exchange rate would be helpful, by performing its usual role as an important shock absorber. m. carney, " some considerations on using monetary policy to stabilize economic activity " ( presentation to a symposium sponsored by the federal reserve bank of kansas city, jackson hole, wyoming, 22 august 2009 ) : p. 3. see " renewal of the inflation control target, background information, " op. cit., p. 9. how central banks should respond to asset prices is receiving considerable attention in light of the experience of the past two years. 9 more discussion and debate are called for, drawing on those experiences and on what research can tell us. 10 issues of broader public policy and the economy let me now turn to public policy more broadly, and to the economy. there are two elements relating to public policy that i wish to touch on briefly, since both have taken on heightened importance as a result of the global financial crisis. the first is the importance of policies that promote flexibility and an innovative business environment. as we have often seen, most recently during the global financial crisis, many adverse shocks to the canadian economy come from abroad. we must be able to adapt and adjust in response to these developments. sound macroeconomic and financial policies are very important, but we also need policies that enable the efficient shifting of resources from one sector to another and that provide incentives for businesses to be nimble in developing new products and markets as trends change in global demand. the second element relates to the importance of a rotation of global demand to address global current account imbalances. fundamentally, this means that, over the coming years, more u. s. economic growth must come from net exports, and more chinese growth must come from domestic demand within china. the united states will remain canada's major trading partner, but we increasingly need to consider other markets outside north america as destinations for canadian products. here, i'm referring not only to china, and not only to commodities. canada has a comparative advantage in many other areas β for | 0 |
by excess liquidity. we all know that in the past year, financial institutions have had to cope with the implementation of a new accounting standard and with the debt restructuring of barbados domestic government securities. however, the sector has proven resilient with capital remaining above statutory requirements. your foray into corporate lending provides an opportunity for you to diversify your business. at the same time, it presents a challenge, as you compete with brands well established in this area, with larger capital bases and access to mature risk management systems. your goal must be to create a niche area for products and quality of service in the financial services market that will differentiate you from your competitors. your challenge will be to attract small and medium size credits, to provide financing and where possible, advice to enable these entities to grow and flourish. your expansion occurs at a time when the barbadian financial industry is gradually evolving, with an increasing push to offer new types of financial products and services. technology is driving developments with increasing emphasis on on - line banking and digital payment solutions. i believe that these developments will enhance efficiency and productivity and therefore benefit the economy. already we can see a future in which traditional instruments such as cheques and cash will play second fiddle to technological transfers of money within the public and private sectors. these technological innovations will impact individuals, corporates, financial institutions and government, and i encourage you to align your systems to cope with the emerging trends. the adoption of new technologies is a positive development for a small economy like ours with highly concentrated markets. it creates the potential for increased competition, an expansion of the range of products and services available to the public and an improvement in the public β s access to affordable financial services. the central bank is therefore committed to fostering a regulatory environment that will enable existing or new firms to expand and improve the quality and range of financial products and services. in closing, let me reiterate that the opening of this branch provides an opportunity to implement new approaches and offer financial solutions that can add vigor to the existing credit market. on behalf of the central bank, i offer sincerest congratulations to ansa 2 | page financial holdings ( barbados ) ltd and the management and staff of consolidated finance company limited for the demonstration of the commitment and faith in the resilience of the barbados economy. best wishes for the future. thank you. 3 | page | in determining aggregate outcomes during crisis, as well as in specific markets and cycles. i am quite sure that there has been a distinctive step - up in the recourse to notions of expectations and sentiments by forecasters in explaining their muted or upbeat prognosis for macroeconomic variables in the period ahead. 14. andrei shleifer and co - authors have worked on formalising the insights of behavioural economics, such as representativeness heuristics as the basis for realistic expectation formations, within familiar analytical frameworks [ 5 ]. specifically, shleifer shows how representativeness thinking may cause agents to over - weight the probability of good fortune, due to selective retrieval of information from memory, inducing excessive optimism [ 6 ]. embedded in a dynamic model of credit, such drivers of expectations formation can amplify pro - cyclical booms and busts in the issuance of risky credit, credit spreads as well as in investment spending. 15. separately, on the empirical side, we have also seen much [UNK] in the literature to better measure expectations. the point of departure is that survey expectations are not β noise β. they are a useful tool insofar as they reflect what market participants and other agents believe and act on. our latest macroeconomic review featured an article by professor bernard yeung and sumit agarwal of the nus business school, reviewing the latest research work on surveying and characterising consumer expectations [ 7 ]. attempts to make inferences on the formation of expectations and validate any causal impact of expectations on economic behaviour are o en thwarted by endogeneity or imprecise estimates. however, large scale randomised control experiments in conjunction with carefully designed surveys on consumers are now routinely used as they allow researchers to directly control the formation of expectations and to reliably identify causal [UNK] running from expectations to behavioural responses. 16. the article summarises the results of a notable experiment done on singapore consumers, which show that consumers have biased inflation expectations. specifically, the study shows that consumers do not adjust for the [UNK] of changes in quality on prices, thereby overstating the true rate of inflation. this results in a systemic upward bias in the public's inflation expectations if a society experiences widespread income growth, which at the same time induces the upgrading of the quality of purchased goods. in singapore, the department of statistics has adopted hedonic regression techniques in the compilation of the cpi for used cars for example, in order to achieve a | 0 |
macroeconomic environment on banks β resilience. these measures are flanked by regulatory adjustments. this year, stricter regulatory requirements for interest rate risk will enter into force in the eu. [ 30 ] in future, internal risk management will have to take greater account of risks stemming from net interest income and asset depreciation risk. in addition, marisk was revised with the aim of improving the monitoring and management of credit risk. 3. 3 evaluate financial market regulation to strengthen resilience the aims of the g20 reforms of global financial markets provide clear guide rails for regulation : resilience, protection of taxpayers, transparency, and good supervision are very universal objectives that are certainly no less relevant now. however, clear guide rails do not imply rigid regulation. regulation needs to adapt to changes in the environment without losing sight of its objectives. that is why the financial stability board ( fsb ) started evaluating the reforms in 2017. [ 32 ] the evaluation shows that the g20 reforms have largely achieved their objectives without having any relevant side effects. the recent failures of banks in the united states and switzerland have notably brought to the fore the question of how well the β toobig - to - fail β ( tbtf ) problem has been resolved, or whether it is actually still up to government entities to prop up weak institutions, where there is any doubt. an evaluation by the financial stability board [ 34 ] shows that we now have a much better institutional framework for dealing with major financial institutions in stress. resolution regimes have been strengthened, more funds are available to absorb losses ( total lossabsorbing capacity, or tlac ), and risks are better priced in markets. however, the financial sector continues to benefit from implicit subsidies. [ 35 ] what that means is, when large institutions run into difficulties, markets expect fiscal resources to be made available. that lowers the risk premia of the institutions in question, potentially increasing incentives to take risks. recent responses to failures in the banking sector are unlikely to have done much to change this finding ; on the contrary, they have tended to raise expectations of government intervention in the event of a crisis. plugging existing gaps in the regulatory framework is all the more important. the tbtf evaluation clearly showed where gaps remain : national systemically important banks are treated differently and there is hardly any internationally comparable information on these institutions. there is also little information about the holders of bail - inable financial instruments, which could nevertheless give rise to global contagion | re ) financing9. as is so often the case when it comes to money, the workings are more complex than they first appear. anyone wishing to make life a little easier can turn to the beatles for guidance and comfort. as they once sang, β i don β t care too much for money / money can β t buy me love. β 4 reforming monetary union ladies and gentlemen, not only did the beatles shape the music of their time in a way that no other group has ever managed, they also showed what makes a good band : it needs to be greater than the sum of its parts. the same is true when musicians come from different musical backgrounds and were previously solo artists. which takes us back to the present and to european monetary union. some 19 countries decided to form a band for the long haul. this band has now been gracing the stage for 20 years, 6 / 10 bis central bankers'speeches already twice as long as the beatles. with that in mind, it β s more like the rolling stones : there is no end in sight. and so the euro celebrated its 20th birthday on 1 january. when it was introduced, politicians made the public one promise : the euro would be just as strong as the deutsche mark before it. with an inflation rate averaging 1. 7 % over the past 20 years, inflation is converging towards price stability as defined by the eurosystem. the original promise of a stable currency has thus been kept. of course, we mustn β t forget that part of this period was marked by the financial and sovereign debt crisis. it put monetary union to the test on more than one occasion. it could therefore be said that the euro had an easy childhood but a difficult adolescence. if the crisis did one good thing, then, it was that it opened our eyes to the weaknesses in the institutional framework of the euro area. paul romer summed it up perfectly when he said, β a crisis is a terrible thing to waste. β 10 it would have been a terrible thing if we had learned nothing from the crisis. in the meantime, a great many problems have been tackled and reforms initiated. if the financial system or individual euro area countries were to once again find themselves in turmoil, we would be better prepared to deal with this today than we were back then. after 20 years, the euro is all grown up. however, it hasn β t yet put all of its growing pains behind it. in other words, monetary union | 0.5 |
daniel mminele : inflation targeting in the wake of the crisis and the south african experience address by mr daniel mminele, deputy governor of the south african reserve bank, at the luncheon of the southern african - german chamber of commerce and industry, johannesburg, 25 july 2012. * 1. * * introduction good afternoon and thank you to the southern african β german chamber of commerce and industry for the invitation. i thought it may be an appropriate time to take stock of monetary policy in general and more specifically in south africa since the sub - prime crisis. the years between the mid - 1980s until the outbreak of the sub - prime crisis are often referred to as the β great moderation β. 1 this period of reduced macroeconomic volatility came to an abrupt end in 2007, following which uncertainty, instability, extraordinary volatility and strain in financial markets became the norm. increasing trade and financial inter - linkages with the global environment meant transference of this volatility and uncertainty to the south african economy, with consequences for monetary policy. south africa β s monetary policy has been influenced by developments in the us and europe, however, it is also true that our experience has been vastly different to that of central banks abroad. i say this because at no time did we employ unconventional monetary policies, nor did we implement capital controls or intervene in the foreign exchange market. we were one of the few emerging market central banks not to have tightened monetary policy during this period. the crisis in europe shows no signs of abating and the threat of the us fiscal cliff looms large. judging by the most recent developments, things seem to be getting worse. speculation about the likelihood of a third round of quantitative easing by the us federal reserve and a third long - term refinancing operation by the european central bank, is gaining impetus. globally, the stance of m onetary policy is accommodative and one would be hard pressed to find anyone betting on a change in the state of affairs anytime soon. i will discuss how inflation targeting has fared through the crisis and then share some thoughts with you on south africa β s experience and recent developments on the monetary policy front. 2. the appropriateness of inflation targeting? new zealand was the pioneer of inflation targeting 2 and adopted the framework just over two decades ago. the idea of explicitly targeting inflation proved to be an attractive proposition for central banks and thus became much more widely embraced, with approximately 39 central banks 3 said to have inflation | got a job as a methods analyst, which is essentially an internal efficiency consultant. it wasn β t much, but it was a start and i went from there. my second bit of advice is to take the time to find out what really interests you. this means you may want to try a few different things before settling on a particular career path. when i left new college i certainly didn β t know where i was headed. i only made the decision to become a professional economist two years later when i was deciding between law school and economics. and i didn β t decide to opt for more policy - related work rather than become an academic until i entered the job market from berkeley five years later. the important point is that if you like what you are doing, you almost certainly will be successful at it. my third bit of advice is to be true to yourself. it is a lot easier to keep things straight and be happy if your public persona and private persona are not in conflict β you are one integrated person. being true to yourself also means facing up to problems and mistakes early. early on in my career as a professional economist, i got involved in writing a paper about tax reform with the head of the firm β s research department. the night the paper went to the printers, i woke up with complete clarity that there was a mistake in the paper. the mistake did not affect the conclusions of the paper. it just slightly changed all the numbers and was obscure enough that no one would probably catch it. what to do? i decided to take my medicine. i walked into the office of my co - author the next morning and said that we needed to throw out the 10, 000 copies of the paper that had been printed. the head of research β leon cooperman β was known for his β let me say this delicately β strong personality. but rather than blowing up at me, he said fine, let β s fix it. facing up to the error must have actually worked in my favor since i won his respect. a few months later, he introduced me to robert rubin β who, as you know, went on to become the u. s. secretary of treasury. and through robert rubin i met all sorts of interesting people in the clinton administration. my fourth bit of advice is to continue to build your human capital. that means seeking out jobs and opportunities that give you new experiences and skills. keep up with your mentors and continue to cultivate relationships and build your network. | 0 |
alliance is an excellent business and investment opportunity for both countries and institutions. i wish you both the very best in your future endeavours. vinaka vaka levu bis central bankers β speeches | barry whiteside : microfinance and financial literacy development in fiji opening speech by mr barry whiteside, governor of the reserve bank of fiji, at the korovou microfinance expo, korovou, 19 may 2012. * * * the permanent secretary provincial development & multi - ethnic affairs, lieutenant colonel inia seruiratu the commissioner central, major bale tuitubou the roko tui tailevu, mr. semisi saukawa korovou town administrator, mr. jone bera microfinance clients and entrepreneurs representatives of banks and financial institutions government agencies and ngos the vanua of tailevu distinguished guests, friends, colleagues, ladies and gentlemen bula vinaka and a very good morning to you all. it is a real pleasure for me to be here today on this occasion to help open the korovou microfinance expo. i note that this is a first for your town and the feedback we have received since announcing our plan to bring the expo to tailevu has been very positive. i wish to acknowledge the tremendous support we have received from the commissioner central β s office, the roko tui tailevu, the principal of tailevu north high school mr. senikarawa, the northland rugby secretary and all the stakeholders here today in organizing this event. vinaka vakalevu! this is the first microfinance expo organized by the reserve bank this year and follows two we had in the maritime zone and at the suva hibiscus festival last year. our partners are here again today β the banks, other financial institutions, the non - bank financial institutions, investment agencies, government agencies, mobile network operators, ngos, microfinance institutions, the national centre for small and medium enterprise development and the micro enterprises and entrepreneurs. all are combining their efforts to promote greater awareness of financial inclusion. it is a good example of public sector, private sector and civil society partnership towards common goals. results are produced through such coordination and understanding. at the end of the day, it is the general population that will benefit from such collaboration. ladies and gentlemen, this microfinance expo in korovou is a rare opportunity for you ; we have brought microfinance and financial literacy to your door - step. i hope you will take advantage, and benefit from this opportunity. the occasion is meant to be educational and fun. apart from the abundance of useful information, services and products displayed and | 0.5 |
faith in the banking industry and restore the image of bankers as decent, trustworthy and upstanding businessmen. by β us, β i mean banks, other companies in the financial industry, and supervisors. regulators can create a proper regulatory framework, set the right incentives and encourage good conduct. however, taking the necessary action β that is, implementing a code of conduct and focusing on ethics and culture in daily corporate life β is the responsibility of each financial company. but how can banks and financial companies achieve this aim? i already stated earlier that ethics and culture are highly personal. individual values and ethical norms are informed by individual life experiences, family and cultural background, the generation one belongs to, and many other things. but nonetheless, it is crucial for companies to find a common basis : a set of values accepted and lived by each individual employee and the company as a whole. this is not a trivial task : in the realm of culture and ethics, there are neither universal β best practices β, nor are there metrics by which success can be quantified. it is thus very difficult to develop specific criteria that define the culture of a company. to present an example : at the bundesbank we have introduced six leadership principles, in order bis central bankers β speeches to set a good tone from the top. these principles are : recognition, communication skills, responsibility, equal opportunities, judgement and motivation. of course, others may choose different leadership principles, but each entity has to make its own choice. however, these principles, although chosen for a different purpose, of course also influence the bundesbank β s corporate culture. β responsibility β is a value i would like to discuss with you. what about actions that are not expressly prohibited? does that mean they are permitted? as seneca said : β shame may restrain what the law does not prohibit β. so, by which standards do we define what is permitted? i think each bank should try to fulfil its corporate social responsibility. this is a kind of self - regulation by which companies commit to live up to their responsibility towards their stakeholders : their customers, their owners and their staff. of course this is not legally binding, but if a company it should try to meet these expectations and have its customers β interests at heart. this should also be in the banks β self - interest, because there is a feedback loop between a company and its stakeholders. so if the bank respects its stakeholders, it will generally be rewarded : stakeholders will | feel valued, trust will grow, and the bank will acquire more business in the future. in a nutshell : sustainable profitability over the long term is not possible without ethical conduct. i β d like to know what you think of this statement. to sum up, in a memo to berkshire hathaway shareholders in 2006, warren buffett wrote that β culture, more than rule books, determines how an organization behaves. β i believe there is a lot of truth in this statement. in the end, corporate culture is defined not by rule books but by the behaviour of each individual employee. after all, a company β s public reputation is essentially the sum of the behaviour of all its individual employees. finally, introducing a corporate culture or defining a set of ethics and values is important, applying them to daily routines is even more important. each and every one of us can begin by reflecting on, and reexamining, our own behaviour. thank you. bis central bankers β speeches | 1 |
the strengthening of the economic recovery, could be managed better. proper coordination of the banks involved is essential, as is the intervention of corporate restructuring specialists. another fundamental question that banks cannot ignore concerns the need to keep costs down, stemming not only from the prolonged period of low inflation and low interest rates, which have compressed net interest income, but also from the evolution of the financial system that obliges banks to increase operational efficiency, especially those which, as is the case in italy, are focused on traditional intermediation. technological developments call for changes to banks β branch networks, which are still too numerous, and to the cost, size and composition of staffing. to facilitate the implementation of these measures, limiting the economic and social costs, traditional unemployment benefits could be complemented by the industry β s solidarity funds. the strength and nature of the measures aimed at recouping efficiency must be tailored to each intermediary β s needs. greater efficiency must partly be achieved through recent and upcoming reforms of corporate governance. the conversion of the cooperative or popolari bis central bankers β speeches banks into joint stock companies, in addition to encouraging more effective governance structures, will enable consolidation dictated not by the reform law or by the supervisory authorities but rather by market forces. this process could involve the revamping of a small number of intermediaries, which we have been monitoring for some time, now also under european supervision. mutual banks, a highly fragmented sector, are facing strong competitive pressures and have been severely affected by italy β s prolonged economic downturn. the need for greater consolidation, something we have long called for, has become more pressing. the reform being finalized, while preserving the mutualistic nature of these banks, will strengthen systemic resilience and improve corporate governance. * * * italy is emerging from a recession of exceptional duration and intensity, eclipsing the depression of the 1930s. the crisis has put severe strain on firms and households, and has caused a spike in bankruptcies and unemployment. its impact on the banking system, which is rooted in the real economy, has been violent. though shaken, it has endured. now that the indicators point to a more favourable economic outlook, banks must put themselves in a position to effectively counter future risks. europe now has a common regulatory framework for bank crisis management. this provides for a vast array of instruments, some borrowed from italy, others new to us. the most radical innovation is the obligation for holders of capital and debt instruments issued by | wiped out for business loans and is less than 0. 3 percentage points for new home loans. however, substantial differences remain between firms that are vulnerable and the β generally larger, mostly exporting β firms in sound financial shape. in november, bank credit expanded by 4. 0 per cent on an annual basis in the manufacturing sector, was barely positive in the service sector β partly owing to the contraction in lending to firms that provide real estate services β and remained negative for the construction sector. while loans to businesses with 20 or more workers rose, those to smaller firms continued to decline. the difference in borrowing costs for loan amounts above and below β¬1 million is 1. 5 percentage points, 0. 4 points below the peak recorded during the crisis ; at the start of 2008 it was 0. 7 points. as we reported in our economic bulletin, italy β s output could increase by around 1. 5 per cent in 2016 and in 2017. this scenario assumes that domestic demand, and especially investment, will continue to strengthen. the uncertainty in the international arena and its impact, at times chaotic and violent, on the financial markets pose evident risks. bis central bankers β speeches in recent weeks the stock markets have seen brusque movements, with bank stocks being especially volatile, particularly those of certain italian banks. in addition to uncertainties regarding the international situation, the volatility in italian bank stock prices reflects the doubts and concerns that have arisen concerning asset quality, in part related to the alarmist interpretation of a simple request for information by the ecb. tensions of this magnitude are not justified by the underlying conditions of italian banks. as the president of the ecb also recently stressed, non - performing loans in banks β balance sheets were examined as part of the comprehensive assessment performed in 2014, the necessary provisions were made, and there will be no new requests to increase them or to strengthen banks β capital. the climate surrounding the resolution of four banks that had been placed under special administration has also contributed to the volatility. 2. the resolution plan for four banks on 22 november of last year the italian government and the bank of italy applied the new rules approved by the italian parliament following its transposition of the bank recovery and resolution directive ( brrd ) to resolve the crisis at banca delle marche, banca popolare dell β etruria e del lazio, cassa di risparmio di ferrara and cassa di risparmio di chieti. together they held | 1 |
in bank rate will continue to provide a building boost to demand through this year and beyond β we don β t have to keep on cutting rates in order to provide a stimulus. second, in november, the government announced a temporary cut in vat and an acceleration of spending on public investment projects, which should help support demand in the near term. third, and most importantly, to supplement the measures taken last october, the government has launched a five - point plan to ensure an adequate supply of credit to households and business. this comprises measures : to reduce uncertainty about the adequacy of bank capital by capping the losses on their holdings of risky assets ; to facilitate bank funding through the attachment of state guarantees ; to boost the availability of funds to business through direct purchases of company debt ; to raise the availability of mortgage finance to households by halting the running down of northern rock β s mortgage book ; and, finally, to establish a concordat with the banks under which they will maintain an adequate flow of credit to the real economy. the asset purchase facility, operated by the bank for the government, will purchase up to Β£50 billion worth of commercial paper, corporate bonds and similar securities, with the aim of increasing the liquidity of these instruments, reducing the cost of capital to businesses and stimulating increased debt issuance. as we estimate that illiquidity presently accounts for getting on for half of the 5Β½ percentage points interest rate spread of investment - grade corporate bonds over government debt, these actions, if successful, could have a powerful impact on the cost and availability of funds to corporate borrowers. the first purchase under this facility was made last friday. in the first instance, purchases are to be financed by government borrowing. but, subject to the agreement of the chancellor, this facility can also be used by the monetary policy committee to undertake further easing of monetary policy in pursuit of the inflation target. that is likely to prove useful now that bank rate is nearing its floor. in that case, purchases would be financed by the creation of so - called central bank money β effectively ious drawn on the bank of england. at such point, we might also want to expand the range of assets purchased under the scheme to include government debt. the purpose of these actions would be twofold : to push down the yields on a wider range of assets than usual ; and to increase the supply of broad money ( bank deposits plus banks'own reserves ) in the economy. both should help to boost nominal | alan greenspan : impact of energy on the economy remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, before the economic club of chicago, chicago, illinois, 28 june 2001. * * * of the number of factors that have contributed to the slowing of economic growth in the united states over the past few quarters, the one that has received less attention than it clearly merits is the rise in energy prices. in what may or may not be coincidence, at least the last three recession periods in the united states β those of 1990 - 91, 1980 - 82, and 1974 - 75 β were preceded by spikes in the price of oil. as a consequence, we at the federal reserve are especially attentive to developments in energy markets and their effects on the behavior of households and businesses. obviously, caution is required in drawing generalizations from only three observations, and indeed many analysts do not place much credence in the link between oil prices and the business cycle. in part, this skepticism arises because the largely linear models that typically economists rely upon to track the ties between energy prices and gross domestic product do not signal a worrisome linkage. when simulated over periods with observed oil price spikes, the models do not show oil prices consistently having been a decisive factor in the subsequent economic downturns. our heightened wariness about recent developments, however, reflects the possibility that the responsiveness of u. s. gross domestic product to energy prices may be different when households and businesses are confronted with abnormal price hikes. because economic models typically are fit over both those periods with price spikes and the more predominant periods of moderate price fluctuation, their estimated statistical relationships would not fully capture the effect of sudden and sizable shifts in oil prices on the economy. pending the development of far better insights into the actual impact of oil price spikes than currently can be gleaned from macroeconomic models, it is prudent to follow energy markets far more closely than our models would suggest is necessary. one important channel through which changes in the prices of oil and of other forms of energy unequivocally influence the economy is through their effects on the profitability of non - energy corporations. this effect is particularly important because a stabilization of profit margins and cash flow will be critical to an eventual firming of capital investment. as best we can infer, a substantial part of the rise in the total costs of corporations between the second quarter of last year and the | 0 |
the challenge is to provide programmes which keep pace with changes in financial innovation and technology. meeting this need requires rigorous, extended programmes such as the post - graduate programmes in islamic finance and financial engineering with emphasis on islamic banking principles. at the same time, relevant organizations can support such programmes by creating funds to sponsor promising students to pursue formal education, ranging from modular courses in islamic finance to full post - graduate programmes. there is also a need to increase programmes and initiatives that provide education and training in shariah. islamic research organizations and financial institutions need to work towards developing a sufficient number of competent shariah scholars who are equipped with sound knowledge and expertise in both islamic jurisprudence and islamic commercial laws to deal with innovative and cutting - edge products. there is also the need for extensive education of the consumer and business community. this would increase the outreach resulting in increased demand for new and innovative products and approaches. malaysia has implemented a 10 - year structured consumer education programme to increase the level of consumer awareness on the unique characteristics of islamic financial products and the product choices offered by islamic financial service providers. increased awareness will drive the demand for a broader range of islamic products and services customized to their requirements at more competitive prices and through more convenient channels. the outreach has also been targeted at small and medium sized businesses. this process will also prompt the financial industry to increase innovation to strengthen their competitive position. this can be reinforced by market research to enhance the understanding of customers β distinct financial needs and their risk tolerance and therefore enable the design of islamic financial instruments that offer tangible benefits and value to customers. in addition, with increased disclosure and transparency on the manner in which islamic financial transactions are being conducted and on how islamic financial contracts are being executed as well as on the risk and return profiles of financial products, this will further strengthen the role of competition. in conclusion, the investment in the future needs to be undertaken by all the relevant entities in the islamic financial sector - the industry, the regulators, the market participants, the academia and the international community. as a co - ordinated and concerted effort it will be mutually reinforcing in elevating the performance of islamic finance. while the increasingly more competitive prevailing environment raises the pressures to produce immediate - term results, it is the investment in human capital and in research and development that will secure the long - term sustainability of the industry. it is these investments that will be the defining element of the future development of islamic finance and its long - term success. | ##riah dynamism is evident in the evolution of sophisticated islamic financial products that are being structured based on multiple shariah concepts. against these developments, it is timely to move away from β plain vanilla β innovation and to embrace a new wave of innovation that will evolve islamic financial instruments into distinct products that will maximize the potential and wisdom of the shariah and that meets the greater sophistication of consumers and the more complex requirements of today β s businesses. this paradigm of innovation in islamic finance, which by itself shall accord islamic financial institutions with the competitive advantage to forge ahead, entails substantial and continuous investments in research and development ( r & d ). r & d is indeed an essential aspect of modern industries and enterprises and is no less the case in the financial world. there are three important pre - requisites in strengthening research and development capabilities, namely, adequate allocation of resources for infrastructure development, forging strategic alliances through smart partnerships and developing the required pool of qualified and skilled talent. adequate allocation of resources for infrastructure development islamic financial institutions are continually being confronted with new challenges that need to be addressed. their institutional capacities and capabilities need to be continuously strengthened. this includes attention to continually review their strategic orientation and key priorities and the necessary adjustments that need to be made to position the institutions to effectively respond to the new developments and challenges that have emerged. in order to meet the increasing demands of a modern and sophisticated market, financial institutions must continually invest in the supporting infrastructure that promotes research and development. this will enhance the capacity for innovation. attention also needs to be given to the applied approach to islamic finance and its modern practice. financial support for advanced research at universities and research institutes will increase research opportunities. efforts to utilise and install strong technological capabilities will also contribute to enhance research and development. in embracing the new leadingedge technology, the potential for the islamic financial industry to develop new products and services will also be enhanced. forging strategic alliances through smart partnerships to further enhance research and development ( r & d ) activities, the promotion of strategic alliances through smart partnerships can play an important role. entering into strategic alliances with other entities would create greater synergy, which may bring about new approaches, new technologies and new areas of specialization. collaborative efforts amongst islamic financial institutions in particular, would strengthen the ability to leverage on the industry β s expertise. the introduction of innovative islamic financial products in a specific jurisdiction can be expanded to other jurisdictions, which in turn, will contribute to broaden | 1 |
y v reddy : capital account liberalisation and capital controls remarks by dr y v reddy, governor of the reserve bank of india, at the central bank governors β symposium convened by the bank of england in london, 25 june 2004. * * * i am thankful to bank of england for the excellent arrangements and well thought out agenda for the 2004 central bank governors β symposium. as desired by governor mervyn king, i will give a brief introduction in this session on capital account liberalisation and capital controls. professor kenneth rogoff β s well - researched messages on effects of financial globalisation on developing countries are appropriate as governing thoughts for this session. there is evidence of a threshold effect in the relationship between financial globalisation and economic growth, and the heightened risks of volatility in capital flows to developing countries gets reduced only after a particular level of integration. in contrast, empirical evidence shows that trade liberalisation has had beneficial impact. a review of evidence provides no road map for the optimal pace and sequencing of financial integration. many questions in this regard are best addressed only in the context of country - specific circumstances and institutional features. in this background, based on the indian experience, i will present some issues relating to managing capital account. first, capital account liberalisation is a process and it has to be managed keeping in view elasticities in the economy, and vulnerabilities or potential for shocks. these include fiscal, financial, external, and even real sector - say, oil prices and monsoon conditions for india. professor rogoff β s presentation places special emphasis on government borrowings as a vulnerability. second, caution is needed in moving forward with each step in capital account liberalisation, recognising that reversal of any step in liberalisation is very difficult since markets tend to react very negatively to reversals, unless there is already a crisis situation. third, the capital account itself needs to be managed during the process of capital account liberalisation. there is a hierarchy in the nature of different types of capital flows in real life. for example, foreign direct investment is preferred for stability, and quantum of short - term external debt, by residual maturity, should not be excessive. furthermore, adequate reserves, keeping in view the national balance sheet considerations, which include public and private sectors, provide comfort. public policy can achieve these desirable conditions only through some sort of management of capital account. fourth, the management of capital account will be effective under enabling conditions, such as, reasonable confidence in macro policies | is of the essence in order to ensure that credit expansion also takes place in a sustainable manner. finally, it is evident that national fiscal policy has a crucial stabilisation role to play after euro area entry, when monetary policy is no longer available. iv. concluding remarks to sum up, the new eu member states have made considerable β and, in a number of cases, impressive β progress on the road to the euro. the adoption of the single currency will bring many benefits and opportunities to these countries. at the same time, it involves responsibilities and may pose new policy challenges. the adoption of the single european currency implies a permanent commitment. it is, therefore, of paramount importance that the economic policies pursued by the euro area member countries are conducive to price stability and consistent with the constraints imposed by the single currency. the successful participation of a country in the euro area and the smooth functioning of monetary union itself requires that prospective euro area members achieve the necessary high degree of convergence in a sustained manner and prepare their economies β market structures and institutions β so that they can effectively address potential policy challenges that may arise both before and after joining monetary union. good preparation and the attainment of sustainable long - term convergence are crucial before joining monetary union. this is why the ecb β as well as the european commission β take great care to examine the sustainability of convergence and make sure that member states adopting the euro are ready for this momentous historical step. finally, let me stress that to ensure continuity and equal treatment, the ecb will, in its examination of the degree of convergence achieved, employ the same framework of analysis as in the past and will build on the same definitions and principles as set out in the previous convergence reports. thank you very much for your attention. | 0 |
emerging economies, structural changes in the economy over the past two decades such as diversification of sources of growth, wider set of policy tools and deeper domestic financial markets have all contributed to greater independence in the formulation of monetary policy. nevertheless, the transmission of global monetary conditions to emerging economies is unavoidable given the open nature of the economies and the increasingly open and interconnected financial markets. to fully appreciate the changes in the global landscape since the global financial crisis and the challenges and risks they entail, let me suggest five important developments that emerging market economies have been facing in conducting domestic monetary policy. first, global financial markets are more interconnected than before. financial openness in 1 / 5 bis central bankers'speeches the emerging asia, as measured by the sum of assets and liabilities in the international investment position to gdp, has grown from around 800 % of gdp to now more than 1000 % of gdp. emerging asia cannot escape the vagaries of the financial markets around the globe. second, global capital flows have increased in size and volatility. cumulative non - resident capital flows to the region have reached usd2. 1 trillion in 2016, compared to only usd400 billion in the period prior to the global financial crisis. more importantly, capital flows have also become more fickle than before. debt flows now contribute to 66 % of capital flows. these flows are short - term in nature and carry higher propensity of reversals. emerging markets had never experienced such phenomena before. third, the volume of global foreign exchange trading has grown by more than four times in the last 15 years alone. the global foreign exchange market has become bigger, more complex and increasingly disconnected with economic realities. today, exchange rate overshooting is the norm rather than the exception. emerging economies β trade volume relative to the global market is, at best, minuscule. fourth, non - resident participation has increased tremendously in most emerging markets. non - resident holdings of government bonds in uruguay for example. in a little over a year, non - resident holdings surged from 2 % to 45 % of the outstanding bonds in may 2013. closer to home, non - resident holdings of malaysia and thailand government bonds increased from 10. 2 % and 2. 5 % in 2009 to 32. 2 % and 14. 1 % in 2016 respectively. these non - resident investors tend to be driven more by global rather than domestic factors, motivated by the search for yields. as participation becomes too high, it brought | heightened risks to domestic markets through the distortion in asset prices. the disproportionate influence of nr investors further amplified the disconnect between domestic interest rates and economic fundamentals. fifth, asset prices in emerging economies are increasingly correlated with global factors, exposing emerging markets to shocks in the advanced economies. stock market indices and long - term bond yields in emerging markets have shown strong co - movement with the indices and bond yields in the advanced economies, particularly the united states. this has led to signs of weaker monetary control. the increasingly correlated yields between advanced economies and emerging market economies have weakened the transmission from policy rate to domestic yields. given this new landscape, policymakers in highly open economies are often caught in a β catch 22 β situation. raising interest rates to manage rising inflation and the central bank may stoke capital inflows and further currency appreciation. cutting interest rates to manage economic slowdown, only to find that it worsens capital reversals, exchange rate depreciation, and potentially reignite financial imbalances that policymakers have tried so hard to tame. these are some amongst the many challenges to any policymaker, which brings me to my next point β the importance of policy pragmatism. the importance of policy pragmatism our own experience suggests that in dealing with multifaceted challenges, a broad array of policy instruments is critical. the idea is that no single policy tool should be overburdened. the region β s experience theorises that despite great strides in achieving price stability and sustainable growth since the asian financial crisis, an open economy with sizeable financial market invites volatile capital flows that adds layers of complexity in policy - making. we have expanded our policy toolkit to include micro and macroprudential as well as financial market stability measures. this additional arsenal of policy tools has helped to maintain the effectiveness of monetary policy and safeguard domestic financial and macro stability. but having a broad policy toolkit is not enough. it may be tempting for us to treat these challenges 2 / 5 bis central bankers'speeches as linear strings of events in order to cope with the complexity. but breaking the challenges into digestible fragments of their own and tackling them in isolation using our various policy tools seem a futile attempt. given the closely interdependent and constantly evolving nature of the challenges, solving one part of them may amplify the risks in others. in this environment, it is imperative for policymaking to also be agile and pragmatic. | 1 |
technology and financial innovation, and strong arguments were being made to the effect that open capital accounts would bring significant benefits. after all, ongoing real economic integration at a global level demanded at least some degree of global financial integration. in turn, freer capital movements, the ongoing cross - border financial integration, and the growth of private capital flows that followed undermined pegged exchange rates and thus contributed to the spread of flexible exchange rate regimes and inflation targeting in many parts of the world, but in the european union this development provided part of the rationale for a monetary union. the current international monetary system and the official part of the global financial safety net largely reflect the contours of the global economy as they were before global financial integration and private capital flows reached the level we have seen in this century. back then, the global macroeconomic problem was related to global current account imbalances and asymmetric adjustment. keeping your own house in order was in most cases both necessary and sufficient for maintaining economic stability in individual countries. imf facilities to lend to sovereigns of debtor countries facing balance of payments difficulties were the most important part of the global financial safety net ( gfsn ). the world we currently live in is different. financial imbalances in both net and gross balance sheets can be more important than current account imbalances and certainly were so in the build - up to the great financial crisis ( gfc ). this is a world of cross - border spillovers and spillbacks. it is a world where, for small and open economies ( soes ), keeping your own house in order is certainly necessary but no longer sufficient, at least not if we restrict ourselves to traditional demand management and prudential instruments. financially integrated small and open economies can still be overwhelmed by large and volatile capital flows driven by push factors. it is a world that needs additions to the gfsn, some of which we partly have β such as fx liquidity provisions to internationally active banks through central bank - swaps β but some of which we do not have. the international community is certainly aware of these issues. the imf has done good analytical work in this area and proposed reforms. work has been done under the auspices of the g20 looking at potential reforms to the international monetary sytem ( ims ), and currently the eminent persons group is working on a report to the g20 to be delivered at this year β s autumn meetings of the imf. but progress in | , gives rise to two concerns : first, regarding detrimental effects on the traded goods sector, and second, on financial stability where volatile capital flows, currency mismatches, and rollover risk of foreign currency debt are among the key players. adverse effects on financial stability can be particularly severe when a blocked interest rate channel and an erratic exchange rate channel interact badly with other economic and financial risks that can face small, open, and financially integrated economies β such as the global financial cycle, domestic financial vulnerabilities, and policy conflicts. we saw trends before the gfc that were consistent with this story. data on longterm interest rates and spreads in small advanced economies and in many emerging markets economies showed strong and growing correlations with longterm rates and spreads among core rate setters ( mainly the us and the eurozone ), although still some way from the theoretical limiting case. the gfc reversed this process somewhat, as risk premia skyrocketed, cross - border banking partly retreated to home base, and restrictions on capital movements were in some cases reintroduced. it has come back to a significant degree. before the crisis, some argued that these patterns could be due to common shocks, convergence of monetary policy frameworks, and increased credibility of those frameworks. however, case studies, comparisons of the pre - and post - crisis periods, and other observations make it more and more plausible that global financial integration is the main driver. the bottom line is that it is becoming more difficult to conduct independent monetary policy in small, open, and financially integrated economies, and although a flexible exchange rate is a necessary condition for doing so, it might not be sufficient, especially when we factor in the financial stability aspects. this, i think, is why we find on occasion that we are closer to facing a dilemma than a trilemma. i think it is still a trilemma, but with trade - offs of variable severity. 2 what can individual countries do about this? first, those that have the option can enter a monetary union. that has its own pros and cons, as you all know very well. but for a soe were the mu constitutes the biggest trading partner, issues of excess exchange rate volatility and domestic currency mismatches become much less pronounced. second, they can give up on independent monetary policy while maintaining their own currency by either pegging the exchange rate or pegging interest rates to those of global rate setters. the problem with the | 1 |
, researchers in this area were able to identify key frictions that make exchange and payment far from trivial. this is not just a theoretical issue that is only relevant to economists in ivory towers. payments and the exchange process are multibillion - dollar businesses and private sector firms are constantly innovating in this area to overcome the types of frictions that are well - known to this group. the knowledge that i have gained from interacting with 1 / 3 bis - central bankers'speeches researchers in this area for the last 20 years has aided me in one of my roles as a federal reserve governor, supporting the fed's oversight of the u. s. payment system. it also guides my thinking about how to make global payments cheaper and faster, which is a key objective adopted by the g20 countries in 2020 and is one fully supported by the federal reserve. keeping with the tradition of studying exchange and payment, several papers to be presented this year focus on how frictions in financial markets, such as asymmetric information or asset illiquidity, matter for the transmission and implementation of monetary policy as well as unemployment and inflation. similarly, it is great to continue seeing work studying frictional intermediation in asset markets and the implications for asset prices and the efficient sharing of risk. these contributions push the frontier of our knowledge, facilitate our understanding of real - world complexities, and inform policy thinking. the workshop's focus on broader financial stability issues is also very important. financial stability vulnerabilities, such as run risk, excessive leverage, and bubbly valuations, could amplify the effect of adverse shocks, potentially resulting in big economic losses and a slowdown in economic activity. understanding the mechanisms that allow these vulnerabilities to grow and transmit stress to the rest of the financial system requires rigorous theoretical research and solid micro - foundations. over the course of this week, we will hear interesting work on this topic that includes research questions such as how a central bank can balance interventions for financial stability and interventions to achieve a certain stance of monetary policy, how banks take risks, and understanding the risk of runs on banks, non - banks, and stablecoins. other concepts are newer and more novel. as the monetary and financial ecosystem has evolved, so has this workshop, bringing together many perspectives and modeling approaches to money and banking theory and its applications. one recurring theme has been to pay special attention to micro - foundations and institutional details, which is important to rigorously | analyze and understand today's financial innovations and evaluate their implications for welfare and policy. this year's workshop continues in that innovative spirit, keeping an eye on the future of money and banking. the papers to be presented span areas including decentralized ledgers, exchanges for crypto assets, and the impact of certain protocols on financial stability. researching these new technologies helps us deepen our understanding of the implications for the broader financial system. an important point to remember this week is that no single field of study can give the answers to all of the big questions we face relating to the evolution of money and banking. commingling of insights and techniques from monetary theory, finance theory, and other fields is vital in studying the complex interactions of modern financial systems. of course, it is also important to test our theories with available data, and many papers we will see this week deliver on that count as well. without further ado, let's get started. i hope you have a great week of engaging discussions, and i'm sure we will learn a lot from this year's workshop. 2 / 3 bis - central bankers'speeches 1 the views expressed here are my own and are not necessarily those of my colleagues on the federal reserve board or the federal open market committee. 3 / 3 bis - central bankers'speeches | 1 |
momentum of implementation for the remaining issues. let me just mention three areas that i think are of particular importance : first, we must pay more attention to financial stability and systemic risk considerations ; this applies particularly to the global monitoring of system stability and the supervision of cross - border systemically important institutions. for the supervision of cross - border systemically important institutions we need strong international cooperation and clear rules, in particular regarding potential burden sharing. for the global monitoring of systemic risks, the envisaged close cooperation between the international monetary fund and the financial stability board in the conduct of early warning exercises has a crucial role to play. second, the pro - cyclicality of the financial system must be limited. in this regard, it will be crucial that the financial stability board, the basel committee and other bodies develop and implement appropriate regulatory and supervisory tools to promote the build - up of reserves in good times to be used in times of stress. it will also be important to reduce the probability of individual bank β s insolvencies by making appropriate provisions of capital. and third, regulation and oversight must be improved and expanded. in this respect, let me particularly stress in this context that all systemically important institutions, markets and instruments should be subject to an appropriate degree of regulation and oversight. this includes in particular systemically important hedge funds, credit rating agencies and otc β report of the financial stability forum on enhancing market and institutional resilience β, published on 12 april 2008. note that the fsf has been recently renamed the financial stability board, with expanded responsibilities and membership. β principles for sound liquidity risk management and supervision β, endorsed on 25 september 2008 ; and consultative papers on the enhancements to the basel ii capital framework, issued on 16 january 2009. derivatives markets, whose inclusion in the regulatory net has been already endorsed by the g20 leaders. it is only thus that we can in future prevent regulatory arbitrage between sectors and markets as well as the emergence of β shadow markets β. the role of europe but let me now move to the key question of this panel discussion : what should europe β s role be in this new financial architecture? in my opinion, europe has a chance to act as a powerful force in shaping the future of financial markets, if it acts in a coordinated and cooperative manner. i think that the first foundation stones for this have been laid. just think of the determination that the eu leaders showed last autumn in addressing the financial crisis ; together they produced a common | crisis in 2008 β 09. 1 now, some think we β ve entered a new period of β deglobalization. β others see it as a slowdown in globalization β a β slowbalization. β the enormous disruptions caused by the pandemic make the recent trend hard to discern, but there β s no question global trade growth has at least slowed ( chart 1 ). 1 s. aiyar, j. chen, c. h. ebeke, r. garcia - saltos, t. gudmundsson, a. ilyina, a. kangur, t. kunaratskul, s. l. rodriguez, m. ruta, t. schulze, g. soderberg and j. p. trevino, β geoeconomic fragmentation and the future of multilateralism, β international monetary fund staff discussion note no. 2023 / 001 ( january 2023 ). - 3that β s a big concern, especially for open economies like canada and the united kingdom. to some extent, a slowdown in global trade growth was inevitable. once tariffs were substantially reduced and most economies were participating in global markets, the potential to expand trade by lowering tariffs further and including more countries became more limited. but recent events have exacerbated this slowdown. new global tensions have added trade frictions between competing countries. public and political support for open trade is also waning, in part because the benefits have not been evenly shared. we β ve all benefited from a wider selection of goods and services at lower prices. but when lowcost importers undercut domestic producers, workers who lost their jobs lost more than they gained. with changing economics, new security threats, and waning support, global trade is being rewired, recast and redirected. trade is being rewired by shifting international economics. china is no longer the lowest - cost global supplier of consumer goods. production of many manufactured goods is moving elsewhere. as china moves up the value chain, it β s competing more directly with advanced economies. at the same time, the pandemic, russia β s invasion of ukraine, geopolitical conflict and climate change have all made supply chain resilience a greater priority, even at the cost of efficiency. trade policy is being recast to encompass national and economic security and to foster leadership in strategically important industries. trade and industrial policy are being used to make the supply | 0 |
. regarding the future prospects for credit flows it can be noted that stable funding sources ( loan - deposit coverage ratio of around 90 % ), strong liquidity position, and capital adequacy ratio continuously being twice as high than the minimum required, point to room for further increase of lending in the domestic economy. the improvement of the banking sector regulation in view of further implementation of the basle and eu standards will remain being a high priority on the agenda in this field. in general, the current macroeconomic developments and the expected future outlook indicate a moderate recovery of domestic economy ( considering expected developments for the economies of the most important trading partners and domestic drivers of growth ), inflation rate in line with the expectations, a balance of payments position that ensures a comfortable level of foreign reserves and still slow credit flows. these assessments created an environment for monetary relaxation, as a contribution to higher credit growth and thus, support to the domestic economy. on that basis, in january, we reduced the key interest rate on cb bills from 3. 75 % to 3. 5 %, which is the historically lowest level. since january 2013, the changes in the reserve requirement instrument came into force, through reduction of the base of banks β reserve requirements by the amount of newly approved loans, but only for credits to sectors whose growth reduces the external vulnerability of the economy ( net exporters and energy sector ). this non - standard measure will be in effect until the end of 2014, when the need for further application will be examined. these changes in reserve requirements have already started to contribute to higher lending to previously mentioned sectors in the economy. just last week, we have done yet another change in the reserve requirement by reducing the reserve requirement ratio on denar deposits from 10 % to 8 % and simultaneous increase of the reserve requirement ratio on foreign currency deposits from 13 % to 15 %, as well as introducing 0 % reserve requirement ratio on banks β long term liabilities to nonresidents. by this measure, we are aiming to : support the process of deeuroization in the economy, inject liquidity in support of lending to the private sector and stimulate higher inflows from nonresidents especially from financial institutions. last, but not least, i would like to point out our efforts in strengthening our statistics in the last few years. in march 2013, the national bank of the republic of macedonia started transmitting the quarterly balance of payments and annual international trade in services data to eurostat, while in may | 2013 additional data series on fdi flows and stocks disaggregated by partner countries and activities were submitted. currently we are working on the establishment of new data warehouse system in the central bank that will contribute for improved data management in general, as well as enable the transmission of more demanding and detailed datasets in the future. in july 2012 we started with submission of a more detailed set of the external debt data to the world bank within the quarterly external bis central bankers β speeches debt statistics database in accordance with the requirements for sdds countries, thus being among the first countries in the region fulfilling the overall data requirements in this field. in addition, just recently, we have received the first annual report by the imf on data submission under sdds, that we joined in november 2011, with positive annotations of the overall data submission under this system. further improvement of our statistics, bringing it closer to the eu requirements, remains one of the key priorities of the central bank. just to summarize, in view of the global environment, the current macroeconomic performances of the macedonian economy are relatively favorable. anyway, just like in the previous years, the risks are still present and they are related to the expected recovery of the external demand, the sentiment on the global financial markets and the world prices development. continuation with the structural reforms is a key in eliminating structural bottlenecks and paving a way for sustainable growth and faster eu integration process. the nbrm will continue with regular monitoring and analysis of the developments in the economy and remain prepared, if necessary, to undertake appropriate measures to preserve macroeconomic stability. bis central bankers β speeches | 1 |
low - paid workers. unequal access to health and education across and within countries and a consequent drop in human capital accumulation may worsen the impact on future generations. we praise management for the role the world bank group ( w bg ) is playing in this regard, having quickly conveyed substantial resources to help the poorest and the most vulnerable, supporting the health sector, and providing liquidity to the business sector in low - income countries. even more than in other episodes of widespread crisis, the w bg must provide countercyclical support while promoting long - term growth. these two objectives are not contradictory. indeed, it is necessary to help address the ongoing short - term financing needs of client countries in the fight against the covid - 19 shock while simultaneously promoting sustainable growth. interventions in some areas β such as health or social safety nets β emerge as key priorities. however, education and sustainable infrastructure must not be overlooked, as these sectors shore up resilience to environmental, economic and social vulnerabilities. needs arising from the consequences of the shock are huge, and financing a comprehensive economic recovery plan β targeting both poverty reduction and inclusive, sustainable growth β is challenging. only by working together is it possible to come out of the crisis faster and better : 1 / 2 bis central bankers'speeches international coordination is more important than ever. the world bank group β s financial resources have recently been boosted by the ibrd and ifc capital increase and the very successful ida replenishment. this calls for doubling the effort to coordinate with other multilateral development banks, international financial institutions, and the donor community and to leverage all sources of finance β including from the private sector. in this respect, w bg operations should be informed by a clear understanding of the reasons behind private sector retrenchment from developing countries. it is crucial to assess the extent to which retrenchment results from heightened uncertainty about the length and the depth of the crisis, which might call for a better use of guarantees or blending instruments. at the same time, putting the most appropriate economic policies in place is one of the most effective ways of de - risking. while policies aimed at protecting domestic industries to the detriment of fdi flows may have short - term employment benefits, they may entail larger medium - term costs in terms of innovation, technology transfer, and eventually growth potential. we encourage the w bg to support the adoption of long - term oriented policies in its dialogue with partners | to raising potential growth and to increasing the euro area β s resilience to shocks. we are now at your disposal for questions. bis central bankers β speeches | 0 |
crises and to strengthen the resilience of the financial system? " 4. consequences of the financial and debt crisis first and foremost, the stricter financial market regulation is particularly worthy of mention. its fundamental objective was to restore greater validity to the principle of liability in the financial markets. first of all, the root causes of the subprime crisis were tackled. obvious moral hazard in the securitisation business was corrected, for example by introducing a mandatory deductible for securitisation transactions in the eu. in addition, rating agencies are now more closely supervised and are obliged to be more transparent. the more stringent capital requirements under the basel iii framework also mean that the owners, and thus those who are ultimately responsible for taking entrepreneurial decisions, now have to bear greater responsibility for their actions. after all, more money is now at stake for them. at the same time, the institutions have β greater room to manoeuvre β in the event of negative developments, and their loss - absorbing capability increases. the average tier 1 capital ratio of the major german banks improved from 5. 4 % in 2011 to 12. 1 % in the middle of last year. the major banks in germany and the other euro - area countries have also been directly supervised by the ecb, in cooperation with national supervisors, since november 2014. the less significant banks - around 3, 500 in the euro area as whole - are supervised by the national supervisors according to uniform standards. this is also an important step on the road to a more stable banking system, especially as national supervisors occasionally tended to see β their β banks through rose - coloured glasses. the creation of a single supervisory mechanism ( ssm ) should also be used as a means of counteracting regulatory arbitrage, ie the targeted relocation of business to countries with the least strict supervisory regimes. but the ssm is just one pillar of the european banking union. the other, at least equally as important, pillar is the single resolution mechanism for banks, or srm. this mechanism is designed to facilitate the resolution of a failed bank and ensure that there is a clear hierarchy of liability in place, with the taxpayer as the last possible port of call, in line with the β bail - in instead of bail - out β principle. to a certain degree, bail - ins are the implementation of something martin luther had demanded of lenders 497 years ago : β if you want to have an interest in the gains, you | . the lessons of this crisis were learned and then incorporated into banking law and, although this has since been subject to updates and modernization, it has maintained the hallmark strictness it acquired in this period. some of the recommendations put forward in the light of the recent crisis have, in fact, been part of chilean regulation for some time. for example, it includes : a ) regulatory incentives for banks to maintain capital in excess of the required minimum so that their effective capital represents more than 10 % of their riskweighted assets ; b ) prudential standards to preserve the quality of capital ( hybrid instruments cannot exceed 50 % of basic capital ) ; c ) explicit limit on gross leverage as a complement to capital adequacy rules based on basel recommendations ( basic capital cannot be less than 3 % of total non - weighted assets net of required provisions ) ; d ) special regulatory requirements for larger banks ( capital requirement can reach 14 % ) ; e ) robust provisions regime with a forward - looking approach ; f ) quantitative norms on the match of the terms and currencies of banks β assets and liabilities ; g ) preventive capitalization, regularization and resolution systems for banks in difficulties. supervision has also played a key role. in recent decades, this evolved from a formal and passive approach to one that is significantly more intrusive and proactive. supervision now focuses on the governance and, above all, management of institutions. supervisors seek to be familiar with all the aspects or issues that can be important in an institution β s behavior, rather than merely verifying compliance with regulation or simply reviewing financial indicators from previous years. the ultimate aim is to induce changes or corrections in the management of an institution when weaknesses are detected. this approach, known in the literature as risk - based supervision, is the one that has been recommended in the light of the recent crisis. on several occasions, supervision has ventured into what is today termed macroprudence. at the end of the 1990s, the sbif issued recommendations urging that due attention be paid to the concentration of risks in the real estate sector, beyond what each institution might have on its books. applying this same logic, it also issued instructions for the treatment of lending to individuals, particularly consumer loans, in the context of the rapid growth of these operations. then, in the early 2000s, it instructed supervised institutions to carefully assess their clients β exchange - rate risk, regardless of whether their own positions were well hedged. when mergers and acquisitions intensified a | 0 |
, observed in the euro area last year and part of this year, need to be monitored closely, even though they are currently expected to normalise. the liquidity conditions in the euro area banking system is another area to monitor, since it plays a role for transmitting monetary policy and, consequently, affects inflation. these uncertainties are the reason why i believe the ecb governing council approach to be data - dependent in its interest rate decisions, is indeed the right one. in other words, determine the appropriate level and duration of its tightening policy stance, based on incoming economic and financial data and the consequent projections. at this point, i would like to emphasise the complementary role of fiscal policy in supporting and not counteracting the effectiveness of monetary policy, in this currently challenging environment. it is important that governments employ only targeted fiscal measures, supporting the most vulnerable in society. any horizontal measures should be avoided or rolled back to prevent an escalation in medium - term inflationary trends. such horizontal measures risk extending the duration of high inflation, and consequently would force the extension of the duration of high interest rates in order to tame inflation and bring it back to the 2 % target. i would finally like to address another important aspect, which is the synergetic relationship between price stability and financial stability. the pursuit of price stability through monetary policy, as we just discussed, and of financial stability through macroprudential policy, are to a large extend complementary. monetary policy needs to take financial stability and the stance of macroprudential policy into account. monetary 2 / 3 bis - central bankers'speeches policy and macroprudential policy operate through common transmission channels, meaning that the scope for interaction between the two policy spheres is wide. the bottom line is that a stable price environment can foster economic growth and financial stability, while a stable financial system can make it easier for central banks to achieve their price stability objectives, through monetary policy. there are a number of macroprudential measures in the toolkit of macroprudential authorities, which are typically the national central banks, that assist in preserving and safeguarding financial stability. these include capital - based measures, borrower based measures and liquidity - based instruments. capital - based measures target the banks'capital to increase the overall resilience of the banking sector by mitigating the build - up of risk exposures. borrower based measures, in other words for loan holders, impose quantitative restrictions, such as | transition towards a sustainable greener economy are among the challenges that the cyprus banking sector faces. it is important to say that these challenges are not country specific to the banking system of cyprus. they are challenges that are commonly faced by european banks. especially the issues of digital transformation together with the management of climate risks and the transition to a green economy are key issues that should be on top of the agendas'of european economies and banks. they surely are on the top of the supervisory agenda. conclusion let me now conclude. the world's economy has gone through the various problems caused by the pandemic to the consequences of the ukraine war. for the first time in many years, inflation has become a threat for many countries around the world. growth is down and inflation is up. this is a big setback for the global recovery. the decisions we make now will have far - reaching consequences for our future. we need to be determined to make difficult choices. but if these choices are based on data, on what we learned from the past and on a clear understanding of the evolving challenges, then i am sure we will come out from this crisis stronger and better equipped for a more sustainable and resilient economic future. 4 / 4 bis - central bankers'speeches | 0.5 |
the very wide range of factors at play in this recent bout of inflation, including the supply - side and the demand - side factors, i think that a multi - pronged response is likewise called for on the policy front. particularly in terms of macroeconomic and monetary policies, i believe it vital to block off second - round effects such as wage increases, spurred by cost - push inflation spreading to other sectors via inflation expectations and so forth. an important task for the korean economy from a longer - term perspective, meanwhile, lies in securing financial and foreign exchange market stability. korea and the other emerging market countries presently experiencing large global capital inflows, in line with their continued strong growth, are necessarily wary of the possibility of heightened financial and foreign exchange market volatility in the event of any future reversal of these capital flows. and for korea, reducing exchange rate volatility has become an important policy objective, since the korean won β s volatility towers well above those of other currencies. the won β s intraday volatility vis - a - vis the us dollar was in fact found to be 0. 60 % for 2010, fourth - highest among the 25 major currencies assessed against the dollar. in order to address such issues, the korean government aims to ensure financial and foreign exchange market stability through such measures as regulation of banks β foreign exchange forward positions, re - introduction of withholding taxes on foreigners β domestic bond holdings, and implementation in the latter half of this year of a β macro - prudential stability levy β on non - core foreign currency liabilities. these measures are being employed purely as a matter of macro - prudential policy, and not as capital controls, and they will be legislated and implemented in line with global standards. ( closing words ) while korea was the first among oecd members to overcome the impact of the global financial crisis, it was also the one hit the most severely when the crisis initially erupted, as was seen in the dramatic drop in gdp growth. internationally, countries are now striving not only to overcome the global crisis but also to devise and put into place mechanisms to prevent its recurrence. through the construction of a new financial regulatory framework, dubbed basel iii, we seek to prevent individual financial institutions from becoming insolvent while at the same time keeping systemic risks under control, and to thereby avert future global crises. in overcoming and preventing global economic crises, the central bank β | choongsoo kim : changes in the global financial and economic landscape and challenges facing the korean economy speech by mr choongsoo kim, governor of the bank of korea, to the american chamber of commerce in korea ( amcham ) general membership meeting, seoul, 16 march 2011. * * * ( greetings ) good afternoon. i would like to thank the american chamber of commerce in korea ( amcham ) for inviting me to be here with you today. my remarks today will focus on the changes in the global financial and economic landscape, and i will also offer some thoughts on the challenges now facing the korean economy. first of all, however, i would like to offer my deepest condolences to the japanese people in their suffering after the earthquake, and my hopes that japan recovers swiftly from the damage caused. it is very much to be hoped that worldwide economic cooperation be directed now toward helping japan in its hour of need. let me begin my remarks now with the changes in financial and economic conditions. policymakers around the world face a whole new set of challenges today, posed by the recent changes in the global financial and economic landscape. this is an evolution that has been ongoing since the global financial crisis broke out. and these difficulties, which are marked by uncertainty, owe to the fact that nowadays, in this post - crisis era, there can be no return to the world economy of the pre - crisis days, but only a transition to a new paradigm to be explored in international forums like the g20. familiar concepts as we know them are now in flux. to cite just one example, the concept of β too interconnected to fail β has arisen in parallel with that of β too big to fail β. now, the most prominent feature of the global economic environment today is the fact that a two - speed recovery still continues. as you are all well aware, what this means is that the growth paths and growth rates of the advanced and the emerging economies are diverging. and this concept, i would say, is one integral part of the new paradigm that has emerged since the crisis. in this two - speed global recovery, emerging economies now agonize over the instability of their prices, including those of real estate, as they overcame the crisis swiftly and are now enjoying rapid growth. the advanced economies in contrast fret over their own sluggish growth and high rates of unemployment. the task of analysis imposed on us as policymakers thus becomes all the more complicated | 1 |
it judges that the progress realized in underlying inflation is consistent with inflation stabilizing at 2 % over the medium term. commitment to a symmetric inflation target requires particularly strong or long - term monetary policy measures when interest rates are close to the zero effective lower bound. this commitment, which is buttressed by the new forward guidance, is crucial to support the anchoring of long - term inflation expectations to 2 %, but as said it may also imply a transitory period in which inflation is moderately above target. a medium - term orientation for the inflation target is baked in into the new strategy, which also makes it possible, where necessary, to smooth out other economic shocks, such as shocks related to employment or financial stability. if actual inflation is slower or faster than targeted, monetary policy will respond to deviations gradually, considering the nature of the economic disruption. deviations estimated to be temporary may not be responded to at all, but seen through. the symmetric inflation target should help to ensure a stable and predictable price outlook, which is a key prerequisite for sustainable economic growth and a high level of employment. price stability, balanced growth and a high employment rate are mutually consistent goals, and successful monetary policy improves the well - being of citizens by focusing on price stability. to this end, targeted monetary policy communication can improve people β s understanding of how monetary policy responds to current and projected economic conditions. * * * the strategy review also examined how monetary and fiscal policy can work together during and after times of crisis. the conventional thinking gives a clear division of labour between the monetary and fiscal authorities : monetary policy should promote price stability, and fiscal policy should keep sovereign debt on a sustainable path. however, in a period of low interest rates, the scope for monetary - fiscal policy interactions is possibly wider. counter - cyclical fiscal measures complement monetary policy when key policy interest rates cannot fall any further. similarly, low interest rates can keep financing conditions favourable during and after crisis, thus creating space for fiscal authorities to respond to an economic downturn and hence stabilize the economy. fiscal policy also matters for the transmission of monetary policy in low interest rate environments. a recent study by bank of finland staff, β the power of forward guidance and the fiscal theory of the price level β 1, argues that fiscal support is essential for forward guidance announcements to have the right kind of effect on inflation and output. fiscal support remains important at the effective lower bound and before inflation robustly converges to the 2 % target. moreover | the floor for possible questions. thank you. 1 mcclung, nigel, β the power of forward guidance and the fiscal theory of the price level, β international journal of central banking, ( 2021, forthcoming ) see e. g. belu manescu, c and e bova ( 2020 ), β national expenditure rules in the eu : an analysis of effectiveness and compliance β, discussion paper 124, european commission. till cordes, kinda, t., p. muthoora, and a. weber ( 2015 ) : β expenditure rules : effective tools for sound fiscal policy? β. imf working paper 15 / 29. 4 / 4 bis central bankers'speeches | 1 |
18. board of governors of the federal reserve system ( 2011 ), β fomc statement, β press release, august 9. see, for example, board of governors, β fomc statement, β in note 2. bis central bankers β speeches to a specific course for the federal funds rate. market participants are naturally interested in gaining greater insight into how shifts in the economic outlook would affect the likely timing and pace of policy firming. as noted in the minutes of the august and september fomc meetings, the committee has discussed possible approaches to enhance its forward guidance along these lines β that is, to provide greater insight concerning its β reaction function. β 4 one potentially promising way to clarify the dependence of policy on economic conditions would be for the fomc to frame the forward guidance in terms of specific numerical thresholds for unemployment and inflation. such an approach was discussed by my colleague charles evans, president of the federal reserve bank of chicago, in a recent speech. 5 evans suggested that the fomc could indicate its intention to continue holding the federal funds rate close to zero as long as the unemployment rate exceeds a given threshold, conditional on the medium - term inflation outlook remaining at or below a specified level. 6 such an approach could be helpful in facilitating public understanding of how various possible shifts in the economic outlook would be likely to affect the anticipated timing of policy firming. for example, if there were a further downward revision of the economic outlook, investors would recognize that the conditions for policy firming would not be reached until a later date and hence would have a more concrete basis for extending the time period during which they expect the federal funds rate to remain near zero. the approach of numerically specifying the values of unemployment and inflation that could prompt policy tightening is not without potential pitfalls, however. for example, such thresholds could potentially be misunderstood as conveying the committee β s longer - run objectives rather than the conditions surrounding the likely onset of policy firming. thus, in addition to giving careful consideration to this particular approach, it seems sensible to explore other potential enhancements to fomc communications β a topic to which i will return shortly. securities holdings by the federal reserve the fomc has also provided monetary accommodation by modifying the size and composition of the federal reserve β s securities holdings. in particular, during 2009 and early 2010, the federal reserve purchased about $ 1. 4 trillion in agency mortgage - backed securities ( mbs ) and agency debt securities and | over the next five years currently is around 1 - 3 / 4 percent. the substantial amount of resource slack that is projected to remain in u. s. labor and product markets over the next several years, coupled with sustained growth in productivity, should continue to restrain the growth in labor costs, helping to contain inflationary pressures. in fact, there is a risk that disinflationary pressures could intensify if the recovery faltered. indeed, based on imputations from tips prices, market participants β assessments of the odds of outright deflation have risen significantly in recent months. monetary policy since the onset of the financial crisis, the federal reserve has employed a wide array of policy tools to foster our statutory objectives of maximum employment and price stability. in particular, with conventional policy having pushed short - term nominal interest rates close to zero, the fomc β like a number of other major central banks around the world β has provided additional monetary accommodation by modifying our forward policy guidance and by adjusting our securities holdings. forward policy guidance the conventional tool of u. s. monetary policy is to make adjustments to the target for the federal funds rate. that target, which stood at 5 - 1 / 4 percent as of mid - 2007, was subsequently brought down to a range of 0 to 1 / 4 percent, and the effective federal funds rate has been maintained in that range since december 2008. since that time, the fomc has provided forward guidance about the anticipated future path of the federal funds rate. for example, in each meeting statement from march 2009 through june 2011, the committee indicated our expectation that economic conditions β are likely to warrant exceptionally low levels for the federal funds rate for an extended period. β 1 at our august meeting, the committee decided to provide more - specific information about the likely time horizon by substituting the phrase β at least through mid - 2013 β for the phrase β for an extended period. β 2 this clarification appears to have reduced market uncertainty about the committee β s current policy expectations. the committee β s guidance refers to a specific calendar date, which could be periodically revised by the committee if appropriate. however, it is explicitly framed as contingent on economic conditions, including β low rates of resource utilization and a subdued outlook for inflation over the medium run. β 3 importantly, it is not stated as an unconditional commitment see, for example, board of governors of the federal reserve system ( 2009 ), β fomc statement, β press release, march | 1 |
lars heikensten : the integration of european banking - some regulatory challenges speech by mr lars heikensten, governor of sveriges riksbank, at the seminar β the integration of financial markets in europe β, at the β riksdagshuset β ( swedish parliament ), stockholm, 21 april 2004. * * * thank you for inviting me to share my views on the integration of financial markets in europe. we have just heard about the positive role capital markets might have in fostering economic growth and stability. we have also heard about how the regulatory process has been changed to promote the growth of an integrated european market for capital and securities. it is my hope that also the area of bank regulation will become part of this simplified process. it is certainly needed. compared to the european securities market, the banking market is lagging many years behind in terms of integration. true, large companies may have access to foreign bank funding as well as to international debt and equity markets. when it comes to choosing your bank at the retail level, however, swedish households and small and medium sized companies are left to a market which is to more than 90 percent dominated by swedish banks. this situation is shared by most other eu countries. this is not a problem in itself. swedish ( or, in general, domestic ) banks might very well be excellent. however, most of us tend to believe that cross - border integration, just as trade, is something good because it increases competition. higher competition, in its turn, improves the efficiency, which ultimately leads to higher quality and lower prices for consumers. indeed, this is one of the main ideas underpinning the european single market. this idea is undoubtedly true also for the banking industry. there is increasing evidence of the positive link between the efficiency of the financial system, of which banking is the most important part, and the wealth and growth of the real economy. thus the potential benefits of a more efficient financial system are substantial. considering that most financial services bought by consumers ( private individuals and smes ) are bought from their bank, the low integration ( and in many cases low efficiency ) of european banking is a significant hindrance to creating an overall efficient market in financial services. barriers to integration why then is integration of european retail banking not happening or only happening very slowly? the first and second bank harmonisation directives and more recently the many initiatives within the financial services sector plan, fsap, have set the legal framework for cross | it is easy to see that the difficulties related to cross - border expansion might seem insurmountable to a bank manager. on the margin, i think these extra hurdles or barriers might be more important than the inherent economics of banking. generally, in countries where the costs of entering the national banking market are relatively low, the market share held by foreign banks tends to be higher. in the last decade, countries with less developed banking systems and few or no powerful incumbents have seen extensive entry by foreign banks. witness the expansion by european and american banks into emerging markets, e. g. in central and eastern europe and latin america. in the eu, in contrast, national banking markets are generally well developed and incumbents are strong, making entry costs much higher. hence, the insignificant degree of eu cross - border banking integration is probably partly explained by economic factors. however, the existence of large differences in profitability and efficiency between individual eu countries β banking systems indicates potential for cross - border expansion also within the eu. in competitive industries, such differences do not exist for a longer period, as less efficient firms would be pushed out of business or acquired by more efficient competitors. these wide profitability gaps should attract more efficient entrants. against this background, it is interesting to note that many european banks seem more attracted to the us banking market. the us banking system is by many considered as the most developed and competitive in the world. you would indeed expect eu - based banks to find it easier to expand within the eu than into the us. still, several major european banks have much larger retail operations in the us than they have in neighbouring european countries, e. g. hsbc, abn amro, and bnp paribas. one cannot avoid the question of whether larger obstacles to cross border banking exist in europe than in the us. regulatory schemes and practices still a major problem for integration given the gradual increase in harmonisation of eu banking and financial sector legislation, it is perhaps surprising to find regulation to be one of the most important barriers to further integration. in my view, there are two issues here. first, although the general legal framework has been converging, the practical implementation of rules and regulations still differs widely between member states. eu level harmonisation often applies to high level principles and minimum requirements, while implementation, additional requirements and enforcement is left to the member states. in practice, this becomes a barrier to integration. an eu bank will be subject to as many | 1 |
set out in basel ii thus aims to ensure that securitisation transactions now have their own economic reality, rather than seeking regulatory arbitrage as was sometimes the case under basel i. based on two fundamental principles β first, the actual nature of risk transfer and second, the significant nature of these transfers β the treatment of securitisation in basel ii applies not only to banks acting as originators and investors but also as sponsors. this treatment also takes account of the many specific mechanisms in this type of transaction, such as early amortisation clauses and credit enhancement. lastly, it introduces a requirement for regulatory capital to be tailored for certain off - balance sheet exposures, particularly liquidity facilities associated with these transactions, which under basel i were generally exempted of any capital charge. second, by reinforcing the link between the capital base and the risks actually incurred, basel ii encourages banks to improve their systems for managing these risks as well as their due diligence procedures. beyond reminding banks of the basic caution required when extending credit, this encouragement is all the more useful in that banks now often play a role in securitisation transactions for which the underlying assets, for example housing loans, may be initiated by unregulated entities, that are not always accountable for their risk analysis and pricing. in other words, the weaker the discipline surrounding the granting of a loan the stronger banks β diligence procedures needs to be. thirdly, basel ii gives banks and supervisors a vital tool, pillar 2, with which to assess the risk profile of institutions and in particular to take account of certain risks that are sometimes difficult to quantify but whose impact can be great. by way of example, i shall merely mention refinancing risk and reputational risk. pillar 2 thus enables banks, through the determination of the level of economic capital and supervisors, via for example an increase in capital requirements, to ensure that all of the risks incurred are appropriately covered. fourth, basel ii sets out to promote stress tests as one of the tools for managing and assessing risks. this is very important in dealing with the turmoil like that we are currently experiencing. basel ii stipulates that the stress tests conducted by banks must incorporate the effects of a large increase in credit and market risks as well as those of a rise in liquidity risk. the aim is to ensure that banks hold sufficient capital to absorb severe shocks. fifth and last, basel ii aims to substantially reinforce transparency and market discipline. | basic forex transactions, and the availability of more complex hedging strategies enables producers and investors to achieve their desired risk positions. this owes largely to the ability of modern financial products to unbundle complex risks in ways that enable each counterparty to choose the combination of risks necessary to advance its business strategy, and to eschew those that do not. this process enhances cross - border trade in goods and services, facilitates cross - border portfolio investment strategies, enhances the lower - cost financing of real capital formation on a worldwide basis and, hence, leads to an expansion of international trade and rising standards of living. but achieving those benefits surely will require the maintenance of a stable macroeconomic environment. an environment conducive to stable product prices and to maintaining sustainable economic growth has become a prime responsibility of governments and, of course, central banks. it was not always thus. in the last comparable period of open international trade a century ago the gold standard prevailed. the roles of central banks, where they existed ( remember the united states did not have one ), were then quite different from today. international stabilization was implemented by more or less automatic gold flows from those financial markets where conditions were lax, to those where liquidity was in short supply. to some, myself included, the system appears to have worked rather well. to others, the gold standard was perceived as too rigid or unstable, and in any event the inability to finance discretionary policy, both monetary and fiscal, led first to a further compromise of the gold standard system after world war i, and by the 1930s it had been essentially abandoned. the fiat money systems that emerged have given considerable power and responsibility to central banks to manage the sovereign credit of nations. under a gold standard, money creation was at the limit tied to changes in gold reserves. the discretionary range of monetary policy was relatively narrow. today β s central banks have the capability of creating or destroying unlimited supplies of money and credit. clearly, how well we take our responsibilities in this modern world has profound implications for participants in financial markets. we provide the backdrop against which individual market participants make their decisions. as a consequence, it is incumbent upon us to endeavor to produce the same non - inflationary environment as existed a century ago, if we seek maximum sustainable growth. in this regard, doubtless, the most important development that has occurred in recent years has been the shift from an environment of inflationary expectations built into both business planning and financial contracts toward an | 0 |
the duty to create the enabling environment by removing price distortions, promoting competition and protecting the interest of consumers. equally important are the continuous efforts to safeguard transaction security and enhance user confidence in order not to undermine the role of e - payments as a key enabler for financial inclusion. since there are participants from around the region especially from the asean countries, i hope that one day we would have one card for asean, where atm cards issued by any bank in the asean countries can be used to transact within the asean region. i hope you will benefit and be inspired from the discussions, debates and sharing of best practices during this forum. i also hope there would be a change in the mindset of the industry in driving financial inclusion via e - payments. on this note, i wish you all an engaging and productive forum. bis central bankers β speeches | insurance industry remains small. according to swiss re, the combined premium volume of the asean insurance market accounted for only 2. 1 % of the world β s market share in 2017. in comparison, the insurance industries in china and japan each accounted for 11. 1 % and 8. 6 % of the world β s market share, respectively. insurance penetration in the asean region remains low, averaging 3. 6 % in 2017. this is considerably well below the global average of 6. 1 % and the greater asian region β s average of 5. 6 %. while this represents a large gap in insurance protection in the region, this also points to significant opportunities for rapid growth and developments in the near future. the asean insurance market hosts a diverse group of foreign players. many have strong presence in the region and even pioneered the development of the insurance market in some member states. similar to most asean countries, malaysia welcomes their participation. in 1 / 4 bis central bankers'speeches 2017, foreign players represent almost half of the asean insurance market participants, including via participation in domestic companies. these players have brought in sound business models. their strengths and expertise have contributed to the development of the regional insurance industry. they have been given greater market access through liberalisation measures undertaken by asean countries over the years, such as that in the marine, aviation and transit insurance segment. nevertheless, comparing against the speed of expansion of foreign insurers in the region, one can argue that the pace at which the full translation of the corresponding benefits to the development of the local insurance markets remains uneven. i would like to share three observations of their presence that could be relevant : first, we can acknowledge that foreign insurers have contributed positively and extensively towards the more pragmatic and contemporary regulatory enhancements. however, this also means that regulatory design is heavily influenced by them. in other words, there could be risks of regulatory capture where policies and decisions could favour the foreign players at the expense of the local industry and public. as regulators, we have to be cognisant of these risks. it remains an ongoing challenge to balance policy trade - offs and to preserve the best interest of the general public at large. second, foreign insurers also tend to mainly target the more profitable market segments. using their international brand recognition, they are able to capture these markets easily. such segments include the higher net worth individuals, and large and multinational corporates. the insurance needs of the lower income segment and small and medium enterprises | 0.5 |
large. this robust performance reflects a number of common responses that have been undertaken by the banks to manage the increase in credit and market risks. the responses include parring down of investment in foreign assets, lowering the loan growth target in line with the economy, strengthening risk management and credit standards, paying close attention to liquidity, and acting early to assist clients to adjust to the impact of the shock. these measures have helped banks to contain credit risk, and so far we have seen the gross npl ratio rising slightly to 5. 5 percent in march from 5. 3 percent in december. as for the bank of thailand, our approach to bank supervision during this time of global stress is to ensure that the banking system is healthy, and the system continues to operate fully to support the economy with good risk management and adequate capital. so far, this is very much the picture we are seeing. at end of march, the bis ratio for capital adequacy for thai banking system is 14. 9 percent, of which the level for tier - one capital is 11. 8 percent. on the issue of credit extension, to ensure adequate flows of credit to the economy, our approach has been to rely on market mechanism by encouraging greater competition amongst banks with regard to interest rates adjustment through a process of close consultation and dialogue. the recent round of bank β s lending rate adjustment following the last mpc meeting is a case in point. in addition, to help banks better manage the increased credit risk, a credit guarantee scheme backed by government funding has been set up to promote sme lending by banks. also, to help resolve problems related to bank lending, the bank of thailand has set up a customer - call center to look into problems related to loans application and approval between customers and banks. going forward, the slowing economy will continue to put pressure on the asset quality of banks. therefore, managing credit risk will continue to be an overriding focus of thai banks this year. to do this effectively, banks need to have in place both a strong capital base and a good risk management system, both of which have been strengthened significantly in the past years in line with basel ii and international best practices. therefore, this should enable our banks to manage risk adequately going forward while supporting the economy. let me now turn to the second topic which is the medium - term issue of financial sector reform. although the thai financial sector has proven resilient amidst the global crisis, reform of our financial sector needs to continue to | human resource. such infrastructure is crucial for banks so that they can attain greater efficiency and more effective risk management at a lower cost. i will not have time today to dwell on the details of the plan, let me just say that the plan is now complete and is currently being considered by the finance ministry, and is scheduled to come into effect this year. it is our hope that this continuing momentum of reform will help expand the competitiveness and the growth of the thai financial sector and the economy in the years to come. i probably have used up my allotted time. again, i want to thank euromoney for the invitation. it has been a pleasure and thank you for your attention. | 1 |
to bring together the industry practitioners, issuers and investors, the regulators, scholars as well as those in related services, including the it services, legal, accounting and auditing professionals and those in human resource development. it is our hope that the deliberations today will play a catalytic role in building greater collective efforts through multistakeholder dialogues and network - building activities whilst discovering opportunities and also improving our understanding on important areas in islamic finance. ladies and gentlemen, as we know today, there are already clusters of cross - border collaborative activities taking place on several fronts that serve to contribute towards increasing the international integration process of islamic finance. these activities have taken many forms ranging from equity and non - equity business collaboration, regulatory cooperation in setting the global development blueprint, information exchange and building consensus on issues for international prudential standards development, to intergovernmental memorandums of understanding for collaborative developmental initiatives in islamic finance, and many others. ladies and gentlemen, as islamic finance continues to make significant inroads in the international financial markets with expanding scale, growing magnitude and greater sophistication, a critical need emerges for an expanded discourse on the developments and emerging issues with its global relevance and impact, of interest to all its major stakeholders. this is the first time that bank negara malaysia has organized a full - scale, multi - disciplinary, international event of this nature on islamic finance. these sessions include the annual investors & issuers forum, and financial regulators forum and the biannual banking and financial law school. it is our hope that participants will benefit from any of the parallel sessions of their interests and have increased opportunities for network building among the widening groups of stakeholders participation in the forum. these forums have been designed to provide dynamic and interactive formats to encouraging open and inclusive dialogues that foster a greater collective understanding in islamic finance. let me record our appreciation to the many distinguished speakers from various international institutions, financial practitioners, legal fraternity, regulatory bodies and other prominent thought leaders in islamic finance. it is our sincere hope that this global forum will be rewarding and may the collective wisdom derived from the deliberations lead to more collective actions that will be to our increased mutual benefits. let me once again express our appreciation to yang amat berhormat dato'seri abdullah badawi for his presence here this afternoon and for accepting to deliver the keynote address at our forum today. thank you. | muhammad bin ibrahim : asean financial integration, collaboration with myanmar and other challenges for malaysia speech by mr muhammad bin ibrahim, deputy governor of the central bank of malaysia ( bank negara malaysia ), at the maybank myanmar grand opening, yangon, myanmar, 2 october 2015. * * * a very good evening, it is an auspicious occasion. congratulations to maybank on the opening of its branch in yangon, myanmar. i am very confident that the launching of this first branch marks the beginning of a productive, innovative and meaningful journey for maybank in contributing to the economic transformation of myanmar and in particular the development of its financial sector. i am confident that this branch will be the first of many to come. my remarks today will touch on three subjects : firstly, the importance of asean financial integration ; secondly, the close and long - standing friendship between myanmar and malaysia ; and the role of financial institution as a responsible corporate citizen. asean : story of the future that begins today members of asean have adopted an ambitious, unique and comprehensive vision for an economically and financially integrated region. i term it as unique since we are embarking on this process in a phased and gradual manner. each member country is given the flexibility to progress towards integration based on its state of readiness. it is an inclusive approach and a long term strategic plan to unlock the growth potential of our region in the coming decades. the case for integration is self - evident. from its inception, malaysia β s and its founding members β vision have always been for a strong and integrated asean region. the β asean way β believes there is strength in diversity and no country should be left behind. asean strongly believes in the concept of shared prosperity, where wealth creation within the region will be enjoyed by all. the spirit of cooperation and flexibility are amongst the principles which underpinned the success of myanmar β s chairmanship of asean in 2014. under myanmar β s leadership, we saw major strides in financial integration that culminated in the conclusion of the asean banking integration framework ( abif ) by the asean central bank governors. a framework of gargantuan achievement. myanmar β s leadership in seeing this through was crucial and now abif represents the single most important agreement in strengthening the asean banking system, driving deeper integration and enhancing the region β s growth potential. it is an agreement of momentous significance. i would also like to congratulate myanmar for successfully advancing the yangon outcomes for financial inclusion during their tenure as chair in 2014. | 0.5 |
the early stages of the current financial crisis, the cesee countries performed relatively well compared to other world regions, and increases in risk premiums and downward revisions of growth prospects were rather contained. however, with the tightening of the crisis in the fall of 2008, the collapse in world trade and the global increase in risk aversion, emerging market economies in general came under considerable constraint. moreover, country - as well as region - specific vulnerabilities moved into the focus of market participants and investors. credit default swaps increased, but the increase was not at all homogeneous across cesee countries. with the change in global investors β sentiment, growth prospects for cesee countries had to be revised downwards substantially in the recent past. since the cesee region experienced growth rates well above the western european average, the turn in economic activity looks particularly sharp. according to the latest forecast by the european commission, gdp growth in several cesee and commonwealth of independent states ( cis ) countries will be below the euro area average, implying that the catching - up success of previous years will come to a temporary halt. among the countries hit hardest by the financial crisis are ukraine, the baltic countries and hungary. however, cesee countries must not be seen as a homogenous region. the financial crisis has a stronger impact on countries with weaker economic fundamentals, insufficient policy credibility and large economic imbalances. but the outlook for the cesee region as a whole still remains more optimistic than for the euro area. and in the years to come, the region will have higher trend growth rates, on average, than the " old " eu member states, simply because they are still in the process of convergence toward higher gdp per capita. thus, cesee will remain a driver of economic growth in europe for the foreseeable future. for the moment, however, direct and indirect external support is needed as a decisive measure to prevent recession in cesee from becoming worse than in the euro area. although the catching - up process in most cesee and cis countries over the last years was impressive, it was also characterized by some erroneous trends. let me stress two aspects that have made the affected countries extremely vulnerable to external shocks. first, in some countries credit has probably been expanded too fast. the rapid process of financial deepening needed to fund the elevated rates of economic growth in the cesee region was often accompanied by a rise in foreign ownership in the banking system. this was typically a win - win situation | klaus liebscher : european economic and monetary union - how to continue a success story? speech by dr klaus liebscher, governor of the austrian national bank, at the international financial and economic forum, vienna, 13 november 2003. * * * ladies and gentlemen, by the end of last month, the successful era of president willem duisenberg at the helm of the european central bank came to an end. at the beginning of this month, mr. jean - claude trichet became second president of the european central bank. certainly, already this change at the top of the ecb provides a good opportunity for both looking back and looking into the future. moreover, from a broader perspective, we are at the threshold of the historic event of the accession of five central european and three baltic countries as well as two mediterranean islands to the european union. when eleven eu member states entered the third stage of the economic and monetary union by adopting the common currency, the euro, on the 1st of january 1999, this historic step was accomplished in such a smooth way that it is often simply taken as a matter of fact. however, looking back, it should be highlighted that there were not at all any problems, despite heightened uncertainties in the international financial markets following the turbulences in asia, russia and brazil. certainly, this was due to the fact that this step was indeed well - prepared. moreover, the acting persons, and in particular the first president of the ecb, willem duisenberg, whose appointment became effective already as of june 1st 1998, had a strong commitment and merited high credibility. in the meantime, the ecb became a successfully working institution, the eurosystem prepared and realized a great number of logistical, operational and organizational issues - highlighted by the smooth cash changeover in 2002. and the euro establishes itself as a leading world - currency. in 2002, the share of the euro in the settlement and invoicing of global exports of individual euro area countries to countries outside the euro area has risen to between 40 % and 58 %. moreover, the euro has been well - received in the financial markets. in particular, a significant european corporate bond market has emerged. further to its role in trade and financial markets, the euro has been used by many third countries as an important official reserve currency and as an anchor in their exchange rate regimes. the success of the economic and monetary union in europe can be measured not only by looking at all that what happened, but also by | 0.5 |
information on the type and quality of claims underlying structured products would also be helpful. at the same time, i would like to emphasise that ratings are no substitute for a broad - based risk assessment by investors, who should develop their own risk analysis, as randall kroszner from the us fed recently pointed out. thus, investors will have to weigh the benefits of certain instruments against the cost of acquiring the data and expertise necessary to assess them properly. sellers may respond by putting instruments on offer that are less complex and more transparent. as regards the transparency of hedge funds, it is essential to strengthen market discipline and to enable counterparties to make a correct assessment the risks involved in dealing with hedge funds. in may 2007, the financial stability forum published a list of recommendations on hedge funds to address potential systemic risk, which is clearly a step in the right direction. the recommendations include strengthening the management of counterparty exposures and the development of enhanced sound practice standards for hedge fund managers. the g7 have endorsed these recommendations. a group of uk - based hedge funds under the leadership of sir andrew large have announced plans to introduce standards based on the industry β s best practices. i think this is a very promising project. in the us, the government has launched two working groups on hedge fund transparency. we expect to see their recommendations by the end of this year. concerning sovereign wealth funds greater transparency should be in the interests of the investing countries as well, because they would also benefit from a reduction of uncertainty in the financial markets. moreover, a commitment to best practices would reassure the target countries and could help to prevent protectionist tendencies. the dialogue between investing and receiving countries should definitely be intensified. the formulation of and adherence to best practices in that area seems to be a promising route to follow, possibly with the involvement of the imf and the oecd. in any event, we should not call into question the principle of free capital movement and should avoid resorting to protectionism. last but not least, i would also like to point to the lack of aggregate statistics on credit risk transfer. transactions are mostly carried out over - the - counter. comprehensive and reliable data, say, on the overall volumes of transactions, exist only for some market segments. in particular, data on the cdo market are far from sufficient. in other areas, for example, with regard to cdss, different sources publish figures that are difficult to compare. they are often based on surveys carried out by the private | tiff macklem : the imperative for public engagement remarks ( delivered virtually ) by mr tiff macklem, governor of the bank of canada, at the federal reserve bank of kansas city jackson hole symposium, jackson hole, wyoming, 27 august 2020. * * * introduction i last spoke at jackson hole in 2005. then, the world had been dealing with a frightening coronavirus called sars. and my topic was the sea change in central bank communications and transparency in the greenspan era. today, we are discussing the policy response to a more widespread and contagious coronavirus, and my topic is the need for a second sea change in central bank communications β from transparency with markets to more engagement with the public. we β ve started, but we need to accelerate. in a nutshell, we need to spend more effort speaking and listening to the citizens we serve. diversifying our engagement improves our capacity to make better policy decisions and enhances our legitimacy as public institutions. that is more important now than ever as we grapple with covid 19 and its harsh economic consequences, which affect everyone. and it will be critical in the future as we tackle the impact of structural changes to our economies arising from the legacy of covid 19 and those it is amplifying, including digitalization, debt and inequality. while the sars pandemic didn β t have lasting economic impacts in 2005, the 2008 us sub - prime mortgage crisis certainly did. our economies eventually recovered, but societal scars remain. when too - big - to - fail global banks were bailed out in the crisis β and struggling homeowners weren β t β it stoked the belief that the system is rigged and that globalization benefits a few at the expense of many. this contributed to the broader decline of trust in public institutions and experts and a rise in political populism β trends that affect our jobs as central bankers. 1 the last 15 years have also seen a profound change in how information is shared, consumed and debated. the internet slashed the cost of communication. this disrupted traditional media and led a growing segment of the public to get their news from alternative channels and social media. many had hoped that the democratization of information would make us all better informed. sadly, too often that β s not the case. while the internet and social media have vastly broadened access to information, they are also awash with misinformation, echo chambers and conspiracy theories β often pushed by bots and trolls, | 0 |
worse still, if there are supervisory gaps, the chance of any one authority identifying potential adverse impact from areas outside of one β s own mandate is even smaller. take the us as an example, the authorities and investors did not realize that credit rating agencies were not doing an adequate job in their rating of complex structured products. if there were a lead supervisor, would the whistle have been blown earlier? i believe that there would have been a better chance if there were a lead supervisor with a clear mandate to take the lead responsibility and who is risk focused. there would have been more dialogues through which weaknesses may have been identified and corrected. the idea of a lead supervisor has gained widespread support in the area of cross - border supervision, as it contributes to better coordination, which in turn could help to prevent or identify problems at an early stage. by the same token, such benefits could be gained in the domestic setting from having a lead supervisor under the separate authorities model. of course, in the case of the integrated model, the notion becomes a lead department in the same agency, rather than an outside lead supervisor. the next question is : who should be the lead supervisor? the obvious answer is it should be the one that supervises the core financial institutions of the country. and following my previous argument that a central bank should supervise the core financial sector, the central bank should be the lead supervisor. the financial landscape, role, and systemic importance of financial institutions evolve overtime, so must the scope of oversight and focus of lead supervisor. the lead supervisor must closely monitor this evolution and ensure no regulatory gap emerges. it can do so by expanding its scope of supervision either directly or indirectly through the relevant agencies and build coordination to ensure it can perform its lead role properly. | of credit to sound borrowers, even when secured by what had been seen as good collateral, has been a source of instability and constraint on credit flows. central banks can address such a shortage because they can remain unaffected by panicky flights to liquidity and safety. their willingness to extend collateralized lending in size against a broad range of assets can replace flows of private credit that are normally uncollateralized. another aspect of our efforts to affect financial conditions has been the extension of our open market operations to large - scale purchases of agency mortgage - backed securities ( mbs ), agency debt, and longer - term treasury debt. we initially announced our intention to undertake large - scale asset purchases last november, when the federal funds rate began to approach its zero lower bound and we needed to begin applying stimulus through other channels as the economic contraction deepened. these purchases are intended to reduce intermediate - and longer - term interest rates on mortgages and other credit to households and businesses ; those rates influence decisions about investments in long - lived assets like houses, consumer durable goods, and business capital. in ordinary circumstances, the typically quite modest volume of central bank purchases and sales of such assets has only small and temporary effects on their yields. however, the extremely large volume of purchases now underway does appear to have substantially lowered yields. the decline in yields reflects " preferred habitat " behavior, meaning that there is not perfect arbitrage between the yields on longer - term assets and current and expected short - term interest rates. these preferences are likely to be especially strong in current circumstances, so that longterm asset prices rise and yields fall as the federal reserve acquires a significant portion of the outstanding stock of securities held by the public. against this general background, let me address some questions about our operations. have they been effective? yes, i believe they have helped ease financial conditions, though they can't address all the problems in financial markets. and the situation in financial markets and the economy would have been far worse if the federal reserve hadn't taken the actions we did in supplying liquidity as well as lowering our federal funds rate target. clearly, sharp decreases in the federal funds rate target have shown up directly in other short - term interest rates. our commercial paper facilities helped stabilize money market mutual funds and have steadied the commercial paper market and lowered rates for highquality issuers. and the announcements of our purchases of mbs and treasury bonds have reduced mortgage and other long - term interest rates | 0 |
may 10, 2017 bank of japan outlook for economic activity and prices and monetary policy speech at a meeting held by the naigai josei chosa kai ( research institute of japan ) in tokyo haruhiko kuroda governor of the bank of japan ( english translation based on the japanese original ) introduction it is my great honor to have the opportunity to address you today at the naigai josei chosa kai. at the monetary policy meeting ( mpm ) held at the end of april, the bank formulated its projections for japan's economic activity and prices as well as risk factors through fiscal 2019, and released them in the outlook for economic activity and prices ( outlook report ). today, i would like to talk about the bank's outlook for japan's economic activity and prices as well as its thinking behind the conduct of monetary policy, while outlining the outlook report. i. current situation of japan's economic activity and its outlook stronger global economic growth momentum let me start by talking about global economic developments. in the first half of 2016, pessimistic views about the global economy prevailed amid turbulence in global financial markets against the background of the slowdown in emerging economies and uncertainties regarding those economies. with the benefit of hindsight, however, it appears that the global economy hit bottom in the first half of 2016. since mid - 2016, the global economy has continued to improve steadily, and its growth momentum now seems to be strengthening further. in particular, a global improvement in the manufacturing sector and trade activity has become clear. for example, an indicator of the overall business conditions in the manufacturing sector has continued on an improving trend in advanced economies as well as emerging and commodity - exporting economies ( chart 1 ). in addition, with regard to the world trade volume - - calculated by adding up imports in each country - - a pick - up in the trade volumes has been spreading globally, mainly for asia and the united states ( chart 2 ). the world trade volume had tended to grow at a slower pace than world economic growth for a long period since the global financial crisis, and such deceleration in growth of the world trade volume is called " slow trade. " as regards the background to this, structural factors such as a pause in the expansion of the global supply chain have been pointed out, in addition to a cyclical decline in demand. the recent global improvement in the manufacturing sector and trade activity draws attention as this may suggest a change is finally | at around 2 percent of late. as for scheduled cash earnings of full - time employees, many firms are expected to raise their base pay for the fourth consecutive year in the annual spring labor - management wage negotiations this year. base pay rises are especially evident this year in small and medium - sized firms that face higher labor shortages. against the background of such improvement in the employment and income situation, private consumption has been resilient. although relatively weak developments had been seen in some of its indicators in the first half of 2016, it has picked up thereafter, due mainly to an improvement in consumer sentiment. the consumption activity index ( cai ) - - which the bank calculates by combining various sales and supply - side statistics - - has followed a moderate increasing trend since the second half of 2016 ( chart 8 ). outlook for japan's economic activity with regard to the outlook, japan's economy is likely to continue its moderate expansion. specifically, with the growth rates in overseas economies increasing moderately, a virtuous cycle from income to spending is likely to be maintained in both the corporate and household sectors, on the back of highly accommodative financial conditions and fiscal spending through the government's large - scale stimulus measures. under such circumstances, the economy is likely to continue expanding and maintain growth at a pace above its potential, mainly through fiscal 2018. at present, japan's potential growth rate as estimated by the bank is in the range of 0. 5 - 1. 0 percent ; the medians of the policy board members'forecasts of the growth rates for fiscal 2017 and 2018 were 1. 6 percent and 1. 3 percent, respectively ( chart 9 ). these projections are more or less unchanged from those presented in the january 2017 outlook report. in fiscal 2019, for which the outlook was newly formulated in the latest outlook report, the growth pace is projected to decelerate, although the economy is expected to continue expanding. the first reason for the forecast concerns cyclical adjustments in capital stock. that is, the current economic expansion phase has been continuing since end - 2012, and it would have lasted for a considerably long period by fiscal 2019. considering the business cycle, therefore, business fixed investment in particular is likely to decelerate. furthermore, peaking out of the olympic games - related demand would also exert an impact on the cyclical adjustments. the second reason is the scheduled consumption tax hike. in the april 2017 outlook report, economic projections were formulated based on | 1 |
heng swee keat : financial developments in singapore opening remarks by mr heng swee keat, managing director of the monetary authority of singapore, at the press conference on the monetary authority of singapore β s annual report 2009 / 10, singapore, 29 july 2010. * * * strong recovery from the recession 1. the singapore economy has recovered strongly from the recession. five quarters since gdp reached a trough, singapore β s output has exceeded its pre - crisis peak by 13. 3 %. the rapid climb from the trough can be traced to several inter - related factors. in particular, the domestic economy had been lifted by the cyclical upturn in global trade and financial market conditions since early 2009, supported by inventory restocking and unprecedented policy stimuli in the major economies. given its openness and competitiveness, singapore was in an especially strong position to benefit from these global forces through our externally - oriented sectors. in addition, investments made in the earlier years were completed in time to tap onto the global upturn. these investments introduced new activities in singapore β s economic landscape, including high - end manufacturing and tourism services, and strengthened the competitiveness of our existing industries. 2. global markets also recovered strongly after march as the financial system stabilised and investor confidence recovered. taking into account translation effects stemming from the stronger singapore dollar, interest and dividend income, as well as gains in the valuation of assets, mas recorded a net profit of $ 10. 12 billion during the financial year. 3. looking forward, considerable risks remain in the global economy and the global financial system. singapore β s financial system has, by and large, weathered the crisis well. however, we must not be complacent and we need to prepare ourselves to respond to any future challenges. there are three areas which mas has been working on and which we will continue to focus on in the coming year : first, sustaining macroeconomic stability in the postcrisis period ; second, strengthening the financial system ; and third, maintaining the growth of singapore β s financial services sector. sustaining macroeconomic stability in the post - crisis period 4. the strong pace of growth seen in the first half of this year is not expected to be sustained. growth is likely to have peaked at the middle of this year, and will moderate to a more sustainable rate, as external demand slows after the post - crisis bounce from stimulus measures and inventory effects wane worldwide. for 2010 as a whole, the singapore economy | ravi menon : fintech β harnessing its power, managing its risks panel remarks by mr ravi menon, managing director of the monetary authority of singapore, at the singapore forum, singapore, 2 april 2016. * * * fintech is fundamentally transforming the financial industry. β’ the smartphone is becoming our bank. β’ computer programmes are offering investment advice. β’ people can now lend directly to one another online. technology will replace many jobs in finance but will also create exciting new jobs. β’ calls for new and different skill sets β understanding technology and the ability to work with and harness the power of machines and algorithms β’ as someone in silicon valley put it, β the geek shall inherit the earth β. unregulated fintech companies are now providing many financial services. they will challenge traditional financial institutions ( fis ), disrupt and even displace some of them but will not replace them. β’ banks and insurance companies have something that unregulated entities do not have β trust. trust based on a track record of performance. β’ fis are not sitting still. β they are actively harnessing technology to enhance product offerings and improve efficiency. β they are setting up in - house fintech units to replicate the start - up mentality. many global banks have set up β innovation labs β in s β pore : citibank, stanchart, ubs, hsbc, to name a few. and insurance companies too : aviva, aon, axa, metlife. β they are also collaborating with or buying over fintech companies to tap their technologies. financial technology, or fintech, may well be the best hope for the future of finance. β’ the financial industry is facing many headwinds β β’ slower economic growth, narrower margins, tighter regulation, and greater competition from outside. fintech can potentially help the financial industry regain its dynamism and at the same time purposefully serve the economy and the people. but the fintech phenomenon is not without risk. β’ the rapid pace of innovation and adoption throw up many questions for the industry and financial regulators. β’ what should be the policy approach? will speak from the perspective of mas. first β take a differentiated approach to different technologies and their applications. fintech encompasses a wide range of technologies : we cannot take a β one - size - fits - all β approach. the nature of technologies, their benefits, and risks are very different. bis central bankers β speeches β’ digital payments, digital currencies β | 0.5 |
therefore more credible and strengthens stability and confidence in the area ; ii ) a unified mechanism for the resolution of banking crises, so that individual countries no longer have to shoulder the burden of major upheavals on their own ; iii ) a unified deposit - guarantee mechanism to avoid banking panics. over the past year, these ideas and words have translated into concrete actions, and europe has demonstrated that it can carry out rapid, in - depth reforms, to ensure it emerges stronger from the crisis. i would just like to tell you where we stand currently in the move towards banking union. as you know, the area in which we have made the most progress is in supervision. european heads of state agreed to the principle of a single supervisory mechanism at the end of 2012, and we are in the process of actively preparing its implementation. by november, the main banks in the euro area will be supervised by a federalized system headed in frankfurt. a supervisory board will be established to plan and carry out the ecb β s supervisory tasks, undertake preparatory work, and propose complete draft decisions for adoption by the ecb β s governing council. moreover, the entire european banking system, including hungary of course, will be supervised on the basis of a single set of principles β the single rulebook β which has been compiled by the european banking authority. this is a huge step towards a more unified and consistent european banking system, and one that is therefore more robust and efficient. the move towards a single supervisory mechanism is firmly on track. last october, we reached another important milestone with the announcement by the ecb that european banks will be subject to a comprehensive assessment prior to the set up of the ssm in november 2014. bis central bankers β speeches this exercise is now underway. we must be aware that the exercise is an unprecedented one : about 130 participating banks β including 13 french banking groups β representing 85 % of the total assets of european banks, will simultaneously undergo a thorough asset quality review ( aqr ) using a common methodology, and this will be followed up with stress tests this summer. the purpose of this rigorous exercise is threefold : β’ to foster transparency about the condition of the european banking system ; β’ to take the needed corrective actions ; β’ and finally to restore confidence. of course, this exercise is a challenge. but i think that it is also a great opportunity for european banks to show that they have cleaned up their balance sheets and that they are trustworthy. as you can | , cutting its key policy rates to historically low levels and providing unlimited 3 - year liquidity. but even this proved insufficient to calm market tensions. in some countries at least, monetary policy measures were simply not being fully transmitted to the real economy. what was the reason behind these three phenomena, which were largely responsible for the escalation of the crisis in the euro area? it was the vicious circle that developed between the state of a country β s banking sector and its perceived sovereign credit quality. and why did this vicious circle emerge? because of the lack of banking union : β’ in a monetary union, capital can circulate freely and rapidly from one country to another, which can amplify the potential fallout from β banking panics β, unless there bis central bankers β speeches are effective supranational mechanisms in place for supervision, resolution and the guarantee of deposits ; β’ as long as the financial health of the euro area remains at the mercy of the difficulties encountered by one of its member countries, there is a threat that negative interactions may develop between sovereign credit risk and banking risk ; β’ in reality, the lack of a banking union allowed a high degree of fragmentation to develop within the euro area banking system and this, in turn, nourished doubts about the β singleness β of the euro. the crisis thus made it clear that a uniformly healthy financial system was vital to safeguard the stability of the euro area and ensure the effective transmission of a single monetary policy. once we had agreed on this reasoning, we had to come up with a concrete solution. the key to banking union can be summed up as follows : the aim is to find a way to ensure that banks in the euro area are considered precisely as that, as β euro area banks β, and not as β irish β, β german β or β italian β banks. in other words, the goal is to ensure that credit conditions in the euro area will not depend on where you are but on who you are, which is what should be expected of an efficient financial market. to achieve this, we need to have three things in place : i ) federal bank supervision, to guarantee that all institutions are subject to the same rules and same methods of control. a supra - national supervisor is in fact better placed to assess the risks of cross - border activities and therefore to protect and encourage such activities ; it is not subject to national biases that can lead to the temptation of economic introversion. it is | 1 |
draghi : first of all i hope that by then the recovery will be on its way. there is a risk but i think fears are exaggerated. banks have done a lot already in raising capital. we should reach a globally accepted definition of capital. the basel committee and the fsb are working so that the timing chosen for the implementation of the new rules do not prejudge economic recovery. handelsblatt : are you confident that we will have a globally coordinated regulation? lately we have seen a lot of tension between the eu and the us. mr draghi : i think those tensions are being exaggerated. many of the proposals now being publicly discussed, like the β volcker rule β or a tax on banks in the us and the uk, have already been discussed by the fsb. handelsblatt : you have been criticised for having worked at goldman sachs, the us investment bank accused of having been involved in dubious transactions with greece. what can you tell us about it? mr draghi : when i left the italian treasury, in 2001, we had no rules in italy forbidding to take a position in an investment bank. nevertheless, i went to harvard and taught for six months there. then i entered goldman sachs. since the beginning i made it clear that having worked 10 years with governments and government officials, it would be very embarrassing to ask them to do business with goldman. i therefore insisted to develop my own clients in the private sector. and that β s what happened. i did that for about 3 β 4 years. handelsblatt : any country among your clients? mr draghi : no, i have never made any transaction with any government. the reason is simple : i was too busy doing corporate investment banking with private clients. handelsblatt : have you ever been to greece? mr draghi : i have never been to greece for working reasons. those transactions were done before my arrival at goldman sachs. there have been further transactions with greece but i have never been involved. i would also like to point out that i was not deputy ceo, because that position does not exist at goldman sachs. handelsblatt : when you think now about goldman sachs and greece, do you think it was a good idea for goldman to help greece mask its budget? mr draghi : that β s where the difference lies, the difference in purposes. one is debt management, the other one is debt concealment. that concealment is a very bad thing | about 4 percent for more than half a century, as shown in the left - hand - side panel of chart 4. however, once we plot the growth rates of individual economies, the diversity in the nature of the region β s economic development becomes immediately apparent. the graph also reveals that there were shifts in the region β s β rising stars. β japan recorded double digit growth in the 1960s, but its growth rate became subdued thereafter. instead, the asian nies took over the position of very rapid growth economies, followed by china more recently. if we redraw the picture, not against time horizons but against income levels, as shown in the right - hand - side panel of chart 4, there emerges a pattern of development stages. growth rate tends to become higher once a country makes the transition from the low - income to the middle - income stage. the growth rate reaches its peak when an economy is at the middleincome stage. after that, it tends to become slower, especially once a country enters the high - income stage. ii. three traps for growth can asian countries sustain their rapid economic growth for the foreseeable future? if history is any guide, we could expect another rising star to emerge in asia. it is by no means guaranteed, however. even if it is the case, we cannot entirely count on one single rising star. the growth rate of relatively high - income asian economies needs also to be sustained at a reasonably high level if the prosperity of the regional economy as a whole is to be maintained. i believe there are three traps which we must avoid falling into if we are to sustain economic growth in asia. despite the heterogeneity which we have observed, these three traps are relevant to many countries in the region, albeit to varying degrees, depending on the circumstances. the first trap is the β middle - income trap. β 6 history shows that many economies have faced difficulties in advancing beyond the status of a middle - income economy once they have see http : / / data. worldbank. org / about / country - and - lending - groups. in my presentation, i loosely follow their definitions by using thresholds of 12, 000 u. s. dollars and 1, 000 u. s. dollars of per capita gdp. david n. weil, economic growth, third edition, pearson education limited, 2013. the darkness of north korea is noteworthy, as is often pointed out in the literature, including charles i. jones, β | 0 |
. the oil price has been unexpectedly high, although recently it has fallen slightly. moreover, industrial activity appears to have weakened slightly, both in sweden and abroad. we therefore came to the conclusion in april that growth in sweden would be somewhat weaker than was anticipated in the march inflation report. since then, we have seen statistics showing that growth in germany was slightly stronger than expected during q1, and that the downturn noted in the united states in march appears to have been temporary. we had anticipated lower growth in sweden β s net exports, but exports of goods appear to be increasing even less than was forecast. however, good growth in real incomes and low interest rates will contribute to favourable growth in household consumption. the labour market remains relatively weak, and our forecast is based on employment strengthening during 2005. at the same time, we can see rising price pressures in some industrial nations, particularly the united states, which are partly β but not solely β a consequence of the high oil prices gaining greater impact in the production and consumer segments. it is important to monitor whether the slackening tendencies seen in economic activity recently are temporary or more persistent. if we were to see a notably poorer development than we envisage now, such as much lower growth than forecast, the arguments in favour of cutting interest rates would in my opinion take on greater substance. we will be considering all of these factors at our next monetary policy meeting on 20 june. thank you! | a rate and in a scope that few people considered possible a few decades ago. since the reform policy began at the end of the 1970s, average growth has been 9 per cent a year. china has accounted for one third of the world β s real growth in recent years. the country has rapidly transformed into the second largest economy in the world, become the third largest trading nation and one of the largest recipients of foreign direct investment. 3 the strong growth in china has been driven by investment and exports. investment comprises just over half of gdp, which is much higher than the shares in oecd countries or in other rapidly - growing economies. the high level of investment has been almost entirely financed through domestic savings. the saving ratio in china amounts to around 45 per cent of gdp, which is a much higher level than in most other countries. according to estimates, chinese households save one third of their incomes. one reason for the high level of saving is the lack of a social safety net and a general pension system. as a consequence of the high level of saving, private consumption is relatively low. china has had relatively strong growth in exports ; in the past five years alone exports have trebled. 4 the country is currently a nation as open as, for instance, france and italy, measured in the percentage of foreign trade in gdp and considerably more " open " than the united states. china has come to be called β the factory of the world β as an increasing number of foreign companies have chosen to purchase goods and locate parts of their production there. for instance, china manufactures more than two thirds of all photocopiers, microwave ovens and dvd players, and 40 per cent of all of the world β s computers. 5 however, a large part of the input goods for these products are imported from neighbouring countries, but the prevalent picture that china can only compete with lowcost products is slowly changing. in recent years china has gone from specialisation in simple, labourintensive low - cost products to also producing more technically - advanced and internationallycompetitive products. the chinese authorities conduct an active trade and industry policy to build up the domestic industrial and technological capacity, for instance in the fields of telecommunications, energy, motor vehicles and pharmaceuticals. their goal is to have 30 - 50 chinese countries among the world's 500 largest within 5 - 10 years. in addition to investments in research and development, china β s human capital has also been reinforced by an increasing return flow of highly | 0.5 |
human resources. in terms of gender equality, tokushima prefecture has one of the highest proportions of women working as business executives, in management positions, or on councils of local governments, suggesting that women are playing a prominent role in the region. looking back at the history of the prefecture's economy, the indigo and salt manufacturing industries flourished by taking advantage of the climate and nature. these industries have developed over time, and agriculture still flourishes in the areas where indigo was cultivated. the raw material processing technology used in salt production is one of the roots of the chemical industry, which has become a major industry of the prefecture's economy. thus, tokushima prefecture has a history of achieving sustainable development by reinventing itself to meet the changing needs of the times. it is my hope that its economy will continue to develop further by promoting initiatives that are ahead of their time. the bank, through its tokushima office and takamatsu branch, will continue to gather information and exchange views in order to contribute in any way possible to various efforts to revitalize the region. thank you very much for your attention. japan's economy and monetary policy speech at a meeting with local leaders in tokushima december 8, 2021 amamiya masayoshi deputy governor of the bank of japan introduction i. economic developments ii. price developments iii. financial conditions surrounding firms and the bank's conduct of monetary policy iv. current situation of and outlook for tokushima prefecture's economy chart 1 i. economic developments real gdp ann., q / q % chg. 20 / q4 + 11. 8 21 / q1 - 4. 1 q2 + 1. 5 q3 - 3. 0 570 s. a., ann., tril. yen cy 15 note : figures are based on the first preliminary estimates for the july β september quarter of 2021. source : cabinet office. chart 2 i. economic developments corporate sector exports and production corporate profits s. a., cy 2015 = 100 s. a., tril. yen 19 / q4 real exports industrial production cy 06 current profits cy 06 note : in the right - hand chart, figures are based on the financial statements statistics of corporations by industry, quarterly and exclude " finance and insurance. " figures from 2009 / q2 onward exclude pure holding companies. sources : ministry of finance ; ministry of economy, trade and industry ; bank of japan. chart 3 i. economic developments household sector confidence indicator ( economy watchers survey | which such an increase in spending will bring about a sales increase at consumption - related firms and wage increases for those working there, and thereby encourage a further increase in consumption. the third point is the effects of the government's economic stimulus package formulated last month. while the extent to which the package will push up the economy also depends on the supplementary budget and thus should be closely examined, there will likely be the synergy effects of monetary and fiscal policy mix. that is, the bank has pursued powerful monetary easing measures so that short - and long - term interest rates will be stable at low levels. in this situation, an expansion in fiscal spending is likely to have greater stimulus effects without leading to a rise in interest rates. it is therefore expected that the latest stimulus package will underpin the economy through the synergy effects. taking these points into account, it is projected as a baseline scenario that the recovery trend in the overall economy will gradually become evident through next year, as downward pressure stemming from supply - side constraints and covid - 19 wanes and the effects of the economic stimulus package materialize. risk factors however, as i mentioned at the outset, the outlook for japan's economy entails extremely high uncertainties. the following risk factors warrant attention. first, there remain uncertainties over whether services consumption will pick up steadily during the covid - 19 era. as explained, consumption of face - to - face services, such as eating and drinking as well as accommodations, has been picking up. that said, anecdotal information from firms suggests that vigilance against covid - 19 is sticky and thus people are reluctant to hold large year - end parties or go on a group trip. in some european countries, the number of confirmed cases has resurged despite progress with vaccinations, and cases of the new omicron variant, which is considered to be highly contagious, have been detected. given persistent risk aversion of households in japan, mainly of seniors, the extent to which consumption will recover continues to warrant attention. the second factor is a risk that the effects of supply - side constraints will be amplified or prolonged ( chart 4 ). as mentioned earlier, the issue of parts shortages caused by the spread of covid - 19 in southeast asia has started to dissipate. that said, there remains a fundamental problem that firms'supply capacity has not been able to keep up with the surge in demand, mainly for digital - related goods | 1 |
subir gokarn : regulatory perspectives on derivatives markets in india keynote address by dr subir gokarn, deputy governor of the reserve bank of india, at the international options market association, world federation of exchanges annual conference, organised by the national stock exchange, mumbai, 4 may 2011. * * * inputs from sudarsana sahoo, edwin prabhu, rajib das, h. s. mohanty, nishita raje and g. mahalingam are gratefully acknowledged. introduction it is a pleasure for me to be speaking at this conference organized by the international options market association. the presence and role of derivatives in india, both otc and exchange traded, has been increasing steadily over the years. these instruments are an important component of the overall financial sector strategy and the broad regulatory objective is to ensure that they are used to their potential in ways that are consistent with both financial development and the contribution of financial markets to economic growth. i would like to begin by laying out a simple framework, which helps us think about financial sector development in terms of multiple objectives. this will provide a useful backdrop to the various issues relating to derivatives in india, which i will then go on to talk about. financial sector development can broadly be viewed as pursuing four objectives. efficiency : we can look at the notion of efficiency from two perspectives. for the provider of products and services, it means the ability to do this at the lowest possible cost, with the full benefit of technology and market infrastructure. for the user, efficiency relates to the availability of products and services which address his / her requirements at the lowest possible price. stability : from the viewpoint of the financial system, stability requires that aggregate risk is bounded in some way. this requires, in turn, that individual participants be required to mitigate and manage their own risks. however, in situations in which systemic risk goes beyond the aggregate individual risk, additional measures may be warranted. transparency : the basic premise is : β what cannot be measured cannot be managed β. the more market participants know about overall activities and outcomes, the better able they are to make their cost - benefit calculations and act on them, contributing to the overall effectiveness of the market. inclusion : financial development is not an end in itself. it serves the broader purpose of facilitating economic activity, through resource mobilization and risk management. the more accessible the financial system is to individuals in pursuit of these two objectives, the better. against this backdrop, i will address four | very large money supply could result in inflation or higher prices which affect the common person the most. on the other hand, inadequate monetary resources can affect the growth and disrupt the payments system. rbi tries to strike a proper balance through its policies. currency management is an important function. for example, the new currency notes are issued by the reserve bank, old ones are withdrawn and destroyed. their design, production and distribution are managed β to be spread over the entire country. the reserve bank's currency note contains the words'i promise to pay the bearer a sum of β¦. '. that is signed by the governor. so, the reserve bank has to ensure that the value of rupee is maintained so that faith and trust of people is always present. to maintain the value of the rupee, the amount of goods and services that it can buy should not get eroded in a way that confidence in the currency is lost. so, the reserve bank's most important objective is to maintain price stability, contain inflation and anchor inflation expectations. incidentally, you may find in the currency note, the denomination is written in two central government official languages ( english and hindi ) and fifteen national languages. it shows the diversity of our country and the reserve bank's commitment to reach out to one and all. speaking about the value of money, the reserve bank is concerned not only with the value of money in india, but the related issue of value of our rupee in relation to the currencies of other countries : that is maintaining the faith of people outside our country also, in our currency. this work relates to exchange rate management. rupee cannot be directly used in settling transactions with other countries and international currencies like us dollar have to be used. to ensure smooth international transactions, it is necessary to maintain the external stability of the rupee. incidentally, confidence in rupee outside our country also depends very much upon domestic price stability. furthermore, rbi also maintains and manages foreign exchange reserves to sustain this confidence. people would like to borrow and lend money to each other for consumption and production overall, the demand and supply for such resources, in aggregate terms, need to be balanced by an appropriate level of interest rates which provide incentives for savers and also adequate returns to investors in industry, agriculture, etc. such a balance is struck by interest rate policies adopted by the rbi. i am over simplifying, but the idea is to strike broadly a balance β both within our country | 0.5 |
understanding of sustainability issues, thus allowing for better coordination of efforts to address sustainability risks throughout the value chain. in conclusion, it is our fervent hope that with sustainability, an innovative and collaborative mindset, we can come to develop value - driven solutions and discover new avenues for synergistic collaboration. i believe that the line - up of expert contributors for this programme will 2 / 3 bis central bankers'speeches be able to provide delegates with insightful perspectives on best practices to lead the transition to sustainability. the network built today among delegates can continue and be built upon for future collaborative initiatives, either through a local platform by ibfim or internationally, through cisl. to end my remarks, i would like to share this quote by winston churchill, β i never worry about action, but only inaction. β with that, i wish all of you a productive programme. thank you. 1 industries most and least impacted by covid - 19 from a probability of default perspective β september 2020 update 2 covid - 19 to add as many as 150 million extreme poor by 2021 3 / 3 bis central bankers'speeches | the community of participants in this market. i hope that you will keep this refrain in mind when you discuss the markets in this conference. i wish your deliberations all success. 1 sebi data 5 / 5 bis central bankers'speeches | 0 |
increasing policy space, such as raising the inflation target, or relying more heavily on fiscal policy to fight recessions and to keep inflation and interest rates from falling too low. the federal reserve renewed its policy framework just recently and decided to move to average inflation targeting. the fed has chosen a policy framework that can be characterised as flexible without being too rigid in its parameters. with it, the fed emphasizes the goal of reaching maximum employment, implying that inflation could temporarily somewhat overshoot its 2 percent target, if that means more americans stay in and join the workforce. it is often argued that strategies that include overshooting of the inflation target are vulnerable to a time - inconsistency problem. we will today have a chance to listen to james bullard, president of the st. louis fed, who will give his take on this and more broadly on the fed β s strategy review. these lower - for - longer, or β make - up β strategies also include variants of price - level targeting. in the model simulation exercises, make - up strategies turn out to be effective in reaching inflation targets in the medium term, as they take past deviations from the target into account β in other words, this time β bygones are not bygones β. in my view, we in the eurosystem should be open not only to a genuinely symmetric price stability target, but also to considering make - up strategies as a way to strengthen the commitment to symmetry. consequently, while a symmetric inflation target and a reaction function, preferably with a makeup strategy, would help us in achieving our price stability mandate, it would, of course, be no silver bullet alone. rather, it would be one key building block of how the review can enable the ecb β s monetary policy to better achieve its inflation aim and to better support sustainable growth and a higher level of employment in the coming years. monetary and fiscal interaction as we know, the ecb β s monetary policy is now very accommodative ; in parallel, the euro area member states are providing very substantial fiscal stimulus. importantly, monetary policy and fiscal policy now work hand in hand and reinforce each other, providing a safety net until the covid - 19 crisis phase is over, and hopefully a trampoline for stronger growth beyond it. the smart coordination this time around reminds me of what tommaso padoa - schioppa used to say about central banks, β independence does not mean isolation. β it is | of working life and period of retirement into account when making decisions on consumption and labour supply. in the face of an expected extension of the period of retirement, consumers of working age will make appropriate provision by increasing their savings. conversely, expectations of a longer working life will boost the consumption of the working - age population in step with higher expected permanent income. path 3. on the other hand, the analysis indicates that if, instead of increasing pension contributions, pension replacement rates were reduced, households would respond by increasing their labour supply, and the loss in economic activity would remain far smaller. the required reduction in pensions would, however, be drastic, and so would its social and political costs. if it were to materialise, the large global increase in public pension contributions would not only mean an intergenerational income transfer, but could also entail losses in employment. at the same time, the growing fiscal cost of elderly care would increase pressure to raise taxes. it is doubtful whether pension contributions could really rise this much, particularly at a time when the increasing mobility of both labour and capital is reducing national governments'room for manoeuvre in taxation. the effort to achieve a more sustainable base for our pension systems has in recent years been a key plank of economic policy throughout the developed world. the sustainability of pension systems can, of course, also be improved by postponing retirement. this, would increase the number of people paying in and reduce the number of people receiving benefits. postponing retirement would slow the growth in pension expenditure, increase the supply of labour, improve the return on investments and accelerate economic growth. for the financial markets, the most important feature the various pension reforms all have in common has been the attempt to reduce the role of pay - as - you - go schemes in providing an income for the elderly. this does not necessarily mean the increased use of funded schemes within public pension systems. macroeconomically, the same result could be achieved simply by reducing or restricting access to the benefits of pay - as - you - go schemes. these types of reform would mean a reduction in the transfer of income from future age cohorts to present cohorts. as a result, the present generation's expected income flow would be reduced, people would become keener to take out private pension insurance to bridge the gap, and the saving ratio of the economy as a whole would rise. we all know how difficult such reforms would be politically. it is interesting to note that the | 0.5 |
mario draghi : hearing of the committee on economic and monetary affairs of the european parliament introductory statement by mr mario draghi, president of the european central bank, at the econ committee of the european parliament, brussels, 9 july 2018. * * * mr chairman, honourable members of the economic and monetary affairs committee, ladies and gentlemen, it is a pleasure to be back at the european parliament before your committee. since we last met, the ecb β s governing council has taken important decisions on the recalibration of our monetary policy stance after september this year. in my remarks today, i will outline these decisions and explain the assessment of the current economic environment on which they were based. following the recent euro area summit, i will also take this opportunity to discuss the future of our economic and monetary union ( emu ), pointing to priorities for the near term from an ecb perspective. economic and inflation developments the euro area economy grew by 0. 4 % during the first quarter of 2018, marking five years of continued economic expansion. underlying economic fundamentals remain solid, notwithstanding some moderation in growth at the beginning of the year. the labour market has improved notably over recent years. employment has risen by 8. 4 million since mid - 2013, and is growing in nearly all euro area countries. the unemployment rate stood at 8. 4 % in may, its lowest level since december 2008, and labour force participation now stands at an all - time high. looking ahead, the latest eurosystem staff macroeconomic projections foresee average annual growth of 2. 1 % in 2018, 1. 9 % in 2019 and 1. 7 % in 2020. while uncertainties related to global factors, including the threat of increased protectionism, have become more prominent, the risks surrounding the euro area growth outlook remain broadly balanced. of course, we continue to closely monitor developments. according to the eurostat flash estimate, headline inflation increased to 2. 0 % in june from 1. 9 % in may, reflecting higher rates of energy and food inflation. excluding these more volatile items, inflation decreased from 1. 1 % in may to 1. 0 % in june. as the economy continues to grow and slack is absorbed, supporting rising wages, underlying inflation is expected to pick up. recent wage agreements in several countries point to a continuation of these favourable dynamics. i will discuss the inflation outlook in more detail as i explain the monetary policy decisions taken by the governing council in june. the ecb | , as would the relationship between a cbdc and euro banknotes and coins, along with the process by which one could be exchanged for the other. should it not be acknowledged that the ecb β s exclusive right to authorise issuance in euro would also be applicable to a digital issuance? a retail cbdc could be based on digital tokens, which would circulate in a decentralised manner β that is without a central ledger β and allow for anonymity towards the central bank, similar to cash. some argue that a token - based digital currency might not guarantee complete anonymity. if that proved to be the case, it would inevitably raise social, political and legal issues. we are currently looking into the legal questions raised by the potential use of intermediaries to facilitate the circulation of a cbdc and also the processing of transactions in a cbdc. to what extent are we permitted to outsource public law tasks to private entities? and what would be the appropriate extent of supervision over such entities? alternatively, a retail cbdc could be based on deposit accounts with the central bank. though involving vast numbers of accounts, it would not be a particularly innovative option from a technological viewpoint. for the euro area, it would basically mean increasing the number of current deposit accounts offered from around ten thousand to between 300 and 500 million. a cbdc of this nature would enable the central bank to register transfers between users, thereby providing protection against money laundering and other illicit uses ( or those considered illicit by the rulers of the day ), depending on the degree of privacy granted to users. these are just two of the many ways to design a cbdc. we are currently scrutinising the various options to assess their potential impact β both positive and negative β on the financial system and on our ability to honour our mandate. disintermediation β economically inefficient and legally untenable you may wonder why central banks have not chosen to provide retail access to central bank money, despite the technology for an account - based cbdc already being largely available. the main reason is that introducing a retail cbdc could have major consequences for the financial system. 2 / 4 bis central bankers'speeches if households were able to convert commercial bank deposits into a cbdc at a rate of 1 to 1, they may find it far more attractive to hold a risk - free cbdc rather than bank deposits. during a systemic banking crisis, this could trigger digital bank | 0.5 |
loopholes that emerge due to financial innovation β this calls for a confident, strong supervision in the face of new developments that are not covered 1 / 3 bis central bankers'speeches by international standards. but another source of weakness of the international basel standards is insufficient implementation. i was recently discussing with my staff the implementation of basel iii in the eu. at some point, the discussion turned to the less than optimal experiences with the previous basel standards. some pointed out that the us did not implement the basel ii standard in full, despite having pushed for it in the first place. that led to the question how complete the implementation could be if other jurisdictions simply cherry - picked. but then i saw two colleagues whispering and laughing β and i asked what it was about. one of them, quite reluctantly, explained that it may be true that basel ii implementation in the us diverged from what the eu had hoped for β but that it was the eu which had been found to be materially non - compliant with the basel iii standard. the room suddenly fell silent. finally, someone asked : will it be different this time around? the purpose of this tale is not to blame and shame. my concern is rather to highlight where we are right now in terms of finalising regulatory reform after the financial crisis β and that the system of national implementation does not favour full implementation. so where are we? we are getting closer, we can already make out the finishing line. but the last leg of national implementation is a steep upward climb. without reaching the last milestone, basel iii would lose dramatically in value in terms of financial stability. what we need is complete implementation, nothing less : all internationally active banks β be they american, european, asian or from any other region β need to be subject to these minimum standards β otherwise we have failed to achieve a truly international compact. does this mean that, in future, every community bank should apply internal models to estimate its risk of credit valuation adjustment in derivative positions? of course not. international cooperation would reach beyond what is sensible. the basel rules are highly complex and call for big compliance departments β something that is beyond the reach of a community bank business model, for example. that β s why smaller institutions which are not internationally active should be subject to less complex rules. and that β s why the us and the eu have begun to reduce operationally burdensome rules for such institutions β a path that we are pursuing further, within the basel committee as well as in national implementation. | sabine mauderer : welcome speech - 15th anniversary of the deutsche bundesbank's representative office welcome speech by dr sabine mauderer, vice - president of the deutsche bundesbank, at the 15th anniversary celebration of the deutsche bundesbank's representative office, new york city, 24 september 2024. * * * check against delivery 1 welcome ladies and gentlemen : for me, it is always a great pleasure to be here. especially this year, as we celebrate the 15th anniversary of our trading office. since its inception in april 2009, the trading office has provided the bundesbank executive board with first - hand knowledge from wall street and beyond. i know for sure that its success rests on a network of exceptional people, namely you! therefore, i want to start with a big thank you to all of you, for your cooperation and trust over all these years. but before we move on to the fun part, let us look at what has happened in the markets since we last met in september 2023. 2 economic backdrop from an economic point of view, the world looked different a year ago. inflation in the euro area β and in the us too β was significantly higher. almost a year ago to the day [ sept. 2023 ], the eurosystem raised its key interest rates for the last time in the tightening cycle. in september 2023, the deposit facility rate reached 4. 0 percent. the tightening has done its part to cool euro area inflation. today, the eurosystem is well on the way to meeting its inflation target. in the us, we also see positive developments in this regard. inflation has decreased significantly, thanks to a series of interest rate increases. although us inflation remains above the fed's two percent target, things are heading in the right direction β just like in the euro area. in terms of economic growth, the us remains ahead of the euro area. while euro - area gdp grew by 0. 4 percent last year1, the us economy mustered 2. 5 percent growth2. as it stands today, the us is poised to outperform the euro - area economy once again this year β despite recent signs of a cooling in the us labour market. against the backdrop of lower inflation, central banks on both sides of the atlantic have taken steps to pare back the degree of monetary - policy restrictiveness. as expected, the fed last week [ sept. 18 ] decided to lower its target range for the federal funds | 0.5 |
john c williams : banking culture - the path ahead remarks by mr john c williams, president and chief executive officer of the federal reserve bank of new york, at the conference " building cultural capital in the financial services industry : emerging practices, risks and opportunities ", federal reserve bank of new york, new york city, 4 june 2019. * * * as prepared for delivery good morning, everyone. i β d like to begin by welcoming you to the federal reserve bank of new york and to the fifth conference on culture in financial services that we β ve hosted. before i launch into my remarks, it β s time i remind everyone that the views i express today are mine alone and do not necessarily reflect those of the federal open market committee or others in the federal reserve system. when i took on the role as president of the new york fed last year it so happened that my first day coincided with this conference. in my remarks that day, i emphasized that culture is a longterm project, a constantly evolving one, which is never done. the trouble with long - term projects with no distinct finish line is that they can lack a sense of urgency. the pressure to make real progress is often missing, especially when there are so many other priorities competing for our time. headlines in the financial news illustrate the lack of progress. in the year since our last conference, stories of money laundering and fraud have been an all - too - frequent feature. culture is at the heart of many of these issues, and addressing the root causes of misconduct must remain a high priority for the industry and regulators. the supervisory approach given this imperative for change, the question is, what can we do to improve culture in financial services? culture is like many of the risk management issues challenging businesses. cyber threats, digital transformation, and climate change are all facts of life that companies face today, and will be facing 10 years from now. but i don β t hear any ceos saying that securing their servers is a project that can wait until 2029. nor does anyone think that there are β once and done β fixes for these problems. indeed, one important lesson from cybersecurity is that this is not purely a technology problem, but one that requires a fundamental shift in mindset and culture over the long term. so the first thing is the industry, the regulatory agencies, and the banks need to take culture seriously, now. a major and essential part of this is that there must be meaningful consequences for firms | the first step of understanding the nature of organizational culture. these three concepts β β connect, β β convene, β and β catalyze β β will continue to be our guiding principles on the issue of culture as we build on our current work and explore new initiatives. like addressing cyber risks and climate change, the journey toward reforming culture in the banking and financial services industry is a long one. and there β s no single action that a regulator or a bank can take to make it happen. getting it right is going to require the will and expertise of regulators, financial services firms, academics, and practitioners. and while changing organizational culture is a long - term, complex, and challenging task, i β m optimistic that we can and we will make progress. and the federal reserve bank of new york is committed to being a partner on that journey. thank you. 3 / 3 bis central bankers'speeches | 1 |
aspects will be considered separately. some of us attach more importance than others to monetary indicators. what is so attractive about our strategy is that it leaves room to afford greater or lesser weight to the different indicators. in an economy as complex as that of the euro area, this is a sensible approach. strategy in practice in practice, making monetary policy is difficult because the economy is continuously exposed to shocks, the effects of which are sometimes not entirely predictable. one might think of sudden changes in the oil price caused by tensions in the middle east ; of failing crops ; or of exchange rate fluctuations. in particular, shocks that push up inflation in the short - term while at the same time reducing output, confront a central bank with difficult policy decisions. a strategy offers a guideline for choosing among the available options. in this context, some ecb watchers have urged the eurosystem to direct its policy towards what they call " underlying inflation " instead of unadjusted inflation. in their view, underlying inflation is something of a cure - all. by assigning a central role to this concept of inflation, the eurosystem would, as it were, be able to see through the direct impact of a shock on prices. the usual method to arrive at underlying inflation is by disregarding fluctuations of volatile components such as energy and food prices in calculating inflation. i myself reject a monetary policy explicitly centred on underlying inflation. like other cure - alls, it is a piece of quackery. rely on it too much, and it can become life - threatening. there is a real danger that a policy centred on an artefact such as underlying inflation would harm the ultimate goal, which is price stability. the public is not interested in underlying inflation, but in the inflation they can see in their purses. for this reason, the european treaty is also directed towards maintaining price stability, not towards underlying inflation. another major objection would be that the categorical exclusion of, say, oil price rises from relevant inflation rate is based on flawed reasoning. without doubt, oil price rises are often to some extent exogenous. think of a decision by opec to raise prices or of rising tensions in the middle east. to the extent that such a shock is exogenous, there is little reason to worry about more than the knock - on effect on, in particular, wages. but in many cases a rise in oil prices may also reflect increased economic activity. an oil price increase due to a | problem has begun to disappear, simply because the public has become more accustomed to our approach. a great help in this respect was the decision to halve the frequency of meetings where monetary policy is discussed to once every month. this has also reduced the extent of speculation over impending interest rate adjustments. in the second place there was β apart from the occasional communication error β too much communication sometimes, especially in the early days. this may sound paradoxical, but what counts is optimum, not maximum, communication. too many messages do not enhance transparency, especially if they convey what seem to be contradictions. for this reason, the governing council has agreed that in the run - up to each monthly meeting, radio silence will be observed about developments with a direct bearing on monetary policy. thirdly, communication is a complicated matter if one wishes to be as open as the ecb. although it does not publish minutes of its meetings, the ecb is the only large central bank which holds a press conference directly after every decision, to explain its motives. at the same time, a communique is published enumerating the considerations which have led to the decision. compare this to the sober comments by the bank when it pursued its independent monetary policy, pegging the guilder to the deutsche mark. we used to confine ourselves to phrases like : " domestic and foreign developments considered, the nederlandsche bank has decided to lower the interest rate on advances by 0. 25 % to 5. 25 %. " the question pondered these days is how the eurosystem β s press releases may provide even more clarity on the considerations leading to interest rate decisions. this has been an ongoing issue. having said this, it would not be very useful to publish individual members β views on interest rate policy. a single person may simultaneously harbour considerations in favour of and against a specific decision. besides, in the european context there would be the risk that views of individual council members could be linked erroneously to the economic situation in their home country. what ultimately matters is the credibility of the eurosystem as a whole and publishing the opinions of individual council members would add little, if anything, to that. to sum up, the monetary strategy of the eurosystem offers a sound framework for economic and monetary analysis ; it has been effective, in my experience, in guiding the monetary decision - making process within the governing council of the ecb. the results are favourable, considering current and expected inflation. there have been occasional | 1 |
back of stabilised real disposable income, a declining general level of prices and reduced uncertainty. other significant positive developments were the recovery of total employment by 0. 3 % and of dependent employment by 2. 3 %, while the number of unemployed decreased for the first time since 2008, by 3. 3 %. nevertheless, the unemployment rate remains high and the highest in the eu. another major concern is that the long - term unemployment rate continues to rise, which increases the risk of human capital depreciation. unit labour costs decreased further in 2014 on the back of higher productivity and lower employer contributions, thereby helping the economy gain in competitiveness. structural competitiveness in greece has been showing signs of improving since 2013. more specifically, according to the world economic forum β s global competitiveness index, greece moved up the ranking to 81st place, from 91st in 2012, while according to the world bank β s ranking on the β ease of doing business β, greece advanced to 61st place, from 65th and 89th, respectively, in the past two years. however, low access to financing, red tape and tax policy bis central bankers β speeches instability remain the biggest drags on the international competitiveness of greek businesses. the over - performance against the primary surplus target set in the economic adjustment programme by 1. 2 % of gdp in 2013 was a milestone achievement that provides a solid base for the attainment of the fiscal target in 2014 for a third consecutive year. however, the general government fiscal outcome in 2014 faces downside risks, largely associated with the uncertainties in the last weeks of the year, combined with a back - loaded revenue schedule. these uncertainties have increased following the completion of the state budget execution for 2014, which pointed to significant tax revenue shortfalls, especially in december. despite an increase in public investment, total investment remains particularly low, reflecting a decrease in private investment mainly on account of limited bank lending and the high cost of borrowing. the fall in private investment was primarily concentrated in residential investment, whereas productive business investment has started to show signs of recovery. for the first time since 2008, the increase in investment in the third quarter of 2014, albeit moderate at 1 %, may be signalling a longer - lasting recovery trend. global financial markets global financial market conditions continued to improve in the first half of 2014. gradually, however, from the third quarter onwards, increasing investor uncertainty about the banking sector of euro area countries, signs of economic recovery losing | in promptly setting up a sufficiently forceful institutional response. these difficulties were clearly identified by the markets and meant that the specific risk of insolvency of a member state rapidly turned into a systemic risk for the whole of the area. evidently, the spread of fiscal difficulties in one specific country to other member states can run through many channels, which may include the exposure of financial institutions to sovereign debt, the correlation between risk premia on markets and the effects associated with changes in trade flows. the importance of these mechanisms is unquestionable. but the speed at which tensions have spread in this case and their initial and sharp impact on those member states whose public finances have most deteriorated suggest that the weaknesses perceived in the institutional arrangements for governance of the euro area may have played a central role. as has been brought home to us in these months, the rapid spread of tensions has meant difficult and far - reaching decisions have had to be adopted on two fronts : the common european front and the domestic front of each member state. on the european front, the heads of state and of government and the ecofin outlined a powerful programme of financial support for the greek authorities. implementation of the programme was conditional upon greek economic policies being redressed with regard to their fiscal consolidation strategy, which had to be strengthened and accelerated, and to the need to undertake ambitious structural reforms to move back onto a path of sustained growth. subsequently, the agreement to create a european stabilisation mechanism strengthened this firm commitment of the member states to maintaining the stability of the euro area. although the details of this programme are still being worked out, the volume of the funds involved, which including the imf contribution could amount to as much as β¬750 billion, seems sufficiently illustrative of the determination of governments to defend the common european project. naturally, as in the case of the initial support package for greece, the possible financial support will always be subject to a strict principle of conditionality, as an indispensable factor to ensure that the underlying problems are addressed with sufficient ambition and determination, and to avoid possible situations of moral hazard which could degenerate into the accumulation of new risks for the future. the european commission and the european central bank have also contributed decisively to this task of strengthening the common pillars of the area. in this respect important steps have been taken to establish a sounder framework of policies to preserve the smooth functioning of the euro area. i refer in particular to the commission β s recent proposals to strengthen in | 0 |
attracted hateful criticisms. the tendency of some groups, like a special - forces warrior, to fight every new regulation had reached a vexing point. despite resistance from pressure groups to resist, the bank had proceeded with its regulatory reforms and soldiered on effectively. it took quite some time for players in our economic system to fully realise that banking is a different kind of business and financial systems are not and will never be totally free market systems. over the years much has been achieved in terms of the health improvement of deposit - taking institutions in the country. effective banking supervision is an evolving discipline. free flows of capital in a globalised world marked by all kinds of disruptions, unleashed by economic and non - economic forces, the quests for high returns by investors and quick profits by speculators, fraudulent practices, excessive risk - taking and violent economic cycles, amongst others, have made regulation and supervision of financial institutions an unprecedentedly challenging task. the regulator β s job has become increasingly complex and demanding in terms of skills and clairvoyance, more so after the august 2007 international financial crisis. as regulators, we need to constantly bear in mind that any capitalist economy inevitably progresses from conservative finance to reckless speculation. the economy has financing regimes under which it is stable and financing regimes under which it is unstable. in other bis central bankers β speeches words, over a period of prosperity, a capitalist economy transits from financial relations that make for a stable system to financial relations that make for an unstable system. we also need to bear in mind that it β s in the personal interests of the ceos of banks to show profits, often by any means, for the benefit of their shareholders. and it is simply not true that the pursuit of their individual interests will lead to financial stability. what β s good for an individual ceo may not be necessarily good for the banking industry as a whole. the self - interests of bankers and levered investors do occasionally lead to economic contractions and a loss of human welfare. i need not emphasise to a crowd like this one that financial stability is an indispensable precondition for economic growth and human welfare. there is every reason for regulatory authorities to act proactively in order to prevent financial crises from developing in the first place. with the recent experience that the bank of mauritius had with regard to an ailing bank, i cling to the view that regulators must broaden their scope and take initiatives to prevent the development of practices that favour financial | a continuation of our policy of limited intervention and would imply a greater role to the market in managing the exchange rate. we expect that trade in currency derivatives can assist this area, by relieving pressure on the spot market and contributing to eradicate erratic and opportunistic behaviour, and thus reducing volatility. the launch of a global derivatives exchange in our jurisdiction is yet another indication of the growing sophistication of our financial system. i strongly believe that the domestic financial market is now mature enough to engage in derivatives trading under proper regulation. i would like to mention in the same breath the efforts of the bank to develop a secondary market for treasury bills and bank of mauritius bills. this will add greater depth and liquidity to the official paper segment of the market and perhaps pave the way for a bond and interest rate futures market. another initiative worth mentioning is the introduction of islamic financial services and the need for islamic treasury products. discussions have been ongoing with gbot for several months now to provide a platform for launching and trading such products. yesterday itself, the press reported that the stock exchange of mauritius ( sem ) and the central depository & settlement co ltd had approached the financial services commission to launch index futures trading, targeting the sem - 7 index. all these initiatives aim at remedying the deficiencies of our financial system to which i alluded earlier and which need to be addressed to achieve greater financial system efficiency and realize our ambition to become an international financial centre. the development of a vibrant market for trading currency derivatives, not just for the domestic market but for the region, is another element that would contribute to position mauritius as a world - class financial centre. it would help in forging deeper economic ties and strengthen our commitment to regional integration. such ties are mutually beneficial β for mauritius they can help to overcome the constraints posed by the small size of our domestic market and for our regional partners in africa, they can contribute to accelerate the pace of development. perhaps there can be no better testimony to our commitment to regional integration than the determined drive by some of our major banks to expand their operations in the region. as the process gathers momentum, others will follow suit ; and currency derivatives are set to take on greater importance in the risk management toolkit of our banks. this seminar comes at a time when policy - makers across the world are reflecting deeply on the role of the financial crisis in the global recession and the necessary changes to be made to the financial system to make it | 0.5 |
to the subprime market or to complex structured products in domestic financial systems has surely helped in this regard, but there are more structural reasons. in particular, there has been an important reduction of the financial vulnerabilities that were widespread in the past, and which led to costly crisis with important output losses and poverty increases, as the asian crises ten years ago crudely demonstrated. many emerging market economies have reduced their financing needs and improved their debt management. many more run current account surpluses which reduce their reliance on external funding. most have accumulated massive international reserves, well in excess of what would be needed for precautionary reasons. all in all, this paints a very different picture as compared to past episodes of global turbulence, when these economies used to be not only β influenced β by the ups and downs of the changing risk preferences in global financial markets, but simply β driven β β even β drowned β β by them, sometimes regardless of their economic fundamentals. in my view, this separation from the main stream of the turbulence constitutes an achievement in itself. from other stand point, it is certainly striking that in this period of global financial turbulence inflation is identified as the key economic challenge for emerging economies. indeed, the rise of inflationary pressures on food prices derived from the commodity boom, is becoming a very worrying concern. the large change in relative prices that underlies this prolonged boom is having a stronger impact on developing economies, with very negative and substantial effects on the well being of the poorest portions of their populations. therefore, as inflation creeps up the concern of policymakers deepens, not only in the sphere of macroeconomic stability, but beyond. in connection with this, the fact that monetary policies have remained focused on inflation stability in most emerging market economies is an additional novelty to mention in the context of the present turmoil. going a step forward, it is also noteworthy that emerging market economies, and in particular asia β with china at its centre β may become some kind of a β spare engine β to world growth, buffering the impact of the turbulence on global activity. this idea of a β second pillar β for growth relies mainly on the observed strength of domestic demand in asia, and the key issue here is whether this strength could be self - sustaining. maybe, we will not be able to answer this question thoroughly until the macroeconomic impact of the turbulence unfolds completely and the trade channel works itself out. but, one aspect that is clear β even now | in all, i would conclude that the financial sector in asia is still lagging behind when compared to other very dynamic and exemplary sectors in the region, such as certain industries, education and technology. i believe that this imbalance may eventually become a drag for the consolidation of a sustained growth path. therefore, the development of the financial system is of central importance for the long - term growth perspectives. under these circumstances, banking reform and restructuring is an important challenge that many asian economies are inclined to face. let me tell you that in spain we know well this challenge and its rewards. the highly successful performance of the spanish economy over the past 20 years cannot be explained without taking into account the significant contribution by the financial sector and, in particular, by the banking system. in turn, the transformation β and improvement β of our banking system in this period has been outstanding. this is evidenced, for example, by its favourable performance in terms of profitability, efficiency and solvency, both on an absolute basis and in comparison with other countries. taking advantage of hindsight, i would like to stress two chief lessons learned from this twenty - year process of modernisation. the first is that regulator and banks have formed a β joint partnership β, prompting a fruitful β virtuous cycle β and matching goals and efforts in order to attain efficiency and soundness. close communication and constant exchanges of views are the principles currently governing this relationship. the second lesson is that, at the end of the day, there has been no trade - off between profitability and soundness : the competitive capacity of spanish banks has not been dented by supervisory policies. these policies have been oriented towards enhancing the solvency and internal governance of banks, and to increasing the confidence of the public and the markets in the banking sector. however, this transformation has not been painless. it has to be recalled that the spanish financial system had to overcome a deep - seated crisis in the mid - seventies to early eighties. by the end of the 70s, our banking system was weak, closed, corporatist, old - fashioned and highly regulated. such regulation affected many of their operating areas, curtailing competitiveness. interest rates were set administratively and credit institutions were obliged to meet investment ratios to finance certain economic sectors with maximum interest rates. this environment made for weak structures with no incentive to compete and no professional teams or systems to accurately identify and manage risk. at that time a range of new banks were allowed to set up. most | 1 |
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