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financial resilience can also play a crucial role in mitigating the adverse effects of cyberattacks. cyberattacks erode the confidence that investors and institutions have in each other and in the financial sector. while strong capital and liquidity positions will not, by themselves, prevent an intrusion, they leave the affected institution in a better position to rejoin the system once the attack is resolved and, most importantly, promote confidence among its counterparties. moreover, the effects of chaotic markets may impact other institutions that suddenly face losses whose magnitudes might be hard to judge. well capitalized, - 10 highly liquid, and well managed institutions will be best positioned to manage such difficult circumstances. conclusion let me conclude by summarizing how we approach the set of issues i have discussed — including systemwide monitoring, cre and private credit developments, and cyber risks — in our financial stability work. we cannot know the next shock that will test the resilience of the financial system. that is why we focus on the resilience of the financial sector in our regulatory and supervisory work concerning banking organizations and in our engagement with other regulators. we also continuously monitor the financial system and regularly report our assessments in the financial stability report. such public communication contributes to the transparency and accountability of our efforts. i hope it also stimulates a public discussion of vulnerabilities to financial stability, as my colleagues and i value the range of views on these issues held across researchers, financial market participants, and the broader public. for this reason, i look forward to our discussion. again, thank you to the hutchins center and the brookings institution for hosting me today. may 07, 2024 figure 1 business and household debt - to - gdp 1. 1 ratio ratio quarterly 1. 0 0. 9 0. 9 0. 8 0. 8 0. 7 q4 0. 6 0. 4 0. 7 0. 6 nonfinancial business ( right scale ) household ( left scale ) 0. 5 0. 3 1. 0 0. 5 0. 4 note : the shaded bars indicate periods of business recession as defined by the national bureau of economic research : january 1980 - july 1980, july 1981 - november 1982, july 1990 - march 1991, march 2001 - november 2001, december 2007 - june 2009, and february 2020 - april 2020. gdp is gross domestic product. source : federal reserve board staff calculations based on bureau of economic analysis, national income and product accounts, | pre - federal reserve see ben s. bernanke ( 2012 ), “ some reflections on the crisis and the policy response, ” speech delivered at “ rethinking finance, ” a conference sponsored by the russell sage foundation and century foundation, new york, april 13. for the classic discussion of financial panics and the appropriate central bank response, see walter bagehot ( [ 1873 ] 1897 ), lombard street : a description of the money market ( new york : charles scribner ’ s sons ). information on the centennial of the federal reserve system is available at www. federalreserve. gov / aboutthefed / centennial / about. htm. the panic of 1907 is discussed in a number of sources, including o. m. w. sprague ( 1910 ), a history of crises under the national banking system ( pdf ), national monetary commission ( washington : u. s. government printing office ), and, with a focus on its monetary consequences, milton friedman and anna jacobson schwartz ( 1963 ), a monetary history of the united states, 1867 – 1960 ( princeton, n. j. : princeton university press ). an accessible discussion of the episode, from which this speech draws heavily, can be found in jon r. moen and ellis w. tallman ( 1990 ), “ lessons from the panic of 1907 ( pdf ), ” federal reserve bank of atlanta, economic review, may / june, pp. 2 – 13. see charles w. calomiris and gary gorton ( 1991 ), “ the origins of banking panics : models, facts, and bank regulation, ” in r. glenn hubbard, ed., financial markets and financial crises ( chicago : university of chicago press ), pp. 109 – 74. bis central bankers ’ speeches panics, money markets were tight when the panic struck in october, reflecting the strong seasonal demand for credit associated with the harvesting and shipment of crops. the immediate trigger of the panic was a failed effort by a group of speculators to corner the stock of the united copper company. the main perpetrators of the failed scheme, f. augustus heinze and c. f. morse, had extensive connections with a number of leading financial institutions in new york city. when the news of the failed speculation broke, depositor fears about the health of those institutions led to a series of runs on banks, including a bank at which heinze served as president. to try to restore | 0 |
a significant change in the behaviour of investors for some time. ( iv ) value at risk ( var ) most financial firms use var and stress tests to measure market risks and assign position limits. despite declining financial market volatility during recent years, most large banks have nevertheless reported a trend rise in the aggregate var of their trading book. this presumably implies that they have taken larger positions. this is not necessarily a matter of concern because trading profits and capital increased broadly in line with higher vars. yet the marked movements in the absolute vars of large firms over time does raise questions. these changes could reflect : ( a ) underlying market volatility ; ( b ) frequent changes in the firm ’ s positioning ; or ( c ) changes in various aspects of methodology. if firms, conscious of methodological shortcomings, frequently modify how they compute their vars, changes over time may not be a good guide to changes in underlying risk exposures. this would also make it harder for counterparties to keep accurate track of how underlying risks are evolving. ( v ) stress tests stress tests used by banks probably do not adequately reflect their substantial reliance on liquid capital and money markets for managing, distributing and hedging risks. some of the problems ( eg., difficulties in the leveraged loan market, the valuation of complex products ) are not typically incorporated in stress tests. stress tests at many banks also may fail to adequately capture the potentially significant growth in balance sheet exposures resulting from contingent credit and liquidity facilities to abcp conduits. moreover, stress tests tend to focus on a few risks and thus often fail to capture the potential interactions between many different risk factors. and in such stress tests, banks frequently assume an ability to unwind positions across a wide range of asset classes – including structured credit and other complex products – that may not be feasible in stressed conditions. in addition, attempts to reduce risk exposures during a credit event can further impair market liquidity. this failure to take into consideration the likelihood that leveraged firms ( during a period of market stress ) would attempt to reduce exposures in virtually identical ways might explain why large financial shocks have been more frequent during the past 10 years than models predicted – even as underlying macroeconomic conditions have become more stable. it is thus clear that recent bouts of market uncertainty have been aggravated by the lack of information about the distribution of risks in the global financial system and the risk profiles of individual institutions. new, complex financial instruments have | , 218 - 252. lane, philip r. and kitty moloney ( 2018 ) : “ market - based finance : ireland as a host for international financial intermediation ” banque de france financial stability review 22, 6372. lozej, matija and martin o ’ brien ( 2018 ), “ using the counter - cyclical capital buffer : insights from a structural model, ” central bank of ireland economic letter 2018 - 7. lunn, peter d. ( 2013 ), “ the role of decision - making biases in ireland's banking crisis, ” irish political studies 28 ( 4 ), 563 - 590. o ’ brien, eoin, martin o ’ brien and sofia velasco ( 2018 ), “ measuring and mitigating cyclical systemic risk in ireland : the application of the counter - cyclical capital buffer, ” central bank of ireland financial stability note no. 4. obstfeld, maurice, jay c. shambaugh and alan m. taylor ( 2005 ), “ the trilemma in history : tradeoffs among exchange rates, monetary policies and capital mobility, ” review of economics and statistics 87 ( 3 ), 423 - 438. rodrik, dani ( 1997 ), has globalization gone too far?, peterson institute for international economics. rodrik, dani ( 2010 ), the globalization paradox : democracy and the future of the world economy, ww norton. schoenmaker, dirk ( 2011 ), “ the financial trilemma, ” economics letters 111, 57 - 59. } spencer, john e. ( 1993 ), “ aspects of the life and personality of r. c. geary, ” economic and social review 24 ( 3 ), 215 - 224. timmer, yannick ( 2018 ), “ cyclical investment behaviour across financial institutions, ” journal of financial economics 129 ( 2 ), 268 - 286. torslov, thomas r., ludvig s. wier and gabriel zucman ( 2018 ), “ the missing profits of nations, ” nber working paper no. 24701. whelan, karl ( 2014 ), “ target2 and central bank balance sheets, ” economic policy 29, 79137. | 0 |
vitor constancio : the european crisis and the role of the financial system speech by mr vitor constancio, vice - president of the european central bank, at the bank of greece conference on “ the crisis in the euro area ”, athens, 23 may 2013. * * * slides to the presentation can be found on the ecb ’ s website. introduction let me begin by thanking the bank of greece for inviting me to this important conference attended by so many prestigious researchers. there are, of course, several narratives and interpretations about the way the crisis unfolded in the euro area. for some, it is mostly a story of unsound fiscal policies and excessive sovereign debt ; for others, it is principally a story of competitiveness losses engineered by uncontrolled unit labour costs ; and for others still, it is essentially a traditional balance of payments crisis in a “ fully fixed ” exchange rate regime. in more recent years, the narrative of seeing it as a banking crisis has gained attention, combining it with the sovereign debt crisis to create a story of “ two debt overhangs ”. naturally, there is a grain of truth in all these narratives, as is to be expected given the complexity and interplay of factors within a major international crisis. however, more than trying to discuss a cogent overall interpretation of the euro area crisis, i would like to explore two perspectives : • first, what were the root causes and key initial drivers of the crisis? • second, what role did the international financial crisis, originating in the us, play in triggering the european crisis? the first question is important to identify the possible shortcomings in the design of monetary union that need to be corrected to avoid future crises. it is my contention that the main driver of the crisis was located in the financial sector, particularly banks which intermediated large capital flows towards the periphery, creating imbalances that became unsustainable when a sudden stop occurred following the international crisis and the abrupt revision of price of risk that it entailed. the second question is useful to consider whether the construction of monetary union would have been sufficient to ensure a gradual correction of vulnerabilities and avoid a crisis, if a major international shock had not occurred. one can speculate that, left alone, the euro area may have been able to gradually overcome its own vulnerabilities through a process of interregional rebalancing. but we can never be certain about that. fortunately, this | two channels. • first, a number of euro area banks had substantial balance sheet exposures to the us housing market. constancio, v. ( 2005 ) “ european monetary integration and the portuguese case ” in the third ecb central banking conference, published by carsten detken, vitor gaspar, gilles noblet ( editors ) “ the new eu member states : convergence and stability ”, ecb 2005, available in http : / / www. ecb. int / pub / pdf / other / neweumemberstatesen2005en. pdf bis central bankers ’ speeches • second, when the general global re - pricing of risk triggered by the us sub - prime crisis materialised, it had serious adverse consequences for local financial stability in those countries. facing losses on several of their assets, banks were forced to rebalance their portfolios in order to meet regulatory capital standards. they rapidly increased their holdings of “ safe ” government debt, as a rule denominated in domestic currency. this development was especially obvious after the collapse of lehman brothers which triggered an unprecedented flight - to - safety. at the same time, in many euro area jurisdictions public finances were strained to the limit by the recession - induced collapse in tax revenues and by the necessity to recapitalise failing banks. overall, this meant that banks were becoming more exposed to their sovereigns at precisely the moment when sovereign creditworthiness was declining – creating the conditions for the infamous “ bank - sovereign loop ”. … and from banks to real economy the full effects of these developments emerged in 2010 when sovereign debt tensions appeared in countries with large recent increases in public debt and budget deficits, and / or poor long - term growth prospects due to neglected structural reforms. in this way, the general banking crisis developed into fiscal crises in specific european countries, causing severe recessions in those under stress and at some points endangering the stability of the euro area. the way in which this phase of the crisis developed took some observers by surprise, in particular the contagion effects, self - fulfilling cycles and possibility of multiple equilibria. contagion has been demonstrated to exist in the euro area from sovereigns to sovereigns and from sovereigns to banks, in both directions. two recent ecb working papers3 show that contagion also exists among banks themselves and from them to the real economy. in this case, the study demonstrates that the post - 2009 recovery in bank lending in the syndicated | 1 |
emmanuel tumusiime - mutebile : urban land management as a potential financing mechanism for urban development discussion by mr emmanuel tumusiime - mutebile, governor of the bank of uganda, of prof. paul collier ’ s presentation on urban land management as a potential financing mechanism for urban development, 24 may 2016. * * * the essence of paul collier ’ s argument is that the binding constraint to development in africa is a lack of connectivity in african cities. the lack of connectivity arises from a combination of the low population to land densities and poor transport services which characterise african cities, including kampala. it impedes the functioning of labour and product markets and thereby prevents firms from achieving optimal economies of scale and formal sector status, which in turn depresses labour productivity. consequently the key to development in africa is massive investment in african cities, by three sets of actors ; households investing in residential property, private sector businesses investing in commercial property, including multi - story residential buildings, and the public sector investing in urban infrastructure. most of this investment will entail structures of various types. to mobilise this investment major reforms are needed to create well functioning land markets, long term urban planning and mechanisms to raise finance for the huge volumes of investment that would be needed. paul collier estimates that the average african city will need approximately $ 50 billion of investment in structures – buildings and infrastructure – if its population is to enjoy middle income country standards of living. although there are many useful insights in paul collier ’ s thesis, there are also a number of important aspects which can be questioned. let me elucidate these. african development and structural transformation has undoubtedly been held back by the paucity of private investment in labour intensive industries, such as manufacturing, as a result of which the vast majority of the labour force in the urban areas, including kampala, has to earn its living in very low productivity informal household enterprises. only about 3 percent of the labour force in uganda is employed by a formal sector business. but it is debatable whether the binding constraint to private investment is really the poor connectivity of african cities, rather than other potential constraints such as the poor institutional environment for business, low quality of the workforce or a lack of competitiveness unrelated to urban connectivity, for example because of overvalued real exchange rates. i would like to see empirical evidence to support the contention that the poor urban connectivity, rather than other factors, is the binding constraint to private investment. | if poor urban connectivity is not the binding constraint to private investment and thus higher productivity, then the massive investments needed in the urban areas to improve connectivity will not, by themselves, unleash growth and development. instead they may turn out to be low productivity investments which could cause financial distress among both developers and those that have financed them. investable resources in africa are in scarce. resources which are allocated for investments to improve urban connectivity must unavoidably be at the expense of other types of investment, such as investment in rural development, human capital development or transport links to international markets. therefore, if priority is to be accorded to investment in urban areas to improve urban connectivity, we need to see strong evidence to demonstrate that the social returns to these investments exceed those of other competing demands on scarce resources. paul collier argues that there is under - investment by the private sector in urban structures – housing and commercial buildings – and that this is partly because the financing of structures is more demanding than other forms of investment because the former involves lumpy bis central bankers ’ speeches investments with long payback periods. however, i think that the contention that there is under - investment by the private sector in urban structures is tenuous. uganda does not lack investment in structures. over the last five years, an average of 18 percent of gdp has been invested in structures in uganda, with investment in structures comprising 70 percent of total gross fixed capital formation. in kampala, the bulk of private investment comprises residential and commercial buildings. these investments provide only a very limited number of jobs and yield low real rates of return. in many cases the income earned from property is far lower than the cost of capital. despite this, private investors favour property because of an expectation that its value will appreciate in real terms over time and, in some cases, because of the social prestige which owning property brings to the owner. most of the commercial investment in urban property that characterises kampala and other african cities involves investment in the non traded goods sectors of the economy ; housing, retail trade and business services. i would argue that the real dearth of investment in our economy is not in urban structures but in labour intensive traded goods sectors, such as manufacturing industry and agro - processing, which are the engines for structural change. paul collier argues that the huge public investments in urban infrastructure which he advocates can be entirely self funding with the appropriate taxation. he argues that public investment will generate gains in productivity which will raise the value of land held | 1 |
invest. as we have this discussion, it is also important that we keep focused on the other issues i just touched on, as these areas play an important role in building durable comparative advantage and prosperity. i would like to finish with a few words about the role of the rba in contributing to a positive investment climate. we obviously have no role in influencing the structural considerations that i just spoke about. we do, though, have an influence on the overall environment within which business investment decisions are made. at the highest level we seek to be a source of stability and confidence. having strong credible institutions in the country helps provide the community with a degree of confidence. we seek to build and maintain this credibility through developing a reputation for being a central bank that is transparent, independent, pragmatic and analytical. beyond this contribution, the investment climate is obviously better if we are able to deliver on our core goals of monetary and financial stability. investors should have confidence that, over time, cpi inflation in australia will average between 2 and 3 per cent. they can expect some variation from year to year, but over the medium term the average inflation rate will be 2 point something. as i have spoken about on previous occasions, we pursue that objective in a way that promotes sustainable growth in the economy and pays close attention to financial stability risks. you may have noticed that at yesterday's meeting, the reserve bank board left the cash rate unchanged at 1½ per cent, where it has been since august 2016. our assessment is that the economy is moving in the right direction. we expect stronger growth in 2018 than in 2017 and a further reduction in the unemployment rate. we also expect inflation to increase a little from its current low rate. these developments should help support the climate for business investment. with the economy moving in the right direction, and interest rates still quite low, it is likely that the next move in interest rates in australia will be up, not down. having said that, the expected progress in reducing unemployment and having inflation return to target is likely to be only gradual. with only gradual progress expected, the board does not see a strong case for a near - term adjustment of monetary policy. we will, of course, keep that judgement under review at future meetings. thank you for listening. i am happy to answer questions. endnotes [ * ] i would like to thank andrea brischetto, mark chambers and michelle van der merwe for assistance in the preparation of this talk. see reserve bank | the second is a change in the industries in which investment is occurring. over recent times, one of the central themes in the rba's discussions with businesses has been the much greater use of information technology to increase productivity. among other things, we hear about the possibilities and the challenges of data analytics, machine learning, artificial intelligence, the better use of sensors to control production and the automation of processes and production methods. a similar picture emerges from a survey undertaken by ai group last year, where ceos were asked about their main investment priority for the year ahead. at the top of the list were investment in technology and the staff training that is needed to support that investment ( graph 4 ). next on the list was investment in research and development ( r & d ). further down the list was investment in physical assets. if we look back at previous surveys, it's clear that this focus on investing in technology has increased over time. graph 4 this is not to underplay the importance of investment in physical assets. this remains critical. we need places to work, live, shop and play, and investment in buildings & structures and machinery & equipment remains central to this. but increasingly, investment decisions in these areas are also often just as much about technology as they are about other things. in every industry – in manufacturing, mining, agriculture, the health sector and business services – businesses are having to make investments in information technology to remain competitive. this is changing the way we think about investment. tracking this shift in investment for the economy as a whole is complicated by some limitations in the available data. the abs does, however, publish separate figures for investment in buildings & structures, machinery & equipment and intellectual property ( graph 5 ). graph 5 these data show that over the past couple of decades, investment in intellectual property has grown noticeably faster and more consistently than investment in buildings & structures and machinery & equipment. this is particularly so since 2009 / 10. over this period, the weakness in overall nonmining investment is explained by there being almost no growth in investment in tangible assets. in contrast, investment in intellectual property has grown at an average rate of 5 per cent. following this sustained period of strong growth in investment in intellectual property, this component now accounts for around 20 per cent of total non - mining investment, in nominal terms. by way of comparison, this share was just 3 per cent in the early 1980s ( graph 6 ). conversely, the share of investment spending on machinery & | 1 |
william c dudley : opening remarks at the transatlantic economy – convergence or divergence conference remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the transatlantic economy : convergence or divergence conference, federal reserve bank of new york, new york city, 18 april 2016. * * * it is my pleasure to welcome you to today ’ s conference. over the past decade, the new york fed has been working together with the european commission and the centre for economic policy research in sponsoring a number of conferences on interdependencies and policy challenges on both sides of the atlantic ocean. today, as in the past, we have a great program with many distinguished speakers from academia, and the private and public sectors. in particular, i would highlight the keynote speech following lunch by pierre moscovici, european commissioner for economic and financial affairs, taxation and customs. as the two largest economies in the world, the united states and the european union have a shared stake in the vitality of the global economy. without growth in both our regions, the global economy will not prosper and we will not be able to provide the conditions to enable our citizens to fulfill their aspirations. both the united states and europe suffered large social and economic costs from the financial crisis and the deep recession that followed. we continue to take steps to minimize the risks that we will ever find ourselves in that situation again. in many respects, the united states and europe face similar challenges and have similar goals. today i want to focus on some of the challenges. on the regulatory side, there is considerable good news. in particular, substantial progress has been made in strengthening the global banking system. capital and liquidity standards for internationally active banks have been raised significantly. this should reduce the risk of failure for these banks. also, the financial system is being made more resilient and robust. for example, the global set of principles for financial market infrastructures has been updated and strengthened. moreover, some steps have been taken to better deal with the failure of systemically important financial firms on a cross - border basis. key attributes for resolution regimes have been promulgated by the financial stability board. efforts are underway to improve how we can work together in a coordinated way on a global basis. but more needs to be done. the impediments to an orderly cross - border resolution still need to be fully identified and dismantled. this is necessary to solve the so - called “ too | to just under 13 percent, an increase of almost 45 percent relative to precrisis levels, and the quality of capital has improved. bank holding company balance sheets are also significantly more liquid, with liquid assets increasing from 26 percent of total assets at end - 2006 to 38 percent at end - 2014. core deposits now fund 44 percent of total assets, a 10 percentage point increase from pre - crisis levels. a stronger u. s. banking system better protects against future shocks, provides a more solid foundation for growth, and therefore also enhances prospects for growth and financial stability abroad. “ international capital flows : reliable or fickle? ” world economic outlook, april 2011, chapter 4. bis central bankers ’ speeches basel iii implementation has been proceeding on a comparable basis in advanced and emerging market countries. the financial stability board has been monitoring the unintended effects of reforms on eme banks and emes report no significant adverse effects. 4 however, potential differences in reform implementation across jurisdictions could create challenges, particularly in countries where foreign banks are active. this underscores the importance of continued home and host coordination. i would like to briefly touch on two u. s. - specific financial regulatory issues with international implications, namely enhanced prudential standards for foreign banks, including intermediate holding company requirements for the largest institutions, and issues surrounding correspondent banking, u. s. anti - money laundering rules, and “ de - risking ”. of these, the latter may have the most relevance for the emes broadly. the adoption of enhanced prudential standards for foreign banking organizations ( fbos ) is a key element of u. s. regulatory reforms, and a significant change in supervision of fbos. 5 the largest fbos ( with u. s. non - branch assets greater than $ 50 billion ) must hold their u. s. subsidiaries under an intermediate holding company ( ihc ), and meet various capital, leverage, liquidity, stress testing, risk management and corporate governance requirements. these requirements respond to a mandate in the dodd - frank act for enhanced standards for the largest domestic and foreign banks. the most significant requirements are expected to fall on the largest fbos from advanced economies – some of which have also adopted tighter local requirements for foreign banks – and should contribute importantly to a safer and sounder u. s. and international financial system. correspondent banking relationships have also received heightened attention in the context of serious violations of anti - money laundering and know - your - customer standards by some | 0.5 |
: if my memory serves me well, we met in may 2001, at a time when the currency markets were dominated by a strong us $ on the back of strong flows into the usa, although at the time the strong economic growth seen in 2000 was already giving way to a somewhat less favourable growth prospect in the usa. we were all surprised that the us $ was still showing some resilience and continued to be generally strong. as we all now know, things did not stay that way. in the year 2000, the rand lost 22 % of its value against the us $ and during the first five months of 2001 the rand lost about 5. 5 % against the us $, which did not seem too strange based on economic fundamentals at the time. little did we know, of course, that at the end of the year 2001 we would be talking about a 37 % depreciation and that there would have been the attacks on the united states, which would precipitate more conflicts and wars, and change risk perceptions in financial markets. we talked then about volatility in the financial markets and acknowledged that it was becoming a constant feature as the processes of deregulation, liberalisation and globalisation continued to gather momentum. trading in our foreign exchange markets and in the rand was very much influenced by the existence of the nofp and the forward book, with the nofp still registering a negative balance of us $ 9bn, in spite of significant progress that had been made in reducing it from the precarious levels of over us $ 23bn in 1998. this was seen as a negative factor by rating agencies and investors, and we were constantly called upon to explain how we were going to deal with that situation. where did the journey take us after that? as you all know, the period after our last meeting brought with it some major challenges for the world economy, which south africa as a small open economy got its fair share of. however, we also had to face serious challenges that were more related to our own situation. the second half of 2001, especially the fourth quarter saw a steep depreciation of the rand, not only against the us $, but on a broad base. the situation got to a point where the two - way risk inherent in trading the currency was temporarily dislodged, and a perception existed in the market that the rand was a one - way downward bet. our observation of the existence of large speculative positions at the time compelled us | system that also evolve and change. moreover, the data that are used to estimate model parameters and to formulate the economic outlook are inherently uncertain and are often revised as the statistical agencies refine their estimates or gather more information. in addition to uncertainties surrounding macroeconomic models and measurement, there are a number of risks that, if realized, could shock the economy and financial system, making it more difficult for policymakers to confidently assess the economy and the economic outlook. despite these challenges, monetary policymaking requires a forward - looking approach, since its actions affect the economy, labor markets, and inflation with a lag. 2 the post – financial crisis economy and monetary policy at the zero lower bound when i joined the fomc in late 2018, despite nearly a decade of accommodative monetary policy following the financial crisis and subsequent recession, one of the primary concerns was that inflation had persistently been running slightly below the committee ’ s 2 percent inflation target. there was a recognition that the “ natural rate of unemployment ” may have been lower than many on the fomc had estimated, and that inflation may have become greenspan ( 2004 ), bernanke ( 2007 ), and powell ( 2018 ) offer discussions of how risk and uncertainty may influence monetary policy in practice. see alan greenspan ( 2004 ), “ risk and uncertainty in monetary policy, ” american economic review, vol. 94 ( may ), pp. 33 – 40 ; ben s. bernanke ( 2007 ), “ monetary policy under uncertainty, ” speech delivered at the 32nd annual economic policy conference, federal reserve bank of st. louis, st. louis ( via videoconference ), october 19, https : / / www. federalreserve. gov / newsevents / speech / bernanke20071019a. htm ; and jerome h. powell ( 2018 ), “ monetary policy in a changing economy, ” speech delivered at “ changing market structure and implications for monetary policy, ” a symposium sponsored by the federal reserve bank of kansas city, held in jackson hole, wyo., august 24, https : / / www. federalreserve. gov / newsevents / speech / powell20180824a. htm. - 3less responsive to reductions in the unemployment rate. 3 this recognition meant that preemptive increases in the federal funds rate based on expected reductions in the unemployment rate alone may not have been needed to keep inflation and | 0 |
are calling for. this would help to stabilise the banking sector – and, at the same time, would support the transition. however, this will only work if enterprises are transparent about their carbon footprints and climate vulnerabilities across the board. only then will markets be in a position to appropriately price in their climate - related financial risks. the ecb ( european central bank ) recently released the results of its climate risk stress test for major european banks. this included some german landesbanken. the good news is that the significant institutions likely do not need to expect any material losses overall based on the scenarios used in the stress test. that said, the test also found that there is room for improvement when taking account of climate risks in risk management. also recently, the bundesbank once again conducted the lsi ( less significant institution ) stress test for the smaller german banks under our supervision. institutions were surveyed on how they assess the medium - term impact of climate risks on their business and to what extent these are already factored into their risk management. the results will be published by the bundesbank and bafin ( bundesanstalt fur finanzdienstleistungsaufsicht ) on wednesday. it would be surprising if smaller institutions were not also able to improve the way in which they depict climate risks in their risk management. in the european union, the corporate sustainability reporting directive ( csrd ) is helping to provide the necessary basis of information. previously, only enterprises with 500 employees or more were subject to reporting requirements in this regard. with the csrd, more and more enterprises will gradually be required to submit reports from 2024 onwards. forward - looking enterprises are already making preparations to regularly disclose certain climate - related information. savings banks, in particular, with their many small and medium - sized corporate customers, will thus have a significantly better pool of data. this will enable them to develop their risk management systems in an adequate and proportionate manner – in line with supervisory expectations. as supervisors, we central banks are also supporting the transition to a climateneutral economy. in this context, we must adhere to the same standards as banks. we, too, must make sure that climate risks are appropriately accounted for on our balance sheet and in our risk management, especially as we would not be able to safeguard price stability without a sound balance sheet. moreover, we, as the central bank, are also becoming more transparent. in july, for example | philipp hildebrand : snb overview of financial market activity introductory remarks by mr philipp hildebrand, member of the governing board of the swiss national bank, at the half - yearly media news conference, berne, 16 june 2005. * 1. * * developments in the financial markets financial market activity has been dominated in recent months by three key developments. firstly, the us dollar started to strengthen. secondly, long - term capital market yields declined further despite their already low levels. thirdly, changes in credit risk premiums in the different debtor categories have been more mixed than in the preceding months. despite the persistently high current account deficit in the us, the dollar has appreciated since the beginning of the year by roughly 12 % against both the euro and the swiss franc, and by approximately 7 % against the yen. the dollar benefited in particular from the willingness of foreign investors to back us financial investments. in 2004, net purchases of us securities were dominated by the strong demand from certain asian central banks. while such purchases have remained significant so far this year, private investors outside the us, too, have bought more us securities. this surge in demand is due in part to the fact that the markets continue to rate the growth prospects in the us better than those in europe and japan. the growing yield spread in favour of dollar investments as well as political uncertainty regarding the future development of the european union have also contributed to the relative attractiveness of the greenback. at present, there are few indications of any unusually pronounced imbalances between the real exchange rates of the currencies of the large economic blocs. looking at their development, it becomes apparent that they are all close to their long - term averages ( cf. graph 1 ). this suggests that the us current account deficit is not primarily a product of exchange rate distortions. it is mainly due to a comparatively high growth momentum and a low savings rate in the us. yields in the capital markets continued to fall. while this decline was weakest in the us, yields in continental europe hit historical lows. in switzerland, for instance, the yields on ten - year swiss confederation bonds reached an all - time low of less than 2 %. the extraordinarily low capital market yields reflect the market ’ s low inflation expectations. during recent months, certain concerns about economic growth have triggered a further decline in yields. both strong demand for long - term debt securities in industrialised countries ( driven by demographic factors ) and | 0 |
s research and analysis, and anecdotal information related to firms and financial institutions collected at the head office and branches, as well as read a variety of technical and research papers, both domestic and foreign. in addition, members independently gather anecdotal information, and interview and exchange views with market participants and firms'top management. in this way, policy board members gather information related to the overall economy daily. at mpms, policy board members deliberate on this information gathered through daily research and analysis, and reach a consensus on the appropriate direction for policy. at the meeting, the bank's staff first present oral reports on the current economic and financial situation. these reports are based on the staff's written reports distributed to policy board members at least two business days before the meeting concerned. the written reports include a comprehensive analysis of the economy based on both macro - and microeconomic information obtained during the intermeeting period. the volume of written reports is usually large, and the pages including charts and tables number several hundred. during the two business days prior to mpms, members read through the staff's written reports and formulate their views on the economic and financial situation and the appropriate direction for monetary policy. v. on the day of the mpm a. members and the staff attending the mpm let me describe what happens in the first mpm of the month, which is held over two business days. the first day of the meeting starts at 2 : 00 p. m. the nine members of the policy board gather in the policy board room at the bank's head office, ready to present their views on the state of the economy and the course of monetary policy. pursuant to the new bank of japan law, the minister of finance and the minister of state for economic and fiscal policy may, when necessary, attend and express views at mpms, or they can designate a staff member from the ministry of finance or the cabinet office to attend the meeting. three executive directors of the bank in charge of departments and offices directly concerned with monetary policy, and directors - general and other senior officials of departments and offices concerned, attend mpms to present oral reports. others present at the mpm include the senior official in charge of the bank's external relations and the staff of the mpm secretariat, which arranges proceedings for mpms. b. presentation of the staff ’ s oral reports on economic and financial developments on the first day of the mpm, the staff | about a possible decline in stock prices triggers the aforementioned fallacy of composition. against such a backdrop, the bank has decided to begin exploring specifically the provision of subordinated loans to the banks that are subject to international capital standards. this measure aims at ensuring the smooth functioning of financial intermediation and the stability of japan ’ s financial system, by enabling japan ’ s banks to maintain sufficient capital bases even in severe financial and economic environments. by the measure taken by the bank, financial institutions are provided with three channels to raise capital ; ( 1 ) capital raising by financial institutions through markets, ( 2 ) capital raising based on the act on special measures for strengthening financial functions, ( 3 ) borrowing subordinated loans from the bank. subordinated loans by the bank will work effectively in conjunction with the other two measures to raise capital. in addition, providing such a safetynet measure would enhance the robustness of japan ’ s financial system and the functioning of financial intermediation even under the stressed conditions. for a central bank, this kind of direct provision of quasi - capital funds is an extremely extraordinary measure. however, considering the future stress scenario of the financial system, the bank has judged that, from the standpoint of a central bank, it is necessary to do its best to maintain the smooth functioning of financial intermediation and ensure the stability of the financial system even by conducting this extraordinary measure. the bank expects financial institutions to grasp the thinking behind the measure and to strive to maintain the smooth functioning of financial intermediation with further efforts of boosting capital bases. needless to say, risk management is extremely important for financial institutions, which cannot be emphasized too much. however, under the current circumstances, as i mentioned above, the surfacing of the risk stemming from the fallacy of composition should be avoided. to that end, it is important for the management of financial institutions, while conducting sound business operations, to boost capital bases with envisioning the consequences for japan's economy. the bank also expects financial institutions to pay due concern for the smooth communication with their client companies to convey business policies and lending stances. it is the basic premise that the stability of the financial system should be ensured in order to return to a sustainable economic growth path under price stability. from the standpoint of a central bank, the bank is determined to make its best effort to secure the stability of the financial system. we would appreciate your continued support and cooperation. thank you. | 0.5 |
rodrigo vergara : the central bank of chile and the external crisis presentation by mr rodrigo vergara, governor of the central bank of chile, at a special session held by the honorable senate to “ analyze and evaluate the economic policy measures that have become indispensable to confront the severe symptoms of international recession and with the purpose of becoming familiar with the contingency plan announced by the supreme government ”, santiago de chile, 31 january 2012. * * * mr. president of the senate, senator guido girardi, honorable senators. thank you for your invitation to discuss the international economic situation and the measures that can be adopted in our country to address an external crisis. these instances are important for communicating the vision of the central bank of chile ( cbc ) on these issues. in the past several years, the advanced economies have gone through a severe crisis. the causes and consequences of the great recession of 2008 – 2009 have not yet been resolved and we are again enduring periods of external stress that put to the test the strength of our economy and its fundamentals. this forces us to carefully evaluate the current environment, its implications on the performance of our economy, and the measures we can implement if deemed necessary. during the past year, the biggest tensions have originated in the frail fiscal and financial conditions of some economies in the eurozone. this situation has persisted for a long time and no definitive solution is foreseen in the near term. progress has been made in several areas, but the problems ’ complexities and the political difficulties to deal with them are huge. this, coupled with the delicate position of consumers and firms, has translated in deteriorating economic expectations in the region, anticipating a recession during this year. the situation in the united states, while less severe than that in europe, is also complex, especially because of the slow recovery and little room for fiscal and monetary policies to stimulate the economy. the emerging world, chile included, will undergo a period of slower growth than in the past few years. market consensus forecasts, last week ’ s imf projections, and also those in our december 2011 ’ s monetary policy report point in the same direction ( table 1 ). most recently, the information coming from the u. s. shows a somewhat better performance than was forecast some weeks back, but does not modify medium - term problems and risks affecting its economy. in fact, last week the federal reserve extended from mid - 2013 to end - 2014 the period during which it would hold | years ( cbc ) capital goods imports and ipsa ( 1 ) ( billions of dollars ) ( thousands of dollars of 2013 ; million of dollars of 2013 ) real ipsa ( t + 7 ) capital goods imports and ipsa ( 1 ) 1, 700 1, 500 1, 300 1, 100 08 09 10 11 12 13 14 15 16 17 18 19 20 21 ii iii iv ii iii iv ii iii iv ( 1 ) quarterly moving averages. ( 2 ) series deflated by the capital goods import price index, with base year 2013 = 100. spliced with the base year 2008 = 100 series using annual changes. for second quarter, data for the first quarter of that year are repeated. ( 3 ) excludes other transport vehicles. ( 4 ) four - quarter moving average. for each version of the cbc survey, includes 5 - year forecasts, considering the current year. sources : central bank of chile, bloomberg, and capital goods corporation ( cbc ). figure 16 output gap ( 1 ) ( level, percentage points ) mar - 21 report jun - 21 report - 4 - 8 - 12 - 16 ( 1 ) historic estimates of the gap have changed because of recalculation of potential gdp. the forecast uses the multivariate filter, which factors in the new non - mining trend gdp ( 20212030 average : 2. 9 % ). ( 2 ) dotted lines show forecast. source : central bank of chile. page 22 of 27 figure 17 inflation forecast ( annual variation, percent ) cpi mp report jun. 21 core cpi ( * ) mp report jun. 21 forecast ( * ) measured by the cpi minus volatiles. sources : central bank of chile, national statistics institute ( ine ), and health ministry of chile. figure 18 total factor productivity ( tfp ) growth in chile ( * ) ( percent ) tfp 1997 - 2019 mean 2011 - 2019 mean - 1 - 2 - 3 ( * ) annual growth in tfp for non - mining gdp. for details, see the monetary policy meeting's minutes released together with this monetary policy report. source : central bank of chile. page 23 of 27 figure 19 mpr corridor ( * ) ( percent ) 4. 0 corridor fts 3. 5 confidence interval : 66 % ees confidence interval : 33 % forward 3. 0 2. 5 2. 0 1. 5 1. 0 0. 5 jun / 23 mar / 23 dec / 22 sep / 22 jun / 22 mar / | 0.5 |
of a floor on the expected returns and venture capital investment has indeed been granted that latitude. allowing such an arrangement on a secular basis is a matter for future policy. b. it is a fair requirement that an asset must be sold at its fair value to an investor. underpricing the sale of an asset to a non - resident investor is a stratagem to dodge tax and transfer value and accordingly the regulatory framework prescribed a specific valuation methodology – the discounted cash flow ( dcf ) method – for bis central bankers ’ speeches sale of shares of unlisted companies. surely, notwithstanding its problems, the dcf method may be the most appropriate ; but with a view to affording the investors and investees greater freedom in carrying out their transactions, we have last month amended the regulations to permit any internationally accepted valuation methodology at an arm ’ s length basis. 10. as far as portfolio investment is concerned, the access to foreign investors is fairly well defined – the only constraint, consistent with the international norm, is that portfolio investment by an individual investor cannot exceed 10 % of the outstanding stock of a company and the aggregate portfolio investment cannot exceed 24 % or such higher limit as may be decided by the company concerned. this is subject to the sectoral caps, wherever applicable. earlier this year sebi has put in place a comprehensive regime for registration of potential portfolio investors, which has also been notified under fema, 1999. an important relaxation that i like to mention here is that rbi has dispensed with additional kyc requirement for a bank account that a registered foreign portfolio investor has to open for the purpose of investment. the finance minister, in his budget speech, has sought to address a long - standing demand for level playing field in respect of tax treatment of foreign funds whose fund managers are india - based. i am sure this will bring more professional employment and income to indian shores. 11. while on the subject of foreign investment, it is important to note about the proposed revamping of the regulatory framework for depository receipts. depository receipts are essentially instruments to address the home - country bias of international investing communities and over the years has proved a useful tool for indian companies to raise capital abroad. with a view to further expanding the scope of these instruments, a government of india appointed committee ( chairman : shri m s sahoo ) recently looked into the entire gamut of issues and its recommendations are being taken up for implementation. without going into details, the overar | g padmanabhan : fema administration – prospects and challenges address by mr g padmanabhan, executive director of the bank of india, at the kuwait / muscat chapter of institute of chartered accountants of india seminar, muscat, 5 august 2014. * * * assistance provided by mr h s mohanty in finalising this address is gratefully acknowledged. 1. it is a great pleasure and privilege to be here today. i thank the kuwait / muscat chapter of the institute of chartered accountants of india for the unique opportunity to address its members and a cross section of indian population in the gulf region. the institute has set high standards in professionalism and contributed greatly to the development of the corporate business. it is heartening to note that the institute has a large presence in this region and that they are making important contributions to the business world here. 2. india ’ s engagement with the gulf region has been civilisational, dating back to ancient times and beyond. located strategically, the gulf region provided a critical trading node between ancient indian civilisations, predominantly the indus valley urban centres, and the “ fertile crescent ” of mesopotamia. archaeological evidence seems to indicate a great deal of human interactions accompanied the trade and possibly, wealthy merchants from indian principalities had set up base in the gulf region, not very unlike the case today. 3. indians have been sea - faring into distant lands from both her eastern as well as western coast down the centuries. but systematic migration was not a phenomenon beyond what was necessary to support buoyant and sustained trade until the colonial era when the need of cheap labour for plantation industries lured large number of indian labour to foreign shores. during the 1970 ’ s, migration from india acquired a different structure which included large scale flow of professional, skilled, and unskilled labour to support the oil - fuelled development and construction activity in the gulf region. today, i understand that about six million indians working in the gulf region account for about 50 % of the total remittance to india. that this magnitude of remittance has significant implications for our balance of payments is undeniable. the future engagement has to traverse beyond this in greater trade, commerce, investment and entrepreneurial ventures. 4. as you are aware, the regulatory framework for external sector transactions in india has evolved over the years. the rather restrictive regime of the 1970 ’ s progressively yielded space to liberalisations since the mid 1980 ’ s. the process of | 1 |
recently made investors uneasy. the long equities bull market may be nearing an end. in a transitional period, higher interest rates will also reduce the value of the gpfg ’ s fixed income portfolio. norges bank economic perspectives 17 february 2022 developments ahead may also be marked by demographic changes, tension between countries and lower global trade integration. moreover, we are facing a necessary transition to a low - carbon economy. whatever happens abroad will still leave its mark on the gpfg. no investment is completely safe, as history has shown. in 1904, the norwegian government set funds aside in the state reserve fund to be used only “ in extraordinary circumstances or in an emergency ”. when it was dissolved in 1925, it was nearly empty. creative accounting must take some of the blame. yet it didn ’ t help either that it was invested in only a few assets – mainly uk, french and german government bonds – investments regarded at the time as absolutely safe. after the first world war, the value of german and french government bonds was close to zero, wiping out much of the state reserve fund ’ s assets. 5 the investment strategy behind the gpfg stands in stark contrast. the fundamental principle underlying the strategy is risk diversification. this lessens the potential for an across - the - board value decline in gpfg assets. underlying this principle is also the recognition that we cannot predict how the world will evolve. we must be open to and prepared for the unexpected. we have seen how sudden events, such as the global financial crisis and more recently the pandemic can lead to a fall in the value of the gpfg. looking ahead, our management model may face new challenges. analysing different scenarios of possible outcomes is certainly useful, but making major strategic changes based on a particular vision of the future is still a risky undertaking. broad diversification should continue to be a pillar of the strategy. conclusion nicolai rygg delivered his final annual address on 12 february 1940. when the tradition was reinstated after the war, it was under a new governor. the time also represents an important turning point in norwegian economic policy. the ideal of an independent central bank with decision - making authority over the instruments at its disposal had been abandoned. the bank ’ s primary task was to carry out the government ’ s decisions, and the policy rate was geared towards objectives other than low and stable inflation. it was to take forty years for the pendulum to swing back. in 1986, | time when the industry is no longer expanding, but gradually declining, and we will need growth in other industries. businesses must drive structural change and innovation, but the authorities can provide favourable operating conditions to promote an innovative and sustainable business sector. norway ranks high on the ease of doing business index4, supported by solid institutions, a high degree of confidence and a solid welfare system. history has shown that norwegian business and industry have a strong capacity to adapt. many of today ’ s oil service operators had a long history in other industries before moving into the oil sector. a prime example is the shipbuilding industry, which faced a sharp drop in demand for ships in the 1970s. the industry had resources and skills that could be reoriented to production of platforms and other inputs in the oil industry. in hindsight, this was a fortunate stroke of serendipity. companies in other industries have also seen the opportunities afforded by new technology or changes in operating conditions. one example is borregaard. the company has existed through several industrial revolutions. an abundant supply of timber and hydropower from the sarpsfossen waterfall was a good starting point. through the years, new technology was adopted – from water - driven sawmills in the 1600s to waterfall power at the end of the 1800s, and to today ’ s fully automated activities. timber has steadily found new applications in borregaard ’ s products, such as building materials, biofuels and medicine – with timber always as the main raw material. 5 norway ’ s industry structure is in flux. in the past decades, the manufacturing industry has continued to decline ( chart 8 ), reflecting increased automation and relocation abroad. increased prosperity has generated more demand for both private and public services. employment has shifted towards the service sector. 3 blomgren, a. et al ( 2015 ) “ industribyggerne 2015 ” [ industry builders 2015 ]. iris report 2015 / 031 ( norwegian only ). 4 world bank “ ease of doing business index ”. https : / / data. worldbank. org / indicator / ic. bus. ease. xq. 5 throughout its history, borregaard has had various owners and names. see eg bergh, t. and e. lange foredlet virke – historien om borregaard 1889 – 1989 [ processed timber – the story of borregaard ]. ad notam forlag as, oslo ( norwegian only ), and www. borregaard. | 0.5 |
from traditional financial instruments or currencies. unbacked crypto - assets have no fundamental value and are not backed by any cash flows, and their price is driven entirely by sentiment. [ 22 ] the two best - known native tokens are bitcoin and ether, the native token of the ethereum blockchain. native tokens are integral to permissionless blockchains as they reward miners or validators for settling transactions by adding new blocks to the chain. the second type of crypto - assets are stablecoins. these are mostly pegged to central bank currencies such as the us dollar. stablecoins have been primarily developed to overcome inefficiencies and reduce costs in the traditional payments system. [ 23 ] although coined as being “ stable ”, the market valuations of stablecoins in fact fluctuate quite significantly. also some stablecoins are not fully audited, and they disclose their reserves on a voluntary basis only. hence, the existence and composition of reserves cannot always be verified. 2. 2 size and market structure the total market capitalisation of all crypto - assets traded on exchanges reached an all - time high of roughly us $ 3 trillion in 2021 ( chart 4 ). in the first half of 2022, prices for crypto - assets collapsed. besides changes in the macroeconomic environment, this price decline reflected the widespread use of leverage. many crypto - asset intermediaries became insolvent, and market capitalisation dropped to us $ 1 trillion in early 2023, or 0. 2 % of global financial assets. chart 4 : market capitalisation of crypto - assets is highly concentrated and low compared to the traditional financial system. the market is highly concentrated. the top six tokens accounted for more than 70 % of market capitalisation. [ 24 ] as regards issuers of stablecoins, 90 % of market capitalisation is concentrated within the three largest entities ( chart 5 ). a large proportion of all crypto - asset trading takes place on just a few platforms. centralised crypto - asset service providers and crypto - asset conglomerates offer many different services simultaneously, such as brokerage, trading, iending, custody, as well as clearing and settlement. this concentration of activities can lead to conflicts of interest and excessive risk - taking though. chart 5 : the market for stablecoins peaked in early 2022, and it is highly concentrated. part of crypto - asset | second, it means no preferential treatment for london beyond existing equivalency arrangements ; this could possibly be improved slightly, as currently planned by the commission. this brings us to my third point : some new capacity will have to be created in the eu, and at the same time the internal market has to be deepened in terms of financial integration. what should happen is that national and regional efforts should be consolidated under the umbrella of a common european strategy to deepen and modernise the internal market for financial services. i firmly believe that digitalisation holds the key to our success. we are all familiar with examples of how smart digital applications have helped to make buying and selling more transparent ( e. g. comparison websites ), to break down language barriers ( e. g. translation services ), to overcome information problems and to build trust ( blockchain applications ). ultimately, the continental financial centres need a strong digital market infrastructure that makes full use of all new digital possibilities. only then they can effectively overcome fragmentation. to sum up, it is my firm view that deepening and modernising the european internal market is the best economic strategy to counter the geopolitical challenges posed by brexit. which brings us to the new european commission. the team of ursula von der leyen will officially go to work in brussels on 1 november 2019. they will shape how the eu approaches our economy ’ s biggest challenges, and they can decisively shape the financial market strategy. von der leyen has nominated valdis dombrovskis for the important role of executive vice3 / 5 bis central bankers'speeches president for an ‘ economy that works for people ’. as such, he will lead the work on deepening economic and monetary union. von der leyen has set the goal for dombrovskis, namely that “ europe ’ s social market economy helps ensure that social fairness and prosperity go hand in hand ” ( quote from ursula von der leyen ’ s mission letter to valdis dombrovskis ). it should also be climate - neutral and work within the ecological boundaries of the planet. the mission letter states the following goals : “ to preserve and improve financial stability, protect savers and investors and ensure the flow of capital to where it is needed. ” to achieve these goals she has identified eight crucial priorities. the new commission aims : to complete the banking union, to speed up the work towards a capital markets union to diversify sources of finance for companies and tackle the barriers | 0.5 |
stretch fiscal positions. fourth, global imbalances were also continuing to worsen. while the causes of these imbalances are complex, the lack of fully flexible exchange rate regimes in some countries was undoubtedly an aggravating factor. large and growing current account deficit countries in many western economies were mirrored by large and growing current account surpluses in other countries such as china. these surpluses then formed the basis for much of the financing of the debt - fuelled imbalances occurring in the western economies. surprisingly many of these phenomena were largely ignored by policy makers, until it was too late to intervene. the financial institutions and rating agencies that were meant to monitor and price for risk proved to be more interested in short term profits and management bonuses. governments were reluctant or unable to take the longer view in terms of their fiscal positions. the regulators in western developed economies displayed a notable bis central bankers ’ speeches reluctance to take action at an early point when it might have made a difference. in the end the inevitable financial crash occurred and governments around the world were left to pick up the pieces and the taxpayers the tab. what the financial collapse revealed was a world economy that was “ seriously imbalanced ”. on the one side stood the western developed economies whose societies had expanded debt, both private and public, to maintain and lift living standards. while, on the other, the newly emerging economies, benefiting from globalisation and the low cost production of manufactures, had recycled their earnings as savings to the western economies. for most of the 2000s this apparently mutual beneficial relationship persisted, but eventually it unravelled as a substantial part of the debt accumulated in the developed countries turned out to be unserviceable. the pressures of rapid growth in the developing countries were also becoming apparent. oil prices started to rise rapidly from a low of around $ 20 a barrel in 2001 to a peak of $ 140 just prior to the gfc. currently the price of oil is around $ 100 a barrel. this represents an ongoing weight on economic activity that did not exist at the opening of the 2000s, despite the fact that the world is in a period of low growth. there was also strong growth in non - oil commodity demand and prices. hard commodities, like iron ore, coal and industrial metals were sucked into china and other east asian economies to fuel industrial development and urbanisation. while soft commodities, like dairy products and meat, experienced substantial volume and price increases as the rapidly growing middle classes in the emerging countries | we were prepared for. the new zealand economy is a small boat on a turbulent global sea. 4 secondly, the single most important thing we as central bankers can do is to ensure the economy and in particular the financial system ( the oil that keeps the boat ’ s engine running ) is highly seaworthy at all times. this means building resilience, maintaining private sector and public - policy buffers that can be drawn on when required, and having enough policy flexibility to be able to exercise a variety of tools and settings when needed. our review and decision to lift banks ’ regulatory capital requirements was a major step forward in this respect. one of my more pleasurable responsibilities has been as a member of the east asia - pacific ( emeap ) deputy governors six - monthly meetings. it is always enlightening and humbling comparing and contrasting central banking policy approaches in the international context. these discussions regularly remind me that we are in the mainstream of countries looking to lift their bank capital levels in order to provide adequate resilience. the pandemic has been a further pertinent reminder to all of the benefits of higher capital. 5 regulatory approach the international context leads me to my next topic. new zealand is a net importer of capital and reliant on strong credit standing ( though less critically so than in the past ). 6 we welcome international financial institutions and open capital markets for the innovation, networks and lower cost of capital they bring. of course, there can be attendant volatility or fickleness so we need good international relations and we value our participation in international fora. our close working relationship with apra is especially important ( and the broader trans - tasman banking council ), given the dominance of australian banks, as are the wider basel, bis, iosco, ngfs and emeap communities. the imf financial sector assessment program ( fsap ) review of our regulatory framework in 2016 – 17 endorsed a number of key features and competencies in our regime, while at the same time setting the bar higher in terms of the international benchmark for regulatory discipline ( more intensive supervision and enforcement, greater operational independence in macro prudential policy, and more standard and higher regulatory requirements for crisis management and fmis ). we accepted the challenge and ( aided by increased funding ) have been actively strengthening our regulatory pillar, whilst maintaining continued attention to the market and self - discipline 2 / 6 bis central bankers'speeches pillars. 7 the development of the | 0.5 |
they retrieve documentation, such as the banks ’ risk analysis, an independent edp audit report and the results of a penetration test. this test is a legal attempt to hack, conducted by an external organisation. as well as the national initiatives i just mentioned, there are international activities under way in the e - banking area. a good example of this is the work of the electronic banking group, or ebg, which is a working group of the so - called basel committee of banking supervision. this group is engaged in formulating international guidance and principles regarding e - banking. the ebg recently published its principles for risk management in electronic banking, which also include issues relating to consumer protection. one example is a principle that concerns appropriate disclosures for e - banking services. this principle states that banking organisations should provide on their websites some core information in order to assist customers in making informed choices. examples of such disclosed information could include contact details for the supervisory authority responsible for the supervision of the bank ’ s head office as well as details of access to national compensation or insurance schemes. the risk management principles for e - banking are currently presented to the banking sector for consultation. it is expected that the final version will be presented to the basel committee next month. around april, the principles will be published at the website of the bis ( www. bis. org ). beside the publications at our own website ( www. dnb. nl ), such as this speech, you also find a link to the site of the bis. besides the work of the basel committee that applies specifically to the banking sector, there is more general legislation in the form of eu directives. these affect e - banking as well. for example the directive on electronic commerce, which requires providers of electronic services to make information on prices and conditions accessible for consumers. another relevant directive for e - banking is that on the remote provision of financial services. this states for example that consumers have the right to recall an agreement if a supplier did not provide them with the terms of delivery, like prices, before entering into a transaction. conclusion to summarize : e - banking is a phenomenon which affects both banks and regulators. i hope i have made clear that this subject has the regulators ’ full attention, both nationally and internationally. as well as participating in international discussions on e - banking, the bank has undertaken various initiatives to include e - banking in its supervisory policy. this does not mean that we can afford to be complace | are provided by the same organisation. examples are account management, product development and infrastructure. the internet puts pressure on this integrated organisational structure. an important aspect of internet technology is that its development requires very high initial investment, but that the marginal costs of use are low. this raises the possibility that new, specialised suppliers are able to carry out certain specific activities more efficiently than the banks themselves. on the one hand, this situation offers the banks the option to outsource some of their operations to others, thus achieving cost reductions. on the other hand, it could bring unwanted pressure on parts of the banks ’ value chain, and ultimately lead to deconstruction of the chain itself. a practical consequence of this trend is that banks are developing into network organisations by way of alliances and cooperation with both financial and nonfinancial institutions. for example the cooperation between abn amro and kpn in relation to the launch of the ‘ money planet ’ internet site. a third consequence is that new suppliers can enter the market more easily. in the virtual world, barriers to entry are significantly lower. there is no longer a need for an extensive branch office network, for example. lower entry barriers mean more suppliers in the market, which intensifies competition. these suppliers may take different forms. they may be existing banks originating from other countries. these banks can use the internet to bring about a rapid internationalisation of their activities. various institutions have already set up electronic subsidiaries, which offer banking services on an international scale under a new brand name or under the name of the parent bank. examples include the bank of scotland ’ s electronic subsidiary eubos, which offers mortgages on the internet in this country, or ing direct, ing ’ s electronic offshoot, which is active in canada and elsewhere. new suppliers can also be pure electronic banks, or institutions from the non - banking sector. pure electronic banks are not linked to an existing physical bank. although they do not have the high fixed costs of a branch network, they do have to invest heavily in building up their reputation. it is interesting to note that the current market share held by such banks is still very small. the principal reasons for this are probably the lack of confidence resulting from the lack of a physical presence and the high cost of marketing the brand name. newcomers from the non - banking sectors can be existing non - financial institutions that offer a limited range of financial services through electronic channels. volkswagen in germany is one example. they offer | 1 |
the causes of sickness are both internal and external. the major causes are limited financial resources, lack of organisational, financial and management skills and expertise, diversion of funds, diversification / expansion before stabilisation, non - availability of power supply shortage of raw materials, marketing difficulties, delayed and inadequate credit, globalisation and liberalisation of the economy, obsolete technology, inadequate infrastructure, etc. with a view to ensuring that potentially viable sick ssi units are provided with the timely and adequate assistance by all agencies concerned, there are state level inter institutional committees ( sliic ) constituted in each state involving state government, financial institutions, commercial banks and sidbi. ssi associations are also invited to the meetings of this committee. a sub - committee of sliic has also been set up in each state to examine the individual cases referred to it for rehabilitation. to address the incidence of growing sickness in the sector rbi has recently issued a complete set of revised guidelines drawn up on the basis of the recommendations of a working group constituted by it for the purpose. policy initiatives the indian industry remained within an inward oriented policy framework up to the 1990s. with globalisation, liberalization, financial and real sector reforms, the country adopted an outward looking approach. at present, both the industrial sector in general and ssi sector in particular are exposed to international competitive environment. however, the most significant aspect is that india has evolved a sound institutional set up for financing of the ssi sector. new industrial policy was announced as part of the structural reforms in 1991, which eliminated various controls on the industrial sector, provided a greater role for the private sector and encouraged inflow of foreign investment and technology, but also contained specific initiatives for the development of the ssi sector. the pace of de - reservation of ssi items, needs to be accelerated so as to ensure that size does not remain a constraint to higher production, cost - efficiency and technological upgradation. the case for de - reservation of the ssi sector becomes even stronger in the light of the experience of south - east asian economies which indicates that ( a ) their export basket transformed from labour - intensive and relatively low technology products ( textiles, clothing, shoes, toys, etc ) in the 1980s to higher - technology consumer goods and capital - intensive goods ( capital goods and petrochemicals ) in the 1990s and ( b ) production of such consumer goods could be achieved by large - scale final assembly operations coupled with copious out - sourcing to | scale buyers to the ssi units adversely affected the recycling of funds and business operation of ssi units. though the government has enacted the delayed payments act, many of the ssi units are reluctant to pursue cases against major buyers. the act since amended in 1998 has made it compulsory that the payment of ssi suppliers should be made within 120 days. to improve the plight of ssi entrepreneurs due to delayed payments, steps for strengthening and popularizing factoring services, without recourse to the ssi suppliers may have to be thought of seriously. the banks have also been advised about sub - allotting overall limits to the large borrowers specifically for meeting the payment obligations in respect of purchases from ssi. it is expected that these measures will improve the situation of delayed payments. marketing marketing remains the most critical area for the ssi sector as some of the units are very small and so is their output individually. adopting consortium approach could best solve the marketing problems of the ssi sector. besides finance for marketing related activities, dissemination of requisite information on demand pattern, futuristic trend, etc. could be made available by the development institutions / ssi associations, etc. challenges emanating from the wto to face the challenges emanating from the wto agreement, ssi units irrespective of their size need technology up - gradation and modernisation. an awareness about the implications of wto agreement has to be created. the preparation for competitiveness needs to be done by the government as well as entrepreneurs and the corporate. the government should provide good infrastructure and create level playing field for the industry. considering the fund constraints with ssi sector government has introduced the credit linked capital subsidy scheme for technology up gradation of small scale industries under which 12 % back ended capital subsidy would be admissible on the loans advanced to the ssis by banks / financial institutions for technology up gradation in certain select sectors. sickness growing incidence of sickness of ssis is yet another area of concern. when the sickness prolongs it leads to the closure of units and unemployment. lately mortality of the ssi units has been showing increasing trend. this has wider implications including locking of funds of the lending institutions, loss of scarce material resources and loss of employment. the number of sick ssi units as a percentage to the total number of ssi units is around 10. the number of units identified as potentially viable as a percentage to total sick ssi units is around 8. | 1 |
haruhiko kuroda : monetary policy – its effects and implementation opening remarks by mr haruhiko kuroda, governor of the bank of japan, at the 2015 bojimes conference, hosted by the institute for monetary and economic studies, bank of japan, tokyo, 4 june 2015. * i. * * introduction good morning, ladies and gentlemen. it is my great honor to say a few words at the beginning of the 22nd boj - imes conference. on behalf of my colleagues at the bank of japan and myself, i would like to express my sincere welcome to all of you. at last year ’ s conference titled “ monetary policy in a post - financial crisis era, ” we had active discussions on fundamental issues of monetary policy during the period of slow economic growth following the global financial crisis. since then, there has been further progress in research on the effects of unconventional monetary policy in academic and central bank circles. besides, growing attention has been paid to renewed debate over the slow recovery after the financial crisis, as represented by the thesis of secular stagnation. against the backdrop of these factors, we have selected “ monetary policy : its effects and implementation ” as the theme of this year ’ s conference. the aim is not only to keep monetary policy at the center of the discussion, but also to put greater emphasis on implications for policy conduct in practice. i hope that, in light of the progress in monetary policy research and the recent developments in the global economy, we will have frank and lively discussions on the monetary policy challenges that we central bankers currently face. to kick things off, i would like to raise some issues relevant to these challenges. ii. global economic conditions and current issues concerning the conduct of monetary policy over the past year, the global economy as a whole has been recovering moderately. however, we have observed considerable differences in developments of economic activity and prices among countries and regions. in reflection of these differences, diverging directions of monetary policy among the united states, europe, and japan have become increasingly apparent. this certainly was a major feature of monetary policy in the global context for the past year. meanwhile, headline inflation rates dropped globally, due primarily to a plunge in crude oil prices. with these significant developments in mind, i would like to raise three current issues concerning the conduct of monetary policy. the first issue concerns the effects of unconventional monetary policy and its transmission channels. in terms of monetary policy implementation, the european central bank launched the expanded asset purchase programme | in january, and many of the major central banks have now adopted quantitative easing ( qe ). on the research front, academic and central bank circles have accumulated studies on unconventional policy that have been conducted vigorously to date. these studies have demonstrated that unconventional measures, such as qe and forward guidance, have been generating monetary easing effects, primarily through influencing long - term interest rates and asset prices, as well as inflation expectations. i believe that it will be meaningful if we can further promote a common understanding on unconventional policy by sharing the various insights obtained from both implementation and academic research of monetary policy. the second issue pertains to inflation expectations and the decline in crude oil prices. the plunge in crude oil prices since 2014 has posed a new challenge for the conduct of monetary policy. in october 2014, the bank of japan decided to expand quantitative and qualitative monetary easing ( qqe ). this policy decision aimed at maintaining the improving momentum of expectation formation and at pre - empting manifestation of a risk that the decline in the bis central bankers ’ speeches inflation rate, even though caused by the oil price decline, could delay conversion of the deflationary mindset, which had been progressing steadily under qqe. the background to the policy decision is that, unlike the united states and other countries where medium - to long - term inflation expectations have been well anchored, japan is in the midst of drastically changing the deflationary mindset ; namely, re - anchoring inflation expectations to the price stability target of 2 percent. inflation expectations are obviously one of the most important variables for the conduct of monetary policy. therefore, it is a major policy concern for central bankers to gain a better understanding of how to measure inflation expectations, how such expectations actually affect firms ’ price - and wage - setting behavior, as well as households ’ consumption decisions, and how to evaluate the degree to which inflation expectations are anchored. i hope that further progress will be made in research in this field. the third issue is how to deal with the international spillovers induced by the diverging directions of monetary policy among advanced economies. in emerging economies, monetary authorities have paid more attention to developments in foreign exchange rates and international capital flows that are influenced by major central banks ’ policy actions and announcements of their future directions of policies. in addressing these international spillovers, how to use monetary policy, macro - prudential policy, and capital flow management policy in combination has come to be a crucial issue, particularly for countries | 1 |
with possibility of unintended consequences and the emergence of yet more risks. fiscal and monetary policy, two of the most important macroeconomic policy tools, are reaching a point where they have very limited room to influence the desired growth and employment outcomes. this raises a few questions – have we reached a point where macro economy becomes a dismal science? have we reached a macro - policy trap? what have we missed in the design of these policy tools? these are very important questions. they warrant a deep rethinking of the underlying basis of the discipline, and a re - examination of the many principles that we have been relying on all these while. to apply the same solution over and over again is certainly not a viable option. the international monetary system fosters imbalances and volatility of capital flows and exchange rates since the departure from the bretton woods system, the international monetary system has evolved to reflect on - going changes in global economic developments and economic thoughts. the architecture of our current monetary system is characterised by flexible exchange rate regimes, free capital flow and independent monetary policy. this global landscape has expanded the cross - border exchange of goods, services and capital. importantly, the transition to more market - based foreign exchange rate system has accorded policymakers greater control over domestic policies, accelerated the development of financial sector, and, ultimately, boosted economic growth. nonetheless, this international monetary system also has obvious shortcomings. in the postbretton woods period, the frequency of banking and currency crisis has increased dramatically with large output and employment losses. at the centre of this international monetary system, policy adjustments in major economies have led to significant volatility in the financial markets. the initial hint of tapering by the federal reserve in may 2013 resulted in large reversal of capital flows and exchange rate over - shooting in emerging economies. today, the complexity of managing an economy is compounded by the impact of global shifts in capital on domestic financial markets and real economic activities. given our high degree of openness, malaysia was not spared by these developments. for example, global concerns over monetary policy normalisation by the federal reserve continue to impact the ringgit. ringgit volatility since september 2014 has exceeded levels in previous episodes of sharp adjustments such as the european sovereign debt crisis and taper tantrum. the weak ringgit performance was further amplified by the misperception about malaysia ’ s reliance on commodities and our position as a net oil exporter. despite malaysia ’ s lower | code of conduct and principles was issued last year by bank negara malaysia. in a more positive light, there is evidence that public trust in banks around the world is improving. this is something we can build upon. the right place of finance is to be the catalyst for the economy. as guardians of public trust, bankers must protect the system against any threats. this means protecting against abuse, misconduct and exploitation. no banker should tolerate misselling of products to customers which are not suited to their needs. no banker should tolerate charging excessive and hidden fees to unsuspecting customers and use these fees to excessively enrich themselves. no banker should tolerate unethical and illegal behaviour of a fellow colleague. no banker should tolerate any wrong doing or misconduct. the currency of bankers is not money but trust. loss of trust is calamitous for the profession. 1 / 4 bis central bankers'speeches for us in malaysia, our approach to ensure professionalism, trust and confidence rests upon a two - pronged strategy. the first is to create a system that upholds the values of honesty and integrity. professional organisations such as aicb play a crucial role in this, with the chartered banker accreditation as a tool. the syllabus for this qualification places importance on ethics and professional standards. the requirement for fresh graduates to undergo an induction course on ethics is also a good starting point. there are other initiatives in store, we will step up efforts to ensure that the roles, responsibilities and accountabilities of leaders of financial institutions are clear and transparent. to this end, consultations with the industry will be conducted this year on proposals to sharpen accountability of individuals holding senior roles. the second complementary strategy is to create an enabling environment to empower financial institutions to make informed and sound hiring decisions. effective 1 july 2018, it will be a requirement for financial institutions to screen all new hires, except those performing ancillary functions. this includes their employment history and criminal records. financial institutions will be required to keep proper records related to employees and to provide the required information when requested by another institution. this will guard the system against disreputable staff and enact barriers against potential threats to the integrity of the system. as guardians of the system, bankers need to look at these requirements as useful enabling tools or defenses that help with their mission to successfully protect the integrity of the system. guardians of knowledge and wisdom the complexity scientist, samuel arbesman in his study of how knowledge develops, | 0.5 |
policy financial market participants have no simple formula to guide them in forming expectations about future short - term rates ; instead, they must infer the likely course of policy based on their own economic forecasts and their knowledge of policymakers ’ outlook and objectives. given the complexity of the central bank ’ s forecasting and policy evaluation processes, making these inferences is a daunting challenge. clearly, under a forecastbased policy, central bankers have scope to provide considerable help to the private sector in its attempts to anticipate policy changes. to the extent that policymakers can accurately communicate their outlook, objectives, and tactics to the public, financial markets will be more efficient and monetary policy more effective ( bernanke, 2004 ). i will return to the issue of communication shortly. the policy framework of the federal reserve it would be nice, at this point, if i could tell you definitively whether simple feedback policies or forecast - based policies represent the superior approach to making monetary policy. but drawing strong conclusions at this juncture would be premature, to say the least. the debate in the monetary economics literature remains lively. moreover, to some degree, central bank practice remains eclectic. at the federal reserve, both simple feedback and forecast - based approaches are used to provide information to policymakers. for example, fomc members routinely compare their policy choices with both the prescriptions of various forms of the taylor rule ( as noted, a type of simple feedback policy ) and the results of model simulations and forecasting exercises undertaken by staff at the board and at the twelve reserve banks ( as required by the forecast - based approach ). 8 although i will not try here to resolve the deeper debate about frameworks, i can say something about the degree to which central banks rely on these approaches in practice. both simple feedback policies and forecast - based policies influence how policymakers think about their decisions, as i have just noted. however, in my judgment, reliance on these two approaches is not symmetric ; instead, the forecast - based approach has become increasingly dominant in the monetary policymaking of leading central banks. this dominance is reflected in the resources that central banks devote to data collection and modeling and in the increasing sophistication and detail of central bank forecasts. 9 indeed, a number of central banks with explicit inflation objectives publish regular forecasts and closely link monetary policy decisions to those forecasts. 10 the federal reserve does not explicitly link policy actions to forecasts, but projections of how the economy | with other disclosures and written in small print and dense prose. consumer testing indicates that many consumers set the documents containing these disclosures aside without reading them. under the proposal, creditors must highlight critical changes in a summary table. creditors that enclose their notices with periodic statements must place this table on the periodic statement above the transactions list, where consumer testing suggests consumers are most likely to notice it. checks that access a credit card account many credit card issuers provide accountholders with checks that can be used to obtain cash, pay the outstanding balance on another account, or purchase goods and services directly from merchants. the solicitation letter accompanying the checks may emphasize a low introductory apr for these checks. the proposed revisions would require creditors to disclose other rates and fees that will apply if the checks are used, rather than simply suggest the consumer review the disclosures provided at account opening. to ensure the disclosures are conspicuous, creditors would be required to place the rates and fees in a table on the same page as the checks. right to dispute billing errors the board also has proposed several revisions to substantive and procedural protections tila provides consumers. four proposed revisions, in particular, would clarify regulation z in ways that strengthen consumers'rights to dispute billing errors on credit cards and other forms of revolving credit. first, if a creditor determined that no error occurred, the proposal would make clear that the creditor may not impose finance charges or other charges until the grace period ( if any ) in the credit agreement has elapsed. second, if a creditor credited a borrower's account for a disputed transaction, the proposal would make clear that the creditor may not reverse the credit after two billing cycles or ninety days, whichever period is shorter ; this clarification is meant to ensure finality. third, the proposal would make clear that the right to dispute billing errors covers check transactions that access open - end accounts. fourth, the proposal would make clear that the right to dispute errors applies to purchases of goods or services made using a third - party payment intermediary, such as a person - to - person internet payment service. attachments g - 10 ( c ) applications and solicitations sample ( credit cards ) g - 17 ( b ) account - opening sample g - 18 ( h ) periodic statement form | 0.5 |
mark carney : three truths for finance remarks by mr mark carney, governor of the bank of england and chairman of the financial stability board, at the harvard club uk southwark cathedral dinner, london, 21 september 2015. * * * i am grateful to ben nelson and iain de weymarn for their assistance in preparing these remarks. “ all england is an american shrine, full of rich records of the makers of their nation. ” 1 none more so than glorious st saviour ’ s – southwark cathedral – a few minutes south of the river from here. its connection with harvard makes it something of an american mecca. for at st saviour ’ s was baptised a southwark butcher ’ s son who became benefactor to the university that would bear his name. john harvard would doubtless be delighted with what has become of the 320 volumes and £800 he bequeathed to posterity : a college founded for the avoidance of leaving “ an illiterate ministry to the churches, when our present ministers shall lie in the dust ”. from that bequest sprung one of the world ’ s leading universities. a community dedicated to its motto : veritas – truth ; the pursuit of truth in the sciences, humanities, even economics. truth to create a better world. but recall pilate ’ s question that has echoed down through the centuries from the pulpits of southwark cathedral to memorial church, “ truth? what is truth? ” indeed, upon arriving at harvard, students and visitors are confronted with a curious truth, or rather, three untruths. in harvard yard sits a statue of john harvard, seated on a bronze throne, commemorating 1638, the year of the university ’ s founding. tour - guides relish in pointing out that, in fact : no - one knows what john harvard looked like, so it is unlikely to be a great resemblance of him ; the college wasn ’ t founded in 1638, but two years earlier ; and it wasn ’ t founded by john harvard, but by the court of the massachusetts bay colony, which first voted to set up the university. the “ statue of the three lies ” is part of harvard legend. the three lies in question are harmless fun. but they should remind us how deeper untruths can persist, embodied in monuments or sustained by conventional wisdom and mores. we gather this evening almost seven years to the day that the failure of lehman brothers shattered conventional wisdom and laid bare three lies about finance. | , innovate and grow. repeated episodes of misconduct ( such as the libor and fx scandals ) have called that social licence into question. to restore it, we need to rebuild fair and effective markets. knight, f ( 1921 ), risk, uncertainty and profit, signalman publishing. in keynes ( 1936 ), chapter 12, he wrote : “ even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than on a mathematical expectation, whether moral or hedonistic or economic. most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits – of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities. ” keynes, j m ( 1936 ), the general theory of interest, employment and money, palgrave macmillan. bis central bankers ’ speeches not markets that collapse when there is a shock from abroad. not markets where transactions occur in chat rooms. not markets where no one appears accountable for anything. real markets are professional and open, not informal and clubby. their participants compete on merit rather than collude online. real markets are resilient, fair and effective. they maintain their social licence. but real markets don ’ t just happen ; they depend on the quality of market infrastructure. robust market infrastructure is a public good in constant danger of under - provision because the best markets innovate continually. this inherent risk can only be managed if all market actors, public and private, recognise their responsibilities for the system as a whole. true lies so this time is the same. markets don ’ t always clear. and we can suffer from their amorality. so what to do with such knowledge? and how to retain it? the longer you are a central banker, the more careful you become in your forecasts. “ irreducible uncertainty ” and “ multiple equilibria ” are occupational hazards ; so if you must predict the future, you are tempted to hedge heavily and must modify constantly. but in two areas i ’ m confident : the three lies of john harvard will continue to be revealed for years to come, and with time, the three lies of finance will come to enjoy widespread credulity again. to resist their siren calls | 1 |
the recent softness in consumption suggests that this net wealth erosion has continued to weigh on household spending. that said, it is important to recognize that the extraction of equity from homes has been a significant support to consumption during a period when other asset prices were declining sharply. were it not for this phenomenon, economic activity would have been notably weaker in the wake of the decline in the value of household financial assets. in the business sector, there have been few signs of any appreciable vigor. uncertainty about the economic outlook and heightened geopolitical risks have made companies reluctant to expand their operations, hire workers, or buy new equipment. executives consistently report that in today ’ s intensely competitive global marketplace it is no longer feasible to raise prices in order to improve profitability. there are many alternatives for most products, and with technology driving down the cost of acquiring information, buyers today can ( and do ) easily shift to the low - price seller. in such a setting, firms must focus on the cost side of their operations if they are to generate greater returns for their shareholders. negotiations with their suppliers are aimed at reducing the costs of materials and services. some companies have also eschewed the traditional annual pay increment in favor of compensation packages for their rank - and - file workers that are linked to individual performance goals. and, most important, businesses have revamped their operations to achieve substantial reductions in costs. on a consolidated basis for the corporate sector as a whole, lowered costs are generally associated with increased output per hour. much of the recent reported improvements in cost control doubtless have reflected the paring of so - called " fat " in corporate operations - - fat that accumulated during the long expansion of the 1990s, when management focused attention primarily on the perceived profitability of expansion and less on the increments to profitability that derive from cost savings. managers, now refocused, are pressing hard to identify and eliminate those redundant or nonessential activities that accumulated in the boom years. with margins under pressure, businesses have also been reallocating their capital so as to use it more productively. moreover, for equipment with active secondary markets, such as computers and networking gear, productivity may also have been boosted by a reallocation to firms that could use the equipment more efficiently. for example, healthy firms reportedly have been buying equipment from failed dot - coms. businesses may also have managed to eke out increases in output per hour by employing their existing workforce more intensively | ##ebtedness of private sector and households should be avoided. it is necessary to improve the access to financing. 83 % of households have 6 % of deposits, whereas 0. 3 % of households hold 25 % of deposits. housing loans have been accessed by only 1 % of very low income earners ( the 1st quintile ) and by only 4 % of relatively high income earners ( the 4th quintile ). 12 % of the highest income earners ( the 5th quintile ) have accessed housing loans. a roadmap is necessary for joining the euro area. the public goods that should be preserved and even strengthened include : the country ’ s security, financial stability, investors ’ confidence. european union – romania joint agenda for 2019 conclusion of brexit negotiations. completion of important files, such as the prudential treatment of banks ’ exposures to sovereign risk ( the bank - sovereign link ), edis ( european deposit insurance scheme ), euro area reforms. 2020 budget – better use of resources. aligning the budgetary provisions of the nato with those of the eu. exemption of the rise in military expenditure, for nato countries that are eu member states, from the edp ( excessive deficit procedure ) rule and from the mto ( medium - term objective ). monetary policy normalisation and fiscal policy sustainability. | 0 |
jean - claude trichet : hearing before the economic and monetary affairs committee of the european parliament introductory remarks by mr jean - claude trichet, president of the european central bank, brussels, 30 march 2009. * * * madame la presidente, mesdames et messieurs les membres de la commission economique et monetaire, je me rejouis d ’ etre entendu pour la troisieme fois par le parlement europeen depuis le debut de cette annee, et pour la deuxieme fois par votre commission. je n ’ oublie pas non plus la rencontre conjointe du parlement europeen et des parlements nationaux en fevrier. la rencontre d ’ aujourd ’ hui est la derniere prevue au cours de cette mandature. elle revet donc une importance particuliere. permettez - moi des a present de vous remercier pour les echanges de vues stimulants et riches que nous avons eus au cours des cinq dernieres annees. il ne s ’ agit pas moins de ma vingt - et - unieme audition devant votre commission, ce qui atteste de l ’ intensite des relations entre la bce et les representants elus des citoyens europeens. heute mochte ich mich auf vier themen konzentrieren : die aktuelle wirtschaftliche lage, die struktur der finanzierung privater immobilien im eurogebiet, die auswirkungen der krise auf eine zukunftige einfuhrung des euro in den mitgliedstaaten in mittel - und osteuropa und schließlich die vorschlage zur reform der bankenaufsicht in europa. ich hoffe, dass ich damit auf einige der wichtigsten themen eingehe, bevor ich mich wie ublich ihren fragen stelle. economic and monetary developments let me begin with the economic situation and our recent monetary policy decisions. please note that, with only three days before our next monetary policy meeting this thursday, i am in the so - called " | proposed composition of the systemic risk council reflects a recognition of the role played by central banks in macro - prudential supervision. third, the fact that the systemic risk council would be set up under the auspices of the ecb and the escb would allow it to benefit from the analytical capabilities and technical infrastructures developed by central banks in its analysis of monetary and financial stability. in this context, the systemic risk council will have to rely on a wide range of macro - and micro - prudential data. this implies that the ecb and the escb should have access to the relevant micro - prudential information from supervisors. fourth, for the proposed macro - prudential framework to function as intended, it is crucial that risk warnings be translated into policy action as effectively as possible. in this context, the systemic risk council should report its risk warnings and relevant recommendations to the ecofin council. finally, we should provide an appropriate institutional basis for the establishment of the systemic risk council and the related new macro - prudential tasks of the ecb and escb, in order to ensure the necessary authority, accountability and legal capabilities. the activation of article 105 ( 6 ) of the treaty could be a very useful avenue in this context. * * * i could not conclude today ’ s introductory remarks without very warmly thanking you, madame la presidente, and all the honourable members of the committee for our regular exchanges of views over the past five years. these 21 hearings have been important opportunities to receive feedback from the members of parliament. thank you for your kind cooperation and thank you for your attention. | 1 |
zeti akhtar aziz : current issues and developments in islamic banking and finance keynote address by dr zeti akhtar aziz, governor of the central bank of malaysia, at the asli ’ s conference on developing islamic banking and capital market : “ new opportunities, new market and new frontier in islamic banking and finance ”, kuala lumpur, 25 august 2004. * * * islamic banking and finance has emerged as a financial intermediation process that is competitive and resilient and that contributes to the overall wealth creation, growth and development of our nation. amidst an increasingly challenging and competitive financial environment, the evolution of a comprehensive islamic financial system seeks to meet the range of requirements of a rapidly changing economic environment, with its soundness and stability secured through the robustness of its regulatory framework supported by the strength of its financial infrastructure and the sophistication of its products and services. indeed, the strength of the respective components of the system and the interconnections of its markets will open new frontiers in islamic banking and finance and will maximize the potential and opportunities that it accords. distinguished guests, it is my pleasure to be here today at this conference organised by asli to speak on the current issues and developments in islamic banking and finance. the islamic financial system in malaysia has evolved as a viable and competitive component of the overall financial system, complementing the conventional financial system as a driver of economic growth and development. the rapid progress of the domestic islamic financial system, reinforced by significant developments in the islamic financial infrastructure, including the legal and shariah infrastructure and the regulatory and supervisory framework, has strengthened the position of the islamic financial system as an increasingly important component in meeting the changing requirements of the new economy. the financial sector masterplan launched three years ago provides the strategic direction envisioned for the development of the islamic financial sector looking beyond the near term and taking a longer - term perspective into the needs and requirements of the future. the strategies outlined in the plan have emphasized the development of the respective building blocks of the various parts of the financial sector that need to be put in place to form the solid foundation on which sustainable future progress can be achieved. the expansion of the islamic financial system in malaysia has therefore taken place with attention given for the development of a comprehensive system. towards a more diversified islamic financial system at the onset of our journey in the development of a comprehensive islamic financial system that is progressive, efficient, dynamic and sustainable, due attention was thus given to the development of the key | 2009 o tax relief to boost demand o increased expenditure on public projects to create employment and public assets o cost 3. 5 % of gdp – rs. 1. 86 trillion ( $ 37 billion ) o net borrowing during 2008 - 09 rose from budgeted rs. 1 trillion ( $ 20 billion ) to rs. 2. 29 trillion ( $ 46 billion ) o increase in fiscal deficit from 2. 7 % of gdp in 2007 - 08 to 6. 2 % of gdp in 2008 - 09 o net borrowing during 2009 - 10 budgeted at rs. 3. 97 trillion ( approx $ 80 billion ) potential fallout of increased market borrowings and rbi ’ s response o the increased market borrowing programme of the government has the potential to put upward pressure on interest rates with unintended consequences for growth as well as borrowing cost for the government. to mitigate this, rbi has been conducting open market operations ( omos ). from mid - february 2009 till date, rbi has purchased government securities worth rs. 765 billion ( $ 15 billion ) as part of its open market operations. these measures have had the desired effect of lowering deposit and lending rates of banks and increased credit flow to the real economy. besides, recent quarterly figures of corporate earnings have been quite healthy and encouraging. further, india has well developed liquid and efficient derivative markets like interest rate swaps, currency futures, otc forward contracts which afford businesses instruments to hedge their financial risks. moreover, exchange traded interest rate futures are due for launch shortly which will further increase the choices to market participants. also, at usd 255 billion, foreign exchange reserves provide more than adequate comfort. exchange rate of the rupee is market determined and rbi intervenes at the margin only to contain excessive volatility and to ensure orderly conditions in the foreign exchange market. significantly, indian foreign exchange market is very deep and liquid as reflected in bid offer spreads which compare with the major international currency pairs such as $ - euro, $ - sterling and $ - yen. in addition, as against the net outflow of portfolio investment in 2008 - 09, net foreign direct investment ( fdi ) was substantially positive in 2008 - 09 at $ 18 billion underscoring the confidence of foreign investors in the growth prospects of the indian economy. this was the consequence of liberal and transparent policy on fdi. even the overseas direct investment ( odi ) policy is also very liberal which has resulted in an annual average odi outflow during the last 3 years of usd 17 billion. here | 0 |
only consistent momentum in credit growth can lead to strong net benefits for the economy. the recent financial reform the recently approved, multi - layered financial reform contains measures that may strengthen the banks ’ institutional framework, allowing for more robust and sustainable credit expansion, among other benefits. three sets of measures that stand out seek more effective propertyrights protection for creditors, more formal regulation and the promotion of competition among financial intermediaries. on the subject of creditors ’ property rights, the reform makes significant progress towards correcting problems observed in the application of the bankruptcy law approved in 2000. specifically, the new legislation closes loopholes which debtors had been using to prolong the debt resolution process in areas such as intercompany liabilities, director and manager responsibility, while it makes bridge lending in cases of liquidity crunches more feasible. the reform reduces obstacles to expediency in the judicial process to recover collateral, illustrated by the possibility for debtors to choose the court level and select assets to be seized. an important innovation is the founding of specialized commercial - law courts at the federal level. in the field of regulation, the reform provides rules for the authorities to manage the resolution or liquidation of banks in cases of liquidity squeezes and insolvency. the specifics cover lending of last resort with equity shares as collateral, bank contingency plans for adverse scenarios, and ring - fencing actions, for example, in the case of majority shareholder problems. an expedient bank judicial liquidation process and a legal framework for transfer of assets and liabilities are established. the capital requirements to comply with basel iii guidelines are now mandatory under mexican law. the procedures for applying liquidity requirements are also determined. with respect to competition in the sector, a new law facilitates mortgage substitution by debtors, allowing them to choose banks offering more favorable terms. other measures that work in the same direction include greater facility for the mobility of deposits and consumer loans, meaning that customers can transfer their accounts and loans to other banks with less red tape and shorter delays. importantly, bundled sales of financial products and services are prohibited. these measures will potentially foster a more competitive, consumer - friendly and healthy banking system. along with other reforms, they may contribute to higher potential economic growth. however, as is true with the overall current reform agenda, the effectiveness of these measures will depend heavily on the quality of pending legislation needed to put the changes in place, and adequate implementation. the current economic cycle after a full year of | . in particular, bank credit expansion needs to pick up pace in a sustainable way. 2 in this aim, the first order of business is to understand why mexico is behind other nations in building a deeper, more accessible banking system. if we turn to recent history, higher levels of financial deepening have been attained but not sustained. in fact, the total domestic international indicators of bank penetration and financial inclusion are available in : world development indicators ( 2013 ), the world bank ; financial access survey ( 2013 ), international monetary fund ; and demirguc - kunt, a. and l. klapper ( 2012 ), “ measuring financial inclusion : the global findex database ”, world bank policy research paper 6025. for a review of the literature regarding the effect of financial development on long - term economic growth, see levine, r. ( 2004 ), “ finance and growth : theory and evidence ”, nber working paper no. 10766. bis central bankers ’ speeches financing to the private sector over gdp at the beginning of the 1970s and just before the crisis of 1995 reached new highs before swooning. 3 three key reasons help explain historical high volatility and average low levels of financing ratios. one was the accumulation of macroeconomic imbalances fueling excessive inflation, which created uncertainty and distortions, rendering lending activities more costly. the widening fiscal deficit of the 1970s and 1980s and financial repression resulted in the diversion of resources to the government. also, the nationalization of the banks which occurred in this context carried with it a drastic loss of skills and expertise in making loans. later, in the mid - 1990s, macroeconomic imbalances presented themselves again under a different guise. high short - term dollar - linked government debt and an unsustainable currency peg contributed to the emergence of a severe crisis. debtors found it difficult to make suddenly rising repayments on variable - rate loans in the face of surging inflation. a second factor stems from the financial liberalization that took place in the late 1980s without adequate bank regulation and oversight. this circumstance, together with the re - privatization of banks in the early 1990s, led to a huge expansion in low - quality loans to the private sector. existing poor accounting and provisioning standards, as well as insufficient capital, inevitably fed a subsequent credit bust. a third factor then became evident in the form of weak contract enforcement, particularly noticeable in widespread abandonment of credit obligations and difficulties in the repossession of collateral | 1 |
- off between output growth and inflation. the intellectual basis of policy was the phillips curve. eventually, however, the stagflation that marked the 1970s caused both the objective of policy and its implementation to be reassessed. today, there is a widespread consensus among central bankers, and economists more generally, that price stability should be the overriding goal of monetary policy. the rational expectations literature, and the lessons of experience, suggest that there is no exploitable trade - off between output and inflation in anything other than the very short run. moreover, inflation leads to distortions and uncertainties that impair economic performance. worse, the short - run relationship between inflation and output growth seems to be asymmetric : the output sacrifice needed to get inflation down may be greater than the output gain when inflation is allowed to rise. taken together, these considerations mean that the best service monetary policy can render for the real economy is to keep inflation credibly at low levels. in fact, policy has been remarkably successful in recent years in bringing inflation down in virtually all industrial countries. so much so, that a number of issues are now coming to the fore that were previously considered as of second - order importance. these questions include : how to avoid bias in the measurement of inflation ; whether inflation should be zero or some low positive number ; whether the authorities ’ objective should be expressed in terms of inflation or the price level ; and how quickly one should return to the stated objective after a disturbance. it is hard to dispute that measurement bias in inflation should be corrected, if possible. that is easier said than done, however. some biases can be relatively easily removed, such as that arising from infrequent re - weighting of the consumption basket. others are more difficult to deal with, such as adjusting adequately for quality changes. and some are very difficult to correct, such as properly incorporating new goods and services. still, with some heroic assumptions it should be possible to arrive at a serviceable estimate. the boskin commission in the united states has put the bias at just over 1 % ; in other countries, the bias is thought to be no more than half that. concerning the desirable level of ( properly measured ) inflation, there seems to be a consensus that a low positive number ( 1 - 3 % ) is better than zero. 1 the reasons for this are both a priori and empirical. when inflation averages zero over time, the price level must, by definition, be falling for | " the case for an international banking standard ", institute for international economics, washington, april 1997. - 11 - against the systemic transmission of instability. transparency and disclosure have an obvious role to play here. fourthly, and lastly, the international monetary system. here, too, the power of market forces seems likely to grow. this has the potential for beneficial consequences insofar as bad policies are disciplined and good policies are rewarded. but it would be naive to suggest that market forces always get it right. my expectation is that efforts will need to be devoted to promoting greater stability in the market - led international monetary system. the bulk of these efforts will be in the direction of improving policies ( and their mutual consistency ) and making markets more transparent ( e. g. through better information ). but it cannot be excluded that more direct measures will be required to limit damaging exchange rate fluctuations or contain the cost of currency crises. taken together, this presents a full agenda for central bank policy - makers. i noted at the outset of this lecture that “ the last twenty - five years have been an eventful time for central banking ”. the years ahead promise to be no less eventful. | 1 |
unemployment remains low and is declining … inflation expectations continue to be firmly anchored, with the forecast close to lower end of target range of 3 – 5 %, so interest rates can be seen to be stable … bop is seen to post a surplus of $ 2. 6 billion. foreign reserves are projected to continue to rise to about $ 77. 5 – 78 billion in 2012 while debt service is expected to remain stable, or even decline … with these, the peso can be expected to trade within reasonable ranges. … banks are seen to remain in good health. ladies and gentlemen, if you are to build opportunities and ride on the wave of our current position of strength, you need to recognize that the choices you make today will have lasting consequences …. this was what your policy makers did in 1997. we took on the difficult reforms to correct structural vulnerabilities then. thus we developed the defenses that ensured resilience through the crisis of today. it hasn ’ t been easy getting to where we are today. so your role in this uneven operating environment is to safeguard the gains so far, for it is these hard - earned gains that will allow you to take advantage of the opportunities going forward. in support, you can be assured that the bsp will craft the requisite enabling monetary, external and banking sector policies. there is no magic formula that will allow us to accomplish all these effortlessly. the key, however, remains to think of the bigger picture – no longer just in terms of individual pay - offs but rather on how our respective actions can produce the shared goal of a strong, steady and upward economic growth trajectory that benefits the greater majority. bis central bankers ’ speeches | the country ’ s sources of resilience that have allowed us to sustain positive growth and make notable headway towards greater inclusion. finally, i ’ ll relate these developments to emerging challenges for policy and the role the private sector can play in promoting inclusive growth. 1 / 7 bis central bankers'speeches global outlook and risks in terms of the world economic outlook, global growth is projected to improve modestly over the next two years, with upward adjustments to the projections of the imf for the us, eu, uk and japan for 2017. note, however, that these forecasts are still lower than the actual growth outcomes prior to the global financial crisis. 2 meantime, the outlook for emerging markets is still mixed. in particular, economic activity in china has held firm, while growth projections for india and brazil in 2017 were cut. a downside risk to this outlook, however, is potential political discord and heightened inward - oriented sentiment, both of which could undermine global trade and dampen financial market sentiment. meanwhile, an offshoot of the evolving upward momentum in global growth is the possibility of reflation, or that global inflation may be at a turning point. this positive momentum is reflected in the shift in policy stances of a number of central banks. as you all know, the us fed raised its target fed funds rate by 25 bps last week. furthermore, it is widely expected to continue on this path, with at least two more hikes anticipated in 2017. a review of recent monetary policy decisions suggests that central banks have largely turned neutral — they see less urgency for further accommodation and would rather stay on hold. this phenomenon has been described as “ watchful pause ”. the prospect of higher interest rates in advanced economies could cause capital outflows from emerging market economies ( emes ) as investors search for yield. the retreat of funds away from emes could lead to tighter dollar funding conditions in emerging markets. for firms with significant dollar - denominated liabilities, these developments could pose a risk to their balance sheets and profitability, unless of course these exposures have been adequately hedged. in the case of the philippines, we have seen some incipient signs of capital flow reversals as early as last year. fortunately, the risk to businesses was mitigated by robust domestic liquidity and credit growth and by an adequate supply of foreign exchange. debts of nonfinancial corporations in the philippines also remain mostly peso - denominated, which provides some | 0.5 |
“ the quest for policy scope : implications for monetary policy strategies ” speech by klaas knot at the fourth annual high - level conference racing for economic leadership : eu - us perspectives new york, 16 october 2019 in new york, at the 4th annual high - level conference on eu - us perspectives, klaas knot participated in a session “ the quest for policy scope ”. mr knot highlighted implications for monetary strategies, by discussing how longer - term changes in the global economy continue to create important challenges for monetary policy. these challenges have gained in relevance over time. they should be important elements of future reflections on monetary policy strategy. more than a decade after the global financial crisis erupted, inflation in the euro area has still not reached the ecb ’ s aim of below, but close to, 2 %. this despite unprecedented conventional and unconventional monetary easing and five years of economic expansion. moreover, market - based indicators of long - term inflation expectations in the euro area have fallen, fueling concerns that the anchoring of inflation expectations may have weakened. against the backdrop of a weakening global economy and heightened geopolitical risks, these concerns prompted the ecb to take further measures to boost inflation at its september meeting. a lot has been said and written about the desirability of this package of policy measures. last week the ecb published the account of the meeting, which includes an extensive overview of the arguments exchanged in its governing council. today i do not want to dwell anymore on the merits of the policy package or its individual elements. rather, i would like to look ahead and discuss how longer - term changes in the global economy continue to create important challenges for monetary policy. these challenges relate to the controllability of inflation by monetary policymakers. i will argue that these challenges have gained in relevance over time. i therefore believe they should be important elements of future reflections on monetary policy strategy. some of these challenges affect all central banks, while others are specific to the institutional context in which the ecb operates. setting the stage to set the scene, let me first present two stylized facts on long - run inflation dynamics. first, low and falling inflation is not a recent phenomenon. at dnb we have performed an analysis that decomposes inflation in a time - varying trend and a cyclical component [ figure 1 ]. the results show that inflation has been subject to a renewed downward trend since the crisis. this differs from the episode that is known in the literature as the great moderation | when there was no significant up - or downward trend in inflation. figure 1 euro area hicp inflation and its trend percent notes : the trend is estimated by an unobserved components model of hicp inflation and the unemployment rate for the euro area, see bonam et al. ( 2019 ). second, not only has inflation been subject to a downward trend, but also its inertia – or persistence – has increased since the crisis [ figure 2 ]. after having declined gradually between the mid - 1980s and the early 2000s, inflation persistence is now back at its long - term average. figure 2 euro area hicp inflation and its persistence percent notes : inflation persistence is estimated from a time - varying autoregressive model over a 30 - quarter moving window for seasonally adjusted, quarter - on - quarter euro area headline inflation. the graph shows hicp inflation ( in percent ) together with the inflation persistence parameter. the vertical bar shows the start of the gfc. for details, see bonam et al. ( 2019 ). the million dollar question is then what these developments signal for central banks ’ ability to control inflation. let me explain my take on this issue. notwithstanding the ongoing debate on its validity, i still regard the phillips curve as a relevant analytical framework to structure our thinking. according to the standard view, the phillips curve explains the inflation process in terms of three main elements. the first element is expectations of future inflation. expectations can be forward - looking, in which case inflation is self - equilibrating ; or backward - looking, in which case inflation is more persistent. the second element is economic slack, which captures the impact of aggregate demand. while slack has traditionally been measured by an output gap or unemployment gap, recent research suggests that more granular indicators of labor market conditions are needed to better capture phillips curve relationships in the data. 1 the third element is shocks. these shocks can in principle have a positive, negative or ambiguous effect on inflation. if shocks are more permanent, inflation will be more inertial. if we look back at the euro area over the past decade, most of these shocks appear to have been quite persistent and have 1 see e. g. aaronson, s., cajner, t., fallick, b., galbis ‐ reig, f., smith, c. and w. wascher ( 2014 ). labor force participation : recent developments and future prospects, brookings papers on economic | 1 |
once again for being a key partner and player in the financial inclusion game. i would like to encourage the fides bank to keep up this good work. your dream saver and other services are testimony to the fact that low - income people are not only bankable, but they also insurable. 10. through the dream saver, you have made a difference in the lives of many people now and for generations to come. with this product you have empowered our people. congratulations! i thank you for your kind attention. bis central bankers ’ speeches | tom alweendo : announcement of the commencement date of the financial intelligence act 2007 speech by mr tom alweendo, governor of bank of namibia, at launching the awareness campaign on provisions of the financial intelligence act 2007, windhoek, 29 april 2009. * * * distinguished invited guests ; members of the media ; ladies and gentlemen ; i would like to welcome all of you to the bank of namibia this morning. the occasion today is to officially launch the commencement of the financial intelligence act and to also launch our public awareness campaign. as you are all by now aware, the financial intelligence act was enacted in 2007. the act empowers the bank of namibia, amongst others to receive suspicious transaction reports from reporting entities, to analyze such reports, and to disseminate the intelligence gathered to law enforcement agencies for further investigation and possible prosecution. the bank is further required to conduct compliance audits with all reporting entities to ensure effective adherence to this act. the key in combating money laundering through the reporting entities is to know who their customers are. if they know their customers well, they will be able to detect attempts at money laundering. in fulfilling this mandate, since 2007 we have been preparing ourselves to be ready with the implementation of the act. in this respect, i am happy to say that we have managed to build the necessary capacity and that we are more than ready to implement the act. due to some legislative delays, the bank was not able to commence with the implementation of the act as early as we would have wished. however, i am happy to report that the commencement date for the act is now set to be the 1st may 2009. in order to educate the public on money laundering, we are also starting with a comprehensive awareness campaign. this is necessary because we are only likely to successfully combat money laundering when the public in general understand as to what is at stake. financial crime, of which money laundering is part, is increasingly becoming a global phenomenon. this is despite the enactment of laws designed to curb financial crime. this is not only a threat to the global financial sector, but if allowed to flourish money laundering has the potential to become a threat to society. it can lead to the accumulation of economic power to organized crime. this development has the potential of eroding our political and social systems based on elected representation as we know them today. in other words, the social consequences for allowing money launderers to operate unchecked could spell disaster for stability and the rule of | 0.5 |
deposit taking. out of the remaining 11, 788 non – deposit taking nbfcs, there are many nbfcs who do not access public funds and so are not interlinked. these do not pose much risk to financial stability. hence, a simplified regulatory framework will suit them. 11. today, there are various types of nbfcs and regulation varies depending on the type of nbfcs. this has unnecessarily complicated the structure. as a precursor to let nbfcs undertake any of the permitted activities, than be constrained by the specific segment of registered activity, we thought it fit first to harmonise the regulations among various types of nbfcs so that no regulatory arbitrage will be possible. thus harmonisation with banks has also been warranted for those nbfcs which are in good competition with banks. 12. thus the approach for redesigning the regulation has been “ a lighter regulatory framework on nbfcs other than for those with large asset sizes and deposit accepting, harmonisation of regulation across various types of nbfcs, harmonisation with that of banks to some extent for nbfcs with large asset sizes, and for all deposit accepting nbfcs, creating a level playing field that does not unduly favour or disfavour any institution and to provide adequate time to manage transition ”. let me now explain the changes in more detail. harmonising minimum capital requirement 13. harmonising the minimum capital requirement for all nbfcs at ₹200 lakh. the minimum capital requirement of ₹200 lakh was set in from april 1999. however, there are several thousand legacy nbfcs registered prior to this date, the capital of which is below this level. with the changed profile of nbfcs, their entry into newer businesses, the capital of ₹200 lakh in itself is grossly inadequate. the general increase in the price level since 1999 by itself would call for an increase in the capital requirements necessary to function as nbfcs. besides, as the usha thorat committee has pointed out that any financial intermediary must necessarily invest in technology to be efficient and competitive and reap economies of scale, all of which requires enhancement of capital. a higher capital requirement also ensures that serious players enter this space. besides, registration with the bank confers a legitimacy to the nbfc as a regulated entity and gives a sense of comfort to the lenders to the nbfcs. it is therefore necessary to | cost for borrowers of nbfcs and it will lead to recall of loans, repossession of the assets, etc. these fears are all baseless. what are we telling the nbfcs? we are saying that you be truthful, when you prepare your balance sheets. if a loan is non - performing i. e. if an instalment or interest payment is not received even after a reasonable period after the due date, you cannot recognise income out of that loan. thus, what we are bringing is an accounting discipline, so that all stakeholders know the real financial position of an nbfc. be it the depositor who keeps a deposit with an nbfc or be it an investor or prospective investor of the nbfc when it raises funds from the market, or be it a bank which finances an nbfc, all of them need to know the real financial position of the nbfc ’ s assets. these irac norms i. e. the income recognition and asset classification norms are thus an accounting requirement ; these in no way curtail the nbfcs ’ right to extend further / adequate time to the borrowers who are viable. these norms do not require that these loans / assets classified as npas should be recalled or repossessed. that is a call the nbfcs will take, based on their assessment about the possibility of repayment, and the probability of default, not on the mere fact that these are classified as npas. 31. i understand that several members of the industry have already factored these changes and suitably, that too voluntarily, moved towards a 150 days or a 120 days asset classification norm. also it may be borne in mind that the revised rules have been made applicable to only systemically important nbfcs, that too as per the new definition and for deposit accepting nbfcs in line with the bank ’ s mandate of financial stability and depositor protection. besides, ample time of 3 years has been given for compliance, which is likely to cushion impact on profitability. as on date, as i said earlier, out of the total 12, 029 registered nbfcs, only 190 nbfcs which are systemically important, non - deposit taking nbfcs and only 241 deposit taking nbfcs will be required to comply with these requirements. 32. on reduction in deposit acceptance, i would like to clarify that these have not been reduced but merely aligned to the industry practice. | 1 |
##ence goes beyond technology, it also encompasses governance, company culture and business processes. given the extensive interlinkages and interdependencies in the financial system, it is obvious that 1 / 2 bis central bankers'speeches markets ’ overall cyber resilience depends not only on the resilience of each individual market actor but also on that of interconnected market infrastructures, participants and service providers. the eurosystem cyber strategy for financial market infrastructures following the increase in both the frequency and severity of cyberattacks over the last few years, legislators, regulators and standard setters have issued legislation and guidance on cyber security at national and international level and at cross - sectoral as well as sector - specific level. let me briefly mention three initiatives. first, in 2016, the ec adopted the directive on security of network and information systems ( the nis directive ). its aim is to bring the cybersecurity capabilities of operators of essential services to the same level of development in all the eu member states and to ensure an efficient exchange of information and good cooperation on the topic throughout the eu. second, at international level, the g7 countries have drawn up a set of fundamental elements of cybersecurity for the financial sector, as well as three further recommendations on the effectiveness of cybersecurity assessments, third - party risks, and coordination with other critical sectors. third, with a key focus on financial stability, the cpmi - iosco published a principles - based “ guidance on cyber resilience for financial market infrastructures ” in june 2016. supplementing the “ principles for financial market infrastructures ”, it provides additional detail related to the preparations and measures that financial market infrastructures should undertake to enhance their cyber resilience. in recognition of the escalating cyber threats, the legislative and regulatory guidance and the required paradigm shift, the eurosystem ’ s overseers have launched a strategy for cyber resilience in relation to financial market infrastructures. this strategy – which will be explained in more detail at agenda item 3 – is built on three pillars. the first pillar refers to the cyber resilience of individual financial market infrastructures. the second pillar refers to the resilience of the financial sector as a whole. the third pillar highlights the importance of establishing a forum which brings together market actors, competent authorities and the cybersecurity service providers. this brings me to the third and final objective of today ’ s meeting. creation of a | complex decisions, particularly when resolving the large stock of nonperforming loans. thus, bank boards have to have strong and independent directors with a robust track record who can ensure arm ’ s length decisions in the best interests of their stakeholders and of the greek economy. bank management needs to be free of political interference and vested interests. with this aim in mind, we encourage the hellenic financial stability fund to make every reasonable effort to finalise the review and reconstitution process within the next few weeks. on financial sector policy, there are other important elements of the ongoing second review which seek to further reduce structural impediments to swift and effective npl resolution. let me highlight the reform of the out - of - court workout framework, with its main goal being to provide sufficient incentives for creditors and debtors to agree on mutually beneficial debt restructuring arrangements. the framework is intended for viable but distressed firms whose profitability has been severely hit by the prolonged economic crisis. to be effective, it needs to take into account the fact that greek firms have both significant non - performing loans vis - a - vis banks and significant arrears to the state. let me add that as of end - 2015 total arrears to the state in respect of taxes and social security contributions were around €110 billion, of which about €79 billion was due from corporations, small and medium - sized enterprises as well as professionals – the categories eligible for out - of - court frameworks. the stock of non - performing exposures in greek banks relative to these same categories amounted to another €55 billion. 2 / 4 bis central bankers'speeches apart from developing effective out - of - court frameworks, the greek authorities also need to fully implement the agreed measures to strengthen the judicial system, thereby substantially shortening legal proceedings and enhancing the competence of the courts. these requirements are not specific to greece ; experience has shown that npl resolution requires strong legal frameworks throughout the euro area. in any case, creditors in greece have to wait longer to obtain a court ruling after an insolvency than in any other eu country except the slovak republic. it takes on average about three and a half years, compared with less than six months in ireland, the eu ’ s best performer. swift progress on npl resolution will also help banks to support the economic recovery through credit provision, eventually ending the prolonged period of negative credit growth. so far, credit developments remain subdued, with credit from monetary financial institutions | 0.5 |
caused markets to lose confidence in the euro. as in past crises, the mounting uncertainty triggered substantial upward pressure on the swiss franc. why switzerland doesn ’ t have the euro considering its close economic ties to the euro area, why didn ’ t switzerland ever seriously contemplate joining the single currency? politically and legally speaking, the answer is simple : a country can only join the eurosystem if it is already an eu member state. swiss voters and cantons rejected accession to the european economic area in a referendum in 1992, and in 2001 followed this up by voting against a popular initiative favouring a “ yes to europe ”. these decisions settled the question of whether switzerland should join the eu for the foreseeable future. quite apart from these political and legal factors, the economic case for joining the euro had always been weaker for switzerland than for many other european countries. switzerland ’ s inflation had always been relatively low, and the country thus saw no need to import monetary credibility by pegging the swiss franc to a stable currency. furthermore, it makes sense for switzerland to pursue an independent monetary policy given the structure of its economy – particularly in view of its status as an international financial centre and the research - intensive nature of the industrial goods it produces. monetary policy between fixed and floating exchange rates in 1973, when the system of fixed exchange rates established in bretton woods towards the end of the second world war collapsed, switzerland decided to adopt a system of floating exchange rates. over the long term, this decision has proved its worth. however, there are pros and cons to both fixed and floating exchange rate policies. the disadvantage of fixed exchange rates is that they prevent a country from pursuing its own, independent monetary policy ; monetary policy in a given country cannot be geared towards ensuring price stability. equally, the central bank is virtually unable to take account of economic developments or respond to the kind of special circumstances that typically arise during crises. ultimately, under a fixed exchange rate system, monetary policy is delegated to the central bank of the country to whose currency one ’ s own is pegged. in the long term, this leads to relatively high fluctuations in both production and inflation. floating exchange rates allow a country to pursue its own, independent monetary policy ; however, the disadvantage of such an approach is that it can result in major ( nominal and bis central bankers ’ speeches real ) exchange rate fluctuations. a country ’ s currency may thus be substantially under or overvalued – sometimes for | as a proportion of gdp over the last years despite many challenges and a difficult environment. in 2007 the commission estimates that public spendings will represent 43. 8 % of gdp, which is 4. 3 percentage points less than in 1999. cooperation between the two major monetary authorities i hope i have by now convinced you that the monetary authorities in the united states and the euro area face challenges that are similar. internally, diversity in these large areas is of the same magnitude, although possibly not of the same nature. externally, both regions count on a large external sector, with significant bilateral linkages. similar experiences naturally call for close working relations. this interaction has become particularly intense since the advent of the euro and the setting up of the european central bank and of the eurosystem, but at the same time builds on a long - standing history of central bank multilateral cooperation in various international institutions and fora, including the bank for international settlements since the 1930s, the international monetary fund since the mid1940s, the g10 since the 1960s, the g7 since the mid - 1970s and, more recently, the financial stability forum and the group of twenty. contacts with the federal reserve these international organisations provide an excellent opportunity for the federal reserve chairman and myself, for the members of the boards as well as for the staff of both the fed and the ecb / eurosystem, to meet very regularly. to give you some idea of the level of contact we have, i can say that ben and i meet, through the g7, the g10, the g20, the imf and bis meetings, probably a little more than once a month on average. in addition, mr bernanke and i jointly participate in a number of international conferences. indeed, through our regular meetings, ben and i have built up a very close working relationship, a climate of mutual trust, and a platform for direct and quick contact in special circumstances that would require urgent communication. why is this important? the purpose of our contact is not the coordination of our monetary policies. this would be incompatible with the orientation of our policies towards our respective domestic objectives. rather, the benefit of our close contact lies in the in - depth exchange of information and views on recent economic developments, on the monetary, financial and economic outlook in our respective economies, and on the policy challenges ahead. this includes, as i discussed before, trade and financial linkages between our two economies, directly or via other economies. sharing first | 0 |
with excessive credit expansion and elevated asset prices. | ##bilities to trade and financial shocks since the crisis, however, growth has slowed, mainly on account of a drop in tfp growth and receding fdi inflows. in the new euro area countries, tfp growth remains, unlike in other cee countries, the main driver of growth. but the general slowdown is being felt in all economies in the region, which suggests that, despite the ongoing benefits of the single market and the euro, the cee business model has become vulnerable to shocks to international trade and financial conditions. the benefits of the single market for sustained convergence thus needs to be consolidated, by implementing reforms towards a more balanced growth model that is less vulnerable to changes in external conditions, such as those that have emerged recently. global trade has faced headwinds in recent years as trade - restrictive measures have outpaced liberalising measures. 16 cee economies have been disproportionately affected by this for two reasons. first, trade in cee economies is especially responsive to cyclical developments. since these countries have consistently been more open to trade over the past two decades, their trade elasticity is higher than in the rest of the eu. in addition, the value chains in which they participate mainly involve trade in durable goods, which have a high level of income elasticity. 17 second, cee economies have increasingly specialised in certain industries, which may have made them more exposed to industry - specific shocks. in some countries, for instance, vehicle exports represent nearly 30 % of total manufactured exports, making them more vulnerable to the threat of increasing car tariffs. moreover, the effect of tariffs could be amplified, as a large share of goods cross borders multiple times during the production process. 18 headwinds could also result from changes in the international financial landscape. net foreign liabilities stood at over 70 % of the cee economies ’ gdp in 2018, which is higher than in many other emerging economies. in particular, fdi was comparably high and accounted for 50 % of total external financing up to 2010, thus providing stability. the share of fdi liabilities has 2 / 4 bis central bankers'speeches declined since then and accounted for 42 % of total external financing in 2018. while many countries in the region have improved their current account balances in recent years, they may remain vulnerable to changing external financial conditions due to their dependence on foreign financing. these developments confirm that sustained policy efforts are needed to maintain a steady convergence path. the region ’ | 0 |
in the medium - term due to the regulatory evolutions it implies. as a first pragmatic step, for host supervisors, it is necessary to establish an intermediate holding that consolidates all financial activities, in order to submit systemically important players to requirements. agustin carstens elaborated yesterday on the " segregation " and " inclusion " approaches. in addition, regulation of big techs in finance should go beyond traditional regulation of finance. let me explain : big techs pose at least three new challenges. that of competition - as they are already much more concentrated than existing financial institutions, and the network economy tends to establish " the winner takes most " rule. that of data protection and privacy, of course. and finally, that of operational risk and cybersecurity. however, in each of these three fields - competition, data protection and cybersecurity - there is no international body, unlike in finance. and the national - or european - authorities that do exist are still hardly used to cooperating with each other. to develop cross - border and cross - domain cooperation, the scope is wide but essential : the oecd, the bis and the fsb can and must be sandboxes. as a beacon of hope, europe is showing the way on all these common challenges. europe now stands out as a spearhead on key issues, thanks to : its regulation on digital operational resilience ( dora ), which will submit critical service providers to direct oversight, and will enhance our financial system's cyber resilience and financial data protection ; its regulation on markets in crypto assets ( mica ), which is tailored to new players and assets and needs to be implemented as quickly as possible, that means quicker than the presently planned november 2024 ; last but not least, the digital markets act ( dma ) will cover competition issues, and the digital services act ( dsa ) will regulate online contents. in their own way, each one of these two new regulations enshrines a principle full of common sense, i. e. what is forbidden in " real life " is also forbidden for companies that operate online. with this new legislation, europe is creating a climate that is more conducive to the emergence of european players in the technological field. we can only hope, in the interest of global competition, that they will be able to grow and reach critical size. 3 / 5 bis - central bankers'speeches the eurosystem is also taking part | bond issuance at the pre - pandemic pace. second, close coordination with the u. s. treasury acted as a force multiplier. the equity committed by the u. s. treasury facilitated broad support for large employers. 8 the facilities ’ combined capacity leveraged treasury ’ s committed equity contribution of $ 75 billion by up to 10 times. third, the support provided by the facilities is broad. excluding banks, all u. s. domiciled firms with an investment - grade rating prior to the facilities ’ announcement were eligible, thus concentrating support for firms that primarily faced liquidity strains due to the pandemic. the facilities also provide support for firms with ratings just below investment grade to mitigate the “ cliff effects ” at the boundary of our support. 9 together, these programs backstop about 80 percent of corporate bonds outstanding, excluding those issued by banks. 10 finally, policymakers signaled their willingness to adapt. even before purchases began, the size of the equity injection and purchasing power of the facility was increased, and the scope was broadened to allow support for “ fallen angels, ” or bonds downgraded below investment grade ( but no lower than bb - ) after the ccf announcement. implementation matters in addition to program design, the principles that guided the implementation of these facilities — access, transparency, and accountability — reinforced their credibility and impact. providing broad access to the facilities for corporate borrowers was essential, both to expand the reach of backstop support for the economy, and to ensure that the facilities avoid the allocation of credit. our initial purchases were in a diversified set of etfs that provide broad exposure to the market for u. s. corporate bonds. purchasing via etfs offered efficient and rapid transmission of broad - based support to the secondary market. at the outset of these purchases, we communicated that etfs would only be used if their purchase is reasonably expected to achieve the objectives of the smccf more effectively than the purchase of underlying bonds. 11 one month after starting etf purchases, the federal reserve announced a framework to use corporate bonds as the smccf ’ s primary vehicle for providing support. in preparation, we had created a “ broad market index ” of eligible corporate bonds, weighted proportionately by amount of debt outstanding from individual companies. 12 we then began purchasing bonds across the index in a rules - based manner, taking care that our purchases are neutral toward eligible sectors and companies. i should note https : / / www. newyo | 0 |
money helps to illustrate the point i am trying to make. it remains to be seen how popular this form of payment will become in the united states, but the question of whether nonbank institutions should be allowed to issue electronic money is actively being debated in many countries. some argue that issuing money is a special bank function and that electronic money should properly remain exclusively a bank product. for the time being, however, i along with other policymakers at the federal reserve have concluded that any decision to reserve the nascent market for smart cards and other forms of electronic money as a province for banks alone might well stifle both competition and technological innovation in this area. thus, while most would agree that providing efficient payment media for small dollar transactions is a “ special ” function that banks currently perform, it does not follow that only banks should be allowed to perform the function. as a corollary, i would also say that there is not a “ special ” public purpose in constraining banks from competing in many other markets traditionally dominated by nonbank financial institutions. this is a subject which is especially topical in the united states because our domestic banks are more restricted in the business activities in which they can engage than are banks in many other countries. as you know, the federal reserve has pushed to expand banks ’ ability to compete with investment houses in underwriting securities, and the scope for u. s. banks to sell insurance - related products has also expanded recently. the third general aspect of banking that is often deemed special is the linkage between the banking system and monetary policy. of course, this is a topic that has spawned a truly vast economic literature. without venturing into this thicket, i would simply like to note as fact that through much of the 1990 - 1994 period, growth of the broad u. s. monetary aggregates such as m2 was quite at odds with historical relationships to nominal income growth. perhaps the most important factor underlying this development has been a fundamental realignment of household financial assets away from bank deposits in favor of bond and stock mutual funds and other capital market investments. this “ decoupling ” of banking system deposit liabilities and nominal gdp became so pronounced during the first half of the 1990s that the federal open market committee downgraded the status of m2 as a policy variable. today m2 remains only one of the many variables reviewed by the fomc in the course of its policy deliberations. i raise this example because financial innovations and shifts in financial structure affecting | jerome h powell : opening remarks opening remarks by mr jerome h powell, chair of the board of governors of the federal reserve system, at the gender and the economy conference, a symposium hosted by the division of consumer and community affairs, board of governors of the federal reserve system, washington, d. c., ( via webcast ), 8 november 2021. * * * good morning. i am pleased to welcome everyone to today ’ s conference on gender and the economy. thank you for being here, for participating, and for lending your expertise on this important topic. we have gathered an impressive lineup of speakers and panelists, who will address a range of timely and important issues. to open the conference, i will give a brief tour of the important research on display here, then discuss how the pandemic has affected the economy along gender lines. research the speakers and panelists will be exploring a wide range of topics, from a historical review of gender issues and the economy to how someone ’ s education options — and the financing of those choices — affect that person ’ s early career and financial stability. speakers and panelists will also be looking at the influence of family and caregiving on career advancement and will discuss timely topics of wealth and retirement. the pandemic and gender the pandemic widened deep - rooted inequities in our economy. along racial, gender, and socioeconomic lines, those least able to bear it, unfortunately, were those who were most affected. women make up the majority of frontline workers, who have been under substantial strain — and subject to personal risks — during the pandemic. additionally, women took on the majority of caring responsibilities, for older relatives and children alike. as schools closed and childcare services shuttered during the worst of the pandemic, that added responsibility and stress made working more difficult for some and took many away from their jobs. these burdens are real and have been an additional challenge during an already challenging time. in a reversal of previous recessions, women suffered more from job losses in the covid - 19 recession than men. in april 2020, the unemployment rate for women was 16. 1 percent, compared with 13. 6 percent for men. the gap persisted until september of that year, and while it has since reversed, it does not account for the many women who left the workforce entirely. 1 increased childcare responsibilities during the pandemic also affected many parents ’ working lives. mothers of small children | 0.5 |
4. 11. 2019 digitalisation and investment in intangible capital : the spanish case within the eu banco de espana - european investment bank pablo hernandez de cos governor ladies and gentlemen, let me start by welcoming you to banco de espana for the conference digitalisation and investment in intangible capital : the spanish case within the eu, jointly organised with the european investment bank. for the banco de espana it is a great pleasure to collaborate with the european investment bank in co - organising a conference for the second time. before going any further with my intervention, i would like to thank all of you for your attendance here today. the topic of this conference is very timely and appropriate. digitalisation is a key development that is increasingly affecting all the sectors of the economy with the ability to significantly transform the functioning of companies and markets and the structure of the economy more generally. however, the final impact of digitalisation on various dimensions is highly uncertain. digitalisation digitalisation refers to the adoption of digital technologies such as big data, cloud computing, e - commerce, artificial intelligence, robotics, the internet of things and 3d printing. the impact of digitalisation on firms and the general economy comes through various factors. first, digitalisation reduces search, transportation and verification costs1. second, it leads to increased automation of routine operations. third, it enables new ways of organising production. fourth, it may change the structure of the market, potentially affecting competitive pressures in some sectors. there is an overall consensus that digitalisation can potentially boost firms ’ productivity through several channels. first, technical progress in the production of digital products leads to new, better and cheaper products generating productivity gains in the sectors producing these products. second, other sectors may benefit from cheaper inputs encouraging a higher use of those inputs as investment goods, resulting in productivity gains for the firms in these sectors. third, digital technologies enhance product and process innovations leading to new production and organisational processes, new business models and new or superior products. finally, information and communication technologies ( ict ) are seen as reducing the cost of sharing and acquiring knowledge, potentially increasing the diffusion of innovation and new knowledge. however, digitalisation may also entail some challenges. first, while some argue that digitalisation leads to more intense competition, others fear increasing market concentration in some sectors on the back of digitalisation2. second, some studies find evidence that ict and automation are related to labour market polarisation3, where mid - skilled jobs either lose value or disappear, | the most critical of respondents, one finds support for most of the new accord. there is support for its three pillars and its intentions to align capital more closely to risk ; to introduce greater consistency in the supervisory review of capital adequacy ; and to promote effective market discipline by enhancing transparency. it was, moreover, satisfying for us that most commentators acknowledged substantial improvements in the proposals since the release of the second consultative paper in early 2001. not unexpectedly, respondents have raised a large number of points worth closer consideration. some letters addressed fundamental concepts as well as several issues that have been debated throughout the entire process. in addition, some member jurisdictions will continue to receive responses through their national rule - making processes up until late autumn of this year, during which time we anticipate hearing additional thoughts. what are some of the themes emerging from the public ’ s reactions? certainly the complexity of the proposals continues to draw your attention. this is a matter we have discussed in the past and is a valid concern. it is important to remember that much of the complexity in the proposals stems from the concerns raised by banks earlier in the process. throughout the process, various banks have requested that the committee offer flexibility and a range of approaches to evaluate the particular risks and profiles of various businesses and specialisations. indeed, one needs only to read a handful of the letters on our website to discover that some recommendations from the industry would tend to increase further the degree of complexity of the accord. nonetheless, the committee is aware that it is easier to enforce a simpler rule than a complicated one. we have long sought ways to simplify those rules thought most complicated. those efforts will continue. another theme noted in the comments concerns the need to maintain a level playing field – or, at least, to avoid “ unleveling ” the playing field further. the committee is very conscious of this matter, and i will say something about our efforts in this respect a little later. a last important theme addressed the sense that the committee may have adopted an overly conservative approach to some aspects of the framework, resulting in much higher capital charges than banks feel are necessary. these concerns are important, as a key goal for the new accord is to align capital more closely to risk. this means that where the original accord treats exposures too harshly relative to the degree of risk that they entail, we expect to reduce the capital requirements. but where the risk is greater, and where the existing rules fail to assign adequate capital, it | 0.5 |
to governor luis maria linde for naming me director general for economics, statistics and research almost two and a half years ago. that was, unquestionably, the necessary step for taking me to where i am today. 3 / 5 thank you, governor, for your constant support over this period. i hope to be up to the task of the legacy you are leaving us. my thanks, too, to the members of the bank ’ s executive commission and governing council and, most particularly, to the deputy governor, javier alonso. javier, your help and far - reaching knowledge of the bank are making these first weeks in the job easier for me. but, above all, i should like to thank my colleagues over the course of the years. it would be impossible to list them all ; many are here today. the career of a banco espana employee can only fully be understood through the prism of the numerous interactions and discussions between us, which are the bedrock on which we build our knowledge and our particular human capital. it is a privilege to be part of this environment and to participate in such an enriching process. finally, the most singular thanks are for my family. without them none of this would have been possible. let me seize this opportunity to refer briefly to what should, in my view, be the two main objectives of the banco de espana at this juncture and which are related to our relevance and reputation. the first has to do with our insertion into the eurosystem and into the single supervisory mechanism. some think this means that the banco de espana has an increasingly diminished role, given that the main functions linked to monetary policy and supervision of the financial system are decided in that framework. however, i believe all of us who have experienced this environment have emerged with a very different lesson learnt. indeed, we cannot overstate the extraordinary potential this setting offers to an institution such as ours which has always valued, and legitimately so, the soundness of its judgement. with that conviction, we should devote most of our efforts to forging closer insertion, collaboration and coordination - based links with our european partners with an essential aim in mind : to reinforce our weight and ability to influence decision - making. this is a challenge and it is also an opportunity, but it is above all a responsibility to support, from the vantage of the banco de espana, the project for european construction. the second objective has to do with our contribution to financial and macroeconomic stability. after an unprecedented | financial crisis, the reputation of economic policymakers, of central banks in particular and, indeed, of the economics profession as a whole was enormously dented. 4 / 5 testifying to this were the regulatory and institutional changes set in train to prevent similar situations from recurring. however, the real test, where we place our social prestige and credibility on the line, will involve us truly being able to identify risks and vulnerabilities in due time, being able to issue warnings about them and, within our remit, being able to act to mitigate them or to contribute decisively to other players acting when they must. all this must be attained in a setting in which new developments and circumstances will be emerging – and they are in fact appearing already – to make our analytical and supervisory tasks more demanding. in any event, enjoying society ’ s trust and recognition will involve being able to respond successfully to this challenge. to be able to accomplish our mission and reach both objectives, the banco de espana is going to have to adapt. but such adaptation must also stand on sound pillars. the first of these pillars is our independence. independence is a necessary condition for achieving the aforementioned objectives and it is independence alone that can offer us the best guarantees of success. secondly, the exercise of independence should be underpinned by analysis and decisions based on the utmost intellectual rigour. this is also the best base from which to address the necessary accountability and transparency to society. thirdly, we can only properly perform our dual role of members of the eurosystem and public servants by the pursuit of excellence in our work and by promoting the excellence of our staff. such excellence has been and is, no doubt, one of the hallmarks of this institution. it is my firm commitment to maintain and enhance the bank ’ s human capital. to conclude, i shall adhere to the tradition launched by governor linde when he took office and end, as he did, with a quote. in tribute to the governor, as i know that fernando pessoa is one of his favourite poets, i'd like to quote his “ odes by ricardo reis ”, in which he reminds us of the importance of being truly committed to our work. “ to be great, be whole : don ’ t exaggerate or leave out any part of you. be complete in each thing. put all you are into the least of your acts. " thank you all for being here. 5 / 5 | 1 |
form of money held exclusively in samos, the south african multiple option settlement system, which is the backbone of the national payments system. it is managed by the sarb. samos accounts are held mainly by banks, 28 currently, who transact directly with the reserve bank. they use these reserves to settle payments between each other. the total supply of bank reserves is around r220 billion, of which about r140 billion is required reserves. this is the form of money used to implement monetary policy. this r220 billion is only a fraction of the total amount of money in the economy. if you turn to our quarterly bulletin, where you will find comprehensive statistics on monetary aggregates or money supply, you will see that m3 – which is a broad measure of money, including all bank deposits and money market shares – was r4. 72 trillion at the end of 2022. the total supply of sarb money was therefore only about 8 % of total money in the economy. how is it that most money is not sarb money? why can anyone else can create money? isn ’ t that counterfeiting? in fact, money creation is a normal characteristic of a banking system. banks routinely create money through the process of making loans. it works in a very simple way. 2 a bank takes in a deposit and that deposit meets the definition of money – for example, this is the money you have in the bank. but then the bank makes a loan, for instance to someone who borrows for a car or a house. and that loan also appears as a deposit at a bank, which is also money. in this way, the act of credit creation expands the money supply. the constraint on banks is that every deposit is a promise to pay in bank reserves, which are the liabilities of the central bank. 3 banks have no power to create these and can instead only access them on terms worked out by the central bank, through its monetary policy implementation framework. this creates a powerful constraint on banks. whenever they create money, they are obliged to ensure these rands are always valued at par with bank reserves. this obligation is tested many times daily : every time a payment goes from one bank to another, this settlement is conducted through the samos system using bank reserves. so, if bank a creates money by extending a loan to a household, and that household then buys something from someone who banks with bank b, bank a will have to transfer bank reserves to | against the backdrop of the stronger global and domestic economic environment, domestic financial markets also rallied in the latter part of 2009. the zar appreciated by almost 23 % per cent on a trade - weighted basis in 2009, reversing the 23. 5 % decline recorded in 2008. this appreciating trend continued until mid - may 2010, supported by stronger commodity prices, the search for yield, liquid domestic markets, a relatively favourable economic and fiscal backdrop and the reduction in risk aversion. the all share index, as well as the morgan stanley capital international index ( msci ) for south africa, registered double digit gains, p / e ratios improved and domestic government bond yields declined. the fixed income market was supported by the easing in monetary policy and healthy appetite for domestic bonds by non - residents. non - residents purchased a net r24 billion worth of domestic bonds in the fourth quarter of 2009 and purchased over r 30 billion in the first four months of 2010. the international bond issues of the south african government in 2009 and 2010 were also well received, as confirmed by the latest usd 2, 0 billion issue in march 2010, which realised the lowest coupon ever achieved on a usd bond issue. nonetheless, the recent bout of risk aversion caused the rally in domestic financial markets to also run out of steam, while the appreciation in the zar dissipated and volatility increased from 13 per cent in april to almost 18 per cent in may. market development initiatives an important milestone was reached in february 2010, when south africa ’ s multibillion rand money market industry officially commenced the electronic issuing, trading and settlement of securities in place of the manual paper based system. as the largest issuer of money market securities ( on our own behalf and on behalf of government ), the bank welcomed the implementation of a fully - dematerialised money market. all sarb debentures and treasury bills are now being processed in the new electronic format, representing not only a milestone for the south african financial markets, but also being the very first fully automated dematerialised settlement environment globally. many of the people here tonight were involved in this project, and i want to sincerely thank you for your contributions to this very important project. as part of the fmd ’ s own contribution to market development and to enhance our exchange of information with market participants, a platform known as the money market liaison group ( mmlg ) was initiated in 2005, mainly to consult with banks on the modifications | 0.5 |
is globally competitive. and we have new and emerging areas of strength, including in green technology and electricity. - 12 to leverage these strengths, we need to invest in trade infrastructure and reduce trade barriers so that integrating canada into the north american value chain is more attractive for businesses. this includes investing in our electricity grid and transportation infrastructure. and businesses need to invest in new equipment and innovation to be globally competitive. as trade is recast for security or strategic reasons, canada is a trusted and reliable trading partner. canada is not going to be the cheapest alternative. but we have a highly skilled labour force, reliable energy and transportation networks and solid financial institutions. moreover, canada has a stable democracy and strong rule of law. and we provide a reliable and important voice at the global table. effective multilateral institutions that brings me to our second priority. we need to invest in effective multilateral institutions — they are more important than ever in this fragmented world. and they will be only as effective as members want them to be. it has never been easy to attain international economic cooperation, and open trade has come under particular pressure. but the trends i ’ ve just outlined increase the urgency. our common interest is shared prosperity. we all benefit from a stable, open, rulesbased global order. we need to build it, protect it, adapt it and ensure the benefits are shared. effective and legitimate multilateral institutions don ’ t just happen. they need good governance, adequate resources, talent and inspired management. canada has long invested in the bretton woods institutions. we have a strong voice at the imf and financial stability board ( fsb ). we know the value of an effective wto that can serve as a forum for negotiations, act as an arbiter of disputes and monitor the implementation of trade agreements. as canada assumes the g7 presidency in 2025, we have a responsibility to lead difficult discussions. that includes trade, global financial stability and mitigating climate change. as central bankers, our particular focus is the imf, the fsb and the international monetary order. we need to be sure that the international monetary and financial system is up to the task and is integrated with the other parts. the fundamentals of economics have not changed, but the need for resilience and agility has increased with changing economic circumstances. managing disruption finally, canada needs to be ready for the trade disruptions that seem inevitable amid a changing trade landscape. the bank of canada doesn ’ t | david dodge : economic and financial trends in canada opening statement by mr david dodge, governor of the bank of canada, to the house of commons finance committee, ottawa, 26 october 2004. * * * good afternoon, mr. chairman and members of the committee. we appreciate the opportunity to meet with this committee twice a year, following the release of our monetary policy reports. these meetings help us keep members of parliament and, through you, all canadians informed about the bank ’ s views on the economy, and about the objective of monetary policy and the actions we take to achieve it. since we last met, we are pleased to have issued canada ’ s new $ 20 bank note with enhanced security features. the new note began circulating on 29 september. last thursday, we released our october monetary policy report, which reviews economic and financial trends in the context of canada ’ s inflation - control strategy. when paul and i appeared before this committee last april, we told you that the economy was judged to be operating significantly below its potential. that is no longer the case, because the canadian economy has grown faster than was projected in last april ’ s monetary policy report and the july update. this stronger growth was largely due to a surge in exports. the economy is now operating near its production capacity and continues to adjust to global economic developments. the bank ’ s base - case projection for the period to the end of 2006 calls for aggregate demand for canadian goods and services to expand, on average, at about the same rate as potential output. given the effects of higher oil prices and the past appreciation of the canadian dollar, the bank projects economic growth to be slightly less than 3 per cent in 2005, and slightly more than 3 per cent in 2006. with the economy expected to remain near its production capacity throughout this period, core inflation is projected to move back up to the 2 per cent target by the end of 2005. that is the same projection that we made last april. however, given the path suggested by futures prices for crude oil, the bank expects total cpi inflation will rise to the top of the 1 to 3 per cent target range in the first half of 2005, before falling slightly below core inflation in early 2006. against this background, the bank raised its target for the overnight rate to 2. 5 per cent on 19 october. the base - case projection assumes further reduction of monetary stimulus over time, to keep the economy near its production potential and to achieve the inflation target. i want to emphasize that the | 0.5 |
the dollar – it would be about building a more stable global financial system. it would also be about providing an additional channel for foreign investors to invest in europe, including into sustainable finance and the green bond markets. there are major challenges involved in taking the cmu forward. for that, we need a clear vision and persistence. we need to revitalise the action plan. with this in mind, in my view it would be useful to reassess the narrative attached to the cmu. a new concept – “ growth and investment union ” for example – might put a more positive drive on the project. dear colleagues, the current global headwinds underline the importance of boosting the economic revival of europe through structural reforms, public and private investment in research and innovation, and a revitalisation of the single market. we need to complete the emu financial architecture to enhance capital allocation and improve private risk sharing. only in this way can we reap full benefits of the single market. and, crucially, europe ’ s economic revival needs to be combined with the greatest challenge of our generation : tackling and mitigating climate change. it calls for a consistent strategy from the eu on how to pursue economic and ecological transformation of our societies and enterprises. in this challenging task, the financial system will need to play an important role in managing risks and mobilising capital for green investments. let me wish you most productive discussions and enjoyable days in helsinki! – many thanks for your attention. 1 see padoa - schioppa 3 / 3 bis central bankers'speeches | the eyes of the public would be enhanced. in exceptional situations, the rules need to allow flexibility, but this should be based on predetermined and consistent criteria. 3 / 5 bis central bankers'speeches an expenditure rule can be defined as a medium - term ceiling for the growth of government expenditure, set in relation to the estimated future economic growth and taking into account the stock of public debt. such a rule would probably serve more effectively as an operational fiscal policy guide than the current rule that is based on the structural fiscal balance. the so - called automatic stabilizers, such as increased expenditure through unemployment insurance in an economic recession, are important mechanisms of economic adjustment in the eurozone countries. the expenditure rule would not prevent the operation of automatic stabilizers. the expenditure rule supports responsible fiscal policy, as we have seen in countries like the netherlands, sweden and finland where it has been used over the past decades. recent research by the imf has come by and large to a similar conclusion : the compliance rate of expenditure rules is greater than that for budget balance rules, especially if it is directly under the control of the government and the rule is enshrined in law or in a coalition agreement. empirical research also indicates that the presence of expenditure rules is associated with stronger fiscal performance, i. e. a higher primary balance and countercyclical fiscal policies. finally, it is essential to repeat the paramount importance of national ownership of responsible fiscal policies. both an expenditure rule and an independent fiscal council can be valuable tools for that goal – but they are only tools, which should be used well. it is worth quoting the director of the imf ’ s fiscal department, vitor gaspar, and his co - authors : “ one extreme and dangerous manifestation … is the expressed perception by many analysts that european fiscal governance releases countries from their national responsibilities. nothing could be further from the truth : fiscal policy is, first and foremost, a national responsibility. ” several eu member states have in fact lived in line with gaspar ’ s recommendation and used the eu rulebook as an instrument to reinforce national ownership of fiscal policy. belgium, denmark, luxembourg and the netherlands introduced national expenditure rules in 1992 in response to the maastricht treaty and its debt and deficit rules. sweden and finland followed suit after becoming members of the eu in 1995. germany went so far as to introduce a constitutional debt brake, which has recently been discussed in germany and criticised for its excessive rigour that may prevent the | 0.5 |
matthew elderfield : solvency ii – the impact in europe and bermuda address by mr matthew elderfield, deputy governor of the central bank of ireland, at the insurance day summit, hamilton, 12 june 2012. * * * thank you to insurance day for the kind invitation to join you at this event. it ’ s a great pleasure to be back in bermuda to have this opportunity to speak and also to spend a bit of time meeting the bermuda firms and my former colleagues at the bermuda monetary authority. in addition to my obvious personal interest in bermuda, there are clearly close ties between bermuda and the irish insurance market. a number of bermuda insurance companies have a significant presence in ireland which they use as their base for pan european activity. and more broadly, wearing my hat as a member of the european insurance regulators or eiopa management board, there are very close ties between bermuda and the eu. bermuda is an important source of risk capital and insurance services into the european union, and as such it is an important source of diversification of risk and provides benefits to wholesale and ultimately retail consumers across the european union. for example, 37 % of emea property cat risk was placed with bermuda companies according to the most recent aon benfield data. france, germany, spain and benelux each place between 18 – 25 % of their total premiums with bermuda companies. it is therefore encouraging to see that in spite of difficult operating conditions last year the bermuda insurance market is continuing to play an important role internationally and that the bermuda monetary authority is continuing to make good progress in its drive to enhance its regulatory regime. what i propose to do today is to start with a brief update on solvency ii implementation. secondly, i want to choose 3 particular aspects of solvency ii to consider in a bit of detail. and, finally, i would like to take an opportunity to say a word about the equivalence process and what it means for bermuda. by this time almost everyone in the insurance industry from chairmen to secretaries, underwriters to loss adjusters and indeed not just in europe but in bermuda, the us and elsewhere, will have heard about solvency ii. it is the new regulatory framework for setting risk based solvency requirements for insurance and reinsurance companies operating within the european union. it is organised around three pillars : a first pillar setting quantitative solvency requirements covering all aspects of insurance business, including asset risks and prescribing eligible forms of capital. the second pillar is aimed at qu | u. s. outlook emanating from abroad are worthy of notice, they are not the biggest thing on my mind. for me, the biggest and costliest downside risk is that in our haste to get back to “ business as usual ” monetary policy, we could stall progress and backtrack to the economic circumstances of recent years – an economy mired in the zlb. to say the least, conducting monetary policy at the zlb has been a difficult experience that we all want to avoid repeating unnecessarily. in the winter of 2009, with the unemployment rate soaring to double digits, the fed would have very much liked to lower the nominal federal funds rate an additional 300 basis points ; but we couldn ’ t because the rate was already at zero. faced with a pressing need to provide additional accommodation, we were forced to turn to innovative, but controversial, unconventional monetary policies. these policies have been extremely helpful. but there is no denying that they were second - best options ; the zlb had made lowering the fed funds rate, which is our first - best interest rate tool, infeasible. everyone will welcome a return to more normal times and a reliance on the traditional policy framework of adjustments to the federal funds rate. but the decision about when to begin to raise rates shouldn ’ t be made prematurely. rather, the decision for policy liftoff has to be made for the right reasons – that is, it should be dictated by economic conditions. like my colleague minneapolis fed president narayana kocherlakota. 2 i think that policy at all times must be goal - oriented. our experiences since the crisis began and current economic conditions are highly unusual. the fomc should not simply set its policy instruments by mechanically aligning them with historical norms if those norms are not currently relevant for the conditions needed to attain both of our dual mandate goals. rather, our policy instruments should be set to achieve our ultimate goals as efficaciously as see, for example, kocherlakota ( 2013 ). bis central bankers ’ speeches possible given current and prospective economic conditions, all the while with an eye on managing against important risks to the outlook. i believe that the biggest risk we face today is prematurely engineering restrictive monetary conditions. in this scenario, the fomc could misjudge the presence and magnitude of economic impediments and misread the recent progress we have made as evidence of sounder economic trends. if we were to presume | 0 |
requirements for the directors and boards of both banks and insurance companies. while these may be more demanding than those in place in other jurisdictions, we believe they set an appropriate benchmark. the statutory fitness and probity standards strengthens the central bank ’ s “ gatekeeper role ” and allow us, where appropriate, to suspend or remove an individual from a senior position in a regulated firm. in december 2011 we formally launched our prism framework for supervision and applied it to banks and insurers. we will extend it to investment firms and credit unions next month and later in the year we will use it in support of focused thematic inspection work across a significant number of firms. prism is at the centre of our new assertive risk - based approach to supervision. put simply, prism involves the targeting of our supervisory resources between firms on the basis of empirically driven quantitative metrics showing the potential of each firm, were it to experience problems, to adversely affect consumers, the economy or public finances. we have significantly upgraded the skills of our supervisors both by bis central bankers ’ speeches recruitment and training programmes. they will ask difficult questions, they will be sceptical and ready to engage in sometimes unpalatable but necessary conversations and analysis. enforcement also helps to deliver a regulatory regime which is credible and effective. we have stepped up our work in this area. last year we entered into enforcement settlements with 10 financial providers, resulting in a range of sanctions including the disqualification of 2 directors and fines totalling €5 million. areas prioritised in 2012 include mortgage arrears, retail intermediaries, payment protection insurance and client asset requirements. we are looking forward to adoption of the central bank ( supervision and enforcement ) bill which should reinforce the powers of the bank in the context of regulation setting, proactive supervision and enforcement. the bill includes a single wide ranging power of direction, wider powers for authorised officers, the ability to require “ skilled persons ’ reports ” and increased administrative sanctions penalties. more broadly, it proposes protections for whistle - blowers and will strengthen the central bank ’ s ability to provide assistance to overseas supervisors. this is a flavour of recent regulatory developments in ireland. the process of rethinking our philosophy, changing our culture and reengineering our processes continues. our regulatory resources have kept pace with the new challenges and responsibilities having grown from 385 in 2009 to a target for this year of 714. in 2012 we expect to consolidate and drive for greater efficiency and effectiveness with | the resources now at our disposal. throughout this period we have tried always to learn from best practice internationally and to take advantage of our membership of the european supervisory authorities. during the panel on banking later this morning i will say something about our expanding engagement with the european institutions and the lead - in to the irish presidency of the council of ministers, which gets under way in january 2013. let me now invite minister noonan to open our conference. bis central bankers ’ speeches | 1 |
future, and such uncertainty is another crucial point that should be taken into consideration in the conduct of monetary policy. specifically, no one knows whether the flattened phillips curve will be a lasting phenomenon. in our outlook report published in april, we pointed out that the shape of the phillips curve may change along with changes in inflation expectations or labor cost restraint by firms. moreover, there is more than one hypothesis competing to explain the flattening of the phillips curve : for example, some point to decrease in firms'control over prices as a result of the stiff competition following deregulation and globalization, while others refer to the decreasing frequency of price revisions by firms in response to disinflation. inevitably, the outlook for the future differs depending on the hypothesis favored. actual economic developments always entail uncertainty, and not only for the reasons i just stated. just as with other economic challenges, a final resolution to the problems posed by inflation dynamics may be too much to ask for. yet in spite of this, central bankers must keep up with the cutting - edge ideas and insights of their time and reflect them in their policy management. as one such central banker, i am very much looking forward to seeing our understanding of inflation dynamics deepened thanks to the research efforts stimulated by conferences such as this. thank you very much for your attention. | toshihiko fukui : inflation dynamics and monetary policy summary of a speech by mr toshihiko fukui, governor of the bank of japan, at the international conference on inflation dynamics, hosted by hitotsubashi university, tokyo, 28 june 2007. * * * it is my great pleasure to be invited to speak before such distinguished economists from both japan and overseas. the theme of this conference, " inflation dynamics, " is, without any question, one that cannot be ignored by any central banker pursuing the most desirable monetary policy. presumably it is the interest in a central banker's perspective on this key topic that explains why i have been given the privilege of speaking to you today. accordingly, i would like to take this opportunity to give my thoughts on the subject. the issue of inflation dynamics has been studied for a long time, yet remains as relevant today as ever. the year i joined the bank of japan, 1958, was the year when the seminal paper by professor alban w. phillips was published. half a century on, the basic idea behind the phillips curve has been considerably extended, and many related theories have evolved in connection with the role of expectations, the mechanisms that bring about price rigidity, and so forth. for monetary policy to achieve its objective of price stability, it is extremely important to accurately understand the dynamics of inflation. these dynamics, however, may change along with changes in the economic structure, and it is often difficult to detect such changes in a timely manner. this often becomes a source of anxiety to central bankers conducting monetary policy in the real world. in recent years, especially, the biggest challenge facing central bankers may be the conduct of monetary policy in the face of the flattening of the phillips curve and increase in uncertainty with regard to inflation dynamics. with a flatter phillips curve and given a situation where the inflation rate is within the desirable range, small economic fluctuations will not cause the inflation rate to shift outside the range. on the other hand, a flatter phillips curve means that, once inflation shifts outside the range, bringing it back is that much harder, since the output gap or the change in the output gap necessary to raise or lower the inflation rate becomes correspondingly larger. for example, in the united states, governor mishkin of the federal reserve board, in his speech delivered in april, stated that " returning inflation too quickly to levels consistent with price stability might unnecessarily exacerbate the economic weakness | 1 |
it into demesne control, instead of receiving a fixed nominal rent, the lord of the manor could take receipt of the real output of the land, which could be consumed, traded, or sold for silver at the going spot price. the consequence was that the richer the baron, the more land he had to exploit, and the greater his potential profits. the effect was to create a massively wealthy elite of oligarchs, now breaking free both of the middling ranks of the gentry at one end, and of the hard - pressed king ( or public sector ) at the other. in all of this, the option of demesne management was infeasible for the king, likely because it would have involved destabilising relations with the administrative class of “ sheriffs ” and other royal officials upon whom the king ’ s political stability depended. 6 causes of the inflation forget royal infighting, wars or the whiff of revolution, it is inflation that really sets the pulses of central bankers racing. and for good reason because closer inspection suggests that inflation may have been a significant catalyst to magna carta. historians estimate that prices were rising sharply in the early 1200s. the prices of agricultural goods, including wheat and oxen, probably doubled in that period. 7 evidence suggests that prices of linen, wax, lead and even palfreys – the toyota prius of medieval horses – were also rising rapidly. wages were rising as well – and to a greater extent than could have just been the consequence of medieval real - wage resistance. king john was paying his knights almost three times as much as henry ii ( even though they weren ’ t as productive on the battlefield ). 8 the daily rate for foot - soldiers had doubled. and limited evidence suggests the wages of skilled labourers on the crown estates probably increased by a similar proportion. 9 with pay growth approaching 20 % a year, wages really were fizzing! 10 the underlying causes of this inflation are debated among historians, but the most convincing argument is that the inflation was a monetary one, albeit with a twist. not harvey, p. d. a., ( 1973 ), “ the english inflation of 1180 – 1220 ”, past and present, no. 61, pages 3 – 30. given the countless other abuses of authority that were going on at the time, one wonders why it was so problematic for the rents simply to be “ renegotiated ” periodically. in part, custom dictated | . central clearing also brings greater transparency – in the run up to the crisis and during the crisis itself, authorities had very poor visibility over the network of derivatives transactions. that made it much harder to identify risks and the connections between institutions. all speeches are available online at www. bankofengland. co. uk / speeches not all derivative contracts are suitable for central clearing. where clearing is not possible, the post crisis reforms include similar requirements to margin and report bilateral derivative contracts. but the additional mutualisation and central default management benefits of central clearing, justify in my view, the authorities efforts since the crisis to move derivatives that are suitable for clearing onto ccps. these efforts have been successful. reforms since the crisis have led to a very substantial increase in the use of clearing services for both exchange traded and over the counter derivatives. for example, a decade on from the crisis, the amount of collateral covering over - the - counter ( otc ) derivative counterparty exposures of global banks has risen by over $ 800 billion, and the coverage of exposures with collateral has risen from about one third to nearly two thirds. this has led to an increase in the amount of collateral available to absorb market moves. for example the total initial margin held by uk ccps against derivatives positions has more than doubled over the last five years with the average level throughout 2017 standing at approximately £145bn at end - 2017. and, crucially, the shift to central clearing has led to a major simplification of derivatives networks ( see figure 1 ). figure 1 : ‘ multilateral netting ’ at ccps reduces aggregate counterparty credit risk and simplifies the network of exposures centrally cleared trades executed on 20 february 2017 in sterling interest rate swaps referencing six - month libor ( top ) — and the counterfactual had they not been centrally cleared ( bottom ) ( a ) sources : dtcc derivatives repository ltd, unavista ltd and bank calculations. ( a ) each yellow node is a clearing member ( the central node in the top chart is the ccp ). an arrow pointing into / out of a clearing member from / to a counterparty denotes that, once all transactions between the clearing member and the counterparty on 20 february 2017 are netted with each other, the clearing member is receiving / paying a fixed rate from / to their counterparty. the thickness of the red arrows is proportional to the size of the net transactions ( in terms of notional amount ) between the | 0 |
challenges ahead. advancing cmu should be a critical political project for the new european commission. it should go hand in hand with strengthening the resilience of the non - bank financial sector as it consolidates its importance in financing the eu's real economy. at the same time, europe remains primarily bank - based. and completing the banking union remains a priority. a single capital market needs to come in addition to, and not 3 / 4 bis - central bankers'speeches instead of, a complete banking union. setting up edis should be high on the agenda in the next eu legislative term. it is essential for depositor confidence and for ensuring a level playing field for banks. both the capital markets union and the banking union should be viewed within the broader context of the european project. enrico letta's recent report2 rightly considers the single market as central to financing strategic goals, competitiveness and the future of the eu. removing existing barriers within the market for goods and services and advancing in the three strategic sectors that were previously excluded from the single market – namely financial services, energy, and telecommunications – will allow us to benefit from the full scale of the market. the single market for goods and services is essential to attract investment, make our economic and monetary union more resilient and support the eu's role as global player on the international stage. at the same time, state aid procedures must guarantee a level playing field and be compatible with the single market. lastly, a permanent eu central fiscal capacity remains essential to the european project. it would enable us to tackle geopolitical and economic challenges more effectively. and by supporting investment in strategically important areas, generating economies of scale and raising productivity across the bloc, it would help to improve the welfare of european citizens while further enhancing financial integration in the eu. 1 ecb ( 2024 ), statement by the ecb governing council on advancing the capital markets union, 7 march. 2 letta, e. ( 2024 ), " much more than a market : speed, security, solidarity – empowering the single market to deliver a sustainable future and prosperity for all eu citizens ", institut jacques delors, france, 27 april. 4 / 4 bis - central bankers'speeches | ric battellino : some comments on bank funding remarks by mr ric battellino, deputy governor of the reserve bank of australia, to the 22nd australasian finance & banking conference, sydney, 16 december 2009. * * * i would like to thank michael davies, anna brown and tegan hanrick, who undertook the research for this talk. one of the widely drawn lessons from the financial crisis is that banks should source more of their funding from deposits and less from short - term debt markets. i want to spend some time today talking about this, focusing in particular on : • how significant are the benefits of such a shift? • how feasible is it for banks to shift their funding sources? • what is the impact on banks ’ cost of funds? and • what are the implications for the level of interest rates? bank funding banks in australia have reasonably diverse funding bases : deposits account for 43 per cent of funding, split fairly evenly between households and businesses ; domestic capital markets provide a further 19 per cent of funding ; and foreign capital markets 28 per cent. securitisation and equity account for 3 per cent and 7 per cent of funding respectively ( graph 1 ). graph 1 since mid 2007, the share of banks ’ funding that has come from deposits has risen by 5 percentage points, with increases in both household and business deposits. banks have used these funds to replace some of their short - term capital market debt. the increased use of deposit funding has been evident in both the major banks and in the regional banks. the foreign - owned banks, in contrast, have experienced a fall in the proportion of funding coming from domestic deposits ( graph 2 ). graph 2 how stable are bank deposits? assessing the relative stability of banks ’ various funding sources is not straightforward, as there can be significant variation even within each category of funding. for example, government - guaranteed deposits are “ stickier ” than non - guaranteed deposits, household deposits tend to be stickier than corporate and institutional deposits, while internet deposits are less stable than other at - call deposits. deposits from corporates and other financial institutions are unlikely to be much more stable than short - term debt, particularly in a crisis. offshore capital market funding can be less stable than domestic capital market funding, as during crises investors often have a strong home bias. the behavioural maturity of a given funding source can also be very different from the contractual maturity, especially during financial crises. it is the behavioural maturity that matters most, and during | 0 |
describe a concept that enables the operation of a distributed, synchronised database. such a database allows participants to exchange digital assets without involving a centralised third party. page 4 / 6 such new technology is highly relevant for central banks, especially in the context of the ongoing debate about central bank money potentially being issued via a distributed ledger. this idea raises a host of central bank - specific questions that will need to be examined in more detail. the snb is following and analysing developments in this arena closely and is actively involved in discussions with market participants, regulators and other central banks. recent developments in the sic system amid all these longer - term visions, we should be careful not to overlook changes that are just around the corner – or indeed, have already been introduced. so let me return to the present and talk about developments in cashless payment transactions that are already having a tangible effect on central banks around the world. for obvious reasons, my remarks will be based on the situation in switzerland. as i have already mentioned, one of the snb ’ s statutory mandates is to facilitate and secure the operation of cashless payment systems. one of the key ways in which we perform this duty is through our strategic guidance of the sic payment system. this includes approving technical changes to the system and the rules of conduct for system participants, fixing operating hours and rates, and deciding who is granted access to the sic system. at the same time, the sic system is operated not by us, but by six interbank clearing ; system participants are involved in the decision - making process and therefore play a direct part. this configuration makes sic a market solution. another feature is that the sic system is used to settle not only interbank payments, but also a large proportion of retail payments. 8 by virtue of its role in sic, the snb has a substantial influence on retail payments in swiss francs and is, in turn, also impacted by dynamic forces at work in this area. the sic system takes account of such forces and sets the stage for cashless payment innovations, which ultimately benefit customers. this is reflected in the launch of the fourth generation of the sic system in april this year. sic now supports iso 20022, the emerging standard in payment messaging. 9 thanks to the it architecture of the new sic system, innovative services can now be maintained and developed more flexibly and cost - effectively than in the past. furthermore, sic ’ s operating hours are due to be changed next year ; | seems to have been turned on its head : decentralisation – not centralisation – now appears to promise the greatest efficiency gains. i do not, however, believe that decentralisation will become the ‘ new normal ’ in all financial market functions and infrastructures. many existing financial market infrastructures are already highly competitive, and barriers to entry for new technology are correspondingly high. the conventional, centralised model they are built on is already low - cost and meets high safety standards. and improvements are being made all the time. distributed ledger technology, meanwhile, has yet to prove it can outperform the existing set - up with respect to safety and efficiency. having said this, there may be some scope for deploying distributed ledgers in certain complex financial market functions or infrastructures. the settlement and safekeeping of securities is one example. in the end, we may well see conventional and new technologies coexisting or blending. staying with the securities example : it is conceivable that we will see a hybrid scenario. this could entail security - specific information being settled via a distributed ledger, while the payment leg could continue to be effected via a traditional, centralised payment system. cf. diana chan, florence fontan, simonetta rosati and daniela russo, ‘ the securities custody industry ’, european central bank, occasional paper series, no. 68, august 2007. in 1949, the banks started bundling interbank transactions in various clearing houses categorised according to bank type. thirty years later, in 1979, the data processing systems of these clearing houses were also centralised. this laid the groundwork for the current sic system, launched in 1987, which has led to the centralisation and standardisation of all swiss interbank payment transactions via snb sight deposit accounts. cf. fritz klein and guido palazzo, ‘ kulturgeschichte des geldflusses. die entwicklung des zahlungsverkehrs mit fokus schweiz ’, 2003, verlag skv. the g20 countries committed to the principle of settling otc derivatives via central counterparties at the toronto summit in 2010 before passing national legislation on the matter ( art. 97 of the financial market infrastructure act [ fmia ] in switzerland, the european market infrastructure regulation [ emir ] in the european union, and the dodd - frank act in the us ). the terms ‘ distributed ledger ’ and ‘ blockchain ’ | 1 |
urban backstrom : the swedish economy speech by mr urban backstrom, governor of the sveriges riksbank and chairman of the board of directors and president of the bank for international settlements, to the swedish shareholders ’ association, orebro, 30 october 2001 * * * first a word of thanks for the invitation to come to orebro and discuss matters to do with the swedish economy with you. it is now a fortnight since the riksbank presented this year ’ s third inflation report. some more statistics have been published in the meanwhile but the information they contain does not point to anything particularly new. so today one can hardly arrive at an assessment of economic developments in sweden one to two years ahead that differs all that much from the picture outlined in the report. those of you who want to know more about our assessment should consult the riksbank ’ s website, www. riksbank. se. the whole report can be downloaded, as can all the figures on which the tables and charts are based. diagram 1 : the ” new economy ” concept in swedish media. ( number of hits ) 2001 jan. oct. sources : mediearkivet and presstext. there are, however, a couple of questions concerning the swedish economy and the outlook in the somewhat longer term that i should like to dwell on here today. diagram 2 : ” the it - bubble ” affarsvarlden : it - index index nasdaq : nasdaq : composite dow jones : industrials usa dow jones industrial average, close daily [ index 1996 - 01 - 02 ] sources : hanson & partners ab. usa nasdaq composite index, close daily [ index 1996 - 01 - 02 ] one is what has happened to the discussion about the “ new economy ”. swedish media are mentioning the subject less and less ( diagram 1 ). i believe that mirrors how people ’ s interest in general has waned. and considering how rapidly and extensively prices have fallen for it and telecom shares, one is inclined to the view that all the talk about the third industrial revolution was really something of a dead end ( diagram 2 ). that leads on to my other question, namely the part that technological breakthroughs play for corporate profits and thereby for the return on equity. where did the “ new economy ” go? concerning my first question, perhaps it is not so surprising that we now hear less and less about the “ new economy ” than we did last year. share prices for it and telecom | will be right, i envisage two possible ways forward for the major swedish banks, both of which represent extremes. the first strategy would be based on the banks ’ proven proficiency in terms of organisation and distribution, and to refine this strength and also become better at peripheral advisory services. fewer resources would be invested in product development and risk - taking – products can easily be copied and risks sold on to other, hungrier investors. the second strategy would instead be to rediscover what you could call “ classic ” banking, in other words healthy risk - taking underpinned by better knowledge about certain risks and conditions than the market in general. as long as higher loan losses and larger earnings fluctuations are kept at a bearable level and are compensated for by higher margins, then risk - taking in itself is not bad business. however, as a central bank governor i do not want to inspire the banks to take on higher risk but instead would encourage them to make use of the opportunities in today ’ s financial markets to repackage and spread risk, but like i said that is a different perspective. 4 / 4 | 0.5 |
with core inflation over the past 12 months dipping to 1. 6 percent. now, most people don ’ t seem that bothered by inflation that is a touch too low, but at the federal reserve we have set a long - run inflation goal of 2 percent. when inflation runs persistently above or below that goal, we take that very seriously. so far, the recent downward movement appears mostly to reflect normal volatility in inflation statistics. for example, if you look at my preferred measure of underlying inflation, called trimmed - mean inflation — which removes the most volatile price movements — it ’ s been running at 2 percent. this measure of inflation hasn ’ t shown any signs of trending up or down. that said, i will be watching developments closely for signs of a persistent shift away from our 2 percent long - run goal. as i mentioned, the economy started the year with a lot of momentum. but there are reasons to believe that the surge in growth won ’ t persist through the remainder of the year. taking into account of all the indicators we follow, i anticipate a step - down of economic growth, from the 3 percent growth recorded last year to a still - solid pace of about 2 - 1 / 4 percent in 2019. 1 / 2 bis central bankers'speeches this is good news. it ’ s above the economy ’ s underlying potential, but not unsustainably so. healthy economic growth should in turn fuel solid job gains, higher wages for workers, and some further declines in unemployment. the strong economy and labor market should also support inflation returning to 2 percent, the federal reserve ’ s long - run goal. the global picture in addition to the positive data we ’ ve been getting for the u. s., we ’ ve also seen encouraging signs that risks from global economic and financial markets are abating. last year there were worries that the global growth slowdown centered in china and europe would spill over onto our shores. this was one factor contributing to a more downbeat assessment of u. s. growth and the stock market sell - off. since then, we ’ ve seen more positive readings on china ’ s economy, in part due to steps the authorities have taken to reignite growth. and financial markets have definitely rebounded from their winter doldrums. still, we ’ re not entirely out of the woods regarding risks from a global growth slowdown. signs of weakness in japan, south korea, and some regions of europe continue, | advantages and risks hedge funds as a group can convey – once again being aware that this is an extremely heterogeneous group. in my opinion, hedge funds fulfil several useful functions in the financial markets. they contribute to spreading market risk and credit risk to more agents. further, since they can act swiftly and in a flexible manner, they can often help improve the pricing for different products. for example, hedge funds that specialise in identifying mispriced assets contribute to prices that better reflect the underlying risk. when the prices are more correct, resources may also be distributed more efficiently and the risks may be better managed. in new and complex markets hedge funds are often important agents with the opportunity and will to take on risk. this, in turn, improves liquidity in these markets. according to the barclay hedge database. see also the ecb financial stability review 2007 : 2. but there is often little insight but the flexibility hedge funds have also entails risk. problems that arise in a hedge fund can spread to the fund ’ s counterparties ; in the first instance the major banks. what is often highlighted in this context is the hedge funds ’ high leverage. high leverage of course increases the risks, and the effects of a fund failing. hedge funds are often accused of showing herd behaviour, that is, of imitating one another's behaviour and taking similar positions. but i find it difficult to believe that hedge funds to a greater extent than other investors just follow the prevailing trend. the fact that the required rate of return is absolute rather than relative in most hedge funds should actually indicate the opposite. another source of concern is that there is little public insight into hedge funds ’ activities. to take one example, in the united states hedge funds do not need to publicly report their activities or even register them. this means that major risks can arise without either counterparties or authorities being aware of this. two well - publicised cases in this context are the ltcm and amaranth hedge funds. both of the funds collapsed and the lack of insight appears to have contributed to the problems. ltcm was permitted a very high degree of leverage by its counterparties, which is remarkable and reflects the fact that there was no overview of the fund ’ s size and total risk. in the same way, no one observed in time the risks on the energy market that were being built up in the amaranth hedge fund. the funds ’ high leverage and lack of transparency has contributed to a | 0 |
rising energy prices, but also to weak productivity growth and to the previous year ’ s weaker exchange rate having a delayed impact. however, data published two weeks ago show that both the cpi and the cpif fell in january. during 2010 cpif inflation is expected to fall, primarily as a result of companies ’ costs falling and the krona strengthening, which is expected to make imports cheaper. the rate of increase in the cpif will rise from 2012 and onwards as economic activity improves and companies ’ costs begin to rise again. at the end of the forecast period, we expect inflation measured in terms of the cpif to be close to 2 per cent. however, cpi inflation is expected to continue to rise. this is mainly because households ’ interest expenditure will stop falling and then rise as the repo rate is raised. figure 9 inflation measured as the cpi and the cpif annual percentage change source : statistics sweden from crisis interest rate to monetary policy in an economic downturn the executive board of the riksbank decided at the latest monetary policy meeting to hold the repo rate unchanged at 0. 25 per cent to attain the inflation target of 2 per cent and to give sufficient support to the economic recovery. we are expecting to begin raising the repo rate again in the summer or in early autumn 2010 ( figure 10 ). this is slightly earlier than in our last forecast, which is because of the two components i mentioned. the financial markets have become increasingly stable and statistics on economic activity – such as slightly higher growth abroad, stronger employment and higher inflation – have gradually confirmed the picture of the recovery being on firmer ground. figure 10 from crisis interest rate to monetary policy in a recession per cent source : the riksbank at the same time, we are now assuming that the increases in the repo rate can be made more gradually. this means that the forecast for the repo rate in the longer term is marginally lower than before, just under 4 per cent at the beginning of 2013. but, of course, forecasts so far ahead are very uncertain. even in the slightly shorter term, there are difficult considerations that must be made and risks connected to our interest rate decisions. as we often point out, the repo rate path is a forecast and hence by definition uncertain ; it is not a promise. how we will conduct our monetary policy in practice in the future will depend on how economic developments in sweden and abroad affect the prospects for inflation and economic activity. there is a risk that | european central bank : press conference – introductory statement introductory statement by mr jean - claude trichet, president of the european central bank and mr lucas papademos, vice - president of the european central bank, frankfurt am main, 7 may 2009. * * * ladies and gentlemen, the vice - president and i are very pleased to welcome you to today ’ s press conference. we will now report on the outcome of today ’ s meeting of the governing council, which was also attended by commissioner almunia. on the basis of its regular economic and monetary analyses, the governing council decided to reduce the interest rate on the main refinancing operations of the eurosystem by a further 25 basis points and the rate on the marginal lending facility by 50 basis points, to 1. 00 % and 1. 75 % respectively. the interest rate on the deposit facility will remain unchanged at 0. 25 %. this decision brings the total reduction in the interest rate on the main refinancing operations of the eurosystem since 8 october 2008 to 325 basis points. current key ecb interest rates are appropriate taking into account all available information and analysis. in addition to the reductions in interest rates, the governing council decided today to proceed with its enhanced credit support approach. in continuity and consistency with the operations we have undertaken since october 2008, and in recognition of the central role played by the banking system in financing the euro area economy, we will conduct liquidity - providing longer - term refinancing operations with a maturity of 12 months. the operations will be conducted as fixed rate tender procedures with full allotment. the rate for the first of these operations, to be announced on 23 june 2009, will be the rate on the main refinancing operations at that time. subsequently, the fixed rate may include a premium to the rate on the main refinancing operations, depending on the circumstances at the time. the governing council has decided in principle that the eurosystem will purchase eurodenominated covered bonds issued in the euro area. the detailed modalities will be announced after the governing council meeting of 4 june 2009. furthermore, the governing council has decided that the european investment bank will become an eligible counterparty in the eurosystem ’ s monetary policy operations with effect from 8 july 2009 and under the same conditions as any other counterparty. these decisions have been taken to promote the ongoing decline in money market term rates, to encourage banks to maintain and expand their | 0 |
ardian fullani : overview of albania ’ s latest economic and financial developments speech by mr ardian fullani, governor of the bank of albania, on the monetary policy decision - making of the bank of albania ’ s supervisory council, tirana, 27 february 2013. * * * today, on 27 february 2013, the supervisory council of the bank of albania reviewed and approved the monthly monetary policy report. based on the latest monetary and economic developments in albania, and following discussions on their future outlook, the supervisory council of the bank of albania decided to keep the key interest rate unchanged, at 3. 75 %. the supervisory council deems that the monetary conditions are adequate to comply with the medium - term inflation target, providing the necessary monetary stimulus to boost domestic demand. let me now proceed with an overview of the economic developments and key issues discussed at today ’ s meeting. * * * annual inflation was 2. 7 % in january. higher food prices were the major contributor, about 75 %, to inflation formation. in this regard, unprocessed foods, which recorded double - digit growth rates, contributed the most to this formation. the prices of the other consumer basket items fluctuated narrowly, maintaining their low contribution to inflation. in the macroeconomic aspect, inflation was formed by the presence of spare production capacities, while supply - side shocks were absent. the slow growth of production costs and low profit margin for businesses were reflected in low core and headline inflation rates. in addition, the stable exchange rate, anchored inflation expectations and low monetary expansion contributed to maintaining price stability. the albanian economy is estimated to have grown below its potential in 2012. recent economic and monetary data confirm, overall, our earlier assessment for the presence of a negative output gap. on the demand side, economic growth was driven mainly by net exports growth, whereas domestic demand is estimated to have provided low contribution. data on trade in goods during the fourth quarter show that exports increased 12 % and imports fell 9. 5 %, year on year. subsequently, the nominal trade deficit narrowed 20. 1 %, in annual terms, boosting aggregate demand in this quarter. on its side, domestic demand remains weak, due to consumers and businesses hesitation to consume and invest. lending standards continue to be tight as banks are more prudent about lending. budget expenditure fell about 0. 3 %, year on year, owing mainly to contracting capital expenditure. collected revenue was also downward, eventually reducing the budget deficit by 1. 2 % compared | ardian fullani : opening, extension and modernisation of the primary and secondary treasury bill market address by mr ardian fullani, governor of the bank of albania, at a meeting with the minister of finance and representatives of all banks in albania, tirana, 8 april 2005. * * * honored ladies and gentlemen! first of all i have the pleasure to thank you for your willingness in finding the time to take part in this work meeting. i would also thank your technical staff for the devotion shown in dealing with this issue, which constitutes one of our priorities at the bank of albania. at the bank of albania conference on “ central banking in the time of integration ” i launched, interalia, the idea of the need for qualitative developments in the banking and financial system and this as closely connected with the need for further increasing the intermediation role of this system in the economy. it is understandable that the implementation of this idea would simultaneously require the giving of more possibilities to the banking system, so that this system carries out its role better and more actively. the topic we are discussing today is in this line. i am strongly convinced that the treatment of this issue did not appear as something unexpected, but it is a logical result of the positive developments taking place so far and the banking system awareness to be more active in its role for raising public confidence in the system. in the line of this logic, the raising of confidence would bring about its positive effects even on increasing their banking activity, which will be in compliance with their objective to be in the market with as much dignity as possible. in this discussion i will not focus on the technical aspect of cause explanation and process implementation, which i consider as exhausted by discussions made between respective technical staff, but i will focus on what we intend to reach and on the shortest and safest way to complete this process successfully. also, i would like to clarify that the individuals will continue to participate in the primary market of securities and this market will continue to be organized by the bank of albania. what we intend to reach through this process is : 1. the realization of a smooth transition process, at the smallest cost possible, in terms of maintaining the participation of individuals in the primary market. 2. the reduction of the time which is needed for the realization of treasury bill primary market auction. 3. the increasing possibilities to apply into practice the principle “ delivery versus payment ” for operations that will be performed in the secondary and retail treasury bill market. | 0.5 |
be whether the recent repricing of uk assets reflects a changed assessment by markets of the uk macroeconomic policy mix between fiscal and monetary policy [ 6 ]. the extent to which that can be determined will depend on whether markets settle at a new level, which itself will depend in part on getting a clearer picture on fiscal policy and the fiscal outlook. prospects for inflation what does all this add up to in terms of the overall impact on the economy and on inflation. an obvious starting point might be to look at the evolution of our forecasts over the last year in response to the four shocks i ’ ve highlighted and other developments. the picture you get is of successive upwards revisions to inflation and successive downwards revisions to growth, with the energy price shock the principal driver of both ( chart 7 ). by the time of the august 2022 mpr, the mpc was forecasting a recession starting in the current quarter and lasting throughout 2023, with a peak to trough fall of gdp of 2. 1 %. but because the fiscal and financial markets shocks post - date the most recent forecast it wouldn ’ t make sense to extrapolate this trend of forecast revisions forward as a starting point for our november forecasts. chart 7 : mpc ’ s inflation forecasts and mpc ’ s annual gdp growth forecasts sources : ons and bank calculations. in the august mpr we had already noted that that the risks around our projections from both external and domestic factors were exceptionally large, given the very large rise in wholesale gas prices and the consequent impacts on real incomes for households and on inflation. the mpc ’ s initial assessment of the energy price guarantee, first made at the time of the september mpc, is that it will significantly reduce the degree of uncertainty around the outlook for uk retail energy prices over the period of the guarantee and therefore also for cpi inflation. as a result the guarantee means that cpi inflation is expected to rise by less in the near term, peaking at a little under 11 % in october, lowering and bringing forward the expected peak in inflation, relative to the mpc ’ s august forecast. for the duration of the guarantee this should reduce the risk that a long period of externally generated inflation leads to more persistent domestic price and wage pressures, although the mpc agreed that risk remained material. at the september mpc we also noted further signs of continuing strength of domestically generated inflation, that the labour market remains tight and domestic costs and price pressures including from businesses are | ##ation tranches is challenging. one solution is to use credit ratings but the shortcomings of that approach were exposed during the crisis. another is to use a regulatory formula capturing dimensions of risk such as the credit quality of the underlying pool, tranche seniority and maturity. in our view, including a differentiation based on stc in that capital calculation helps to capture other important dimensions of risk related to structure, transparency and governance. because one of our objectives is to broaden the investor base, it is important that the stc designation makes things simpler for investors, particularly non - banks. for example, they should be able to place greater reliance on it when conducting their own due diligence on matters covered by the stc criteria, such as risk retention. investors would thus be in a position to concentrate with more confidence on other, existing due diligence requirements, such as in relation to the creditworthiness of the underlying assets and cash flows characteristics. the implementation process for the stc designation is therefore important. in our view, the primary obligation should be on the originator to attest compliance with the criteria. but this needs to be in the context of a regulatory regime with effective supervisory oversight and sanctions. we must also be careful not to label all non - stc transactions as “ bad ”. there should be a continuing place in the market for many transactions that do not qualify for the stc designation, including synthetic transactions, managed portfolios and pools that do not meet the granularity requirements. turning to capital requirements, looking at historical losses on securitisation tranches, we think the calibration of bank capital requirements that the basel committee published in december is broadly right. but there is a case for some lowering of capital requirements for stc transactions on the grounds of lower structure risk. a stronger argument can be made that solvency 2 standardised capital requirements for eu insurers are still too high, especially at longer maturities – although it should be noted that these will not apply to insurers using internal models. for banks and insurers, part of the issue with securitisation capital requirements is the comparison with covered bonds, which tend to be treated favourably in eu regulation. issuers looking to raise secured funding may therefore see covered bonds as a more cost effective alternative to securitisation. covered bonds have a legitimate role in the market as a source of stable long - term funding. but securitisation has the | 0.5 |
: did the economics profession recruit and promote the individuals best able to bring the energy, the fresh insights, and the renewal that every field and every body of knowledge needs to remain healthy? when this question is asked again someday, when economics is tested by future challenges, i hope that our profession will be able to say that we have done all we could to attract the best people and the best ideas. that, i believe, is the very worthy goal of this conference, and i look forward to seeing it advanced by today ’ s discussions and by the continuing commitment demonstrated by the aea to diversity. thank you to those who organized the conference and to the distinguished members of our profession who have come here today to take part in it. bis central bankers ’ speeches | providing both financial means and technological transfer. today privatisation is almost complete and one has to look for new engines pushing forward the catching - up process. currently, i see three main risks that have to be addressed as priorities by policy - makers : ( i ) ( ii ) ( iii ) increased financial vulnerabilities, in relation with fast credit growth and mounting external imbalances ; rising inflation pressures which hurt external competitiveness ; and the challenge of ensuring high future potential growth.. this third challenge belongs to the long - run as future economic developments will need to feed productivity growth beyond the dynamics of catching - up, through technological and production process innovation. it is however a present concern to the extent that recent signs of increasing labour market shortages and decreasing fdi inflows question the capacity to maintain gdp growth at the high levels recorded in the past. addressing these risks and challenges will require the conduct of prudent macroeconomic policies insuring short - term stabilisation, with fiscal authorities avoiding pro - cyclical loosening and generous spending policies, and monetary authorities preserving price stability and guaranteeing financial stability. however, macroeconomic policies alone are not sufficient to improve the long - term growth potential : they are aimed at fostering a stable and transparent business environment, but have to be supplemented by the implementation of structural policies designed to enhance labour market participation, labour mobility, competition in goods market, investment in education, r & d and infrastructure. it appears very clearly that the challenge of a stable and sustainable path for the catching - up process is closely interlinked with the challenge of a successful integration in the euro area. for that purpose, it is in the interest of the new member states themselves to be patient while accelerating structural reforms in order to meet both these challenges. euro area accession will come in due course as the well deserved reward for the efforts of each country in creating the conditions of its own long - term economic prosperity. i look forward to such accessions. | 0 |
mr. mcdonough describes the role of the frbny in the events leading up to private - sector recapitalization of long - term capital management testimony by the president of the federal reserve bank of new york, mr. william j. mcdonough, before the committee on banking and financial services of the us house of representatives on 1 / 10 / 98. good morning mr. chairman and members of the committee. i am pleased to appear before you today to describe the federal reserve bank of new york ’ s role in the events leading up to the recent private - sector recapitalization of long - term capital management and its fund, long - term capital portfolio. i will cover four points. first, i will provide some background on long - term capital ’ s financial problems. second, i will explain our judgment that an abrupt and disorderly close - out of long - term capital ’ s positions would have posed unacceptable risks to the american economy. third, i will explain the limited role we played in facilitating the privatesector resolution to this private - sector problem. fourth, i will identify some of the issues that should concern us as we begin to understand the lessons of this experience. background long - term capital is an investment partnership that was started in 1994. it has many of the characteristics of a “ hedge fund ” in that it borrows money to leverage its capital and is only available to wealthy investors. the strategy of long - term capital was to use complex mathematical formulas to identify temporary price discrepancies between different interest rates. for example, the firm might notice that the yield on corporate bonds relative to treasury yields was higher than the range observed in recent years. if long - term capital believed the former relationship would reassert itself, it would buy corporate bonds and sell short treasury bonds. if the spread narrowed as expected, the firm would profit. if, however, the spread continued to widen, the firm would incur losses. this basic strategy and many complex variations was followed across many interest rate products in the us and many overseas markets as well. the firm was active both in traditional securities markets, and perhaps more importantly, in derivative product markets such as futures, swaps, and options. anticipating that some positions would move in their favor and some would move against them, the firm relied on diversification across a large number of product and geographic markets. long - term capital proved quite successful at this strategy, generating returns in excess of 40 percent in 1995 | area is adopting a collaborative approach to implementing vbi which will be key to mobilising change. for vbi to work, the desired collaboration has to bring in not just our market players, but also other non - financial stakeholders, to pool critical skills and infrastructure that reside beyond our terrain. by expanding our network, we will be better able to deliver far greater values that otherwise could not be achieved if we were to depend on limited capabilities within the financial industry alone. with stronger collaboration, i believe there will be much more that each individual can learn from one another. in this context, the community of practitioners comprising committed islamic banks, will be instrumental in pioneering advancements in vbi. the community of practitioners will serve as the nucleus for other collaborative efforts. networks to be formed will comprise a diverse group, from ventures and corporates to knowledge and advocacy institutions. through the exchange of knowledge and experiences, as well as coordinated actions to address implementation issues, the community of practitioners can help accelerate the execution and amplify the benefits of vbi. i would also like to thank the panel members that will take part in the panel discussion today, which also includes representatives from the community of practitioners. we can certainly gain greater insights from the panel members who will elaborate further on the vbi approach and provide interesting perspectives on its implementation. in conclusion, while the malaysian islamic financial sector has made great strides since its inception over 30 years ago, the next growth frontier in islamic finance is in realising its potential to create greater socio - economic impact. instilling values in the financial sector strengthens trust of the people which benefits the public at large. the vbi initiative is envisaged to shape proactive behaviour amongst industry players. for the islamic finance industry, the move towards embracing vbi is another hallmark in our journey to manifest the larger aspiration of islamic finance. islamic banks, with its natural affinity towards social justice are well - positioned to lead this agenda and become the prominent and leading agent of positive change. however, the momentum of vbi is only sustainable through collective endeavours that prompt a shift in our paradigm and change in our actions. it is only with our strong commitment that we can translate the vbi vision into reality. 3 / 4 bis central bankers'speeches 4 / 4 bis central bankers'speeches | 0 |
we have had more than our fair share of luck in achieving this outcome. there may well be some truth in that. but i'm not sure that we should be too surprised. market and survey evidence shows that people are now clear that the mpc will do what it takes to keep inflation on track. and that expectation is factored into their own behaviour, whether it is negotiating wages, setting prices, or deciding how much to borrow and consume. all of that goes a long way towards ensuring that inflation is well anchored to the target. of course, from month to month, inflation will still vary somewhat around 2½ %. in recent months, rpix has been a little below target, and there has even been some interest in whether it might reach 1. 5 %, the point at which the governor would have to write a formal letter to the chancellor explaining what was going on. the pick up of inflation to 2. 6 % in january has silenced this discussion, at least for the time being. we pore over the reasons for such developments in enormous detail at the bank. but in the bigger scheme of things these month - to - month movements are quite small, and are i hope likely to play very little - if any - role in the key decisions of your businesses, or those you represent. people often ask if our relative success at targeting inflation has come at a cost in terms of lost output or employment. it is increasingly accepted, i think, that there is no such trade - off in the long run. and, looking at recent data, it is hard to see a trade - off even in the short run. unemployment remains close to its lowest level for a quarter of a century - a trend seen in northern ireland just as much as in the uk as a whole. and uk gdp has now risen for 38 consecutive quarters ( albeit in the case of 2001 q4, only just! ), the longest continuous expansion since post - war records began. achieving low and stable inflation is the best contribution that monetary policy can make to the wider economic goals of sustainable growth and employment. having an inflation target certainly does not mean that we ignore real activity. we have discretion over how rapidly we try to bring inflation back to target when and if it diverges from 2½ %. and we regularly publish our best estimate about the likely future path of growth up to a two year horizon. but the aim of policy is clear - we do what is necessary to keep inflation on | policy – be taken into account in setting monetary policy, which is the primary and most effective tool of demand management. taken together with the synergies from sharing information and analysis, these are strong arguments for operating monetary policy and prudential policy in the same institution. in the short time the bank has been responsible for both, we have already seen the benefits of operating them in a coordinated way. for example, our forward guidance framework for monetary policy reflects a clear division of responsibilities. although monetary policy has an important role to play in mitigating financial stability risks, it does so only as a last line of defence. this is important because vulnerabilities can emerge from a long period of unusually low interest rates, as complacency sets in about the future path of policy and asset prices. there have been signs of such behaviour across the housing markets in advanced economies. in anticipation of similar risks arising in the uk the bank ’ s mpc and fpc have met jointly to review them. the fpc has identified a graduated range of macroprudential tools available to it for a coherent, proportionate response to these risks, and has taken initial, prudent steps. as the housing market evolves and macroprudential policy responds the fpc and mpc will continue to work together to understand the collective impact of measures on residual vulnerabilities and macroeconomic outcomes. that co - ordination, the shared monitoring of risks, and clarity over the fpc ’ s tools allows monetary policy to keep bank rate as low as necessary for as long as appropriate in order to support the recovery and maintain price stability. for example expectations of the future path of interest rates – and hence longer - term borrowing costs – have not risen as the housing market has begun to recover quickly. macroprudential and microprudential policy there is also a natural complementarity between macro and microprudential policy because, in essence, macroprudential policy uses prudential policy tools for macroeconomic ends, specifically the mitigation of risks that could in time undermine price and financial stability. 12 so the two will often operate through the same channels – albeit towards different objectives. see adrian and shin ( 2010 ), jimenez et al. ( forthcoming ). for example, the basel iii framework for capital regulation combines microprudential and macroprudential elements. tougher minimum requirements and institution - specific add - ons will be the responsibility of microprude | 0.5 |
execution including e - trading and platforms, prime brokerage, governance, risk management and compliance, and confirmation and settlement. the code is principles - based rather than rules - based. there are a number of reasons why this is so but, for me, an important reason is that the more prescriptive the code, the easier it is to get around. rules are easier to arbitrage than principles. the more prescriptive and the more precise the code, the less people will think about what they are doing. if it ’ s principles - based and less prescriptive then market participants will have to think about whether their actions are consistent with the principles of the code. the code is not a procedures manual. rather, the code articulates principles that need to be taken into account. individual firms may then take these principles and reflect them in their own procedures manuals. our aim in setting out these principles is to provide market participants with the framework in which to think about how they, for example, handle their orders. the emphasis here is very much on the word ‘ think ’. 1 / 4 bis central bankers'speeches these principles of good practice have helped to restore confidence and promote the effective functioning of the wholesale fx market. in my view, the fx market is in a better place than it was a few years ago. that is confirmed by surveys of market participants too, including the one conducted by the gfxc a couple of years ago. the code has also been adopted by a number of securities regulators round the world as the primary reference for their oversight of the fx market, including in the uk, in china and in my own market australia. when we launched the code, it was agreed that the code would be reviewed by the gfxc every three years to ensure it remained appropriate and to also ensure it stayed current with the ongoing evolution of the fx market. hence, around two years ago, the gfxc surveyed market participants to assess what areas of the code needed to be reviewed. 2 the primary response of market participants was that the code remained fit for purpose and changes should only be made as necessary. the strong guidance was that changes to the code should be contained to a few areas. the gfxc identified a few key areas requiring review to ensure that the code continues to provide appropriate guidance and contributes to an effectively functioning market, and remains in step with the evolution of the market. 3 over the past 18 months, various working | first half of this year. on the production side there has been mixed results. gold production has been declining significantly over last year. this year again there are no expectations of a significant pick up in gold output and this is quite unfortunate as this means we are unable to capitalize on the existing high world market price. cane and sugar production are expected to improve this year after declining last year due to the two major floods. data from the fiji sugar corporation reveals that cane crushed so far this year is around 10 percent higher than last year and more sugar has been produced with a further improvement in the tcts ratio. it is especially heartening to see the improvements of the sugar reforms now slowly coming to fruition and there is still more work being done in this critical industry of ours. the tourism industry continues to be robust despite some declines in visitor arrivals last year and the early part of this year due to natural disasters. gross earnings for 2012 were $ 1. 3 billion and this momentum is expected to continue over the medium term. right now we are in the peak tourism season and data on room occupancy and visitors from our major markets, such as australia and new zealand, are favourable. ladies and gentlemen, the reserve bank of fiji has maintained an accommodative monetary policy stance since november 2011 and the banking system is awash with liquidity, which has put consistent downward pressure on market interest rates. lending rates in the financial system are now hovering at historically low levels while capital and money market rates also continue to trend downwards. against this background, domestic credit has continued to gain momentum with private sector credit growth expanding by 9. 6 percent in june, further signaling the improved confidence in the economy. our challenges whilst we may applaud ourselves for the progress we have made in raising our growth prospects and revitalising some of our sectors on the backdrop of a weak global economy and other domestic challenges – many other hurdles face us and could restrict us from forging ahead on a path to sustainable growth. we totally agree with the imf comment that we can do more. while it is encouraging that investment has picked up and is poised to even surpass the government ’ s target of 25 percent this year, maintaining it at such levels remains an important challenge moving ahead. this requires that we continue with the current monetary and fiscal incentives and at the same time improve our ease of doing business. sentiments from the business community suggest that there are still a number of hurdles in registering and conducting business | 0 |
an inefficient medium - term outcome characterised by higher inflation and lower growth. two main factors support this view. first, economic developments are surrounded by a great deal of uncertainty. this uncertainty affects the analysis of both the current state of the economy and its future course. and second, monetary policy operates with relatively long lags, having very little effect on the economy in the short run. past experience has shown that attempts to fine - tune the economy might place in jeopardy the commitment to maintain price stability in the medium term, as is essential for a wellfunctioning economy. once inflation exists and inflation expectations prevail in the economy, the economic costs of the subsequent necessary stabilisation far exceed whichever temporary benefits might have been previously obtained. therefore, the ecb needs to remain focused on the maintenance of price stability in the medium term. the ecb pursues this objective in a consistent and forward - looking manner, ensuring the confidence of all policy - makers, both within and outside the euro area. experience so far suggests that the ecb has been able to keep inflationary expectations at a low level. although current hicp figures in the euro area are adversely affected by energy and food prices, the current outlook is compatible with the maintenance of price stability in the medium term. this view is supported by the analysis of bond yields. it is comforting to see that market participants expect medium - term price developments to remain in line with the ecb's definition of price stability. currently available forecasts give rise to the expectation that inflation will again fall below 2 % in 2002. hence, we appear to be on the right track. however, we must not ignore existing risks to price stability. the governing council of the ecb therefore always stresses that it is vigilant and will take into account all new information that might affect the outlook for price stability in the medium term. let me now conclude by recalling that, while the ecb cannot be held accountable for growth in the euro area, interest rates in the euro area have been relatively low, and cannot, by any means, be considered to be an obstacle to growth. currently, although uncertainty remains high, the general expectation is that growth in the euro area will remain at, or slightly above, trend potential growth in the period ahead. having said that, the ecb would welcome an increase of the already substantial contribution of the euro area to global economic growth. however, this should be achieved in a lasting way, | background, the ecb will definitely follow - up on your request for further analysis. i do not exclude that we will conclude that there is a real case for enhancing the present framework which relies essentially on the vigilance of the financial institutions that are themselves under supervision as regards their counterparty risks on the hedge funds. but i also note that any such enhancement should be agreed upon at the level of the international community and, in particular, on the basis of an appropriate transatlantic discussion. as regards payment and settlement issues, let me first thank the european parliament for the support expressed for the implementation by november 2007 of the target2 system. being an integrated large - value payment system, target2 will provide for efficiency gains and improved liquidity management by banks. in this regard, i should like to refer to an increased pressure to also have an integrated platform for the settlement of securities transactions in euro. the eurosystem is therefore currently examining, in co - ordination with the european commission and in close co - operation with the market, the feasibility of setting up a eurosystem infrastructure for the provision of securities settlement services in central bank money. a decision on whether to offer such a service, referred to as “ target2 - securities ”, is expected in early 2007. in the field of retail payments, we strongly support the efforts to establish a single euro payment area ( sepa ). we welcome the eu commission ’ s initiative for a directive on payment services and i warmly welcome european parliament ’ s contribution to a swift adoption of this directive to assist the banking industry in their implementation of sepa payment instruments as from 1 january 2008. i thank you very much for your attention. i am now available to answer your questions. | 0.5 |
ravi menon : money at a crossroads - public or private digital money? summary of panel remarks ( virtual ) by mr ravi menon, managing director of the monetary authority of singapore, at the imf seminar on money at a crossroads, 18 april 2022. * * * summary of remarks by ravi menon a crypto asset or token is about digitally representing anything we regard as having value, putting encryption around it on a distributed ledger, where the ownership of the asset can be ascertained and verified, and it can be transferred securely. in singapore and in mas, we are excited about the potential to build a crypto or tokenised economy. cryptocurrencies, about which there is so much excitement, is just one sliver of the crypto ecosystem or economy comprising a variety of tokenised assets. cryptocurrencies are crypto assets which perform a payments function and try to mimic money. private cryptocurrency is unlikely to perform the functions of money because its value is unstable and it is not backed by the central bank or the government. stablecoins are pegged to a fiat currency and therefore derives stability, but it is not clear that all stablecoins, which purport to have a backing, are indeed backed adequately. without such backing, it is hard to imagine how they will fulfil the function of money. stablecoins will become a more prominent feature as long as their backing is strong. they could potentially challenge the currencies of some smaller emerging market economies. if they are used widely, they could lead to currency substitution and the potential loss of money sovereignty in these countries. with respect to central bank digital currencies ( cbdcs ), mas makes a careful distinction between wholesale cbdcs and retail cbdcs. both are digital currencies issued by the central bank. for wholesale cbdcs, mas sees a variety of potential use cases. they can be used in the interbank system on a decentralised ledger to facilitate cross - border payments and transactions. mas has conducted successful experiments with the industry and other central banks on wholesale cbdcs. this is an interesting development to watch. most of the impactful use cases are going to be in wholesale cbdcs for, for example, cross - border payments, and cross - border trade finance. for retail cbdcs, mas is keeping an open mind. we want to make sure we have the technology, governance, and policy structures to | launch a retail cbdc, if necessary. but there does not seem to be a compelling case for it yet, given that todaya€™s digital payment system is already effective and efficient in transferring money. the regulatory approach that mas has taken towards crypto assets or tokens distinguishes the different types of such tokens. if a crypto token is being offered as a security with an expectation of a return, it is regulated under the securities and futures act. if a digital token is being offered as a payment instrument, it is regulated under the payment services act where the focus is on anti - money laundering and technology risk management, and increasingly, customer protection. mas looks at the underlying activity, and the nature and quality of the crypto asset, to determine the specific risk it poses. we right - size our regulations to focus on those risks. we hold digital payment token licensees to the same high anti - money laundering standards that we hold banks to. but we do not regulate them like banks because they do not conduct other activities that 1 / 2 bis central bankers'speeches banks do. payment service providers have a lighter regulatory regime overall compared to banks. this gives them more latitude and space to innovate, and yet for the risks that they pose, we hold them to the same high standard. 2 / 2 bis central bankers'speeches | 1 |
a significant responsibility for ensuring that the objectives of the regulation are achieved without compromising the level playing field in banking and the integrity of the internal market. it is important that the regulation is implemented in a coherent manner throughout the eu. i welcome the commission ’ s proposal for the regulation on the separation of certain trading activities from credit institutions. depending on how it is applied, this regulation could bring about needed structural changes in the largest and most systemically important european banks, as envisaged by our group. bis central bankers ’ speeches the proposed regulation would give the authorities powers to implement a structural reform that would prevent depositor protection from becoming an incentive for banks to engage in excessive risk - taking. together with the forthcoming eu framework for bank recovery and resolution, the proposed regulation would also reduce the pervasive too - big - to - fail and too - complex - to - fail problems in europe. the proposal could also curtail interconnectedness within the financial system and hence reduce the likelihood of contagion. if consistently implemented, it would improve market discipline and redirect the european banking sector towards better serving the real economy and sustainable growth. bis central bankers ’ speeches | ##prime panic ” in the european financial management 15 ( 1 ). andrew haldane ( 2014 ) “ halfway up the stairs ”, central banking journal. bis central bankers ’ speeches | 0.5 |
the debtor about credit, budgeting, and financial management ”. it serves three purposes. first, it examines the ways to solve current financial problems. second, by educating about the costs of misusing a credit, it improves financial management. third, it encourages the distressed people to access the formal financial system. as per the all india debt and investment survey, 2003, nearly a fourth of the households were indebted in 2002. the per cent of indebtedness households in rural areas increased sharply from 23 in 1991 to 27 in 2003 ; the corresponding figures for urban areas during the same period were 19 and 18, respectively. as per the nsso survey ( 2003 ), out of 89. 35 million farmer households, 43. 42 million ( 48. 6 % ) were reported to be indebted. farmer ’ s indebtedness was highest in andhra pradesh followed by tamil nadu and punjab. the average outstanding loan per farmer household was highest in punjab, followed by kerala, haryana, andhra pradesh and tamil nadu. the report on the situational assessment of farmers ( nss 59th round - 2003 ) estimated that 64. 4 % farmer households are indebted in kerala as against the national average of 48. 6 %. the major reasons for arrears in repayment reported include high cost of cultivation, fall in prices of agricultural produce and crop failures. opening of credit counselling centres such as these can certainly benefit the people. earlier, there were reports of farmers committing suicides in some parts of the country due to their financial liabilities. through the provision of timely and professional advice, common people can be helped to manage their debt, improve money management skills and gain access to the structured financial system. counselling can help solve current financial problems, create awareness about the costs of misusing a credit, can improve financial management and help develop realistic spending plans. debt counselling / credit counselling can be both preventive and curative. in case of preventive counselling, the centres could provide awareness regarding cost of credit, availability of backward and forward linkages, where warranted, etc. the clients could be encouraged to avail of credit on the basis of their repaying capacity. preventive counselling can be through the media, workshops and seminars. in the case of curative counselling, the clients may approach the counselling centres to work out individual debt management plans for resolving their unmanageable debt portfolio. here, the centres could work out | pandemic, they have recently become more pronounced due to factors such as japan's baby boomer generation - - i. e., those born in the late 1940s - - exiting the labor market. against this underlying trend of tightening labor market conditions, the significant rise in import prices after the start of the pandemic triggered a major change in the behavior and mindset based on the assumption that wages and prices will not increase easily. a survey the bank conducted around the start of the year as part of its review of monetary policy from a broad perspective revealed changes in firms'wage - and price - setting behavior. please take a look at chart 7. regarding their recent situation, more than 80 percent of firms reported that the difficulties in passing on higher costs to selling prices have eased, and around 90 percent reported that they have shifted their stance toward raising wages. prices of a wide range of goods and services have begun to rise moderately recently, in reflection of the increase in wages. against this background, the bank judges that the sustainable and stable achievement of the 2 percent price stability target is now within sight. achievement of the 2 percent target and economic stabilization so, with the achievement of the 2 percent target, what kind of changes can be expected in japan's economy? in an economy where the 2 percent target has been achieved, it becomes easier to stabilize the economy through monetary policy, and this in turn supports the economic activity of firms and households. monetary policy affects economic activity mainly through changes in real interest rates, that is, nominal interest rates minus the expected rates of inflation. when inflation expectations are 2 percent, it becomes possible to lower real short - term interest rates even into negative territory by reducing nominal short - term interest rates, facilitating the stimulation of demand. under deflation and low inflation, japan's economy faced the zero lower bound, a situation in which the bank was unable to sufficiently lower real interest rates by guiding the short - term policy interest rate. against this background, the bank deployed a wide variety of unconventional monetary policy measures. these included conducting large - scale jgb purchases to push down long - term interest rates and keeping the short - term policy interest rate slightly negative. by doing so, the bank further lowered real interest rates, including long - term rates, and thereby stimulated the economy. according to various quantitative analyses conducted in the review of monetary policy from a broad perspective, the unconventional monetary policy measures pushed up economic activity and prices to some extent. it should be | 0 |
considerable time. i have focused so far on the possibility of a deterioration in the bank's profits and impairment of its capital deriving from the difference between interest income on jgbs and interest payments on excess reserve balances of financial institutions'current accounts at the bank. however, attention also needs to be paid to the fact that a similar issue could arise ; for example, in case of a fall in the prices of etfs and j - reits – of which the bank's holdings have increased under qqe. it also is important to note that a decrease in the bank's payment to the government, by way of causing a decrease in government revenue, could be the trigger for the public to clearly acknowledge the costs of qqe, which had been hard to discern without such a decrease. in other words, it will be widely shared among the public that the bank, through its pursuit of qqe, is deeply involved in income distribution. although the deterioration in the bank's profits and impairment of its capital that i mentioned earlier may not directly hinder its business operations, the possibility cannot be denied that these could negatively affect the stability in the value of currency in some way. in addition, the bank has communicated its stance that it will implement the policy measures necessary to achieve price stability while giving consideration to its financial soundness. however, given the bank's accounting rules under which the capital adequacy ratio is maintained at around 10 percent, within the range of about two percentage points above or below that level, speculation in financial markets could be raised that the bank might, as economic and price conditions improve, place priority on maintaining financial soundness over price stability and maintain interest rates on excess reserve balances of financial institutions'current accounts at the bank at relatively low levels. 5. side effects of qqe with a negative interest rate qqe with a negative interest rate may have additional negative effects on financial institutions'profits, mainly through a narrowing of interest rate margins on loans and a reduction in yields on financial assets, and this potentially could undermine financial system stability. it also should be noted that financial institutions – to compensate for deterioration in their profits – could pass on costs to their depositors and borrowers by, for example, not only lowering deposit rates but also increasing lending rates and transaction fees. this conversely could lead to monetary tightening effects. in addition to such side effects, my concern is the possibility of impairing the sustainability and | services and factor markets. as a means of cross - checking, we have equipped ourselves with another perspective, which we refer to as the “ monetary analysis ” and that is grounded on the belief that medium to long - run price developments can be attributed to the growth rate of the stock of money. each of these “ pillars ” is, in turn, characterised by a rich and comprehensive analysis of a large amount of data. for example, within the “ economic analysis ” we monitor the developments in prices and unit costs, overall output, aggregate demand and its components, government finance accounts, capital and labour market conditions, exchange rates, financial markets, balance sheets of households and firms, etc. the ecb ’ s “ economic analysis ” has been significantly extended and enriched over time. this is largely thanks to the progress made in the production of euro area general economic and financial statistics and in the analytical processing of such information. as mentioned above, the inaugural publication of integrated financial and non - financial quarterly accounts for the euro area, hopefully in 2006, will be another milestone. the ecb and the national central banks use a variety of models for macroeconomic analysis and forecasting. the macroeconomic projections by eurosystem staff constitute an important input into the monetary policy decisions, because they are a way of organising a large amount of information and they help to create a consistent picture of possible future developments. however, the economic projections cannot encompass or even reflect all the complexities, conditioning factors, nuances and the multi - dimensional nature of a comprehensive assessment of the risks to price stability on which monetary policy decisions need to be based. while the information synthesised from various indicators serves as an important input into the decision - making process, the governing council of the ecb does not take decisions only on the basis of projections. the governing council ’ s “ judgement ” must eventually come into play in order to assess the likelihood of the alternative scenarios suggested by the economic analysis. this is particularly important when it is quite unclear how a certain situation will evolve, as is the case sometimes with sharp movements in asset prices. related to this, attempts to base monetary policy decisions solely on inflation forecasts would involve significant limitations. notably, they would entail an inefficient use of information, since every forecast, or any composite index of indicators, is based on one possible scenario and one combination of assumptions. in the end, monetary policy requires judgement on the part of the policy - maker to assess not only the pl | 0 |
, in particular, have benefited from the broad - based reforms and capacity building measures that had been undertaken following the asian financial crisis. notably, the consolidation of the banking sector, the strengthened board and senior management oversight functions within banks, and the more risk - sensitive capital and the stress - testing requirements have contributed towards reinforcing the core foundations for a more resilient banking system. banking institutions have also made significant advances in the adoption of improved risk management infrastructure and practices. today, the payoffs from these efforts are evident. the banking sector has maintained a steady growth momentum since the asian financial crisis, with profitability of the malaysian banking system growing by 36. 7 % to record rm17. 7 billion in 2007. the exposure of the malaysian banking sector to the sub - prime market has been minimal amounting to only 0. 3 % of the capital base of the banking sector. the malaysian banking institutions are thus now on a stronger foundation to venture into new businesses, undertake more complex risks and withstand shocks. their enhanced capabilities are backed by stronger balance sheets, with the risk - weighted capital ratio of the banking sector at 13. 2 % and net non - performing loans ratio of 3. 0 %. on the regulatory front, bank negara malaysia continues to direct significant effort and resources towards strengthening our surveillance capabilities to detect, monitor and to deal pre - emptively with emerging risks and vulnerabilities in the financial system. these efforts have also been reinforced by improvements in the surveillance tools and processes to enable pre - emptive action to be taken to avoid disruptions to the financial system. the supervisory processes have also been enhanced with more granular and holistic risk assessments of the financial institutions. in terms of the regulatory framework, the bank will be outlining the approach for the implementation of pillar 2 of the basel ii framework. the bank is providing further guidance in the areas of liquidity and operational risk management, the maintenance of internal capital targets, market disclosures, and the valuation processes and controls – particularly for illiquid instruments. the guidance will also be issued to address the implementation of the internal capital adequacy assessment process within the institutions to complement the minimum regulatory standards under pillar 1 and will also stipulate the minimum requirements for banks that are adopting the internal ratings - based approach. details of the proposed capital framework for securitization will also be released during the year. in addition, the liquidity guidelines will be revised to strengthen the requirements in the management | * markets can be defined by the instruments that are traded on them : oil, gold, foreign exchange, interest rates. but they are also defined by the people who use them. a marketplace brings together people who, by virtue of trading with each other, share common interests. it forms a community. and as for all communities, the protection of each of its members against potential abuse by others requires appropriate governance. this raises a particular issue for those markets that extend across national borders. it is that issue which forms the topic of my remarks. bis central bankers ’ speeches 1. the benefits of cross - border markets cross - border markets are a fact of contemporary life. there have of course been periods of high integration of global trade and finance in the past – the decades immediately preceding world war i were a particularly stark example. but markets have never been more integrated than they are today. trade integration is ever more facilitated by technological progress, making the transportation of goods easier and faster ; and by the fact that, in a digital age, a rising share of services in global output makes the distance on the ground between producers and consumers less of an obstacle to transactions. that is why global integration of trade 1 has risen sharply from 39 % of gdp in 2000 to 48 % in 2014. for the euro area, trade openness has increased from 58 % to 66 % of gdp over the same period. the same applies to finance, too – and perhaps all the more so. capital can be shipped across vast distances at virtually no cost. and there are good reasons why we should want in principle to facilitate cross - border investments. financial markets intermediate between the needs of savers and borrowers ; they open up a range of opportunities to both, thereby supporting innovation ; and they allow risks to be shared among those more willing or better equipped to bear them. all of this applies across borders as well as within borders. let me give you an example. countries, just like individuals, have different needs for capital at different stages of their demographic lifecycle. those with young demographics exhibit demand for capital from overseas, while countries with more mature populations have excess savings as they accumulate assets for retirement. in the case of europe, our demographics would justify a moderate current account surplus and capital account deficit. put differently, we benefit from open markets because we need to be able to invest abroad part of the savings that will finance our pensions. 2 for all these reasons, the belief that open markets are conducive to freeing human | 0 |
measures currently in place in the euro area follow from this : they were decided as a direct result of a euro area inflation rate well below comfortable levels and persistent weakness in the economy. and in meeting our objective, we support growth and inflation, which in turn creates the conditions for interest rates to “ normalise ” once more. of course, the level that rates will return to in the future is dependent upon the degree to which the secular drivers, currently depressing rates, can be reversed. challenges of the low interest rate environment let me start, however, by briefly touching on the challenges the current situation poses for the pension fund sector, as well as for the insurance sector given its similar focus on fixed income assets and the prevalence of long - term liabilities. large euro area insurers show quite reasonable profitability, 1 albeit the aggregate picture masks substantial heterogeneity see ecb ( 2015 ), “ financial stability review ”, may. bis central bankers ’ speeches across countries and types of business. small and medium - sized, non - diversified life insurers with high policyholder guarantees are typically highly exposed to low yields and have found their business models more under pressure. for pension funds the impact of low interest rates is strongest on those maintaining defined benefit schemes. the challenges for the insurance sector were underscored by the mixed performance in the stress test undertaken in 2014 by the european insurance and occupational pensions authority ( eiopa ). 2 while the top 30 european insurers all fulfilled the solvency ii requirements in the baseline scenario, 14 % of participants – mainly small firms representing 3 % of total assets in the sample – did not do so. the similar exercise currently being conducted by eiopa for pension funds will provide valuable insights into the strengths and vulnerabilities of the sector in the current market environment, an issue for which, at present, data is relatively scarce. the challenges, however, are not limited to the sectoral level. how insurance companies and pension funds adjust to the low interest rate environment could also have wider implications. with total assets of over €9 trillion, the strategies they employ to cope with low investment returns could clearly have spillover effects both to financial markets and the broader economy. one dimension of adjustment that could be relevant here is related to reallocation of portfolios towards higher return assets. “ healthy risk - taking ” – to borrow a famous expression coined by ben bernanke – is at the very heart of monetary transmission. | budgetary policies accordingly, policymakers started heavily criticising the pact, arguing that it was inflexible and set the wrong incentives. in the end, it was the rules – and not the policies – that were adjusted. in march 2005 the council agreed on a reform of the pact. changes to its corrective arm, which seeks to deter countries from running excessive deficits and ensure their prompt correction, have considerably weakened the eu ’ s fiscal framework by placing greater emphasis on flexibility and discretion. the improvement seen in member states ’ fiscal positions since the new pact was adopted is attributable largely to the recent cyclical upswing, while progress with structural consolidation in countries with budgetary imbalances has generally been disappointing. this lack of ambition as regards fiscal consolidation, which is not consistent with the provisions of the revised stability and growth pact and falls short of the political commitments made, could potentially undermine the credibility of the new pact. the real test of the new pact ’ s credibility is still to come, but the indications, particularly from some large member states, are not very encouraging in this regard. in addition, also wage policies have often not taken sufficient account of the requirements of the new environment – the fact of having a single currency. in some countries, wage growth has considerably outpaced productivity growth, leading to considerable increases in unit labour costs. such developments have, in turn, led to significant deteriorations in the cost and price competitiveness in these countries, which will require some sort of re - equilibrating wage adjustments in the future. a quick glance at the facts thus reveals that there is a need for better coordination of national economic polices in the euro area. but it would be a mistake to infer from this that there is a need for some kind of economic government for the euro area. the economic policy provisions of the treaty and the eu ’ s framework for economic policy coordination do, in principle, ensure the sound conduct and coordination of economic policies, promoting economic prosperity in the countries of the euro area. the reasons for the lacklustre performance of many euro area countries ’ economic policies are rooted not in deficiencies in the current institutional framework, but rather in some national governments ’ lack of willingness to adhere to the rules of that framework. as national governments obviously lack the political will to coordinate their economic policies and adhere to the rules of emu, could an economic government make a difference? this would potentially involve the transfer to a european institution of national | 0.5 |
broadly - based and self - sustaining, and it is important to remember that it is the level of output relative to potential that drives inflation, not the growth rate. we are in the process of developing an updated forecast for growth and inflation, and it will be published in next month ’ s monetary policy report ( mpr ). risk management despite the recent news about economic growth, the story of inflation in canada over the past few years has been dominated by downside risks. indeed, for most of the past five years, inflation has been in the bottom half of the target band. bearing in mind the long lags between economic activity and inflation, much of this low inflation has been due to slow economic growth in the past. more recently, it has also reflected temporary factors such as weakness in food and electricity prices. in fact, inflation has been surprisingly soft recently in much of the developed world, not just canada. i will have more to say about this in a few minutes. since inflation has been so consistently in the lower half of the target band, our risk - management approach to monetary policy led us to pay greater attention to forces pushing inflation down. this is because when inflation is already low, a negative shock to the outlook for inflation has more significant policy consequences than a surprise on the upside. throughout, we wanted to be sure our policy would be sufficiently stimulative to get the economy home. as the expansion continues, we will continue to manage the evolving risks to the inflation outlook. 3 / 5 bis central bankers'speeches the temporary factors that have been holding inflation down should dissipate in the months ahead, although recent exchange rate developments could affect this timing. in our july projection, we forecast that inflation would reach close to 2 per cent by the middle of next year. since that projection, the bank ’ s measures of core inflation have edged higher, as expected. we expect the downward pressure on inflation to shift to upward pressure as economic slack is used up. indeed, our models forecast a very slight overshoot of our 2 per cent target in 2019 — a product of our model ’ s dynamics. the appropriate path for interest rates in this situation is very difficult to know, because there are a number of important unknowns around the inflation outlook. these unknowns are unusual, as they are mostly the product of the unusual nature of the situation we find ourselves in — the legacy of the global financial crisis, the protracted period of slow economic growth and extremely low interest rates | , data for the past 150 years show that financial services in the us have been produced under constant returns to scale, with an annual average cost between 1. 5 % and 2 % of outstanding assets ( philippon 2015 ). bazot ( 2017 ) documents similar trends for european banks, albeit based on shorter time series. more recently, roughly since the global financial crisis, the costs of financial intermediation seem to have declined as a result of improved technology and increased competition ( philippon 2019 ). the potential of banks to realize economies of scale and scope has been a recurring theme in the empirical literature. recent research challenges the view that there are relevant economies of scale in banking. instead, the systemic risk externalities that large banks pose to financial systems may outweigh cost advantages due to size. funding cost advantages are a proxy for the implicit government subsidy accruing to systemic banks and thus the expected bailout that debt holders expect to receive ( siegert and willison 2015 ). banks ’ expectation that they will be bailed out in case of distress may affect their behavior, and particularly increase their size and complexity beyond socially optimal levels. estimates of economies of scale in banking find that the potential cost advantages are smaller than the costs to the macro - economy due to systemic risk and distorted incentives ( boyd and heitz 2016 ). once controlled for too - big - to - fail ( tbtf ) status, banks no longer benefit from economies of scale ( davies and tracey 2014 ). how digital innovations affect productivity in banking crucially depends on changes in the competitive structure of markets. as in other industries, the entry of new, more productive firms and the exit of incumbent, less productive firms, can be a channel for improvements in productivity. this process of “ creative destruction ” is, however, constrained by the fact that financial institutions which are being restructured or are eventually resolved may pose threats to financial stability. dynamics of entry and exit thus differ across banks and non - financial institutions : in the event of insolvency, liabilities of non - financial firms can be frozen, and the firm can be gradually restructured and, possibly, resolved. applying standard insolvency procedures to banks is more [UNK] because of their short - term liabilities and the risk of runs and contagion effects. one core objective of post - crisis financial sector reforms has thus been to restore normal market functioning, inter alia, by introducing restructuring and resolution regimes for systemically important banks. c | 0 |
jacqueline loh : broadening and deepening shanghai - singapore cooperation keynote address by ms jacqueline loh, deputy managing director of the monetary authority of singapore, at the 4th shanghai - singapore financial forum, singapore, 27 november 2018. * * * shanghai municipal financial regulatory bureau, director general dr zheng yang distinguished speakers and guests ladies and gentlemen, good afternoon. introduction 1 first, let me thank the shanghai municipal financial regulatory bureau ( “ sfrb ” ) for hosting the 4th shanghai - singapore financial forum. it is a great pleasure to see our good friends from shanghai and singapore at the forum today. bilateral cooperation between singapore and china 2 over the last five years of china - singapore financial cooperation, our central banks, regulators, and financial institutions have achieved significant milestones. in particular, bilateral ties in financial services between singapore and china strengthened significantly this year on the back of recent high - level visits between both countries. a. in september 2018, chinese vice premier han zheng visited singapore for the 14th joint council for bilateral cooperation ( “ jcbc ” ). the jcbc meeting saw financial agencies from both sides affirm the strong foundations laid through our collaboration in rmb internationalisation. we also agreed to strengthen supervisory cooperation, enhance financial markets connectivity and expand cooperation in the new area of fintech. b. in october this year, the third china securities regulatory commission ( “ csrc ” ) - mas supervisory roundtable was held here in shanghai, chaired by csrc vice chairman fang xinghai and mas deputy managing director ong chong tee. our regulators agreed to enhance information sharing and cross - border supervision of futures exchanges and intermediaries, as well as the substantive areas for cooperation in supervising exchange - trade derivatives. a mou on staff exchange was also signed. c. just two weeks ago, chinese premier li keqiang visited singapore for the 33rd asean summit and related meetings. a key outcome of the visit was the signing of the protocol to upgrade the china - singapore free trade agreement ( “ csfta ” ). as part of the visit, mas signed a fintech cooperation agreement with the people ’ s bank of china ( “ pbc ” ), and a mou for the cooperation and exchange of information on regulation of derivative activities with csrc. 3 to celebrate the success of china - singapore financial cooperation over the last five years and to tie - in with the commemoration of china ’ s 40 years of reform and opening up, we will be releasing an infographic during my visit | bwalya k e ng ’ andu : financing small - and medium - scale industries in africa keynote speech by dr bwalya k e ng ’ andu, deputy governor ( operations ) of the bank of zambia, to the united nations economic commission for africa expert group meeting on “ financing small - and medium - scale industries in africa ”, lusaka, 26 june 2012. * * * • the undp resident representative, ms khanni wignaraja ; • director of uneca, southern region office, ms beatrice kiraso • the afdb representative, dr fred kwesiga ; • officials from the ministries of finance of various countries ; • officials from various central banks ; development banks, commercial banks and other financial institutions ; • private sector representatives • participants ; • ladies and gentlemen ; i would like to firstly express my appreciation to the director of uneca, southern region office for extending an invitation to me to deliver the keynote address at the start of the experts group meeting of financing small and medium scale industries. i commend uneca for this great effort to bring together this assembly of high level officials and experts from government, the financial sector, private sector and academic institutions to discuss the vexing problem of enhancing financial flows to the sme sector in africa. i note from the very elaborate programme for this meeting that you will in the next three days cover a wide spectrum of issues some of which will focus on factors that constrain smes access to finance and some of which will focus on what needs to be done to change this situation. the meeting is, therefore, an opportunity for us to face a number of challenges that characterize this sector. these will include revisiting strategies and approaches to sme financing currently in use as much as it will require a review of current institutional arrangements through which finance is directly delivered to smes, on one hand, and those which indirectly obstruct or facilitate this flow of resources, on the other. however, i believe that probably the greatest challenge before this assembly is to attempt to narrow the gap between analysis of the problem and the implementation of measures and actions that work. meetings, workshops, seminars, etc. on sme financing are plenty at national, regional and international levels. some of you have had the opportunity to attend several of these meetings in the past. indeed, some of you have become experts at talking about the subject. barely two weeks ago, the bank of zambia held a financial sector forum here in lu | 0 |
international finance division within the directorate general for economics, statistics and research of the bank of italy. mr pagano has cooperated and co - authored several articles with distinguished institutions, such as : bocconi university and university of california, berkeley. as i emphasised earlier, mr pagano will discuss on the role of productivity on economic growth, in particular, the recent debate triggered by the hypothesis that advanced economies are doomed to experience a long period, why not decades, of slowdown of economic growth and deceleration of welfare improvement. 1 / 3 bis central bankers'speeches i would rather not anticipate the findings in the presentation, but i must say that i feel encouraged by the finding that this hypothesis is likely not to be true. productivity and its role on economic growth has always been a central theme at the focus of the attention at the bank of albania. our studies suggest that, beyond the cyclical fall in the aggregate demand, the economic slowdown in albania, after the crisis, has had a strong structural element. in other words, the reduction by half of the economic growth pace before and after the crisis, shows both the slowdown in the expansion of demand for goods and services, and the slowdown in the capacity of the economy to provide these products. in particular, our studies have found that the degree of expansion of productivity in the albanian economy – broadly defined as the capacity of an economy to utilise labour and physical capital to generate output – is reduced in this period from 2 % to 1 %. for this reason, the growth of productivity has been and should remain a guideline in the agenda of structural reforms in albania. in this context, the conclusion in today ’ s presentation that the currently slow growth in productivity, globally, does not necessary represent a new “ normal ” of the economy, is a further encouragement for the success of reforms in albania. let me now explain this argument in greater detail. first, the albanian economy has been going through a restructuring process of its growth model. among others, this process envisages a higher reliance of growth on export oriented sectors – such as industry and tourism – and a further orientation of financial resources towards the expansion of investments. the shift in financial, human and management resources between sectors of the economy needs time and is followed by a temporary slowdown of productivity. nevertheless, rebalancing the sources of growth – from construction and trade towards industry and export - related services – has already started. this shift is | noted even in the symmetric rebalancing of banking credit portfolio. second, the level and speed of productivity expansion is directly connected with the level of education and qualification of the labour force. the educational system reform and the emphasis on vocational training are essential dimensions of the economy ’ s restructuring, whose benefits will increasingly become clearer in the long run. however, albania still has a lot of work to do in this regard, in particular with regard to containing the migration of its qualified labour force and the renewal of its labour force skills by the private sector. third, productivity is closely connected with the improvement of business management skills. the campaign to enhance formal business practices, the gradual increase of competition, and the revision of the law on bankruptcy will provide the necessary stimulus in this regard. in particular, i am confident that the legal improvements regarding the enforcement of bank credit contract will not only help the banks ’ soundness, but will also contribute to increasing the discipline and effectiveness in the use of funds by the albanian enterprises. finally, i would like to highlight that unlike the advanced economies, which are on the technology frontier, and see their progress related to their ability for innovation, albania has considerable space for development through the adoption of the existing technologies and practices. in this light, our task remains to choose and implement the tested models of development. based on the above, i am confident that albania has all the premises to increase productivity and, in this way, to accelerate the economic growth pace and increase the welfare of the albanian people. what is needed now is a consensus on the vision for the development of the country and a shared will to implement it. dear participants, i am fully convinced that this presentation will further enrich our debate on these issues. 2 / 3 bis central bankers'speeches thank you! 3 / 3 bis central bankers'speeches | 1 |
expected growth rates ( chart 9 ). with firms having come to take a positive view of their business conditions, a virtuous cycle from profits to fixed investment is starting to operate, where they aim to achieve higher profitability by raising the prices of their goods and services. i believe that the higher margins earned by firms through price rises could lead to wage increases and are expected to serve as a great catalyst for achieving the 2 percent price stability target. now i would like to reassess the two factors just mentioned based on recent developments. let me focus on the first factor - - firms'price - setting behavior. as the surge in raw material prices was much larger than expected, many firms in the dining - out and food manufacturing industries are passing on such cost increases to retail prices. similar moves are increasingly seen in other industries, such as apparel. looking at developments in the di for firms'output prices in the bank's latest march 2022 tankan to examine their price - setting stance, the di has reached the highest level since 1980 ( i. e., just after the second oil shock ) for the manufacturing industry and the highest level since 1991 ( i. e., the end of the bubble period ) for the nonmanufacturing industry ( chart 10 ). these moves to raise selling prices are mainly due to cost - push factors stemming from the surge in raw material prices. however, such a pass - through of cost increases was barely seen when a similar price hike in raw materials occurred in past deflationary periods, like the one from 2007 to 2008. this may suggest that many firms are trying to change their " low - margin, high - turnover " business models that were quite common in those days. on the other hand, regarding the second factor for inflation - - that is, firms'growth expectations - - many firms unfortunately do not seem to have raised their expectations yet, partly due to the global supply - side constraints that i pointed out earlier. this is suggested by the fiscal 2021 annual survey of corporate behavior released by the cabinet office, which shows that firms'forecast for the real economic growth rate over the next five years was 1. 0 percent, thus remaining only close to the 1. 1 percent presented in the fiscal 2020 survey. firms'growth expectations are key to the sustainability of wage increases in japan. although the proportion of firms that have adopted so - called simultaneous recruiting of new graduates and seniority - based wages has started to decrease recently, | these employment practices remain typical in japan. under such practices, young workers are prone to be underpaid compared to their labor productivity, while middle - aged workers could benefit from being overpaid for their productivity. this is known as " employees'invisible investment, " which refers to the situation where young workers invest their human capital in the firm they work for and later earn relatively high wages that include dividends on the investment. 1 this model could explain the structure of japanese - style business management to some extent. in order for the model to work, human capital invested by young workers in their firm needs to yield future dividends by contributing to corporate growth ; to this end, sustainable growth in corporate sales is necessary. in reality, however, due to prolonged deflation, many firms were forced to lower their growth expectations and were less likely to see sustainable growth in their sales. as a result, it has become difficult to maintain the mentioned model, and firms seemed to have actively reduced their labor costs by, for example, increasing the number of non - regular employees and rehiring retirees at low wages relative to their labor productivity. i believe that in this way japanese - style employment practices hit turbulence. given these circumstances, i consider firms'growth expectations to be important in enhancing the sustainability of wage increases, which is vital to achieving the price stability target, and am paying attention to developments in such expectations. for example, see kagono, t. and kobayashi, t., " miezaru shusshi : jugyoin mochibun to kigyo seicho, " chapter 9 in itami, h. et al., kyoso to kakushin : jidosha sangyo no kigyo seicho ( tokyo : toyo keizai inc., 1988 ). ii. monetary policy the bank will persistently continue with accommodative monetary policy until the 2 percent price stability target is achieved ( chart 11 ). i would like to say a few words about the points i see as essential in the conduct of monetary policy in japan going forward. let me touch on the impact of foreign exchange rates and crude oil prices, mainly on economic activity and prices, as this has become a hot topic lately. faced with the recent yen depreciation and rising crude oil prices, some have pointed out the risk of stagflation, while others say that the bank should urgently revise its monetary policy to avoid materialization of | 1 |
the countries develop economically and institutionally, a more flexible exchange rate and proper inflation target may well represent a less costly regime choice. to conclude, it is difficult nowadays to isolate oneself totally from external shocks and sudden capital movements. but the authorities in emerging markets can render their economies less vulnerable by running sustainable fiscal policies and choosing a suitable exchange rate regime. to build a sounder banking sector might be more challenging. again it is very difficult to isolate the banking sector from capital movements, but the authorities can demand large capital requirements. authorities could also supervise the currency mismatches in the banking sector properly. more capital and less foreign currency liabilities might render the economies less vulnerable to sudden capital movements and crises. | ##cyclicality in the financial system, and that provides momentum for reform to strengthen financial infrastructure and governance. thailand, like most emerging markets, has also been struggling with this issue. and i want share with you some of the policies that we have pursued in response to the challenge. it is a long journey, and it is the journey that we are making. on the issue of reducing risk from procyclicality of the financial sector, prevent excessive lending, and ensure adequate capital. in our view, the key issue here is to reduce a possible large swing in the availability and the price of credit stemming from the tendency of banks to underestimate risks in good times, and then to overestimate them in bad times. on this, our approach has been to ensure that banks ’ capital and riskmanagement policy is forward - looking by using a combination of three instruments. the first is stress testing to ensure that bank ’ s own internal process for assessing the adequacy of capital and overall risk management is alert to possible key risks. thai banks have begun conducting stress tests as part of the supervisory process since early last year when we first underwent the fsap assessment. from our experience, we find stress testing to be a useful and effective instrument for helping banks in formulating strategy for capital and risk management in a forward - looking manner. also importantly, it provides a formal process for a two - way dialogue between banks and supervisors on risk management and on other financial stability issues. the second instrument is the fair value accounting rules or ias 39, which we have adopted for non - performing loans and for structured products. in our view, these rules can help strengthen market discipline over bank lending and investment. and because fair valuation involves marking to market, its adoption also helps make provisioning for asset impairment more forward - looking. the third instrument is prudential policy to limit excessive procyclicality. in the past five years, when capital inflows were strong, we have put in place prudential measures to stem the build - up of excessive credit growth on consumer spending and on speculative housing demand. these include measures on credit card approval and maximum loan - to - value ratio for luxury housing. as i noted earlier, in the context of monetary policy framework, combining inflation targeting with macroprudential measure offers a pragmatic approach to deal with concerns on financial stability and asset prices without compromising the discipline of monetary policy with respect to its primary inflation | 0 |
to 2. 5 percent, and 1. 2 to 1. 5 percent for fiscal 2021, 2022, and 2023, respectively ( chart 8 ). turning to prices, they are likely to be under considerable downward pressure from the effects of a particular factor - - namely, the significant decline in mobile phone charges. however, as for other items, price cuts that aim at stimulating demand have not been and are not likely to be observed widely. thereafter, the year - on - year rate of change in the cpi is expected to increase gradually, on the back of the output gap continuing to improve along with economic recovery and the effects of the reduction in mobile phone charges dissipating. in the april outlook report, the forecasts of the majority of policy board members for the year - on - year rate of change in the core cpi are in the range of 0. 0 to 0. 2 percent, 0. 5 to 0. 9 percent, and 0. 7 to 1. 0 percent for fiscal 2021, 2022, and 2023, respectively ( chart 8 ). however, the outlook for economic activity and prices remains highly unclear. in particular, the impact of covid - 19 on domestic and overseas economies continues to require close and careful monitoring. the outlook is based on the assumption that the impact of covid - 19 will wane gradually and then almost subside in the middle of the projection period. however, the pace of the vaccine rollout and the effectiveness of the vaccines entail uncertainties, and thus there is a risk that downward pressure on economic activity will increase. it is also uncertain how firms'and households'appetite for spending and their behavior, including price setting, will change due to the shock caused by covid - 19 that has pushed down the economy considerably. moreover, if covid - 19 has a larger impact than expected, attention should be paid to the risk that deterioration in the real economy will affect financial system stability, thereby exerting further downward pressure on the real economy. ii. conduct of monetary policy with regard to the bank's policy conduct, i would like to talk about ( 1 ) policy responses in light of the impact of covid - 19 and ( 2 ) further effective and sustainable monetary easing. a. policy responses in light of the impact of covid - 19 let me first touch on policy responses in light of the impact of covid - 19. the bank has conducted powerful monetary easing since march 2020 in response to | expectations upward for both the short term and the medium to long term. like other advanced countries, japan had been witnessing the phenomenon of the rate of increase in the cpi becoming less sensitive to changes in the output gap over recent years – the so - called flattened phillips curve. nonetheless, the bank assessed that the cpi inflation was likely to rise gradually based on the already - mentioned considerations : ( 1 ) an expected further improvement in the output gap ; ( 2 ) expected tighter labor market conditions, partly as a result of growing economic activity ; and ( 3 ) rising inflation expectations of firms and households. the increase in international commodity prices and the yen ’ s depreciation also contributed to the rising inflation prospects. based on these observations, it was expected that the uptrend in the cpi would probably be achieved, even though those movements would be partially offset by downward pressures stemming from intense competition among domestic firms, intensified cross - border competition under deepened globalization, and advances in information and telecommunication technology. the growth rate of the core cpi was thus estimated to be within the range of 0 – 1 percent in fiscal 2006 and would approach the level of slightly below 1 percent in fiscal 2007. in march 2006, the bank thus concluded that it was time to exit the qe policy since the conditions laid out in the commitment had been fulfilled. 6 therefore, the decision was made to reintroduce the standard uncollateralized overnight call rate as an operating target for money market operations instead of the outstanding balance of current accounts at the bank. also, the new target for the uncollateralized overnight call rate was set at effectively 0 percent. at the same time, the bank adopted a new framework for the conduct of monetary policy by setting the “ understanding of medium - to long - term price stability. ” this is the level of the cpi inflation rate currently recognized as price stability by each member of the policy board of the bank. an agreement was made among board members that a range of such an inflation rate would remain approximately between 0 and 2 percent with the median of 1 percent. it was also agreed that the rate would be reviewed annually. you may wonder why the range of inflation was lower than that of many other advanced countries. this is because the bank found it important to take into account past price movements : namely, the average rate of inflation over the previous few decades had been lower than that of major overseas economies and had been low even during the bubble period of the 1980s. in addition, japan | 0.5 |
important to note that monetary policy is not on a preset course. my colleagues and i will make our decisions at each meeting based on the incoming data and the implications for the outlook. while the current stance of monetary policy appears to be sufficiently restrictive to bring inflation down to 2 percent over time, i remain willing to raise the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed. restoring price stability is essential for achieving maximum employment and stable prices over the longer run. the future of banking turning back to the future of banking, today we find ourselves at an interesting juncture in the evolution of the banking system. some traditional risks - like interest rate risk and liquidity risk - have become a higher priority concern for banks and regulators, while other risks - like cybersecurity and fraud - continue to evolve and pose challenges. and of course, banking regulation and proposed reforms exert pressure on important elements of the banking system, affecting both the size and activities of banks. at the same time, i see important opportunities - and a critical need - for banks to continue supporting their communities and to find new and innovative ways to deliver financial products and services. bankers and regulators alike must think about these dynamics and how they will impact the future of the banking system, including safety and soundness, u. s. financial stability, the future role of banks in the u. s. financial system, and how our actions today could have long - term consequences. 2 / 7 bis - central bankers'speeches the risk of complacency banks have an obligation to manage all material risks, and yet we see that even with traditional risks - interest rate and liquidity risk, for example - long periods of calm, such as those that followed the prolonged period of low interest rates following the 2008 financial crisis, can lull both bankers and regulators into a state of complacency. often, this complacency stems from false assumptions, assumptions that prove to be inaccurate over time. for example, leading up to the 2008 financial crisis there was an unrealistic expectation that housing values would continue to appreciate. those who relied on this expectation made choices that proved to be ill - advised in the long run resulting in severe economic consequences. likewise, the persistently low interest rates that were a legacy of the post - 2008 financial crisis period led some to chase yield in their securities investment portfolios, over - investing in fixed - rate, long - term securities | as may be the case, some forms of risk are almost exclusively systemic, in the sense that the risk will turn into loss only in a systemic crisis. but surely, even with these qualifications, the regulatory system has much to gain from increasing market discipline in financial markets. two possibilities have been most widely discussed. first, as already noted, there is wide support for a resolution mechanism for large financial firms that would create a third alternative to the current, unsatisfactory options of bailout or possibly destructive disorderly bankruptcy. both the reform bill passed by the house last year and the bill to be considered on the floor of the senate contain variations on this basic proposal. yet the debate around resolution proposals has highlighted the challenge of crafting a workable resolution regime for large, interconnected firms. the basic design problem is that such a regime must advance the goals of both financial stability and market discipline. while these goals are usually complementary, they can at times be competing – especially in periods of high financial stress, when time consistency problems can loom large. in the midst of a crisis, governments fearful of financial upheaval can be tempted to provide assistance to supposedly uninsured creditors, even at the cost of increasing moral hazard in the post - crisis period. despite the design difficulties, i think certain features are essential in any special resolution process. one is that any new regime should be used only in those rare circumstances where a firm ’ s failure would have serious adverse effects on financial stability. that is, the presumption should be that generally - applicable bankruptcy law applies to nonbank financial firms – even large, interconnected ones. another is that once the new regime is invoked, the government should have broad authority to wind down the financial firm in an orderly way. most importantly, there should be a clear expectation that the shareholders and creditors of the failing firm will bear losses to the fullest extent consistent with preserving financial stability. to personalize things for this audience, we must ensure that if you have invested money in a large financial firm that runs aground, you will suffer losses. shareholders of the firm ultimately are responsible for the organization ’ s management ( or mismanagement ) and are supposed to be in a first - loss position upon failure of the firm. shareholders, therefore, should pay the price for the firm ’ s failure and should not benefit from a government - managed resolution process. to promote market discipline on the part of the creditors of large, interconnected firms, unsecured | 0.5 |
/ abs. pdf, basel committee on banking supervision ( 2011 ) and bertay, gong and wagner ( 2017 ). 5. see allen ( 2022a ). 6. see deutsche bundesbank ( 2022 ). 7. see b [ https : / / www. bis. org / bcbs / publ / d546. pdf ] asel committee on banking supervision and cornelli, doerr, frist and gambacorta ( 2023 ). 8. see mccaul ( 2023 ) for a discussion on how to improve the oversight of crypto asset markets. 9. see financial stability board and international monetary fund ( 2022 ). 10. cong, li, tang and yang ( 2022 ) estimate the share of “ wash trading ” to be as high as 70 % of total trading activity in unregulated crypto - asset exchanges. “ wash trading ” describes a type of market manipulation in which investors simultaneously buy and sell the same financial assets in order to create artificial activity in the market. this distorts prices, volumes, and volatility in unregulated marketplaces. 11. see european systemic risk board ( 2023 ). 12. see bremus and buch ( 2017 ). 13. see adrian and brunnermeier ( 2016 ). covar measures the “ value at risk ” of the financial system, conditional upon an individual financial institution being in distress. a higher value implies higher systemic risk. 14. see financial stability board ( 2021 ). 15. see diamond and rajan ( 2009 ) and deutsche bundesbank ( 2019 ). 16. see basel committee on banking supervision ( 2013 ). 17. see financial stability board ( 2021 ). 18. see https : / / www. bloomberg. com / features / 2022 - lehman - brothers - collapse - plan - repay - afterbankruptcy / # xj4y7vzkg. 19. see basel committee on banking supervision ( 2021 ). 20. see financial stability board ( 2022 ). 21. see gschossmann, van der kraaij, benoit, and rocher ( 2022 ). 22. see european systemic risk board ( 2023 ). 23. see financial stability board ( 2023a ) for challenges in cross - border payments. 24. see https : / / coinmarketcap. com / charts /, accessed 30 march 2023. | encik abdul rasheed ghaffour : value - based intermediation ( vbi ) propelling islamic finance address by mr encik abdul rasheed ghaffour, deputy governor of the central bank of malaysia ( bank negara malaysia ), at the value - based intermediation ( vbi ) dialogue, kuala lumpur, 24 august 2017. * * * over the years, finance has lifted the lives of many, enabled businesses to grow and helped to fund the construction of public infrastructure that we now depend on. yet, as the global economy transforms and society evolves, the question as to whether the financial sector is sufficiently serving the needs of the real economy continues to be debated. the evidence from the global financial crisis underlines the need for the financial sector to restore its balance with the real economy. there is a need to rethink, reassess and re - strategise the role and contribution of the financial industry. undoubtedly, there is an increasing expectation for the financial sector to deliver greater impact to the economy and society. i am pleased to be here with you today and be part of this important milestone in our islamic finance journey. the issuance of the value - based intermediation ( vbi ) strategy paper by bank negara malaysia marks the next step to realising the full potential of islamic finance. on behalf of the bank, i wish to thank all of you who have devoted time and effort to work with us in this important initiative. your input has been valuable in designing the strategies and approach to advance vbi as a key thrust in propelling the islamic finance industry further forward. today, i would like to share some of my thoughts on the concept of value - based intermediation. i will begin by giving an account of the achievements of our industry within the past decades. i will then touch on the role of vbi as a catalyst for growth with positive impact and the call for islamic finance to lead the way in realising the visions and objectives of vbi. islamic finance in malaysia has evolved and grown by leaps and bounds over the last 30 years. today, we have a well - developed and regulated islamic finance industry. there are diverse industry players, both local and foreign. prior to 2000, there were only two islamic banks and two takaful operators in the country with total market share and takaful penetration rate of less than 5 %. islamic banking assets have now grown to capture more than a quarter of the | 0 |
2022, p. 71. 6 meinerding, c., schuler, y. s. and p. zhang ( 2023 ), shocks to transition risk, bundesbank discussion paper no 04 / 2023. 7 binder, c. and r. kamdar ( 2022 ), expected and realized inflation in historical perspective, journal of economic perspectives, vol. 36, no. 3, p. 131 - 156. 8 huber, s. j., minia, d. and t. schmidt ( 2023 ), the pass - through from inflation perceptions to inflation expectations, bundesbank discussion paper no 17 / 2023. 4 / 4 bis - central bankers'speeches | , a stability - oriented economic policy with a focus on medium - term objectives together with structural reforms – not least in the labour market – have transformed the danish economy. today, unemployment is among the lowest in europe. we have sound fiscal balances and low public debt. large current account deficits have been replaced by large surpluses. this has transformed denmark from a debtor nation to a creditor nation with net foreign assets of about 70 per cent of gdp. page 3 of 7 in turn, we have created a highly robust economy. i think it is fair to say that the fixed exchange rate policy has had an educational effect on several generations of politicians. they all remember or have heard of the economic woes of the 70s and 80s. and no one wants to end up there again. * * * the system has withstood several tests over time – adding credibility to the system * * * keeping the exchange rate fixed is not always an easy task. it takes determination. vigilance. a forward - looking and responsive mindset. a willingness to learn and adapt. this is particularly true in periods with pressure on the krone. and we have seen our fair share of such periods. but we have shown that we are ready to do whatever it takes to keep the krone stable. as the economy has transformed over the years, so has the type of exchange market pressure that we encounter. and each time we have drawn new experiences. in the early 1990s, european foreign exchange markets came under strong pressure from speculators. our currencies were pegged to each other within the exchange rate mechanism, erm. but one after another, they came under attack. the danish krone was no exception. amid the turmoil, the united kingdom abandoned its fixed exchange rate policy. later sweden and norway followed suit. the situation developed into an attack on the entire erm system. responding to the crisis, it was decided to widen the bands within which the currencies were allowed to fluctuate to plus / minus 15 per cent. although denmark had argued in favour of retaining the erm as far as possible in its existing form, the danish krone depreciated significantly against the d - mark. the danish government under the leadership of prime minister poul nyrup rasmussen – who is here today – and danmarks nationalbank agreed to stand ground. it was emphasised that denmark had sound economic fundamentals and that the fixed exchange rate policy would be maintained despite | 0 |
hong kong, support the building and development of hong kong as an international financial center, and finally promote the high - level opening - up of china's financial markets. in the end, i wish hong kong a new and splendid success as an international financial center! thank you! 2 / 2 bis - central bankers'speeches | be more aware that china ’ s financial system may face a series of challenges arising from financial globalization and china ’ s wto accession. a great deal of topics are to be studied, giving rise to crucial tasks for scholars in the field of finance. nevertheless, i would like to stress that researchers are also lucky as they are in a transition period and the country is undergoing unprecedented economic and financial reform, where many economic and financial phenomena are hard to be well explained by existing theories and experiences. china ’ s practice has provided researchers with abundant materials and room for innovation in such areas as sequence of financial market development, coordination of the development of money market, capital market and insurance market, the roadmap and institutions associated with the evolution of multi - layer financial markets, in particular capital markets and financial risk management system. moreover, chinese authorities have been conducting monetary policy management, exchange regime reform, rural financial system reform, policy bank reform and related legal system reform under very complicated circumstances. these issues unique to china also provide scholars with sufficient room for research. china ’ s financial researchers have been exposed to the frontier by the great time. this is not only a precious opportunity, but also a great challenge. modern economic and financial theory emerged in the western countries after long - term observation and research by western economists. the theory is subject to relatively strict conditions, which may not be appropriate in china ’ s practice. nevertheless, we believe that china ’ s financial researchers will take a scrupulous attitude and not confine to the existing theories and historical experiences. with these efforts, theoretical development will be brought to a new stage on the basis of china ’ s reform practice, giving rise to financial theory development in the world. passion is needed in the reform, while cool mind is necessary for research. researchers need to be objective, independent and scrupulous with the research work. economic and financial performance involves the interaction of interests of different parties. the objective of financial theoretical research is to objectively describe the patter of interests and the rule of its change, providing guidance to economic and financial policy making aimed at establishing appropriate incentive mechanisms. in this vein, the china financial institute will take measures to further mobilize research resources to conduct pioneering study on important theoretical issues with respect to china ’ s reform and development under the support of financial supervisory agencies, commercial banks, securities firms, insurance companies, publishing houses, schools and financial research institutes. in conclusion, i wish professor huang da continued success in economic and financial | 0.5 |
crisis in part because the shari ’ a prohibits the excess leverage and speculative financial activities that were at its root. they also take comfort from the fact that many participants in conventional finance, as well as regulators, and policymakers have begun to ask whether there are lessons to be learned from the principles of islamic finance which might help avoid future crises. recent events have certainly created a great opportunity for the islamic financial industry. at the same time, however, there is no room for complacency and if the industry is to make the most of the opportunity that has now arisen it will need to ensure that the lessons of the crisis are fully learned. some of these lessons are quite general and apply equally to conventional and to islamic finance. central bankers and regulators have learned that they must pay more attention to risks that are common throughout an entire sector of the industry. these risks might not be immediately apparent from reviewing the balance sheet or financial statements of an individual institution. an example of such a risk is when all banks assume that they can exit their speculative positions at the same time. this requires them to assume that financial markets will always remain as liquid as they are in normal times. but if every financial institution is operating on the same assumption, then the point at which everyone tries to rush to the exit will be the point at which financial markets cease to function. there will be only sellers and no buyers. this is what happened in conventional finance when banks invested in structured financial instruments like cdos and clos which they then found they couldn ’ t sell at any price. now some people might believe that because islamic financial institutions cannot invest in cdos and clos, they must be immune to this problem. but think about the exposure of many islamic banks to the real estate market. it might be a reasonable assumption for an individual institution that it could exit profitably a property development that it is funding. but when many other institutions are making similar assumptions about the projects they are funding, the industry as a whole may find it difficult to exit its investments without substantial losses or within a reasonable time - frame. a further lesson of the crisis is specific to the work of the accounting standard setters and thus to aaoifi. this lesson relates to the importance of disclosure and transparency. good disclosures ensure that risks can be clearly identified and that market counterparties are able to form a considered view of the value of financial instruments and investments. the financial crisis involved multiple failures of disclosure and transparency. for example, | rasheed mohammed al maraj : ensuring stability – international perspectives on creating an effective regulatory framework inaugural plenary address by his excellency rasheed mohammed al maraj, governor of the central bank of bahrain, at the 15th world islamic banking conference 2008, manama, 24 november 2008. * * * your excellencies, ladies and gentlemen : “ salaam alaikum ” it is a pleasure to participate in this opening session, and to have this opportunity to welcome you all to the 2008 world islamic banking conference. this is the 15th conference of its kind to have been held here in bahrain, and in july of this year, the first wibc european summit was held in london. the inaugural european summit was yet a further indication that islamic finance is rapidly moving into the financial mainstream. i should like to begin by thanking the many distinguished speakers who will be appearing during the conference, as well as the event organisers and sponsors. collectively, your contributions are the reasons for the success of this event. i should also particularly like to extend a warm welcome to his excellency heng swee keat, managing director of the monetary authority of singapore. thank you for being with us today. the theme of this session – “ ensuring stability : international perspectives on creating an effective regulatory framework ” – is timely in my view. until very recently, many commentators and analysts believed that the economies of the gcc were an oasis of calm in the ongoing global financial turmoil. however, since the collapse of lehman brothers in mid - september, it has become clear that no part of the world can be immune to the present crisis. we have seen a vastly changed financial landscape, and there is little doubt that the availability of funds and the costs of borrowing are being affected in all parts of the world. against the background of this global financial turmoil, it seems a good time to take stock of the prospects for the islamic financial industry, and to consider in particular how best to ensure the stability of the industry in future. in recent months as the global financial crisis has deepened, many commentators have pointed out that islamic financial institutions have escaped relatively unscathed from the severe downturn which is affecting most conventional financial institutions. this certainly presents the industry with an opportunity to continue its rapid and successful growth of recent decades. however, the fact that shari ’ a compliant institutions have avoided significant losses resulting from the global financial crisis does not mean that there are no lessons that they can learn from the fallout. let | 0.5 |
coordination may only strengthen, if brexit implications assume the negative dimensions listed above. let me emphasise that, in bank of albania ’ s vision, the monetary policy oriented toward price stability, and the supervisory and regulatory policy oriented toward financial stability contribute to the sustainable and long - term development, and are complementary to each other. this creed is fully tested by experience, both in the world and in albania. in the long - term horizon, the bank of albania is confident that the investment we have made in promoting financial stability will bear its fruit with regard to sustainable development, and will increase the space for monetary policy manoeuvring. in addition, accomplishing our price stability objective would enhance the confidence in the national currency, reduce volatility and foster transparency in financial markets, thus contributing to the sustainable development of the financial system. meanwhile, in the short - term, the coordination of monetary policy and financial stability often present challenges and compromises. in this context, setting clear priorities, using the right instruments, and communicating transparently central bank actions and objectives are key elements for the success of our work. concluding, i would like to reiterate that i am fully confident that in the course of the day, all the issues i posed above will be elaborated in greater detail. i do believe that the contribution of the eminent panellists and active input from all participants will be an added value in this regard. i wish the best of success look forward with the greatest interest to the outcome of your deliberations. * * * thank you for your attention! 4 / 4 bis central bankers'speeches | communicates effectively with the broader economy, guiding responsible decision - making across the private sector and households. i strongly encourage you to extend your influence beyond the confines of the bank, engaging with academia and various interest groups to foster the continuous communication with the economy. this engagement will ensure that our policymaking is better understood and gains an ever increasing public support. 2 / 3 bis - central bankers'speeches i wish you a very productive discussion! 3 / 3 bis - central bankers'speeches | 0.5 |
the functioning of our financial system in at least three areas : products, processes and analysis. this is true for both front office functions ( eg customer business, trading ) and back office functions ( eg executing trades, risk management, market research ). special - purpose ai can solve specific problems, eg in customer engagement, financial management or cybersecurity. applications focused on market operations cover various core areas eg trading, portfolio composition, backtesting and validation of models, market impact analysis, modelling trading of large positions and stress testing. dynamic portfolio adjustment, depending on the macro environment, may be strengthened by ai. with the help of ai, various human shortcomings in dealing with finance can be mitigated. as behavioural finance has taught us, biases, inertia and ignorance lead to the malfunctioning of markets. ai allows humans to reach out beyond their intellectual limits or simply avoid mistakes. 1 / 4 bis central bankers'speeches 2 … but beware of the risks but opportunities are always accompanied by risks. as regards the financial system, if too much trust is put in “ intelligent ” systems, the stability of financial markets may be at stake. the workings of ai can be a mystery ; it can trigger loss of control, make fatal errors, and have a procyclical effect due to its mechanistic functions. pattern recognition has its limits. this can be dangerous particularly in crisis scenarios. an autopilot would never have been able to land a jet on the hudson river. nor can algorithms stabilise in periods of financial stress. looking at the recent turbulence in equities and the market for vix - related financial products, it can be concluded that the events of 5 february share many similarities with a “ flash crash ”. unfortunately, as with the original flash crash of may 2010, we have only limited knowledge about the direct drivers that triggered the event. it can be assumed that algorithmic market participants were quite active during the relevant period. but as to which strategies were applied and to what effect, we have no knowledge so far. the rise in volatility in the s & p 500 then nearly instantly affected the vix industry, making it not the cause but more the first victim of this market event, with losses up to 95 % on assets. we do not expect this phenomenon to disappear in the future. on the contrary, more of these flash events are to come. ai is still in its infancy | ##udential policy in new zealand drew on international policy insights from the financial cycles that preceded and succeeded the gfc. governments became more concerned about the financial stability risks associated with credit and asset price cycles and introduced new counter - cyclical ” macro - prudential ” policy measures to lean against emerging risks. a macro - prudential policy framework was agreed between the reserve bank and the minister of finance in may 2013. new policy frameworks present policy challenges in building understanding of their objectives and operation. faced with accelerating house price inflation on top of already over - valued house prices, the bank moved quickly to introduce new policy measures, including new capital requirements against high loan - to - value ratio ( lvr ) lending and limits on the share of new high lvr lending that banks could undertake. the challenge confronting the bank was the risk of not achieving its financial stability outcome goals if it failed to act ( with potentially very severe consequences ) vis - a - vis the risks to the bank ’ s reputation and confidence in its policy - making. there were risks and uncertainties to manage in introducing an important policy innovation that was new for households and banks. a classic risk - reward trade - off – one that required significant evaluation and preparation by senior management. several steps were taken to ameliorate possible downside risks. we set the scene for these measures in a number of on - the - record speeches and in remarks at press conferences, and in monetary policy statements and official cash rate statements expressing our concerns with easier lending standards and house price inflation. we consulted with banks and published analyses of the potential impact of the measures, as well as comparisons with regimes in other countries. following their introduction, we provided assessments of the impact, rationale and objectives in further speeches, media interviews, and in the november 2013 and may 2014 financial stability reports. the introduction of lvr restrictions has attracted commentary from different quarters. in some commentators ’ eyes, there has been a blurring of financial stability and monetary policy objectives, with some analytical debate about the merits of the policy. others have questioned the bank ’ s operational policy design and its distributional impacts. some have credited the bank with policy innovation and the willingness to act before a crisis eventuates. to date, the impacts have been broadly in line with the bank ’ s expectations. house price inflation is moderating, along with the risks to financial stability ( fsr, may 2014 ). 2. operational risks relate to the achievement of business plans and | 0 |
dear mrs. olmstead, honorable ambassador rohde, dear mr. berisha, it is a special pleasure to be part of this ceremony that marks a very important step in the launch of the green recovery and opportunity window, where through the kosovo credit guarantee fund, access to finance for businesses investing in renewable energy and in energy efficiency will be facilitated. the launch of this project designed and funded by the millennium challenge corporation and the millennium foundation kosovo, and with the capital donated by kfw shows the continued support of our international friends for the development of the kosovo credit guarantee fund and in general for the development of kosovo's economy. the kosovo credit guarantee fund within a relatively short period of time has managed to become a very important institution for increasing the facilitation of financing for the country's economy. financial institutions play a very important role in financing the green economy, so this project will significantly help promote and further stimulate the green transition. this project will also enable the increase of the guarantee potential of this institution, making possible the increase of the number of beneficiaries from the guarantees issued by this institution. in other words, a large number of businesses with difficulty in accessing finance will be able to provide easy access to this source of funding. bank lending continues to be a very important and sustainable source of private sector financing in kosovo. the value of bank loans with data of april 2022 has reached 4 billion euros, or an annual increase of 17. 9 %. however, despite the satisfactory trend of increasing bank lending, it is considered that the level of financial intermediation in kosovo continues to be below the average of countries in the region, which indicates the possibility that this window and the kcgf is giving to increase the rate of financial intermediation in kosovo. the opening of this window also plays an important role. in this context, we expect that in addition to supporting the growth of credit financing in general, the kcgf portfolio is increasingly reflecting the growth of credit support for sectors with greater difficulties in accessing credit financing, but which have potential to make a significant contribution to the economic development of the country. for this reason, the opening of this window and many other windows within the kcgf, have to do with the fact that we need to support businesses, which have difficulty accessing finance. today, if we look at the structure of the country's economy in kosovo, we have a structure of the economy that is mainly dominated by commercial | essay contest, the primary goal is to encourage high school youth to be more informed about economic and financial topics. cbk will continue to be focused in order to continuously advance the field of financial education, in order to contribute to the awareness raising, transparency and information of citizens and in particular consumers of financial products and services. similarly, we will continue to cooperate with local and international financial institutions in order to, through this function, be as close as possible to the citizens. finally, i want to thank you for your presence at the distribution of these awards and on this occasion, you are closer to the central bank and as a result, you will have greater familiarity with the central bank of the republic of kosovo and with the functioning of the financial sector in kosovo. you may complement this acquired knowledge by studying in financial directions at universities in the country or abroad and in the future, you will be the bearers of the development and steer of the finances of our country, both in the central bank and in other financial institutions. congratulations on the prizes and i wish you success in your studies and new school challenges. all the best! 2 / 2 bis - central bankers'speeches | 0.5 |
17. 01. 2018 papanel : “ new challenges for central banks ” * * russia and the world : values and virtues / gaidar forum luis m. linde governor * on 17 january 2018, governor luis m. linde participated in the 2018 gaidar forum panel entitled “ new challenges for central banks ”. the panel was structured around a debate format moderated by ksenia yudaeva, first deputy governor of the central bank of the russian federation, with the participation of jacob aharon frenkel, chairman of jpmorgan chase international and former governor of the bank of israel, and petr aven, chairman of the board of directors, abh holdings s. a. this note includes the thoughts on central banking that were the focus of governor linde ’ s speech. i. taking a step back : three main developments have defined the global economy in the 21st century. globalisation. the period between 1990 and the early 2000´s was characterised by an intense process of globalisation, with rapid growth of trade and financial relations among countries. for instance, between 2000 and 2007 the growth of world imports averaged 7. 4 % per year, about twice as much as global gdp growth. global banking also expanded markedly, in terms both of cross - border activities and local entry into banking sectors overseas. the crisis entailed a dramatic and severe reversal of this trend. trade plunged by more than 10 % in 2009, an extraordinary collapse by historical standards. since 2012, trade has gradually recovered at a slower pace than pre - crisis levels, with imports growing around 3 % annually. financial markets experienced a sudden stop in the fall of 2008. the decline in global banking activity has been particularly pronounced in cross - border positions vis - a - vis advanced economies, which declined by 20 % between 2008 and 2017, whereas cross - border lending to emerging market economies increased by 44 % during the same period ( primarily driven by very strong lending to china ). global financial crisis. during the years of expansion of the so - called great moderation, from the mid - 80s until the crisis, the global economy was progressively accumulating high levels of debt and leverage, assisted by easy financing conditions and the underpricing of risk. this led to increased vulnerability of the global economy and to the accumulation of bubbles, mainly in the financial and real estate sectors in advanced economies. what took us all by surprise was the intense depth and global nature of the crisis that exploded in 2008. | policy framework addressing systemic risk enhanced international coordination. the global nature of the crisis required a global response and new international institutions to coordinate the regulation of the financial sector. at the global level we saw the creation of the financial stability board and the intensification of the work at the basel committee ( bcbs ). in the case of the european union, we have taken an important step towards financial integration, most notably with the activation of the banking union, currently comprising two elements : the single supervisory mechanism and the single resolution mechanism. there is a third necessary pillar, the european deposit insurance scheme, which is still under political negotiations. iii. four broad challenges for central banks ahead : 1. are we under a “ new normal ” macroeconomic environment for the macroeconomy and what does it mean for monetary policy? new normal? debate about whether or not we are facing a new structural reality of secular stagnation that defines a “ new normal ” for the macroeconomy, characterised by low growth, low inflation and low real and nominal interest rates. most estimates suggest that the natural interest rate ( i. e. the real interest rate consistent with inflation stability and output at its natural level ) is now at historically low, possibly negative, levels. some possible explanatory factors are of a transitory nature ( such as the still - ongoing deleveraging processes ), while others are more structural ( i. e. low productivity growth and demographic factors ). we have to deepen our analysis further in order to have a full grasp of this “ new normal ” reality. implications for monetary policy : new conventional? the question that arises is whether the “ new normal ” should lead to a “ new conventional ” for monetary policy. indeed, inflation and real interest rates are likely to persist at a low level in the future, and therefore nominal interest rates will also be lower and hence closer to their effective lower bound, limiting their effectiveness as a monetary policy instrument, which will possibly lead to balance sheet management as a permanent policy. there are still no conclusive debates about balance sheet management, including on its marginal effectiveness, the optimal size of the balance sheet and the repercussions it could involve in terms of financial stability. again, in this area, we need further analysis. 4 / 6 once the conditions for it are met, the exit strategy from the accommodative policies will require gradualism and predictability. as the recovery gathers speed, and as long as this | 1 |
as determined by such factors as productivity trends and growth of the labor force. although the rates of resource utilization that the economy can sustain cannot be known with any precision, it is clear that, after several years of above - trend growth, slack in resource utilization has been substantially reduced. as a consequence, a sustainable, non - inflationary expansion is likely to involve a modest reduction in the growth of economic activity from the rapid pace of the past three years to a pace more consistent with the rate of increase in the nation's underlying productive capacity. it bears emphasizing that, because productivity growth seems likely to remain strong, the productive capacity of our economy should expand over the next few years at a rate sufficient to support solid growth in real output. as i have noted, the anticipated moderation in economic growth now seems to be under way, although the recent erratic growth pattern complicates this assessment. that moderation appears most evident in the household sector. in particular, consumer spending, which makes up more than two - thirds of aggregate spending, grew rapidly during the first quarter but decelerated during the spring. one likely source of this deceleration was higher energy prices, which have adversely affected the purchasing power of households and weighed on consumer attitudes. outlays for residential construction, which have been at very high levels in recent years, rose further in the first quarter. more recently, however, the market for residential real estate has been cooling, as can be seen in the slowing of new and existing home sales and housing starts. some of the recent softening in housing starts may have resulted from the unusually favorable weather during the first quarter of the year, which pulled forward construction activity, but the slowing of the housing market appears to be more broad - based than can be explained by that factor alone. home prices, which have climbed at double - digit rates in recent years, still appear to be rising for the nation as a whole, though significantly less rapidly than before. these developments in the housing market are not particularly surprising, as the sustained run - up in housing prices, together with some increase in mortgage rates, has reduced affordability and thus the demand for new homes. the slowing of the housing market may restrain other forms of household spending as well. with homeowners no longer experiencing increases in the equity value of their homes at the rapid pace seen in the past few years, and with the recent declines in stock prices, increases in household net worth are likely to provide less of | capital positions were evaluated under a hypothetical stress scenario that involved a deep recession in the united states ( with unemployment reaching 13 percent ) and a notable decline in activity abroad, combined with sharp decreases in both domestic and global asset prices. this exercise was designed to capture both the direct and indirect exposures and vulnerabilities of u. s. financial institutions to the economic and financial stresses that might arise from a severe crisis in europe. the results show that a significant majority of the largest u. s. banks would continue to meet supervisory expectations for capital adequacy despite large projected losses in an extremely adverse hypothetical scenario. conclusion the recent reduction in financial stresses in europe is a welcome development for the united states, given the important trade and financial linkages connecting our economies. however, europe ’ s financial and economic situation remains difficult, and it is critical that the european leaders follow through on their policy commitments to ensure a lasting stabilization. i believe that our european counterparts understand the challenges and risks they face and are committed to take the necessary steps to address those issues. for our part, the federal reserve will continue to monitor the situation closely, work with our financial institutions and foreign counterparts to enhance the resilience of our financial see board of governors of the federal reserve system ( 2012 ), “ federal reserve announces summary results of latest round of bank stress tests, ” press release, march 13. bis central bankers ’ speeches system, and be ready to use our tools to help stabilize u. s. markets should the situation require such action. thank you. i would be pleased to respond to your questions. bis central bankers ’ speeches | 0.5 |
anselmo l s teng : corporate governance in the financial sector welcome speech by mr anselmo l s teng, chairman of the monetary authority of macao, at the fsi - seanza regional seminar on corporate governance for banks, macao, 22 april 2008. * * * distinguished guests, dear delegates, ladies and gentlemen, good morning, i would like to extend my warmest welcome to all of you, on behalf of the monetary authority of macao, for attending the fsi - seanza regional seminar in the next three days. it is our honour that fsi and seanza hold this prestigious seminar in macao, a fascinating city of a unique mix of eastern and western heritage and recreation, featured by various historical and nostalgic constructions as well as gigantic entertainment complexes. i am very pleased to have the privilege to make an opening remark in this occasion and to share with you some of my views on corporate governance in the financial sector. undoubtedly, this is a prominent topic drawing extensive discussion amongst regulators and entrepreneurs in developed and developing countries at all times. to put the discussion in a nutshell, i would like to start with a study of the idea enshrined in the term “ corporate governance ” which is a legacy of our ancient wisdom. the word “ corporate ” comes from latin, meaning the formation of a body, and the word “ governance ” originates from greek, implying to steer a vessel across the sea. these concepts of ancient wisdom is still relevant nowadays, since the protection of shareholders ’ or stakeholders ’ interests as well as the board ’ s role to lead an institution to sail through uncertainties and challenges is the essence of modern corporate governance. in the context of the financial sector, effective corporate governance practices are indispensable to maintaining trust and security and critical to the proper functioning of economic and social system as a whole. poor corporate governance may lead to loss of public confidence in the ability of a financial institution to manage its assets and liabilities in a prudent manner, trigger more serious impacts on the financial sector through contagion effects and may even end in systemic crises. different from other sectors, financial institutions, particularly credit institutions, have “ duties of care ” not only to their shareholders but also their stakeholders, namely, depositors and customers. as the sole regulator of the financial sector of the macao special administrative region, the monetary authority of macao has exerted a lot of efforts to strengthen corporate governance in order to | take this occasion to share with you the following observations : 1. appropriate laws and regulations are needed to foster a regulatory environment that is conducive to financial innovation. it is worthwhile to attempt new ideas as long as they would not contravene the requirements of existing laws and regulations. however, we must have a full understanding of the related risks. and, we must have an appropriate risk control system or measures to mitigate or eliminate the risks. apart from complying with necessary regulatory procedure, the new ideas must facilitate market development without impairing the rights of consumers. to this end, the qdii scheme for stock investment can serve as a classic example. the introduction and moderation of the qdii scheme as well as the gradual opening of the mainland capital market represent an important step towards financial system reformation. these measures are also financial innovation conducive to financial market development. based on this situation, we can expect more innovation in financial policies. in the near future, a wave of keenly anticipated innovations in financial institutions, products, service and cooperation will arise from innovated financial policies. 2. there should be ongoing observation of changes in market development, analysis of special needs of customers, segmentation of customers and markets, as well as the establishment of a system to trace the demand of market and customers. the regulators should proceed in tandem with the pace of market development and monitor changes and characteristics of consumer demands. as far as financial products are concerned, asset management and structural financing that are selling like hot cakes are good examples. 3. financial innovation should be adapted to time, place and people. this issue has been explored before with macao as an example. 4. maintain good communication between regulators and market participants. it is normal for regulators to receive tons of complaints and enquiries from consumers. as these letters are mostly pinpointing financial products and services, regulators would gain a better understanding or come up with a general idea on the types of services demanded by consumers during the course of handling these complaints and enquiries. 5. investors and consumers need education. it is desirable to initiate a two - pronged measure. based on the objectives of protecting the rights of the consumers and investors as well as facilitating the penetration of the financial market, the regulator can actively embark on financial consumption related education through various channels such as the media and topical exhibitions etc. on the other hand, the market participants are encouraged to launch more promotions that are infused with educational | 0.5 |
ewald nowotny : european monetary union – lessons from the debt crisis opening remarks by prof dr ewald nowotny, governor of the central bank of the republic of austria, at the 40th economics conference of the central bank of the republic of austria “ european monetary union – lessons from the debt crisis ”, vienna, 10 may 2012. * * * ladies and gentlemen, let me warmly welcome you to the 40th economics conference of the oesterreichische nationalbank. in particular, i ’ d like to welcome austrian federal chancellor werner faymann and this year ’ s keynote speakers, peter praet, member of the executive board and chief economist at the european central bank, and klaus regling, ceo of the european financial stability facility. and it is a great pleasure to welcome all other high - level speakers, representing the european economic and financial architecture, academia and european institutions. over the past four decades this conference has offered a platform for discussion between policymakers and economists with an institutional and academic background. it has played a useful role in creating new ideas and stimulating political reactions to ever - changing economic environments. this year ’ s conference, entitled “ european monetary union : lessons from the debt crisis ” focuses on economic developments in europe and the corresponding policy reactions from 2007 until today. recent developments in international bond markets indicate that unfortunately, the fiscal problems in the euro area cannot be considered to be completely solved yet. the aim of the conference is to identify possible further policy responses to the crisis and to offer a forum for discussion on how to tackle future challenges. from a historical perspective, sovereign debt crises are clearly recurrent phenomena. going back to the pre - world war ii period, various european states ran into difficulties servicing their debt and some of them defaulted. ( reinhart, c. m. and k. s. rogoff ( 2008 ). this time is different : a panoramic view of eight centuries of financial crises ). since world war ii, however, there have been no cases of sovereign default in western europe. rather, sovereign default became a phenomenon typical of emerging and developing countries. due to their high dependency on international lending and their high responsiveness to changes in the monetary policy of creditor countries, fluctuations in exchange rates and commodity prices, many of these – mostly african or latin american – countries encountered severe financing problems. hence, debt restructurings in latin american countries has been the topic of numerous economic publications. thus, it was quite an unhappy innovation when | the large profits of risky business while being bailed out in the event of a risky investment turning sour invite imprudent risk - taking, thereby putting the stability of the international financial system itself at risk. three approaches to private sector involvement compete in the international debate although they are not mutually exclusive but may be combined : collective action clauses, a code of good conduct and a sovereign debt restructuring mechanism. the sovereign debt restructuring mechanism was put forward by the imf but, despite certain modifications, did not appeal to the international community. collective action clauses ( cacs ) in international bond issues ensure that an agreement on the restructuring of sovereign debt cannot be undermined by litigating minority investors. this market - based solution is now almost standard in new international bond issues after mexico went ahead in february 2003. however, cacs can be only part of a solution as they, by their very nature, cannot solve the issue of coordinating a multitude of bond issues by one single debtor, as, for example, in the present case of argentina. to take account of this problem, it may be advisable to go back to certain elements of the proposed sdrm such as the aggregation of liabilities. we must be aware that the transitional period up to the time when all bonds outstanding contain cacs will span almost three decades. as a third proposal that was originally forwarded by the banque de france one and a half years ago, a code of conduct is currently being negotiated between the private sector and governments of some g - 7 and g - 20 countries. the purpose of such a code would be to facilitate the introduction of certain procedures and a number of recognised principles for governing the very complex debtor - creditor relationship in the event of increasing market tension or acute crises. the code could serve both to keep crises from coming to a head and to make unavoidable debt restructuring run more smoothly. the code, which would not be legally binding, would spell out basic principles about both crisis resolution and crisis prevention. the bundesbank backs the development of such a code and hopes that consensus can be found soon, maybe as early as this autumn. if these efforts are to involve the private sector in the process of crisis resolution with a view to delivering the desired result of greater stability of the international financial system, the international financial institutions need to break with their generous lending habits of the recent past. large - scale lending beyond regular access limits, long - term recourse to fund resources, and the | 0 |
to start islamic finance operations here in mauritius, and welcome hsbc amanah to our shores. today, my colleagues and i who have worked on this subject for two years now feel a legitimate sense of fulfillment. and i can tell our friends from hsbc : you add depth to our financial sector. and give a new dimension to your long - established presence here. you also comfort us in our ambition to grow and develop our country as a major international financial centre. in these very difficult times that we are going through, when we inspect every passing cloud for any trace of silver lining, can we perhaps expect amanah to be the spark that we are looking for to re - energise our faltering economy? all our very best wishes to you and your team, and a very good day to all of you, ladies and gentlemen, who are here with us this morning for the launching ceremony of the very first islamic finance operation in mauritius. | banks under the standardised approach to risk - weighted assets, basel iii determines a more detailed risk weighting and lesser reliance on external credit ratings. banks are also required to hold “ capital conservation buffers ” of an amount equal to at least 2. 5 per cent of the risk - weighted assets, in the form of cet1 capital, which would be available in times of stress. however, the minimum level for total capital requirements remains at 8 per cent of risk - weighted assets. in addition, banks would have to keep a leverage ratio as a percentage of total assets inclusive of off - balance - sheet items such as derivatives and letters of credits to constrain their debt build - up. finally, banks would have to keep a countercyclical buffer from their retained earnings during periods of high economic growth to even out any stress on their capital during periods of economic downturns. in the case of global systemically important banks ( gsibs ), they would be subject to additional capital requirements. 1 / 4 bis central bankers'speeches in effect, these higher common equity requirements would undoubtedly incentivise shareholders, investors and senior management including board of directors to take less risk. liquidity risk, implicitly covered in pillar 2 under basel ii, is a stand - alone risk requirement under basel iii. the liquidity risk is addressed by the introduction of the liquidity coverage ratio, which would provide banks with enough high - quality liquidity instruments for 30 - days in the event of stressed conditions, and the net stable funding ratio for stressed liquidity conditions of up to one year. both the lcr and the nsfr seek to reduce the excessive mismatch of banks ’ assets and liabilities structure. in mauritius, basel iii implementation has been a gradual process. prior to july 2014, the year basel iii was introduced, banks in mauritius had to maintain a 10 per cent minimum capital adequacy ratio consisting of a ratio of 5 % tier 1 capital and a similar ratio of 5 % tier 2 capital to risk - weighted assets. tier 1 capital consisted of equity, general reserves, statutory reserves ( 15 % ) and retained earnings. tier 2 capital, limited to 100 % of tier 1 capital, consisted of subordinated debt of maturity of at least 5 years, which can only be redeemed after approval has been received from the regulator, revaluation reserves with a 55 % haircut and other instruments as may be approved by the regulator. under basel iii, | 0.5 |
emmanuel tumusiime - mutebile : the implication of the exchange rate depreciation for inflation and monetary policy remarks by mr emmanuel tumusiime - mutebile, governor of the bank of uganda, at the 10th private sector foundation uganda international trade expo, lugogo, 25 august 2015. * * * good morning ladies and gentlemen. i would like to begin by commending the private sector foundation for organising this trade expo, which performs an important role in promoting trade and industry in uganda. in this address i want to take the opportunity to explain the macroeconomic policies which the bank of uganda is currently implementing to address the shocks facing the economy and ensure that it remains stable. as you all know, uganda ’ s exchange rate has faced repeated bouts of pressure since the first half of 2014. on a trade weighted basis, the exchange rate has depreciated by around 23 percent since august 2014. the main reason for this depreciation is that uganda has suffered several external shocks which have affected exports, tourism and foreign direct investment, while at the same time demand for imports has remained quite strong. we suffered a wider current account deficit in the last financial year and this deficit was not fully covered by surpluses on the financial account of the balance of payments. uganda is far from unique in facing exchange rate pressures. many emerging markets and developing economies around the world, including in africa, have seen their currencies fall sharply in value over the last year, mainly because of lower commodity prices and a reversal of capital flows. the depreciation of the exchange rate has implications for the macroeconomy and for the different sectors of the economy. i will discuss the macroeconomic implications first and then address the sectoral implications. before discussing the impact of the depreciation on the macroeconomy i want to emphasise two important features of our macroeconomic framework. the first is that the primary objective of the bank of uganda ’ s monetary policy is the control of inflation. this is because inflation is such an important variable in the economy, directly affecting the welfare of all the population as well as the business environment for the private sector and because it is a variable which it is feasible for monetary policy to control, at least over a medium term horizon. our target for annual core inflation is 5 percent. it is not realistic to control core inflation to 5 percent in every single month – sometimes it will be lower and sometimes higher – but it is realistic to aim for | this has meant that innovations have had to be designed to incorporate safeguards to protect the public ’ s savings, as is the case with mobile banking, which i will discuss later. in other cases, such as with small informal financial institutions, we have to recognise that it is not practically possible to provide effective prudential regulation. i would like now to highlight four innovations in the ugandan financial markets which are relevant for financial inclusion and explain the regulatory approach that we have adopted to them. deposit taking microfinance institutions the first innovation i want to discuss is the establishment of microfinance institutions ( mfis ), which began in uganda in the 1990s. initially these were not - for - profit institutions which relied mainly on donor funding and did not take deposits. at around the turn of the bis central bankers ’ speeches millennium, uganda, along with many other countries, took the view that at least some of the mfis should be allowed to accept deposits, both because their customers would benefit from access to deposit facilities and because mfis could grow more rapidly and be more sustainable if they could mobilise deposits. therefore, specific legislation was introduced in 2003 to allow mfis to take deposits. to provide safeguards for the deposits, the legislation imposed prudential regulations on microfinance deposit taking institutions ( mdis ) and brought them under the regulatory aegis of the bank of uganda. however the prudential regulations were specifically designed to take account of the fact that mdis are generally much smaller than commercial banks and have a very different business model. for example the minimum start up capital requirement for a deposit taking microfinance institution is much lower than that of a bank. for an mdi the minimum capital is shs 500 million, whereas for a commercial bank it is shs 25 billion. in 2010, the coverage of the deposit protection fund was extended to include the deposits of mdis. it is fair to say that the growth of the mdis has not been as rapid as originally hoped. although the number of deposit accounts with mdis has increased five fold since 2006, as shown in table 1, it is still small in comparison with the number of deposits accounts held in commercial banks ; commercial banks held more than five times as many deposit accounts as mdis in 2014. as such mdis have only made a relatively modest contribution to reducing financial exclusion over the past decade. it appears that the business model of mdis, which involves a high volume of small | 0.5 |
new challenges for monetary policy, federal reserve bank of kansas city, jackson hole, wyoming, 26 – 28 august, pp. 77 – 128. bernanke, b. and v. reinhart ( 2007 ), “ conducting monetary policy at very low short - term interest rates ”, american economic review, 94 ( 2 ), pp. 85 – 90. bernanke, b. ( 2009 ), “ the crises and the policy response ”, stamp lecture at the london school of economics, 13 january 2009, london, england. curdia, v. and m. woodford ( 2010 ), “ the central - bank balance sheet as an instrument of monetary policy ”, mimeo, columbia university. de gregorio, j. ( 2008 ), “ la gran moderacion y el riesgo inflacionario : una mirada desde las economias emergentes ”, estudios publicos, n° 110, pp. 5 – 20, otono. english version, banco central de chile, documento de politica economica no. 24. de gregorio, j. ( 2010 ), “ monetary policy and financial stability : an emerging markets perspective ”, international finance, 13 ( 1 ), pp. 141 – 156. gali, j. and l. gambetti ( 2009 ), “ on the sources of the great moderation ”, american economic journal : macroeconomics, vol. 1 nº1, pp. 26 – 57. goodfriend, m. ( 2010 ), “ central banking in the credit turmoil : an assessment of federal reserve practice ”, mimeo, carnegie mellon university. murray, j. ( 2009 ), “ when the unconventional becomes conventional – monetary policy in extraordinary times ”, remarks to the global interdependence center, philadelphia, pennsylvania. | jose de gregorio : the role of central banks after the financial crisis keynote speech by mr jose de gregorio, governor of the central bank of chile, delivered at the bank of korea international conference 2010, 31 may – 1 june 2010, seoul, 1 june 2010. * * * i am very grateful to luis f cespedes and kevin cowan for insightful discussions and contributions. as a response to the global financial crisis of 2008 – 2009, we witnessed a period of unprecedented central bank activism. many central banks, particularly in developed economies, implemented diverse policy actions. central banks around the world reduced monetary policy rates to their lower bounds and announced their explicit commitment to keep these rates at that level for a prolonged period of time. some of them went further, including the purchasing of private securities, lending to financial institutions other than banks and exchange rate interventions. all these actions contrast with how monetary policy was conducted during the so - called “ great moderation ”, which extended since the mid 1980s. during this period, most central banks relied exclusively on short term interest rate management in order to achieve their goals. this dramatic change of events has led many observers to argue that central banks forgot about a crucial task in their mandates – financial stability – and / or they were imprudent for thinking that an adequate management of the short term interest rate would suffice to secure price and financial stability at the same time. in either case, the argument goes, the global financial crisis should lead central banks to reevaluate their role in this new era. there is no doubt that we have the responsibility to carefully assess the recent events. we need to do it in order to improve our understanding of the economy and in order to improve our macroeconomic policy design, so as to avoid crises, but also handle them appropriately. in my view, many of the lessons will not be new, but they draw from lessons from previous experiences, but forgotten in academic and policy circles in industrialized countries. i will start my discussion on the new role for central banking after the recent financial crisis by discussing the factors that were behind it. understanding these factors will be crucial to analyze if and how the objectives of central banks should be modified and potential tradeoffs between competing objectives. finally, i will discuss the interactions between price and financial stability and the challenges for central banks in the new times. what caused the financial crisis? there are many candidates being pointed out as the culprits of the financial crisis of 2008 – 2009 | 1 |
federal reserve's periodic survey of consumer finances ( scf ) suggest that a higher level of education significantly increases the chances that a household will use an electronic banking product. in particular, in 1998, the typical user of an electronic source of information for savings or borrowing decisions had a college degree - a level of education currently achieved by only about one - third of u. s. households. the most recent data from the survey reveal a good news - bad news picture of the financial status of households, providing evidence that we need to reach further to engage those who have not been able to participate fully. for example, while the median real net worth for all families increased 17 - 1 / 2 percent between 1995 and 1998, this trend did not hold true where the head of the household had a high - school level of education or less, family earnings were less than $ 25, 000 annually, or the ethnicity of the respondent was non - white or hispanic. that families with low - to - moderate incomes and minorities did not appear to fully benefit from the highly favorable economic developments of the mid - 1990s is, of course, troubling, and the survey results warrant a closer look. in the details, we find that families with incomes below $ 25, 000 did increase their direct or indirect holdings of stock, and more reported that they had a transactions account. however, they were less likely to hold nonfinancial assets - particularly homes, which constitute the bulk of the value of assets for those below the top quintile according to income. at the same time, one encouraging finding from surveys conducted by the bureau of the census is the increasing homeownership rates for minorities. for example, the homeownership rate for blacks increased from 42. 9 percent in 1995 to 48. 6 percent through the second quarter of 2001. the homeownership rate for hispanics also rose, from 42. 0 percent in 1995 to 46. 1 percent through the second quarter of 2001. this trend may be a sign of improved access to credit for minorities. other recent findings of the scf include a rise in families'median level of debt burden, financial stress ( defined as debt payments that represent more than 40 percent of income ), and incidence of late payments on debt. the findings showed increases in each of these categories across all income and age groups, with the highest levels of financial stress among households headed by people 65 and older and earning less than $ 25, 000 annually. | alan greenspan : the importance of financial education and literacy remarks ( via videoconference ) by mr alan greenspan, chairman of the board of governors of the us federal reserve system, before the national council on economic education, chicago, 26 october 2001. * * * i am pleased to address your conference today. education is a critical issue for our country, and economic education is of particular concern to those of us at the federal reserve. throughout our economic history, we have seen significant adjustments to enable markets to respond to the demand for services. structural changes in recent years have heightened competition, encouraging market efficiencies that continue to help drive down costs, and fostered the emergence of increasingly diverse and highly specialized organizations. these organizations - ranging from firms that offer their services through electronic delivery mechanisms to local partnerships that provide one - on - one counseling and financing arrangements - provide consumers increased access to a variety of credit and savings instruments. for this ever - more complex financial system to function effectively, widespread dissemination of timely financial and other relevant information among educated market participants is essential. informed judgments by consumers are required to foster the most efficient allocation of capital. constant change, of course, can be unsettling no matter how beneficial, and one challenge economic and financial educators face is overcoming consumer anxiety about the new products and choices they encounter. but just as the rapid adoption of new information technologies has expanded the scope and utility of our financial products, so too has it increased our means for addressing some of the associated educational challenges. for example, universities provide remote learning options to allow students to pursue continuing education via the internet. financial service consumers can use web - based calculators to create customized budgets, or to develop long - term savings strategies for retirement or a college education. in both scenarios, technological advances represent the opportunity for achieving efficiencies and exercising preferences. this promise can only be met, however, when the end - users know how to obtain pertinent information and how to capitalize on the available knowledge. education enabling individuals to overcome their reluctance or inability to take full advantage of technological advances and product innovation can be a means of increasing economic opportunity. as market forces continue to expand the range of financial services, consumers will have more choice and flexibility in how they manage their financial matters, and they will demand education about use of the new technologies to make informed decisions. indeed, surveys repeatedly demonstrate a strong link between education and the use of new financial technologies. for example, data from the | 1 |
and heritage. the notes have been especially made for the ugandan public with highly visible security features that are easy to identify by visual inspection and the feeling of touch to protect users against counterfeits. the security features are only effective if they are understood by the general public. for this reason, the bank has planned a national public education programme to ensure that the public know how to identify genuine banknotes. in this endeavour, the bank will work with the media and civic organizations to ensure that the public throughout uganda is familiar with the features on the banknotes. the new banknote series will circulate alongside the current banknotes. both series will be legal tender and should continue to be used in cash transactions until the public is informed otherwise. therefore, there will be no special exercise by bank of uganda currency centres to exchange the current banknotes for the new banknotes. the public is advised not to rush to banks to exchange the notes. i would like to make it clear that the introduction of a new family of bank notes should have no effect whatsoever on the prices of goods and services in uganda. the amount of money in circulation will not be changed by the introduction of new bank notes and therefore no inflation should arise from these changes. also there are no changes in the uganda coins. once again, i would like to thank everyone who has contributed to the success of the project of the “ new family of banknotes ” specifically the artists, designers, the consultant, the printers and our own bou staff who have worked tirelessly to ensure the success of the project. i can now confidently say that our banknotes are more secure, convenient, pleasant and truly ugandan. i now invite the honourable syda bbumba, to address us and launch the new family, 2010 series banknotes, which will be issued to the public, and become legal tender on may 17th, 2010. thank you, ladies and gentlemen. | emmanuel tumusiime - mutebile : secure banknotes vis - a - vis non - cash instruments in uganda speech by prof emmanuel tumusiime - mutebile, governor of the bank of uganda, at the launch of the new family of banknotes, kampala, 3 may 2010. * * * the chief guest, hon. minister of finance, planning & econ. development the speaker of parliament the deputy speaker of parliament hon. ministers hon. members of parliament his worship the mayor of kampala visiting governors – central bank of kenya and bank of tanzania members of the board, bou development partners chief executives of financial and other institutions representatives of currency printers and suppliers of currency notes the artists distinguished ladies and gentlemen i wish to welcome you all to this occasion when the bank of uganda launches a new banknote series. i am glad that honourable syda bbumba, the minister of finance, planning and economic development, is here to launch the new uganda shilling banknotes. her presence reflects the support the bank enjoys from its parent ministry and from government in its efforts to serve the public better. i am also particularly delighted to welcome the governors from the central banks of the partner states of the east african community. as you are aware, one of the roles assigned to the bank of uganda is to issue currency notes and coins. over the past 20 years, the bank has stepped up efforts on four fronts. firstly, the bank widened the range of denominations. we popularized the use of low denomination coins which are useful in small value transactions especially in the rural areas. secondly, we adopted a clean banknotes policy to maintain the integrity of our banknotes. we acquired notes processing machines that automatically sort out clean notes for reissue in line with clean note policy. thirdly, the bank has continually reviewed the security features of the banknotes to keep ahead of counterfeiters. fourthly, we have widened features on the notes to assist the public to easily differentiate the genuine notes from counterfeits in addition to assisting members of the public who may suffer from sight impairment to easily identify legal tender in its various denominations. i am pleased to recognize the presence of a delegation from uganda national association for the blind. their presence is a manifestation of the bank ’ s efforts to help the visually impaired to identify banknotes with the aid of a special design feature using the sense of touch. this is the first major change of currency design in over twenty years in uganda. it is a result of | 1 |
ivan iskrov : growth and the financial system – lessons from emerging europe with a focus on bulgaria speech by mr ivan iskrov, governor of the bulgarian national bank, at the conference on “ achieving sustainable growth in south east europe : macroeconomic policies, structural reforms, socio - political support, and a sound financial system ”, organised by the bank of greece and st antony ’ s college ( oxford ), athens, 11 february 2011. * * * ladies and gentlemen, it is a pleasure to be here at this conference, organised by the bank of greece together with st. antony ’ s college, oxford. above all, let me thank governor provopoulos for the invitation and the opportunity to come here and, together with my distinguished colleagues from south east europe, to be able to talk before such a reputable audience. as a central banker, certainly the financial industry is of direct interest to me. but although the topic of this panel is “ growth and the financial system ”, i would also like to go beyond it and touch upon other issues discussed so far today. politics and politicians do matter the topics of the panels overlap and the four main sessions are arranged in a very logical sequence. i am saying this, because the financial sector does not function in isolation from the rest of the economy and the political stance. a strong financial system cannot co - exist with a fragile economy and political instability ( at least not for long ). the opposite is also true : weak financial markets and weak institutions hamper the sustainable growth. for example, the recent crisis drew the attention to the banking industry, many times blamed to have caused the global turmoil. there is no use repeating now how guilty the banks are, that is, the well - known sequence of events : the “ sub - prime ” lending, the “ toxic ” assets, the need to bail out banks and the subsequent economic and fiscal dimensions of the crisis. however, we should not turn a blind eye to the root cause : the role of politics and politicians. what about the call for “ affordable housing ” which was dominating the political ideology in the last two decades in the us ( and not only there )? what about the related environment of low policy rates, coupled with the failure of regulators to identify and control systemic risks? was that not really at the root of the asset bubbles and risky behaviour of the banks? we all know the answers. the “ greedy ” bankers are not the only ones to blame. learning from emerging europe | the recovery and resolution of credit institutions and investment firms. the part involving the bnb was finalised at the end of last year and is due for submission to the national assembly with legal amendments likely to get adopted by the end of this quarter. the bnb governor also outlined the second work block in this direction, on which the bnb is currently working, i. e., the overall framework of determining the amount of funds to be contributed by banks to the single resolution fund and the amount and way of transferring funds from the bank resolution fund in bulgaria, which was set up in 2015, to the single resolution fund. the third work block covers the overall activity of planning and conducting resolution activities, including the distribution of responsibilities and tasks between the single resolution board and the bnb after our country joins the banking union. with regard to the expected effects on the economy and the business, the bnb governor highlighted that it was positive to reaffirm bulgaria ’ s strategic course, and that the process is already being filled with content and specific timeframe. the whole process stands as a positive counterbalance against the more general uncertainty from the global and european economic environment. 1 / 2 bis central bankers'speeches among the more direct positive effects from this first stage on the path to the euro area is the anticipated improvement of the country ’ s credit rating, as announced by the credit agencies, should the process run successfully in the short - term. that would improve the funding conditions in the country. at the same time, the effects of joining erm ii will not be tangible in regard to the macroeconomic policy and neither will our monetary regime change. the bnb governor made it clear that the only exit from the current regime would be the replacement of the lev with the euro at the currently fixed exchange rate. the whole process of accession – first to the banking union and erm ii, and next to the euro area – could not substitute for the good macroeconomic practices and business projects, mr. radev said. a country refusing to comply with this is sure to suffer serious economic and financial difficulties whether inside or outside the euro area. the two proven pillars of good macroeconomic policy in bulgaria are the fiscal stability and the monetary regime stability. should these conditions, together with the continuous improvement of institutions, be present, the preparatory process and subsequently the accession to the euro area would be a catalyst for the social and economic prosperity of our country. 2 / 2 bis central bankers'speeches | 0.5 |
for enabling a reasonable level playing field, there would have to be a gradual convergence in terms of the operating space and flexibility available to each class of entity. in terms of regulatory and prudential norms governing the public and private sector banking operations, there is already a significant amount of convergence. therefore, from prudential perspective, the debate is infructuous. however, the same level of convergence would have to be extended to managerial and operational flexibility of psbs based on certain governance standards. going forward, this will generate the requisite space for both psbs as well as private banks to grow their business and thrive. iv. business models – diversified vs specialised does the promise of niche, specialised banking still hold? with widespread digital revolution and massive penetration of internet in indian households, the need for aligning banking practices of 21st century with new aspirations of india was felt. based on this evolving scenario, a committee under the chairmanship of dr nachiket mor, the then member of central board of rbi, was constituted to study the scope of comprehensive financial services to small businesses and low - income households. the committee submitted its report in 2013 and discussed idea of'differentiated banking'in india on the basis of horizontal and vertical differentiation involving formation of separate stylised banks on the basis of regional / sectoral scope and activities ( deposit, transaction, or credit ). the concept of'payment bank'was first discussed in that report which started the formal discourse on differentiated banking. subsequently, the union finance minister announced in 2014 - 15 budget speech that rbi will create a framework for licensing small finance banks ( sfbs ) and other differentiated banks. in accordance with the announcement, reserve bank issued guidelines for setting up sfbs and payments banks ( pbs ) in november 2014. the specified objectives of setting up of sfbs, as envisaged in the licensing guidelines5, is to further financial inclusion by provision of savings vehicles, and increase supply of credit to small business units ; small and marginal farmers ; micro and small industries ; and other unorganised sector entities, through high technology - low - cost operations. on similar lines, pbs were set - up with the objective to further financial inclusion by providing small savings accounts and payments / remittance services to migrant labour workforce, low - income households, small businesses, other unorganised sector entities and other users6. since their inception, sfbs have started playing a progressive role in mobilising savings from and providing credit to | and the international finance corporation. my personal observations show that many of us, in asia, could study and learn from the public policies in mauritius relating to high coverage and quality of primary education, efficient delivery of health services and protection of environment. yes, we have a lot to learn from each other and there are many areas in which we can cooperate. the two central banks will, i am sure, strengthen the traditional ties. we will carry forward a continuous dialogue to strengthen cooperation between the bank of mauritius and the reserve bank of india. as a reciprocal gesture, let me extend an open and standing invitation to governor bheenick to visit india soon and, in addition, participate in the celebrations of 75th anniversary of the reserve bank, which is due soon in a couple of years from now. thank you all, ladies and gentlemen. | 0.5 |
of the reduction in pricing power observed in this cycle should be reversed as firming demand enables businesses to take back large price discounts. though such an adjustment would tend to elevate price levels, underlying inflationary cost pressures should remain contained. a lack of pressures in labor markets and increases in productivity are holding labor costs in check, resulting in rising profit margins even with inflation remaining low. although energy - using companies will experience some profit pressures as recent increases in spot oil prices become imbedded in contracts, these effects should be limited unless oil prices increase appreciably further. to be sure, over time, the current accommodative stance of monetary policy is not likely to be consistent with maintaining price stability. but prospects for low inflation and inflation expectations in the period ahead mean that the federal reserve should have ample opportunity to adjust policy to keep inflation pressures contained once sustained, solid, economic expansion is in view. improved profit margins over time and more assured prospects for rising final demand would likely be accompanied by a decline in risk premiums from their current elevated levels toward a more normal range. with real rates of return on high - tech equipment still attractive, the lowering of risk premiums should be an additional spur to new investment. reports from businesses around the country suggest that the exploitation of available networking and other information technologies was only partially completed when the cyclical retrenchment of the past year began. many business managers still hold the view, according to a recent survey of purchasing managers, that less than half of currently available new and, presumably profitable, supply - chain technologies have been put into use. recent evidence suggests that a recovery in at least some forms of high - tech investment is under way. production of semiconductors, which in the past has been a leading indicator of computer production, turned up last fall. expenditures on computers rose at a double - digit annual rate in real terms in the fourth quarter. but investment expenditures in the communications sector, where overcapacity was substantial, as yet show few signs of increasing, and business investment in some other sectors, such as aircraft, hit by the drop in air travel, will presumably remain weak in 2002. on balance, the recovery this year in overall spending on business fixed investment is likely to be gradual. the u. s. economy has displayed a remarkable resilience over the past six months in the face of some very significant adverse shocks. but the strength of the economic expansion that is under way remains to be clarified | susan schmidt bies : sound capital and risk management remarks by ms susan schmidt bies, member of the board of governors of the us federal reserve system, at the oprisk usa 2006 conference, new york, 29 march 2006. * * * i would like to thank the sponsors of oprisk usa for providing an opportunity for bankers, regulators, consultants, and other interested parties to share their perspectives on operational - risk management. today, i will speak about the importance of risk management and its relationship to capital. i will also touch on the broad objectives of effective operational - risk management and offer specific observations on some of the challenges of operational - risk quantification. in addition, i will describe the current status of the basel ii process. importance of risk management over the past several decades, we have witnessed substantial changes in the u. s. banking industry, particularly at our largest institutions. these very large entities have broad geographic reach, operate in many lines of business, and offer a wide array of complex products and services. the largest institutions have moved away from the traditional banking strategy of holding assets on the balance sheet and have adopted strategies that emphasize redistribution of assets and active management of risks. the risk - management techniques employed by banking organizations continue to improve and adapt to the ever - changing financial landscape. the federal reserve, in its role as both a bank supervisor and the nation's central bank, has an obvious interest in maintaining the stability of the banking industry and the financial system as a whole. we, along with our counterparts at the other u. s. bank and thrift regulatory agencies, are responsible for ensuring that banking institutions operate in a safe and sound manner and have strong capital levels. but with the advent of very large banking organizations that engage in a wide variety of business activities - - some of them quite complex - - the federal reserve has become even more interested in ensuring that banking organizations understand the risks of these activities. for their part, bankers continue to improve the risk - management and risk - measurement processes at their institutions, and regulators have supported these efforts. banks themselves have created many of the new techniques to improve their risk management and internal economic capital measures in order to be more effective competitors and to control and manage their losses. by more clearly defining risk exposures and identifying the causes of and controls for their losses, bank management can more effectively integrate decisions about risk - taking into their strategic and tactical decisionmaking. banks that integrate risk measurement into their business - line goals often | 0.5 |
with stronger liquidity, higher solvency and, in the most recent period, improved asset quality. this success was based on three key factors : first, political ownership, socioeconomic awareness and social dialogue. policymakers were committed to the programme ’ s goals and showed deep knowledge of the virtuous response mechanisms to be activated in the critical sectors. on the other hand, the public understood the urgency and even - handedness of the programme. the political compromises achieved between policymakers and social partners were key to ensuring a broad and collective ownership of the programme, which in turn determined its effective and timely execution. second, the positive, intense and fast response by the export sector, which grew by around 45 % in real terms between 2008 and 2017. this contributed to the correction of the 4 / 6 bis central bankers'speeches current account deficit, to put external debt on a downward trajectory, and to mitigate the impact of lower domestic demand on the non - tradable sector. this positive response by the tradable sector was much stronger than expected and was not driven exclusively by foreign markets ’ growth, given that there were important market share gains during this period. third, the maintenance of the general public ’ s confidence in the financial system, as evident in the consistent stability of aggregate deposits. this allowed the financing of the economic activity to proceed without major disruptions and prevented the resort to capital controls. the fear and deposit drain observed in other economies that were subject to assistance programmes did not occur in the portuguese case. this was not by accident, since there was an active and persistent effort by the authorities to preserve confidence in the financial system throughout the implementation of the programme. after the assistance programme the macroeconomic adjustment initiated by the economic and financial assistance programme has continued after the programme ended in 2014, with encouraging results. gdp has been growing at an average annual rate above 2 %, reflecting the continued dynamism of the export sector and, more recently, the rebound of private investment. fiscal consolidation proceeded, with the budget balance expected to be around – 0. 5 % in 2018 and public debt entering a downward trend. the current and capital accounts were kept in surplus and the cleanup of banks ’ balance sheets has intensified, with npls declining from over 50 billion euro in june 2016 to about half this amount in end 2018. despite the undisputed progress, there is no room for complacency. the history of the past 40 years teaches us that the initial impact from an | will be, however, a coordinated distribution of tasks between the ecb and the national supervisory authorities, depending on the size of banks and national banking systems. with all banks in the euro area under unified supervision, responsibility for deposit guarantee and resolution shall be held at the level where supervisory powers are exercised, i. e. at european level. banking union must therefore cover not only integrated supervision, but also shared deposit guarantee and bank resolution mechanisms. if a single supervisory mechanism is not accompanied by european deposit guarantee and bank resolution mechanisms, it represents banking union under construction and therefore an incomplete separation between sovereign and banking risk. fiscal union lack of fiscal discipline among member states during the pre - crisis period revealed the need to strengthen the european fiscal policy institutional framework. important decisions have already been taken in this field, involving a range of regulations to promote fiscal discipline in member states ( for example the so - called “ six pack ” and “ fiscal compact ” ). however, work for the construction of that pillar is still currently under way. these regulations must be complemented by institutions assuring their effective implementation. indeed, europe needs a qualitative change towards fiscal union. economic union the achievement of a genuine economic union requires the establishment of an institutional framework able to assess, coordinate and monitor member states ’ economic policy measures and reforms. special emphasis should be placed on areas with a potentially higher impact on competitiveness, economic growth and employment, simultaneously promoting social cohesion. member states ’ economic policies and macroeconomic imbalances are an issue of common interest and therefore require a “ win - win ” concerted response. the “ european semester ” and the “ euro - plus pact ” are important improvements in this area. strengthening democratic legitimacy and accountability to move towards more integrated fiscal and economic policies we need to implement mechanisms ensuring democratic legitimacy and accountability in joint decision - making. if this political dimension is ignored, we will not be able to evolve towards greater financial, fiscal and economic integration, for lack of legitimacy and accountability. this political dimension of the integration process must reconcile two sources of concern : the need for a legitimate response vis - a - vis “ the whole ” ; and the need to ensure that all parts, irrespective of their size, are represented and participate in the decision - making process. in particular, the so - called “ community method ” must be revitalised, in tandem with restoring the european commission ’ s central role, by strengthening its effectiveness and legitimacy. bis central bankers ’ speeches this | 0.5 |
, if the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, we stand ready to increase our asset purchase programme in terms of size and / or duration. 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 third quarter of 2016, after recording a similar pace of growth in the second quarter. incoming data, notably survey results, point to somewhat stronger growth in the last quarter of 2016. looking ahead, we expect the economic expansion to firm further. the pass - through of our monetary policy measures is supporting domestic demand and facilitating the ongoing deleveraging process. the very favourable financing conditions and improvements in corporate profitability continue to promote the recovery in investment. moreover, sustained employment gains, which are also benefiting from past structural reforms, provide support for private consumption via increases in households ’ real disposable income. at the same time, there are signs of a somewhat stronger global recovery. however, economic growth in the euro area is expected to be dampened by a sluggish pace of implementation of structural reforms and remaining balance sheet adjustments in a number of sectors. the risks surrounding the euro area growth outlook remain tilted to the downside and 1 / 2 bis central bankers'speeches relate predominantly to global factors. according to eurostat, euro area annual hicp inflation increased markedly from 0. 6 % in november 2016 to 1. 1 % in december. this reflected mainly a strong increase in annual energy inflation, while there are no signs yet of a convincing upward trend in underlying inflation. looking ahead, on the basis of current oil futures prices, headline inflation is likely to pick up further in the near term, largely reflecting movements in the annual rate of change of energy prices. however, measures of underlying inflation are expected to rise more gradually over the medium term, supported by our monetary policy measures, the expected economic recovery and the corresponding gradual absorption of slack. turning to the monetary analysis, broad money ( m3 ) continues to expand at a robust pace, with its annual rate of growth increasing to 4. 8 % in november 2016, up from 4. 4 % in october. as in previous months, annual growth in m3 was mainly supported by its most liquid components, with the narrow monetary aggregate m1 expanding at an annual rate of 8. 7 % in november, up from 8. 0 % in october. loan | christine lagarde : how can a united europe meet the challenges it faces today? opening remarks by ms christine lagarde, president of the european central bank, during a dinner on " uniting europe ", world economic forum, davos, 23 january 2020. * * * this year marks the 70th anniversary of the schuman declaration, which first put forward the idea of a single authority to govern the production of coal and steel in europe. robert schuman ’ s method for building europe was clear : “ europe will not be made all at once ”, he said, but “ through concrete achievements which first create a de facto solidarity ”. his idea was that, by taking deliberate policy steps to become interdependent – like sharing raw materials – european countries would become inseparable. and indeed they have. we have become both safer and richer. the formation of the single market gives every eu citizen average welfare gains of €840 each year1. today, schuman ’ s sequence is, in some ways, being reversed. interdependence is now being driven increasingly by a fast - changing global environment – and policymaking has to catch up. european countries have joint exposures to the climate, to the global economy, to multinational firms, to foreign powers. and now we need to work together to address them. so what does that mean practically? there are three key aspects. the first is demonstrating what is needed to make openness globally sustainable. the eu is the most advanced example of cross - border economic and political integration because it has invested in institutions to ensure fairness – a single court and a single set of rules. and when new forces have arisen with the potential to undermine openness – the threat of competitive devaluations or of financial spillovers – europe has not responded by raising barriers. rather it has sought – and is seeking – to fill the gaps in its economic and monetary union with institutional innovations like the banking union. at a time when trade tensions are rising even as global institutions are being weakened, these examples can provide useful lessons. the second aspect is leveraging the areas where the eu is powerful, namely the single market. the eu has become a leader in ensuring strict and fair competition laws which are enforced at arm ’ s length2. this is crucial at a time when winner - takes - all dynamics are increasing in many markets, which raises concerns about firms ’ political and market power. for example, in 2018 the average | 0.5 |
alia, from the restricted access of russian banks and companies to external markets. in order to normalise the situation with foreign exchange liquidity, the bank of russia has introduced reverse transactions to provide it. interest rates on these transactions have been decreased to the level of libor rates plus 0. 5 pp. the volume of foreign exchange liquidity provision is determined by the demand estimates based on the balance of payments forecast. the next one - year repo auction of 15 december will accept eurobonds and provide for the possibility of early deal termination by borrowers. in the near future the bank of russia also intends to consider the introduction of foreign exchange lending secured by non - marketable assets. foreign exchange loans, extended by banks to companies with stable income in foreign currency, are supposed to be eligible as collateral. bank of russia forecast the current situation requires updating the forecasts and adjusting the policy to ensure financial and price stability enabling the economy to adjust to the new conditions and start developing as quickly as possible. the “ guidelines for the single state monetary policy in 2015 and for 2016 and 2017 ” stipulate that the removal of sanctions and trade restrictions results in certain inflation decrease and moderate acceleration of economic growth. we take this possibility into account but base our policy decisions on the forecasts providing for long - term sanctions. the baseline forecast the bank of russia currently applies in the decision - making approximates scenario iiib published in the aforementioned document. we expect average oil prices to be $ 80 per barrel during the next three years. this average price results from consensus forecast of the leading analysts. bis central bankers ’ speeches in the scenario under consideration the current account surplus remains on the acceptable level of $ 56 billion in 2015. in 2016 and 2017, no significant changes in the current account balance are expected either. the development of import substitution will boost domestic production. the service sector will see similar trend. conditions for diversification of the economy will be established. contribution of net exports to gdp will be positive. according to the bank of russia estimates, in these conditions economic growth rates will remain close to zero in 2015 – 2016, however in 2017, when import substitution and increase in non - commodity exports become more apparent, we expect gdp to grow up to 1 – 1. 2 %. higher growth rates in the next three years require structural reforms, primarily measures aimed at real improvement of business climate and higher labour productivity. the inflation level is currently affected by the actual ruble depreciation and the imposed | import restrictions but, according to our estimates, these factors will contribute to inflation increase only till late 2015 q1, afterwards, the inflation will start declining. by late 2015, inflation will fall to 8 %. inflation is forecast to slow down to the target of 4 % by late 2017. these dynamics are largely connected with the increased inflation expectations. in this regard, the bank of russia intends to conduct its monetary policy to prevent further aggravation of inflation and inflation expectations. as i have mentioned, under the baseline forecast the current account surplus will amount to $ 56 billion in 2015 which is below the possible capital outflow we estimate to reach up to $ 120 billion next year. next year the volume of external debt payments will also approximate to $ 120 billion, of which banking sector debt payments will amount to $ 42 billion, including interest payments. non - financial sector debt payments are estimated to be $ 77 billion, including interest payments. we have made special calculations based on the reporting data received from banks and the survey of 40 largest companies. according to our estimates based on these data, more than 10 % of these payments refer to intergroup transactions. another 20 % can be refunded in the international markets. at least 15 % can be redeemed through the partial use of cushion of liquid foreign exchange assets accumulated by banks and state - owned companies. the remaining 55 % of debts subject to redemption which make about $ 65 billion can be covered from the current account balance and reduction of international reserves. according to our calculations, operations to close the gap of the balance of payments will require about $ 70 billion next year. the bank of russia will carry out transactions aimed at maintaining stability of the balance of payments, i. e. the financial stability, in the stipulated volumes. we believe that the international reserves are sufficient to carry out foreign exchange transactions in such volume. meanwhile, in the next three years, the reserves level will be significantly above the generally accepted adequacy indicators. there definitely will be no deficit of foreign exchange liquidity given these parameters of the balance of payments and the volume of our operations. we indent to conduct the aforementioned fx repos, extend foreign currency loans and carry out occasional direct fx buy / sell transactions, inter alia, to accumulate and use government reserve funds. it should be noted that under this scenario the ruble should appreciate considerably next year due to both the compensation of the currently observed exchange rate overshoot or, in other words, excessive depre | 1 |
janet l yellen : confirmation hearing testimony by ms janet l yellen, vice chair of the board of governors of the federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington dc, 14 november 2013. * * * chairman johnson, senator crapo, and members of the committee, thank you for this opportunity to appear before you today. it has been a privilege for me to serve the federal reserve at different times and in different roles over the past 36 years, and an honor to be nominated by the president to lead the fed as chair of the board of governors. i approach this task with a clear understanding that the congress has entrusted the federal reserve with great responsibilities. its decisions affect the well - being of every american and the strength and prosperity of our nation. that prosperity depends most, of course, on the productiveness and enterprise of the american people, but the federal reserve plays a role too, promoting conditions that foster maximum employment, low and stable inflation, and a safe and sound financial system. the past six years have been challenging for our nation and difficult for many americans. we endured the worst financial crisis and deepest recession since the great depression. the effects were severe, but they could have been far worse. working together, government leaders confronted these challenges and successfully contained the crisis. under the wise and skillful leadership of chairman bernanke, the fed helped stabilize the financial system, arrest the steep fall in the economy, and restart growth. today the economy is significantly stronger and continues to improve. the private sector has created 7. 8 million jobs since the post - crisis low for employment in 2010. housing, which was at the center of the crisis, seems to have turned a corner – construction, home prices, and sales are up significantly. the auto industry has made an impressive comeback, with domestic production and sales back to near their pre - crisis levels. we have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession. unemployment is down from a peak of 10 percent, but at 7. 3 percent in october, it is still too high, reflecting a labor market and economy performing far short of their potential. at the same time, inflation has been running below the federal reserve's goal of 2 percent and is expected to continue to do so for some time. for these reasons, the federal reserve is using its monetary policy tools to promote a more robust recovery. a strong recovery | will ultimately enable the fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. i believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy. in the past two decades, and especially under chairman bernanke, the federal reserve has provided more and clearer information about its goals. like the chairman, i strongly believe that monetary policy is most effective when the public understands what the fed is trying to do and how it plans to do it. at the request of chairman bernanke, i led the effort to adopt a statement of the federal open market committee ’ s ( fomc ) longer - run objectives, including a 2 percent goal for inflation. i believe this statement has sent a clear and powerful message about the fomc's commitment to its goals and has helped anchor the public's expectations that inflation will remain low and stable in the future. in this and many other ways, the federal reserve has become a more open and transparent institution. i have strongly supported this commitment to openness and transparency, and will continue to do so if i am confirmed and serve as chair. the crisis revealed weaknesses in our financial system. i believe that financial institutions, the federal reserve, and our fellow regulators have made considerable progress in bis central bankers ’ speeches addressing those weaknesses. banks are stronger today, regulatory gaps are being closed, and the financial system is more stable and more resilient. safeguarding the united states in a global financial system requires higher standards both here and abroad, so the federal reserve and other regulators have worked with our counterparts around the globe to secure improved capital requirements and other reforms internationally. today, banks hold more and higher - quality capital and liquid assets that leave them much better prepared to withstand financial turmoil. large banks are now subject to annual “ stress tests ” designed to ensure that they will have enough capital to continue the vital role they play in the economy, even under highly adverse circumstances. we have made progress in promoting a strong and stable financial system, but here, too, important work lies ahead. i am committed to using the fed ’ s supervisory and regulatory role to reduce the threat of another financial crisis. i believe that capital and liquidity rules and strong supervision are important tools for addressing the problem of financial institutions that are regarded as “ too big to fail. ” in writing new rules, however, the fed should continue to limit the regulatory burden for community banks and smaller institutions, taking | 1 |
caleb m fundanga : the role of the banking sector in combating money laundering a paper presented by dr caleb m fundanga, governor of the bank of zambia, at a seminar organised by the c and n centre for advanced international studies, lusaka, zambia, 23 january 2003. * * * mr chairman distinguished guests ladies and gentlemen allow me first of all to thank you for inviting me to address you on this topic of great importance to the development of our financial system in zambia – “ the role of the banking sector in combating money laundering ”. i have every reason to believe that your training in the last couple of days has provided an opportunity for you to share with the resource persons valuable insights on the subjects you have covered. mr chairman, the scourge of money laundering is not new to mankind. despite money laundering being topical in policy discussions nowadays and on the minds of supervisors and regulators like the bank of zambia, the scourge itself has a long history and could be as old as the history of organised trade. nonetheless, in spite of the fundamentals of the crime remaining, largely, the same as in the olden days, recent advances in technology and globalisation have offered and will continue to offer more sophisticated means to convert ill - gotten proceeds into legally acceptable financial assets. in recent times, money laundering has grown into real big business. for instance, the economist magazine estimated that about usd 500 billion to usd 1. 5 trillion is laundered through banks each year. further, the financial action task force ( fatf ) - an intergovernmental organization under the auspices of the organisation for economic co - operation and development ( oecd ) also estimates money laundering to be in the ranges of usd 590 billion to us1. 5 trillion. as a percentage of world economic output, money laundering accounts for about 2 % to 5 %. obviously, given the secrecy and the illegal nature of this business, it is difficult to tell exactly the extent of money laundering. nevertheless, these figures give us an indication of the magnitude of the problem. in this regard, financial institutions, in particular, banks provide a conduit through which money ( including laundered money ) flows. because of this, the financial system is the focal point of antimoney laundering initiatives because dirty money is most visible when it is first introduced into the financial system. ladies and gentlemen, before i proceed in discussing the various aspects of money laundering including stages in money laundering, its effects on | of the financial sector. this has been demonstrated by the pensions and insurance authority, the insurers association of zambia as well as securities and exchange commission and the capital markets association of zambia who successfully launched the insurance week under the theme " insurance - solutions for a better tomorrow " and world investor week under the theme " learn more about investor resilience and sustainable finance " earlier this month. i am confident that the key messages disseminated during these events will contribute to raising the levels of financial literacy in the country. be assured that i am committed to supporting the implementation of the national strategy on financial education through such campaigns. ladies and gentlemen the world savings day celebrations would not be successful without recognising individual and organizational contributions towards improving financial literacy in zambia. in this regard, awards will be presented under nine categories namely : 1. exceptional individual contribution to financial education, 2. outstanding theme interpretation ; 3. exceptional leadership in financial literacy ; 4. champions award ; 5. most innovative financial education programme ; 6. outstanding financial literacy footprint ; 7. exceptional financial literacy media outreach ; 8. outstanding initiative by an educator ; and 9. best savings product of the year. i am delighted to grace this year's world savings day award presentation and wish the nominated participants all the best. in conclusion, i would like to thank the organisers and stakeholders under our partnership arrangement, in particular, the bankers association of zambia, securities and exchange commission, pensions and insurance authority, rural finance expansion programme and dsik for their continued support to the world savings day celebrations every year. thank you 3 / 4 bis - central bankers'speeches 4 / 4 bis - central bankers'speeches | 0.5 |
klaas knot : rebuilding resilience - the financial system after the covid crisis keynote address by mr klaas knot, president of the netherlands bank, before the international symposium of the national association for business economics, 11 may 2021. * * * it ’ s an honor to speak at this international symposium of the national association for business economics. i think we all share a fascination for economics here. having worked in academia, the imf, the dutch finance ministry and the central bank, i live and breathe economics. so i feel very much at home here. “ my friends, i want to talk for a few minutes with the people of the united states about banking. ” so began, on march 12, 1933, the first of about thirty fireside chats that president roosevelt delivered over the radio. it was eight days after his inauguration. he had spent his first week coping with an epidemic of bank closures that affected households in every state. three days after closing down the entire american banking system, congress passed the emergency banking act. roosevelt used it to create federal deposit insurance when the banks reopened. that sunday night, on the eve of the end of the bank holiday, roosevelt spoke to a radio audience of more than 60 million people. he told them in clear language “ what has been done in the last few days, why it was done, and what the next steps are going to be. ” the result was a remarkable turnaround in the public ’ s confidence. since this, almost iconic, banking crisis of 1933, we have seen financial crises in all shapes and sizes throughout the world. and now, the covid crisis poses yet a new challenge to the financial system. how has the financial system stood up to this latest test? and what can we learn from it for the future? these are the questions i want to address with you today. first, i will reintroduce you to the concept of systemic risk. i will argue that this has been the primary ingredient in financial crises throughout history, from 1933 to the 2008 global financial crisis. i will then discuss what governments and regulators have done to strengthen the financial system. i will explain how the financial reforms of the past ten years helped to cushion the impact of the covid crisis, especially in the banking sector, but that systemic risk revealed itself in other parts of the financial system. i will end by discussing how we can address these new vulnerabilities in the financial system and strengthen its overall res | ##nchments more than doubled in q2 from the previous quarter, mainly in the wholesale trade and transport equipment sectors. the performance of the financial services and the sector ’ s employment situation could continue to be creditable under current challenging circumstances, but we cannot be complacent. we must press on with the sector ’ s transformation efforts, in investing in the workforce for the future. 5. mas has three priorities to support the local workforce in our financial sector. these are : 1 / 6 bis central bankers'speeches protecting livelihoods, creating opportunities, and strengthening the singapore core. protecting livelihoods 6. our top priority is to keep workers employed while deepening their capabilities. labour market conditions will become more challenging, with some firms downsizing and others imposing hiring freezes. jobs will take a different form too, as financial institutions ( fis ) speed up on their digitalisation to cater to the extensive shift in customers ’ preferences. we therefore need to keep workers employed as much as possible. we are heartened that some fis, including large employers like bank of china, bank of singapore, dbs, great eastern life, maybank, ntuc income and ocbc are committed to avoid any redundancy exercises where they can. mas urges more fis to do their part to support their workers and take a longer - term view in investing in their capabilities. mas will support workers to reskill in functions which are becoming more digitalised to harness the potential of technology in new and expanded roles. 7. the nature of jobs has evolved rapidly as the use of technology becomes more pervasive in the financial services sector, from the design, development to delivery of products and services. therefore, jobs will need to be redesigned and transformed too, and employees will need to acquire new skills and adapt to new work requirements. mas and ibf, with the support of workforce singapore, have worked closely with our tripartite partners over the years, to reskill and redeploy workers into new or expanded jobs. 8. thus far, 25 local and foreign fis have committed to support close to 5, 000 employees, of whom 3, 000 have embarked on this journey. of these, 900 have completed their training and are in their new roles. these efforts have helped to avoid retrenchment of staff who might otherwise be displaced, and contributed to the steady decline in retrenchments in the financial sector, from the peak of 2, 300 in 2016 to 1, 300 in | 0 |
era. one in particular is the introduction of promptpay, which provides efficient access to electronic payment at no cost and has served as a catalyst leading to complete elimination of electronic fund transfer fee by banks. these developments have contributed to efficiency improvement in the financial system ; wider access and affordability of financial services, especially to those underserved ; and mitigation of the impacts of several long - term issues. essentially, they help ensure that our financial system can sustainably serve the well - being of the thai people. ladies and gentlemen, despite our progress, we should not settle for what we have achieved thus far. much more can be done and need to be done to improve the sustainability of the thai society as a number of challenges remain. some of which leave us to question our collective actions as a society on how we allow these challenges to get out of hand. allow me to highlight four challenges in particular : first, despite a more broad - based economic growth and a number of government policies targeting low income households, 2 / 6 thailand remains among the world ’ s most unequal countries in terms of wealth, with the richest one percent owning more than half of total household wealth2. meanwhile, low financial literacy and high household debt level continue to hamper the ability of individuals to pursue new opportunities and secure long - term financial security. these have curbed individual ’ s chance to improve her socio - economic status in the long - run. essentially, widening wealth and income inequality is a major contributor to the fragility of the thai society and is frequently used as an excuse to draw public support for a number of costly and unsustainable populist policies. second, our labor productivity growth is moderating and should be emphasized. as an aging society with declining labor force, enhancing productivity is critical for the thai economy to maintain growth. and yet a number of public policies have focused on creating short - term stimulus rather than on encouraging the necessary adjustments to address long - term productivity issue. moreover, our educational standards have not been able to prop up our low productivity level and lag behind in many important areas. without the necessary adjustment now raises the question of how thailand could maintain our competitiveness going forward. third, we have been too negligent on environmental and ecological issues. as a large portion of the thai population remains in the agricultural sector and all of whom rely on quality natural resources for food and income, preservation of environment and natural resources should be our top priority. our | to think wisely, maintain longterm focus, and take responsible actions now so that in the next decade we would not be standing here asking ourselves again how we have allowed these challenges to get out of hand. ladies and gentlemen, the bank of thailand looks forward to collaborating with all of you on our sustainability journey. thank you very much for your participation. bernow, sara, klempner, bryce, magnin, clarisse. “ from ‘ why ’ to ‘ why not ’ : sustainable investing as the new normal. ” mckinsey and company, october 2017. 6 / 6 | 1 |
expectations of employees and employers alike. the social partners have over the last decade demonstrated that there are gains from dialogue, sharing of information and judicious use of mediation when necessary. indeed the barbados model of social partnership has made a name for itself not only in the caribbean, but further afield and countries are trying to emulate it. the continued collaboration of the social partners is even more vital in this environment as we enter a new era of challenge on many fronts, where we will grapple with the demands of regional collaboration as we are presently experiencing and the required infrastructural support, international and regional financial uncertainty and global recession. in an environment where the national pie is shrinking there will be need to restrain wages in line with productivity gains even more so than before and to relate this to ensuring the viability of business. at the same time we cannot compromise on areas such as workplace safety for our workers and a comfortable working environment. in addition, on the government side, on - going tax initiatives designed to benefit the private sector and the workers will be important. the private sector has become more complex and vibrant, and benchmarking, pay - forperformance schemes and other productivity enhancement initiatives, are becoming more commonplace among leading companies. however, it is important going forward for the private sector to become more competitive because the trend toward more liberal trading regimes and the signing of recent agreements will eventually mean even greater competition at home, especially in services, and greater opportunities abroad. it would be useful during this lull in the previously hectic pace of corporate expansion to pause and reflect on how the corporate sector can best position itself in the likely future resurgence of economic activity and to do so more competitively. economy on the economic front, the tourism sector has begun to weaken as the economies of our major markets deal with major economic downturns and overall real growth has been sluggish as barbados continues to feel the effects of the international recession. this has of course brought economic challenges. while the unemployment rate has remained in single digits there is a likelihood of some deterioration in the near future as barbados begins to be more impacted by the widening and deepening global economic recession. in order to lessen the impact of the global recession, keeping employment up will be important, since, if we cannot do so, spending will decline and a decline in spending means a worsening of the impact of the recession. it will be important for the social partners to collaborate closely to arrest this development. | they have involved neither direct nor indirect fiscal transfers. today these programmes are seen as a success, although the picture of a greek recovery is still somewhat blurred, which is hardly surprising. after all, it took several decades before denmark had fully recovered from the situation in the early 1980s, when the economic challenges in some respects resembled those faced by greece today. the debts of greece have been written down, but only for private - sector creditors. the interest terms have been very accommodative and greece annually saves several per cent of gdp on its government interest payments. for example, portugal's interest expenses are higher, even though its debt is lower. but the interest rate has not been lower than that at which the imf and esm have been able to borrow in the market. the principals of the loans have not been reduced. instalments and interest payments have been postponed considerably, but have not been written down. there has been a reduction in the margin lenders add to their financing costs, and there is a possibility that the ecb will waive its profit on market purchases of greek government bonds, but again there have not been any fiscal transfers from other member states. in the international press, increased write - down of debt, also to other governments, has been called for. but write - down of government lending is a fiscal transfer, and there are good reasons why this has not taken place. in that situation, taxpayers in the lender states would feel that they were bearing the costs of decisions made in borrower states – decisions the imf, international monetary fund, established in 1944. the imf today has 189 member countries and a lending capacity of around 1, 000 billion dollars. the esm, european stability mechanism, established by the euro area member states in 2012 as an intergovernmental institution. the esm has a lending capacity of 500 billion euro. side 6 af 9 that they could not influence. this would provide a basis for political conflicts in and between member states. taxpayers and the government of the borrower state would have a joint incentive to ease fiscal plans if others were ultimately to foot the bill. and it may be difficult to raise government loans for other crisis - ridden member states in future if they can subsequently be converted into income transfers. fiscal transfers can be perceived as " taxation without representation ". and there is a legitimate need for member states to be allowed to test their own policies and hence also to bear the consequences. a balance is struck | 0 |
##lli, “ relationship and transaction lending in a crisis, ” the review of financial studies, 29 ( 2016 ), 2643 – 2676. level, this aim is being pursued by implementing the capital markets union project : enriching the types of financing available to non - financial corporations, broadening the portfolio choices of investors, enhancing the efficiency of financial intermediation, removing barriers to cross - border investment, and increasing funding options for smes and infrastructure. in italy, a number of additional initiatives with similar goals have been taken in recent years, such as minibond issues, debt funds, tax incentives for venture capital and allowances for corporate equity. yet in italy, as well as in many other european countries, the role played by the financial markets and non - bank financial institutions is still limited. this is why i am looking forward to discussing these issues with our eminent experts. designed by the printing and publishing division of the bank of italy | effects on systemic risk and growth, ” economic policy 31 ( 2016 ), 51 - 106. savings favours participation in capital markets7 and there is evidence that institutional investors have positive effects on corporate governance. 8 a look at the development of institutional investors in advanced economies highlights the challenges ahead. countries in continental europe continue to lag behind the uk and the us. the gap is all the more serious in the pension funds sector, reflecting the relative weight of funded retirement schemes in national social security systems. the gap is very noticeable in italy. for example, in 2015 the assets managed by pension funds accounted for less than 10 per cent of gdp in italy, compared with more than 100 per cent on average in the uk and the us. we definitely need to attain a more comprehensive understanding of the underdevelopment of institutional investors in most euro - area countries. for all of these reasons, policymakers look favourably at the development of market - based financing and the growth of institutional investors. it must be stressed, however, that banks and market - based finance remain complementary, rather than substituting one another, and that a level playing field should be ensured for all financial intermediaries. if regulatory changes put banks at a disadvantage, firms may end up having difficulties accessing both bank and non - bank forms of external finance. indeed, apart from remaining a vital source of corporate funding, especially for smes, banks are uniquely equipped to help firms to access the capital market. moreover, banks offer contracts ( such as overdrafts or credit lines ) and services ( such as lending assistance ) that are often complementary to market - based finance. these contracts and services can be helpful to firms, especially in periods of distress. 9 * * * to conclude, the corporate sector would greatly benefit from a more developed market - based segment within our financial systems. institutional investors play a pivotal role in this structural evolution. at the european scharfstain, d. s., “ presidential address : pension policy and the financial system, ” the journal of finance, 73 ( 2018 ), 1463 – 1512. mccahery j. a., z. sautner and l. t. starks, “ behind the scenes : the corporate governance preferences of institutional investors, ” the journal of finance, 71 ( 2016 ), 2905 – 2932. bolton, p., x. freixas, l. gambacorta and p. e. mistru | 1 |
summarise the argument i have been making. banks of all shapes and sizes have the opportunity to benefit from the recovery in the hong kong economy when it comes. some banks will however do better than others, and our research indicates that a more efficiently operated and diversified bank will achieve higher profits. i hope that all the banks sitting here today will be among those that fall into this category. | adnan zaylani mohamad zahid : launch of life insurance association of malaysia's starter pack insurance fund keynote address by mr adnan zaylani mohamad zahid, assistant governor of the central bank of malaysia ( bank negara malaysia ), at the launch of life insurance association of malaysia's ( liam ) starter pack insurance fund, kuala lumpur, 28 august 2024. * * * assalamu'alaikum warahamatullahi wabarakatuh and a very good morning. first of all, let me congratulate the life insurance association of malaysia ( liam ) on the occasion of its 50th anniversary and thank you for inviting me to be a part of this event. it is a pleasure to be here today for the launch of liam's starter pack insurance fund, as part of the golden anniversary celebrations. liam's achievements and contributions throughout 50 years of establishment, liam has played an integral role in the development and growth of the life insurance industry in malaysia. as a trade association, liam has bridged the collective interest of its members and also played an important role in addressing the protection needs of malaysians. liam's role has been central in driving the awareness and financial education initiatives on life insurance to promote greater financial resilience for individuals and households, through many initiatives, such as the establishment of the mycoverage website, liam's # bukanextra and # nofomo awareness campaigns, and collaborative efforts with akpk on the jelajah bijak wang. during the pandemic, let's not forget liam together with other industry associations, supported the needs of policyholders – establishing the mycovid19 testing fund during the early days of the health crisis. such efforts by liam and other stakeholders in the industry have certainly contributed to the awareness and takeup of insurance protection products. life insurance industry's achievements and challenges i am pleased to note that the life insurance industry continues to show commendable growth performance. in 2023, the industry recorded a double - digit growth of 11. 6 % in its new business premium amounting to rm13. 4 billion as compared to rm12 billion in 2022. this is driven largely by the strong performance in the take - up of group and investment - linked products. this also shows acceptance of life insurance products not just as protection but also for medical coverage and investment purposes. malaysia's life insurance penetration rate1 measured against the gross domestic | 0 |
system. measures are also needed to tackle negative systemic developments resulting from the interaction of individual decisions even when well - founded – measures which aim to mitigate negative systemic effects on the stability of financial institutions. such measures would be incumbent upon the financial literacy and skills of the economic agents and, in particular, their 1 / 3 bis central bankers'speeches ability to interpret the signs that result from the intervention of the prudential authorities. as a rule, a reduced capacity to interpret this intervention creates a greater risk of a bubble developing in the market and as a consequence determines a need for more interventionist prudential measures on the credit granting side or on the savings application side, to guarantee financial stability. financial literacy and education are therefore key for financial stability and for the nature of conduct and macroprudential supervision policies. in short, to safeguard financial stability, it is not enough to monitor individual choices or to regulate the conduct of banking institutions with their customers. it is also necessary to monitor the system as a whole, to mitigate the negative externalities of individual actions, as well as the supervision of each financial institution to ensure its financial strength, in particular its capacity to absorb the risks resulting from the application of the resources entrusted to it. the relevance of financial literacy and education has increased even more with the globalisation of markets and growing sophistication of products. widespread access to banking products and services that are ever more diverse and complex and the emergence of new sales channels have all brought new risk sources. we have therefore seen, at international level, the progressive strengthening of the framework of rights granted to banking customers, a broadening of areas of intervention for conduct supervision and more intrusive action by the supervisors. the objective is to encourage the adaptation of products and services to the characteristics and needs of customers and prevent conflicts between the interests of customers and institutions. financial information and education for banking customers has also come to be seen as a structural dimension of banking conduct supervision, complementary to regulation and oversight. more informed customers and with a greater ability to understand the characteristics of banking products and services are generally more attentive and demanding. they are also better prepared to choose banking products and services more suited to their financial situation, needs and risk profile, thus contributing to the efficient operation of the market and to safeguard financial stability. banco de portugal ’ s conduct supervision strategy banco de portugal began exercising its conduct supervision mandate at the outbreak of the international financial crisis. we have adopted a strategy based on three | excesses of finance without jeopardizing its much needed role? an optimistic view about this possibility may rely on a positive assessment of all the solutions that have been put forward in several reports and proposals that have flooded our desks, many of which have been adopted in various legislative projects that are now being debated. let me go through several of those proposals with brief comments as many of them are widely known. i just want to provide you with my own sense of their relative importance and later on i will dwell upon a few that i think have not been fully developed or considered. 1. creation of a macro - prudential responsibility explicitly attributed to an existing or newly created institution. this is very important as the crisis showed that micro supervision is not sufficient when the risks come from the overall situation of the economy or the financial markets. doubts remain about the exact competences to be given to the institutions in charge of this new role. 2. introduction of new standards demanding more and better capital along the lines of the basel committee proposals ( the increase in capital against trading book risks has already been the subject of legislation in europe ). 3. reduction of the pro - cyclicality of the regulatory framework, through a system of capital buffers or dynamic provisions ( or reserves ) changeable with the economic cycle. in the first method, required capital would increase in good years, when loan losses are below long - run averages, creating capital buffers which would be drawn down in recession years as losses increase. personally, i prefer dynamic provisions but any of the methods is preferable to the existing situation. 4. correction of the pro - cyclical bias of present accounting standards, which allow profits to be increased with unrealized capital gains in periods of booming asset prices, and exaggerate declining profits in bad times through the effect of unrealized capital losses. besides the changes in standards to permit a more flexible treatment of asset prices in periods of market stress and illiquidity, there is the need to introduce a concept of an economic cycle reserve, along the lines proposed in the turner review, calculated with the same method used in the previous item ( 3 ), in order to set aside profit in good times to reduce losses in depressed economic cycles of the future. it is indeed necessary to affect the accounting reports in order to avoid that volatile unrealized gains influence share prices and consequent behaviour of financial institutions. 5. introduction of a new maximum absolute leverage ratio ( risk unweighted | 0.5 |
the striking thing about these problems is that they erupt without much warning and to the surprise of even the most knowledgeable in this field. they are also not specific to individual economies : market liberalisation and globalisation have made them common problems for all economies that wish to play a part in the international financial system. indeed, with a few economies in asia going through the same process of financial liberalisation and encountering the same problems, the crisis was characterised as one specific to asia, hence the reference to the asian financial turmoil. but explanations of the financial crisis soon moved from regional to international. events in russia and latin america, the long term capital management ( ltcm ) episode, and the subsequent deleveraging of hedge funds soon made it clear that our regional crisis was more than just a problem of a few individual economies not keeping their houses in order. the root of the crisis is in the great increase in the speed, quantity and unpredictability of international capital flows. and many of these capital flows are mobilised or indirectly influenced by highly leveraged institutions operating behind a veil of secrecy interlaced with esoteric mathematical models that do not allow the systemic as well as the rather simpler counter - party risks to be identified, let alone properly managed. as recent events in this region and throughout the world have shown, this phenomenon has reached a level where it is capable of disrupting even the largest markets and completely destabilising smaller markets. it will therefore be useful for us to discuss these issues in greater detail before focusing on what needs to be done. international capital flows for a long time it has been taken for granted that capital flows are exactly analogous to trade flows : that, wherever they occur, and in whatever form, they invariably benefit long - term economic development, and that therefore the looser the rein they are given, the greater the benefit. this presumption, however, has been questioned recently in light of the experience of some emerging market economies. professor bhagwati, for example, in his article last year on “ the capital myth ”, has argued that the assumption that free capital is as virtuous as free trade is wrong and that the claims of enormous benefits from free capital mobility are not persuasive. there are undoubtedly many benefits that go with free mobility of international capital. traditionally, capital flows take the form of commercial bank lending, foreign direct investment, or equity portfolio investment. over the past few decades, these flows have facilitated | the efficient cross border utilisation of capital and have provided liquidity in financial markets. by adding an international dimension to financial intermediation, the mobility of international capital has clearly been helpful in promoting growth and development in both the capital exporting and the importing economies. the mobility of capital has more recently been boosted by advances in telecommunications and information technology, allowing capital to move into or out of an economy in huge amount and within a very short space of time. the virtue of capital mobility therefore carries the risk of capital volatility. the volatility is destabilising in both directions. too rapid a build - up of capital inflows places severe upward pressure on domestic asset prices, fuels inflation, and exacerbates macroeconomic imbalances. conversely, sudden and massive reversals of these flows place intense downward pressure on the exchange rate, and therefore upward pressure on interest rates, causing asset bubbles to burst and splatter. when rapid build - up is followed suddenly by massive withdrawal, we see the kind of crisis that swept across this region in 1997 and 1998. the volatility of international capital flows is also attributable in part to the phenomenal growth of derivatives and the global over - the - counter ( otc ) market in the past decade. a survey by the bank for international settlements ( bis ) in june 1998 estimated the size of the global otc derivatives market at an aggregate notional value of us $ 70 trillion. despite the trauma of the global financial crisis last year, there have been no signs of an overall slowdown. according to the us federal reserve board, the notional value of derivatives contracts outstanding at us commercial banks, the leading players in global derivatives markets, grew by more than 30 % last year : this is the most rapid annual growth since 1994. the sheer volume of derivatives trading does not say much about their associated risks. these new financial instruments have undeniably helped investors to unbundle their risks. they have promoted investments and generated substantial benefits to the developing countries receiving such investments. however, the availability of derivative instruments has also increased the opportunities for speculation that resulted in significant losses with the downturn in markets during the financial crisis. the use of swaps, futures, forwards, and other derivative instruments have enabled investors to take on far greater exposure relative to their capital, and to greatly increase the potential for loss. market stability and highly leveraged institutions let me make it clear that the losses or gains | 1 |
, would not have been possible without this underlying agreement. whether this consensus is a result of the role played by spanish economists, as enrique fuentes set out to demonstrate in his major work published by the real academia de ciencias morales y politicas, will be something for historians to decide. i would, however, venture to say that in the economic debate in spain heterodox positions, or those furthest removed from the central strand of current economic thought, are relatively marginal. concerning qualitative aspects, i have no doubt that another of the factors behind spain's dynamism is the improved management of spanish firms. and behind this lies a process in whose beginnings barcelona was a driving force. i refer here to the expansion and quality of our business schools, which enjoy great prestige internationally. in the business school rankings of recent years, three spanish institutions have systematically been in the top 30 worldwide. i would not wish to conclude this review of the factors contributing to the momentum of the spanish economy in the past 20 years without referring to the important role decentralisation has played. decentralisation is not free from risks - and i shall in fact deal with some that are most relevant to us but it has acted in spain as a powerful economic, social and cultural dynamo, in a similar way to what happened in post - war germany with the creation of the landers. * * * * * let us look now to the future. in the light of the trajectory of recent decades, what can we say about the future of the spanish economy in the medium and long term? to tackle the future from a useful perspective, i shall follow epictetus ’ s recommendation for gaining knowledge of the world. the stoic philosopher divided worldly matters into two : those that depend on us and those that do not. this classification is useful because, when talking about the future of the economy, it is worth focusing on those things that depend on the behaviour of economic agents and all those who intervene in framing economic, regulatory or supervisory policies, without wasting time regretting what we cannot change or influence. among the things beyond our control is, for example, the external environment, including the european economy which is so important for spain, since our influence on developments in the rest of the world is very limited. it is also important to realise that the starting position of the spanish economy with its strengths and weaknesses, which is the basis for predicting its short - term trajectory, is a given and | ##ary discipline rules. and to date the stability objective has been reasonably met. but this is an area where we cannot lower our guard. as i have said, one of the advantages behind spain's growth differential when compared with other european countries is the fact that our public spending / gdp ratio is below 40 %, while in other countries it is close to or exceeds 50 %. the need to maintain this comparative advantage must be clear. and this means that when public demands for education and health care exert pressure on territorial governments, especially at times when the growth of revenue is not as high as it currently is, it will be necessary for increases in education spending, which are so important for growth, to be offset by cuts in spending intended for other less priority areas. as regards health care, it should be recalled that there is extensive potential for improving management, potential which we must harness. it is important to bear in mind the experiences of other european countries that opted for a model of increasing public spending on health but which, nevertheless, did not attain the desired results. decentralisation has accounted for much of our strength in recent decades and growth in the coming years will depend greatly on which direction we take. employers, for instance, have recently issued a warning about the potential impact of decentralisation on certain regulatory aspects affecting market integration. the example of germany's economic history in the 60 years since the second world war, which may very briefly be described as 40 years of vigorous expansion and almost 20 years of sluggishness, should be food for thought when extracting all the strong and favourable aspects of decentralisation and avoiding those phenomena entailing risks to the efficient working of the economy, on which any lasting improvement in well - being ultimately hinges. finally, another policy area to which great heed should be paid when seeking to sustain healthy public finances in the medium and long run is that of social security. admittedly, the forecasts available denote a lack of major problems in the social security system in the coming years ; however, looking further ahead, it is clear that if changes are not made, the system may become a considerable deadweight holding back growth in the spanish economy. when the long - term consequences are taken properly into account, it is fairly clear that the sooner social security reform begins, the less costly it will be. or stated the other way round, if social security reform continues to be delayed, we may find ourselves faced with a truly dangerous dilemma : either | 1 |
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