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target. β’ the bank retains considerable flexibility in the conduct of monetary policy at low interest rates, consistent with the framework outlined in the april mpr. with that, paul and i would be pleased to take your questions. | the fight against inflation, despite the short - term pain that high interest rates can cause. first, i want to talk about the benefits of returning to the 2 % inflation target. specifically, i β ll emphasize how inflation dynamics tend to be self - stabilizing when inflation is near the target and how that helps the economy function better. i β ll also stress how low, stable inflation leads to better employment outcomes. second, i β d like to highlight the dangers of straying from the 2 % target. here i β ll talk about how the stabilizing forces i just mentioned can turn into de - stabilizers. the high and volatile inflation that can result is troublesome for many reasons, including the fact that it makes the price system less informative. this can undermine efficiency and weaken the competitive forces that help the economy achieve its full potential. finally, i want to place the current canadian situation in a global context. although most of our trading partners are also experiencing high inflation, their paths back to their own inflation targets may end up being different than ours. should this be a concern? we β ll dive into that question. the benefits of being near the 2 % target the bank is fully committed to returning inflation to the 2 % target. for three decades, this target has served canadians well. and since it represents a sweet spot on the inflation spectrum, it remains the centrepiece of the bank β s inflationtargeting framework. keeping inflation stable and predictable at that low level is the best contribution monetary policy can make to the economic and financial well - being of canadians. 1 to better understand the value of a 2 % inflation target, we first need to delve into some of the forces that influence firms β price - setting behaviour. these are illustrated in figure 1, which will serve as a roadmap for much of my talk today. inflation dynamics are driven largely by the cost pressures that firms face. these pressures can come from both domestic and international sources. domestic cost pressures tend to appear when the economy is in excess demand β that is, when firms face levels of demand beyond what they β re able to supply on a sustainable basis. as firms strain to meet that excess demand, they not only increase their prices but also bid up wages and the prices of other inputs as they compete with other firms for workers and materials. and since the goods produced by one firm are often inputs for other firms, this can lead to a second round of effects that further broaden and | 0.5 |
if the new opec + agreement is fully complied with. further on, oil prices are expected to gradually rise to usd 45 per barrel in 2022 as global demand picks up and oil stock levels decrease. another key assumption of our forecast is the duration of the coronavirus pandemic and the restrictions implemented in russia and abroad. our estimates suggest that governments will be gradually lifting or considerably easing the majority of current restrictions in the second quarter. in this case, we can expect that in the third and fourth quarters economic activity will be recovering quarter - on - quarter. the economic situation will be returning to normal step - by - step. the direct adverse impact of the restrictions primarily falls on this quarter, while their secondary effects will continue to manifest in the future. according to our surveys, over 80 % of the businesses across various industries have been experiencing the influence of the coronavirus pandemic and current 1 / 3 bis central bankers'speeches restrictions. companies β business sentiment has materially declined. it will take time to restore business processes, logistics and production chains, offset the reduction in profit and revenue, build up reserves and savings that have been used to a greater or lesser extent over the second quarter. combined with uncertainty regarding potential changes in the external environment, this will limit production, investment and consumer activity. in these conditions, gdp will shrink yearon - year in the third and fourth quarters, that is the annual rate of economic growth will be negative. according to the bank of russia β s forecast, gdp will overall decrease by 4 β 6 % in 2020. the major contributor to this reduction will be a decline in exports that may reach from 10 % to 15 %. moreover, fixed capital investment will also substantially decrease ( by 6 β 10 % ) compared to the previous year. companies will be primarily using their financial resources to restore their daily operations. uncertainty about the prospects of domestic and external demand will be confining investment plans. the decline in production and investments will be confining the opportunities for an upturn in income. consumer demand will be shrinking. the measures implemented by the government and the bank of russia will support the economy, and specifically the most affected industries. economic growth in 2021 β 2022 will largely be recovery - type. according to our forecast, gdp will expand by 3 β 5 % in 2021 and by 1. 5 β 3. 5 % in 2022. gdp growth will be promoted by a further implementation of national projects. however, our baseline forecast factors | our actions, show how they influence interest rates and the economy as a whole, and to convince people, proceeding from facts, that bank of russia forecasts on inflation are coming true. inflation has slowed down to about 7 % ( as we predicted a year ago ) and inflation expectations also gradually abate. as a matter of fact, we have switched from measures to prevent the inflation spiral from unwinding to the policy of persistent reduction of inflation and inflation expectations and we are sure that our consistent and smooth actions will help us reach the 4 % inflation target in late 2017 without having an adverse impact on economic growth. the consistent and predictable monetary policy is a factor of reducing general uncertainty for business and, hence, the best environment for decision - making, i. e., the best conditions for growth in lending and investment activity. a desire to help the economy through premature cutting interest rates may have an opposite effect. we should stick to sound conservatism here. in order not to reproduce unstable imbalanced growth output and labour productivity should grow faster than income and demand. this will provide incentives for businesses to optimise costs and look for profitable segments. our policy is spearheaded precisely at this. bis central bankers β speeches it goes without saying that a more responsible fiscal policy ( given the smaller budget deficit we will be able to cut rates faster ) and competition development would be conducive to faster inflation reduction. now, let me say a few words about current issues of monetary policy : they are more technical, but no less important, since they are related to the transition from the structural liquidity deficit to its structural surplus. i would like to emphasise once again that this transition does not affect the central bank β s ability to manage the money market rate and with its help to influence all the other rates in the economy, lending and deposit activity, the economy, and inflation. however, in order to ensure this ability the bank of russia should change its operational activity and start to actively mop up liquidity. these operations comprise deposit operations, issue of bank of russia bonds and sale of assets, for example, the ofz portfolio. given the expected structural surplus growth, we have also decided to raise the required reserve ratio by 0. 75 percentage points from 1 august. in order to stimulate deposit dedollarisation we decided to leave the difference between the ratios on ruble - and foreign currencydenominated deposits intact. we also have plans to cancel ineffective exceptions to this ratio | 0.5 |
crises in 1997, and the devaluation of the russian rouble in 1998. but they were not cost - free : in the absence of using the exchange rate as a shock absorber, the burden of adjustment in the economy under a currency board agreement necessarily falls on wages and prices. in the case of argentina, the rigidity of the hard peg came to the forefront in the wake of a series of external shocks in early 1999 β notably the higher cost of financing to emerging markets, the sharp devaluation of the brazilian real, the rapidly appreciating us dollar, and falling commodity prices. the straitjacket imposed by the currency board cast doubts on argentina β s medium - term economic performance and concerns about its ability to service and refinance debt were further compounded by the relative fiscal laxity in previous years. as the credibility of the currency board came under increasing pressure, the country required policy adjustments but also sustained signs of support from the official sector. yet argentina β s misfortune is that, as its need for official financing was increasing, opinions about how multilateral agencies should act when faced with emerging market crises were changing β in particular, with regards to the need of engaging private creditors ( particularly bondholders ) in the resolution of debt problems. the last imf package in support of argentina ( september 2001 ), for example, contained specific provisions to this end. in the subsequent months, fund officials publicly encouraged the argentinean authorities to reach an agreement with private sector agents over debt - exchange operations. and in december 2001, the fund suspended its loan programmes with the country. while private sector involvement in crisis resolution should be welcome, one may wonder if it should be the sole instrument to deal with such circumstances. many feel that the official sector was rather unkind to argentina. after all, its macroeconomic indicators β particularly its fiscal accounts, which were the main source of concern β were broadly the same ( or better ) than other countries which had received large imf funding in recent years, such as turkey or brazil. argentina β s central government debt in 2001 was less than 55 per cent of gdp, and its government deficit ( including the provinces ) amounted to less than 6 per cent of gdp in the same year. in contrast, turkey posted a 57. 4 per cent debt - to - gdp ratio and a government deficit of 11. 6 per cent of gdp in 2000, right before its currency and banking crises. brazil had a government deficit of 7. | for all other sources of risk that we supervise. an approach that will be here to stay. our interactions with the banks we supervise show that they are also making progress, and they have finally started to put in place the basic infrastructure needed to identify, monitor, assess and control climate - related and environmental risks. 1 / 2 bis - central bankers'speeches all progress should be celebrated. for the banks under our supervision, we are contributing to this by proactively sharing the good practices we see. but let me be clear that all progress is ultimately a means to an end. and that end can be one thing only : practices and policies that are fully aligned with a paris - compatible transition path. this is why, when taking the first set of climate - related actions in our monetary policy, we committed to regularly reviewing all the relevant measures to ensure that they continue to support the decarbonisation path to reach the goals of the paris agreement and the eu's climate neutrality objectives. this is also why last week ecb banking supervision communicated deadlines by which we expect banks'risk management strategies to be fully aligned with our supervisory expectations in the area of climaterelated and environmental risks. this is why, despite the progress we have seen, i will continue to stress that the banks under our supervision need to step up their game and truly manage climate - related and environmental risks in the same way we expect them to manage any other material risk. this is why we support the european commission's proposal that banks should be legally required to put in place prudential transition plans which enable them to assess their risk exposures and the effectiveness of their risk controls in a world that is transitioning to net zero. this is why we ourselves will soon start to disclose data on climate risk exposure and the carbon footprint of our own asset portfolios, a commitment that covers all national central banks in the eurosystem. and this is why we urgently need to continue moving ahead. our road to sharm el - sheikh has been productive. but we cannot assess the success of our actions based on our point of departure. we need to judge our progress based on what is necessary to reach our destination in time. and we unfortunately cannot say that we are ahead of schedule. droughts, floods, heatwaves, and biodiversity loss are undeniably on the rise as very real manifestations of the climate and environmental crises. at the same time, in the eu, we are seeing that governments are all | 0.5 |
and academic economists to observe the decision - making process and provide comments on potential areas of improvement. 7 a recent study by the bis indicated that the bank has self - commissioned more reviews than any other central bank. 8 one further avenue of review is to assess our own forecasting performance. 9 reviews of forecast performance help to update our understanding of economic relationships, evaluate risks to the current outlook and identify areas where we could improve our accuracy. the bank will always make forecast errors, reflecting the uncertainties in assessing the current state of the economy and its outlook. for example, the vast majority of forecasters were unlikely to have been able to accurately predict the sharp decline in oil and export commodity prices that occurred over 2014 and 2015 β one factor that has led to current low see : rbnz ( 2001 ). β the monetary policy decision - making process β, independent review of the operation of monetary policy supporting paper ; rbnz ( 2007 ) above. these visitors will often present a paper containing views on the decision making process and recommendations to improve the process. bis ( 2016 ), β self - initiated reviews of the central bank β s policy performance β, background note for the february 2016 meeting of the central bank governance group. past forecast performance reviews include : mccaw s and ranchhod s ( 2002 ), β the reserve bank β s forecasting performance β, reserve bank of new zealand bulletin, vol. 65, no. 4 ; turner j ( 2006 ), β an assessment of recent reserve bank forecasts β, reserve bank of new zealand bulletin, vol. 69, no. 3 ; labbe f and pepper h ( 2009 ), β assessing recent external forecasts β, reserve bank of new zealand bulletin, vol. 72, no. 4. bis central bankers β speeches inflation. to further illustrate the point, figure 2 shows the bank β s central outlook for annual gdp growth and the error bands around this estimate implied by our past forecast errors. figure 2 june statement annual gdp growth forecast and error bands note : the error bands displayed above reflect the direction and magnitude of the bank β s past annual gdp growth forecast errors at different forecast horizons, calculated over the period 2010q1 - 2016q1. to set the range of the error bands, the bank β s forecast ( in blue ) is adjusted for bias using the bank β s mean forecast error at each relevant horizon. the error bands are then set symmetrically relative to this bias adjusted forecast, using the standard deviation of the | ) benchmark the bank β s forecasting performance against other forecasters and the bank β s own statistical models respectively. if the bank β s forecasts are significantly less accurate than other forecasters or our own statistical models, then we can likely gain insights from these sources to improve our own modelling and forecasting framework. generally, the bank β s recent forecasts have performed well relative to these benchmarks. looking at the period since the financial crisis, the bank has been one of the better forecasters of new zealand macroeconomic variables. in addition, the bank β s forecasts are of a similar quality to those produced by our suite of statistical models. overall, the bank, other forecasters and the bank β s statistical models did not foresee the persistent weakness in inflation or the persistent strength in the new zealand dollar. this is a reflection of the inherent uncertainty that analysts and policy makers have to deal with when forecasting the new zealand economy. despite this, the persistent period of weaker - than - expected inflation remains a focus for the bank. low inflation has been a common experience in most advanced and many emerging economies. the bank has shifted its resources in recent years towards more fully understanding this low inflation environment, and this is a strategic priority in the bank β s 2016 statement of intent. the bank has completed a range of research topics that have shed some light on the drivers of low inflation. this includes an assessment of international influences ( including the exchange rate ), 11 a review of our frameworks for estimating key unobservable variables, 12 mcdermott ( 2016 ), β forward guidance in new zealand β, remarks by john mcdermott, assistant governor of the reserve bank of new zealand, 4 february 2016. richardson ( 2015 ), β can global economic conditions explain low inflation in new zealand β, reserve bank of new zealand analytical note an2015 / 03. bis central bankers β speeches assessing the inflationary consequences of different migration drivers and strong labour supply growth, 13 and highlighting the potential impact of adaptive inflation expectations on current inflation. 14 the bank will continue to update the public on the drivers of low inflation in speeches, research articles and the statement. conclusion each ocr decision and statement publication involves a lot of work from a number of staff around the bank. this staff involvement reflects the inherent uncertainty the bank is faced with when making a monetary policy decision. we have set up processes to help deal with this uncertainty and improve the quality of our monetary policy decisions. for much | 1 |
it - for compliance " failures " related to fatf recommendations that are yet to have a proven impact on crime and of little relevance to most countries in our region. we must ensure that resources and knowledge are shared, and a common pacific voice heard as these affects the livelihoods of our people. on that, perhaps, rather sombre note, i welcome you to our country, with the all the generosity, and warmth of spirit that this country, and our pacific region is known. it is my honour to declare this in person inaugural pacific financial intelligence community plenary open. i hope this meeting leads to the deepening of friendships between participants and ties between our countries. 2 / 3 bis - central bankers'speeches may god bless you all. 3 / 3 bis - central bankers'speeches | believe, unprecedented in our time. just as the offences and facilitators behind these challenges cross borders, so do the impacts. if we are to prevent the influence of criminal wealth on the peace and prosperity of our region we are going to have to work together like never before. 1 / 3 bis - central bankers'speeches a reminder of this - if we needed one - was neatly provided to us by a plane - load of cocaine crashing on a runway not far from here on july 26, 2020. the cocaine shipment, was facilitated β whether knowingly or unknowingly, by international banks, shipping agents, accountants, lawyers, high - value goods dealers, insurance companies -. the list goes on. each step of the process, and each facilitator, represents a missed opportunity to disrupt this shipment. the enormous profit to be made from drug trafficking will ensure that the international drug - trade is here to stay. and it is enormous amounts of money in the hands of criminals that should perhaps be of greatest concern, to those in this room. addressing the challenge presented by the blurring of organised crime, corruption and geopolitics - fuelled by vast amounts of money - will require a new way of thinking, and new techniques for data collection, analysis and sharing - to identify the offenders, their facilitators, and, the most effective means of shutting them down. successful disruption of multinational facilitators will require the accurate identification of those facilitators but it will also require identification of the best jurisdiction in which to take action ; the easiest offences to target ; and the most efficient legal process to be used. these choices and decision will need to be made collectively, by representatives from multiple jurisdictions across our region, acting with trust in each other, in the mutual best interest of the region. what i am proposing here is an unprecedented level of international cooperation to address an unprecedented challenge. if we are to maintain the peace and relative prosperity enjoyed in our region we, the people in this room, must accept the challenge of prioritising each other ; working together ; and trusting one another. this, i hope, is a challenge that you can accept - since it is quite possible that peace in our region depends on it. this trust and cooperation must extend also to a collective effort to comply with international standards. a collective pacific effort to prevent the threat of grey - listing of jurisdictions that are more often the victims of money laundering β not the perpetrators of | 1 |
been reaffirmed each year since ( chart 2 ). in it, the committee indicates that price stability is understood to mean 2 percent inflation in the long run as measured by the annual change in the price index for total personal consumption expenditures ( what we refer to as the pce price index. ) the 1930s β deflation and the 1970s β double - digit inflation clearly indicate that the nation is well - served by the fed having a long - run inflation objective and making sure it achieves that objective within a reasonable period of time. the employment mandate is more nuanced. because maximum employment is determined by nonmonetary factors that affect the structure of the labor market, we can β t have a simple, time - invariant goal. we do, however, project where we think the longer - run normal, or β natural rate, β of unemployment is currently. today, our estimates for this rate generally range between 5. 2 percent and 5. 6 percent. such assessments can vary over time. however, the most important determinants of the natural rate change only slowly, so today β s assessment is an important input into policy. being explicit about it contributes greatly to our accountability. accountability is key. much as corporations require corporate scorecards and earnings calls to explain quarterly performance, the fed needs to regularly communicate its policy strategy and evaluate how it β s doing. and, when we are missing our policy goals, the public needs to know what we are doing about it. we need to decide on the appropriate actions to achieve our objectives and communicate them to the public. to that end, in our longer - run strategy statement we β ve said that when the economy deviates from price stability or maximum federal open market committee ( 2014c ). bis central bankers β speeches employment, we β ll take a balanced policy approach that achieves both goals within a reasonable period of time. a clear articulation of the fomc β s goals and an explanation of how it views its policy misses and plans to correct them help the public better anticipate the fed β s policy actions. in turn, the public β s improved understanding of fomc policy actions increases their efficacy by reducing uncertainty over future financial conditions and how those actions might evolve with changes in the economic environment. so, what we clearly need is a scorecard that communicates our accountability in a straightforward manner. keeping score when there are two goals i like to illustrate our balanced approach to achieving our dual - mandate goals | what economists call a β liquidity trap. β let me explain. in normal times, real interest rates β that is, nominal interest rates adjusted for expected inflation β rise and fall to bring desired savings into line with investment and to keep productive resources near full employment. this market dynamic is thwarted in the case of a liquidity trap. that is, when desired savings increase a great deal, nominal interest rates may fall to zero and then can go no lower. real bis central bankers β speeches interest rates become β trapped β and may not be able to become negative enough to equilibrate savings and investment. that is where we seem to be now β short - term, risk - free nominal interest rates are close to zero and actual real rates are modestly negative, but they are still not low enough to return economic activity to its potential. a liquidity trap presents a clear and present danger of a prolonged period of economic weakness β today that means a risk of repeating the experience of the u. s. in the 1930s or that of japan over the past 20 years. but we need not resign ourselves to such an outcome. because of the dire implications of liquidity traps, economists have studied them over the years in rigorous analytical models. importantly, variants of these models have successfully explained past business cycle developments in the u. s. these studies conclude that economic performance can be vastly improved by employing monetary policies that commit to keeping short - term rates low for a prolonged period. a balanced policy approach as i weigh the evidence, i believe we are in a liquidity trap and favor the prescription of continued accommodation. but i recognize that i could be wrong. central bankers have incomplete information, and sometimes are confronted with very different views of the forces driving the economy. this is especially true in the difficult circumstances we currently face. instead of a liquidity trap, some have posited that we are in an economic malaise that reflects β structural factors β ( such as a job skills mismatch ) and that the economy today is actually functioning close to a new, more dismal productive capacity. i have discussed this very pessimistic β structural impediments scenario β in other forums. 1 if this scenario is true, then further monetary accommodation will only lead to rising inflation without much improvement in unemployment. those subscribing to this view warn of repeating the mistakes of the 1970s. at that time, the fed did not understand that the changing structure of the economy had caused the | 0.5 |
interest and undervalue international interests but also the market mechanism seems to produce a similar outcome. an interesting argument in support of this view was presented in the per jacobson lecture last june in basle 6 and i quote β... there is a nationalist bias in the pro - market revolution... β unquote. given the dominance of globalization and the interdependence of financial markets, it may seem paradoxical that there is still that much difficulty in reconciling national and international interests. to sum up on this point : i think the bretton woods institutions and indeed the united nations system were designed to reconcile national interest with global interests and to ensure the mutual consistency of national policies 7. the fixed but adjustable peg and later on the floating or managed exchange rates regime were supposed to take care of imbalances in the current account. the prevailing hybrid system of exchange rates could not clear the current account and imbalances continue to persist. the good news is that imf surveillance proved to be invaluable in the case of deficit developing countries. since the late 1980s, we have introduced several key structural reforms in jordan based on imf surveillance and imf consultations. more recently, the fsap reviews helped us introduce several key reforms in the financial sector. other developing countries may have gone through the same exercise. in this regard, the imf can play an important role in the ongoing regulatory and financial reform efforts on both sides of the atlantic. furthermore, the call for more legitimacy in representation or quotas may enhance the multilateral role of the imf and meet the concerns regarding imf governance. more importantly, i suggest that enabling the imf to provide international liquidity when needed with schemes that establish a β global financial safety net β and expanding its mandate in the light of the recent global crisis to include macrofinancial surveillance and spillover analysis should be seriously considered. in general, i would suggest that strengthening the imf with some enforcement mechanism, such as keynes original idea of a global clearing bank, would restore to the international monetary system some needed ownership and credibility. i believe it was the late charles kindleberger 8 who said that the international financial system will not work unless somebody should take responsibility for it. finally on this point, it is also essential for the imf to saccomanni, 2010. tommaso, 2010. carney, 2009. landau, 2010. enhance its collaboration with the financial stability board | in place until we consider the covid - 19 crisis phase to be over. let me next turn to the ecb monetary policy strategy review. after being postponed due to the crisis, the review was re - launched last month, and it is expected to be completed by september next year. the essential underlying reason for the strategy review is the profound structural changes in the euro area and in the global economy. these include, in particular, the change in the relationship between the spare capacity of the economy and inflation, as well as the long - term decline in the natural interest rate and the sluggish productivity growth. the lower natural interest rate has reduced the room for interest rate cuts, as the effective lower bound lays the floor for them. however, non - standard policy measures have alleviated this constraint to some extent. a reassessment of the ecb β s monetary policy strategy is all the more necessary given both the long - term low inflation β or β lowflation β β and the damage wrought by the covid - 19 pandemic. 1 the strategy review will cover a wide range of subjects, including climate change and digitalization, and it is supported by in - depth analyses of the forces that drive inflation dynamics today β or rather, slow them down. one of the key issues of the review and of monetary policy 1 / 2 bis central bankers'speeches today is inflation expectations, and how they should or could be correctly anchored. in the early years of its operation, the ecb was seeking to establish credibility in an operating environment in which too high inflation was the main concern. this led to the ecb successfully capping inflation expectations by aiming for inflation of β below, but close to, 2 % β. however, in the current environment of chronically low inflation, it is more important to ensure that inflation expectations are not anchored at too low levels. today, that is regretfully the case, which has been amplified by the perceived ceiling and asymmetry in the price stability definition, as demonstrated in a recent paper by bank of finland researchers. 2 to underpin inflation expectations, the first thing to do is to make sure that our inflation target is defined as symmetric β and in particular that the public understands it as symmetric. my way of thinking is thus largely similar to that expressed by president lagarde in her recent speech. 3 in other words, what we need is, first of all, a clearly and genuinely symmetric price stability target, and secondly, | 0 |
on the stability of mature financial systems 1. 1. i would like to briefly sketch two main features of this financial instability : first, while globalisation and financial integration have decisively contributed to improving overall economic efficiency, experience also suggests that financial asset prices have experienced in many occasions somewhat erratic movements resulting in overshooting and misalignments. this pattern applies to a wide range of markets : exchange rates as well as bond and equity markets in both emerging and mature markets. the very fast ballooning of the " new economy " bubble in 1999 and early 2000 - followed by a series of sharp corrections - illustrates the potential of markets to provide funding to the real economy, particularly to the most innovative sectors ; but it also demonstrates again some tendency of markets to over - react, moving from excessive optimism to disproportionate pessimism. thus, financial authorities have been confronted with boom - bust episodes which must be carefully monitored and assessed since they have the potential to affect the global monetary and financial stability. the second feature is a growing tendency towards volatility on financial markets, in the most advanced economies as well as in emerging markets economies. since the beginning of the mid - nineties, volatility has become higher on both international stock markets and foreign exchange markets. volatility per se is not an issue from a financial stability point of view. not only is volatility inherent to financial markets but it is taken into account in many areas of the operational frameworks of financial markets. however, the micro effects of volatility, particularly of unwarranted or unexpected volatility, may actually impair the smooth functioning of financial markets, through different channels. for instance : the asset pricing process and the determination of equilibrium prices is being complicated ; transaction costs and collateralisation costs increase ; the fragility of financial intermediaries β balance sheets increases ; the unequal ability of market participants to tackle volatility movements can increase polarisation among participants, and develop risks of an uneven playing field. ultimately, these effects may unduly raise the costs and bias the allocation of capital, a source of concern from a financial stability point of view. such a higher volatility may have a globally negative impact on market efficiency. indeed, higher volatility may lead to excessive risk aversion among investors and finally to a misallocation of capital, at both the global and sectorial levels. it may also lead to some lack of discrimination between different debt | conference β unveiling the potential of wholesale cbdc : what insights and prospects? β - paris, 03 october 2023 β wholesale cbdc : as decisive as retail cbdc, and actively experimenting β speech by francois villeroy de galhau, governor of the banque de france press contact : mark deen ( mark. deen @ banque - france. fr ), deborah guedj ( deborah. guedj @ banquefrance. fr ) page 1 sur 6 ladies and gentlemen, it is a great pleasure to welcome you to this conference organised by the banque de france. i would also like to welcome today β s distinguished speakers from both the central banking community and the private sector. i am convinced that only broad - ranging and comprehensive cooperation between all of us will make it possible to β unveil the potential of wholesale central bank digital currency ( cbdc ) β, which is the theme of today β s conference. we are currently facing a wave of technological disruption in the form of the blockchain and tokenisation : our ambition as central bank and supervisor is to explore the embedded β and hugely promising β potential of these technologies as early as possible. this is why no less than 93 % of central banks are currently exploring the possibilities for cbdc. i wholesale cbdc attracts less attention and passion than its retail equivalent ; but it is not less important. its purpose ( the β why β question ) is probably even better perceived by market players than that of retail cbdc and i β ll hence start with its two very interesting applications, namely the tokenisation of assets and cross - border payments ( i ). secondly, i will discuss the β how β question, the technicalities of how this might work. the banque de france is actively conducting experiments at all levels to develop such a system ( ii ). i. wholesale cbdc β s twin purposes and potential a. maintaining central bank money as a β safety pivot β in a tokenised world the tokenisation of finance is a nascent trend, which is subject to a growing interest from the financial industry and its participants. indeed, digital ledger technologies ( dlt ) could enhance the straight - through processing of trade and post - trade activities and hereby generate enormous savings both for the financial industry and end - users. to make this happen, new private settlement assets such as stablecoins are emerging in this tokenised ecosystem. paypal β s project of a global stablecoin | 0.5 |
a policy mistake, creating substantially more inflation than can be explained by the supply shock itself. this point cannot be emphasised enough. the goal of ensuring that inflation does not go well beyond the inevitable price rise called for by the supply shock, through second - round effects, largely explains why the mpc has to respond despite low demand pressures. to take a simple example, imagine an economy where there is a small supply shock, such as a modest increase in world oil prices. the central bank observes inflation somewhat above target in the near term. however, other items in the inflation basket remain stable, so the price increase is confined to fuel and immediately related items such as transport. firms, households and workers do not change their views of inflation, except for the near term. wage settlement rates do not pick up and firms do not seem to be raising mark - ups. financial markets do not start to price more inflation compensation into instruments such as government bonds. in these circumstances, it is an easy choice for the central bank to rely on its credibility and make no policy changes. inflation will very likely return to target after a year without further action. of course, not all policy decisions are so easy. they become harder when the shocks are large and persistent, or when there are multiple overlapping shocks. it is also not always straightforward to determine, given data lags, if inflationary pressures are broadening. there are no definitive sources you can trust for early warning. at the same time, it can be dangerous to wait too long for perfect information because delays can make the problem page 3 of 8 worse. furthermore, it is never clear how much credibility one has until you have lost it. these situations pose some of the most challenging balancing acts for monetary policy. what are the data telling us? let me now put aside the textbook and talk about our real - world decisions. as we went into the july mpc, we were confronted with tighter global financial conditions or higher global funding costs for countries like south africa. in addition, we faced lower global economic growth projections due to factors that included slower growth in china, the continuing war in ukraine, necessary monetary policy tightening synchronised across the world, and the tapering of commodity prices. while growth globally has been revised downwards, inflation has been revised upwards in most countries and has turned out to be more persistent. inflation is expected to be above targets in most advanced and emerging market economies, both this year and next year. south africa has not escaped | proactive way with every household β as a collective as well as with individual members β in their jurisdiction. their role is to promote health, prevent disease and detect disease early, and support treatment, rehabilitation and palliation ; and to do this in a way that both develops capacity and shared responsibility for health care between service providers and service users. since 2010, community oriented primary care has been implemented in tshwane in nine ward - based sites built on a partnership between the university of pretoria ( family medicine ), the department of health and fpd ( foundation for professional development ) in collaboration with private sector companies especially it, health care providers and npos. the initiative involves inter - disciplinary and inter - professional practice. schools and local ngos are used as the premises for health posts and professional nurses head these phc outreach teams and provide clinical and mentoring support. these health posts work very closely with health facilities within the geographic area and former home - based care givers are being trained to provide door - to - door services with each community health care worker being assigned 200 households. households are registered using mobile phone technology, giving the care workers a more accurate way to capture data and focus interventions. the geomed system currently registers households and has 8 modules to assess the health status of each family member. to date 14 745 households have been visited and registered and about 40, 000 individuals have completed a health status assessment. health posts have begun interventions, especially around tb and immediate health care needs. fourth - year medical and other university of pretoria students are attached to health posts, thereby learning on site and providing much - needed services, while community health workers are being trained on site and in a continuous way. bis central bankers β speeches in this way the five principles that guide copc, namely local situational analysis, comprehensive care, equity, practice with science, and service integration around users, are being given effect, building communities and partnerships, and making a real difference to people β s lives. this is an example of how, working together, we can make a real difference to the lives of our people and communities. to get things done we need to work together, and this requires trust and confidence which is essential for building a healthy and equitable society. this evening you have all taken time out of your busy schedules to come here and contribute to noah, an important initiative and example of the generosity of spirit and willingness to give both financially and personal time : one of the hallmarks of many south africans | 0.5 |
my second broad topic, which is the lessons we have learned over the years as we have developed basel ii. i am not looking back simply for the sake of nostalgia. rather, in looking to the past, i would like to share some thoughts on how the things we have learned and reflected in the process of developing basel ii will help to make basel ii successful in the future, to stand the test of time and to have the impact that we intended. focus on risk management first, basel ii is fundamentally about establishing incentive - based approaches to risk and capital within the three - pillar framework. we should never lose sight of the fact that basel ii is built around both qualitative and quantitative risk management elements. why is this so important? as a bank supervisor and central banker, what most concerns me is financial stability. when i review the various reports on this subject that cross my desk, one thing they almost always have in common is an emphasis on the link between sound risk management and financial stability. it is my hope β indeed, it is my belief β that the incentives for risk management in basel ii will therefore promote greater financial stability in the future. improved and more formalised risk management, as fostered by basel ii, will bring more awareness of risks and better quantification of these risks. to the extent that risk assessment and control methods become more formalised and rigorous, this will lessen the likelihood of making bad decisions. it will also contribute to the prompt detection of errors and deviations from targets, allowing banks to implement corrective measures and develop buffers as appropriate at an early stage. banks should be encouraged to develop systems that allow managers to identify and understand the risks they are facing, consider the risks that may arise in the future, and respond promptly and actively to both. this will maximise the likelihood that they can continue to operate, even in the most difficult of conditions. continued outreach and dialogue a second lesson i have learned through the development of basel ii is that communication with interested parties is absolutely essential. one reason we were able to incorporate leading practices into basel ii is because of the open and transparent process by which the framework was developed. there has been a steady dialogue with the industry since the committee began discussing revisions to the capital accord back in 1999. many of the firms represented here today contributed extensive and valuable feedback to the committee on its proposals over the years. the committee has tried to explain to the industry as clearly as possible its objectives and methods during this process, | sitting on a lot of 4 / 5 bis central bankers'speeches excess liquidity. in terms of transmission, we also think up to now banks have benefited from a better macro picture, which means volumes are up even though margins are down. also, credit risk is down, so there β s been less provisioning, less concern about credit risk. that isn β t to say those forces will be forever, so we absolutely accept this is something we β ll look at all the time. it β s an ongoing question. i cannot think of a better question to end that interview on, and a better answer to give us a snapshot of what β s happening in europe. philip, thank you so much. 5 / 5 bis central bankers'speeches | 0 |
be offered to residents for hedging29. it is expected that marketmakers and banks exercise due caution and diligence while interest rate derivatives ( 2019 ) - rupee interest rate derivatives ( reserve bank ) directions, 2019 dated june 26, 2019, fx derivatives ( 2020 ) - risk management and inter - bank dealings β hedging of foreign exchange risk dated april 7, 2020, fx derivatives ( 2024 ) - risk management and inter - bank dealings β hedging of foreign exchange risk dated january 5, 2024, credit derivatives ( 2022 ) β reserve bank of india ( credit derivatives ) directions, 2022 dated february 10, 2022 authorised dealers can offer fx deliverable derivative products to non - residents for hedging their risks and on non - deliverable fx derivatives to non - residents without restrictions in terms of purposes. market makers can offer rupee and foreign currency settled mibor - based oiss to non - residents without restrictions in terms of purposes, subject to a risk limit. risk management and inter - bank dealings - non - deliverable derivative contracts ( nddcs ) dated june 6, 2023 designing and offering such products to customers, keeping in mind the profile of customers. 17. a significant policy initiative has been to permit the banks to access offshore inr markets for ( i ) fx derivatives ( in 2020 ) 30, subject to the presence of an operating ifsc banking unit ( ibu ) ; and ( ii ) for interest rate derivatives ( in 2022 ) 31 with a view to improve the efficiency of price discovery and provide greater opportunities to domestic participants. market - makers have been permitted to deal in such products beyond domestic markets hours. rupee derivatives settled in foreign currency have also been permitted in gift city, both through otc markets and on the exchanges. integrity of markets and market infrastructure 18. ensuring the integrity of financial markets and market infrastructure has underpinned many reform initiatives of the reserve bank. 19. a framework for authorisation of electronic trading platforms was put to place in 201832 to ensure that only entities adhering to a robust set of conditions function in rbi - regulated financial markets. this framework is being updated in view of the recent developments in technology that have accelerated the electronification of financial markets. considering the complaints of cheating and fraud by risk management and inter - bank dealings - participation of banks in offshore non - deliverable rupee derivative markets rupee interest rate derivatives ( reserve bank ) directions β review dated february 10, 202 | sultan bin nasser al - suwaidi : uae efforts in encountering money laundering and combating terrorism financing speech by his excellency sultan bin nasser al - suwaidi, governor of the central bank of the united arab emirates and chairman of the national anti - money laundering committee, at the fourth annual conference of the national anti - money laundering committee, ras al khaimah, 20 - 21 december 2006. * * * your highness, sheikh saoud bin saqer al qasimi, crown prince and deputy ruler of ras al khaimah ( may allah protect him ) your highnesses ladies & gentlemen, i would like personally and on behalf of my brothers namlc members, to first express my gratitude to h. h. sheikh saqer bin mohamed al qasimi, member of the higher council of the federal, ruler of rak ( may allah protect him ), for his continuous support to federal institutions, including our committee. i would also like, on behalf of all of you, to thank h. h. sheikh saoud bin saqer al qasimi for his presence and patronage of this conference. your highnesses ladies & gentlemen, i warmly welcome you to namlc fourth annual conference which is held this year in ras al khaimah emirate under the title : β role of economic development departments, free trade zone authorities and customs departments in implementing laws and regulations regarding encountering money laundering and combating terrorism financing β. the presence of h. h. sheikh saoud bin saqer al qasimi with us today is considered a support to uae efforts in encountering money laundering and combating terrorism financing and an incentive to develop our procedures and regulations applied with regard to encountering money laundering and combating terrorism financing, in a way that enhances economic development and ensures a suitable environment for investment, characterized by transparency and stability in the country. your highnesses, ladies & gentlemen, the uae confirmed, since its establishment, a strategy to continuously combat all types of crime and to confront criminals through establishing strict laws, approving preventive penalties as well as setting the appropriate legal rules in all areas. and with the obvious increase in money laundering activities and terrorism crimes around the globe, uae set as a priority a clearly defined strategy to encounter such dangers. the strategy comprises the following : 1. joining international and regional efforts in encountering money laundering and combating terrorism financing. this is manifest in joining and authenticating international and regional conventions and initiatives | 0 |
allowing expatriate workers the freedom to change their employers for the first time. we are also embarking on a major reform of our educational institutions, such as establishing the bahrain polytechnic, as we realise that there is still much work to be done to provide our young people with the types of vocational skills that they need to flourish in the modern world. underpinning all of these initiatives is our continuing commitment to political reform. as you will have seen in the news, in late october we held elections for the lower house of parliament, and these passed off peacefully and with a 67 % turnout of the electorate. outside the kingdom, some commentators had questioned our commitment to maintaining a system of constitutional government. however, their skepticism was unfounded, and our commitment to political reform remains strong. let me conclude by thanking you for coming to bahrain and for attending the dinner this evening. it is testament to the continuing strong ties between britain and bahrain, a relationship that we have always valued in the past and will continue to value in the future. thank you for your attention. | . let me conclude by wishing the graduating students all the best in their future careers, and to wish you all a very successful conference. | 0.5 |
##uance of catastrophe bonds have grown strongly and total catastrophe bonds outstanding reached a new high of almost usd 30 billion as at the third quarter of this year. this is despite the persistent reinsurance headwinds of excess capacity and depressed rates. 13 catastrophe bonds present unique benefits to reinsurers : they provide multi - year capacity and pricing certainty ; they are more secure due to their fully collateralised nature and ability to be rated ; they are a good alternative to traditional reinsurance for risks that are hard to model ; and they are capital - efficient. 14 to an investor, catastrophe bonds proffer strong benefits too : their low correlation with the 2 / 4 bis central bankers'speeches financial markets make them an effective asset diversification instrument ; they have low volatility and stable returns ; they provide liquidity ; and they can be issued via private placements or as tradable securities. 15 we are therefore seeing a growing cluster of institutional investors and fund managers like quantedge exploring allocation into catastrophe bonds, as they venture into niche and specialised strategies to extract better risk - adjusted returns. 16 on the supply side, we too have seen healthy interest from asia - pacific issuers in the development of an apac market for catastrophe bond issuances, due to the proximity to and better understanding of the underlying risks. 17 given the above, the mas has thus taken progressive strides towards developing the catastrophe bond market in singapore. 18 as a first step, we have formed an alternative risk transfer work - group comprising industry experts in the ils space. chaired by jon paradine of renaissance re, the work - group advises the mas on specific initiatives that will support the development of singapore as an ils hub. 19 today, i am happy to announce one such initiative β the newly created ils grant scheme. to catalyse the development of singapore β s ils market, the mas will fund 100 % of the upfront costs incurred in issuing catastrophe bonds out of singapore. this grant will run from 1 january 2018 and will be applicable to ils bonds covering all forms of risks beyond just natural catastrophe risks. 20 it is my hope that this grant scheme will encourage insurers and reinsurers to consider issuing a catastrophe bond here. in fact, mas is already working with key industry players such as iag re singapore with a view to issuing a catastrophe bond in singapore. this is but the first step of a longer journey, as we look forward to working more closely with the industry to further | liability. this is particularly relevant for asia as industrialisation and infrastructure investments in this region will propel demand for insurance solutions to mitigate construction and project cargo risks. we have established a group of interested lead and follow markets in singapore to offer coverage in these two lines. the markets comprise leading insurers, reinsurers and lloyd β s syndicates operating in singapore. we look forward to the industry β s active participation in this bold venture. conclusion 29 ladies and gentlemen, insurance is fundamentally about risk management. as the region around us continues to grow, the insurance industry can support this growth and development by creating relevant risk management solutions that can pave the way for a broader range of corporates and investors to participate in its growth. 31 the two strategies of ils and public - private partnerships that i have highlighted earlier mark the metamorphosis of singapore β s reinsurance industry as we transform from a mainstream traditional reinsurance hub, to a sophisticated full - fledged global capital for asian risk transfer. 32 i invite you to be a part of this metamorphosis, as we chart new paths together in this journey that singapore is embarking on. 33 thank you very much. 4 / 4 bis central bankers'speeches | 1 |
rates unchanged and gathering more information to confirm the need to raise the policy rate. on balance, our assessment was that the cost of delaying action was larger than the benefit of waiting. elevated inflation is a burden on canadians, especially for the most vulnerable. we are also acutely aware that higher rates are making life more difficult for many canadians. and we know many canadians are asking : is the bank done raising interest rates, or will rates need to go higher still to relieve price pressures? the short answer is we will be taking each decision based on the information available at the time. 2 / 3 bis - central bankers'speeches what we can say is that monetary policy is working, and we know it will take more time for the full effects of past interest rate increases to work their way through the economy. with the increases in our policy rate in june and july, our outlook has inflation going gradually back to the 2 % target. but several things need to happen for inflation to continue easing. and we are particularly concerned about two upside risks to the outlook. first, we have been surprised by the persistence of excess demand and underlying inflation in canada and globally. we know that higher rates are having an impact, but how big their impact will be is uncertain. second, with the downward momentum in inflation waning and our forecast suggesting inflation will be around 3 % for the next year, we are concerned that the progress to price stability could stall, and inflation could even rise again if there are upside surprises. as i said, we are trying to balance the risks of over - and under - tightening. if new information suggests we need to do more, we are prepared to increase our policy rate further. but we don't want to do more than we have to. these decisions will be guided by our assessment of incoming data and the outlook for inflation. we need to see demand growth slow, wage pressures moderate and corporate pricing behaviour normalize. we will also need to see near - term inflation expectations and measures of core inflation come down further. let me conclude. the substantial drop in inflation over the past year is welcome news for all canadians. but monetary policy still has work to do - our job is not done until inflation is centred on our 2 % target. that is the level that helps the economy grow sustainably, restores competitive forces in the economy and gives canadians the price stability they need to budget and invest with confidence. with that summary, the senior deputy governor and i would be pleased to | , even if there are some signs of easing. the unemployment rate has increased slightly but remains historically low, and wage growth has been between 4 % and 5 %, higher than is consistent with price stability. many households have also accumulated savings since the beginning of the covid - 19 pandemic. some households have cut back on spending because inflation and higher rates have eaten into their budgets, and some are being severely squeezed. but for many, larger savings may be acting as a buffer and supporting consumer spending. rapid population growth is contributing to both supply and demand in the economy. newcomers to canada are entering the labour force, easing the labour shortage. but at the same time, they add to consumer spending and demand for housing. turning to inflation, while cpi inflation has fallen relatively quickly, much of the downward momentum has come from lower energy prices and base - year effects as the large price increases we saw last year fall out of annual inflation. we are still seeing large price increases in a wide range of goods and services. our measures of core inflation - which we use to gauge underlying inflationary pressures - have come down but not by as much as we expected. three - month rates of core inflation have been around 3aΒ½ % to 4 % since last september, suggesting little downward momentum in inflation. consumer and business expectations for near - term inflation are moderating, but they are still high. and businesses are saying they are still increasing their prices more frequently than they did before the pandemic. looking ahead, we continue to expect economic growth to moderate and inflation to ease, but this will take longer than we forecast in january and april. as the global economy slows and higher interest rates work their way through the canadian economy, we expect economic growth to average about 1 % through the second half of this year and the first half of next year. this means the economy moves into modest excess supply in early 2024, and this should relieve price pressures. cpi inflation is forecast to remain about 3 % for the next year, before declining gradually to the 2 % target in the middle of 2025. this is about six months later than we expected in april. our decision to raise the policy rate reflected the persistence in both excess demand and underlying inflationary pressures, combined with our outlook for economic activity and inflation. the consensus among governing council was that monetary policy needed to be more restrictive to bring inflation back to the 2 % target. these decisions are difficult, and we did discuss the possibility of holding | 1 |
louis kasekende : the benefits of regionalism opening remarks by mr louis kasekende, deputy governor of the bank of uganda, at the meeting of the technical officials of the association of african central banks ( aacb ) β eastearn africa region, kampala, 2 february 2011. * * * i am here to represent the governor of the bank of uganda, prof. emmanuel tumusiime - mutebile who would have wished to be here at this opening. however due to a conflict in his schedule, he is unable to make it and please accept his apologies. the bank of uganda is very privileged to be the current chair of the aacb eastern africa sub region and indeed to be your host for this meeting of technical officials. as you are aware, africa has embraced regionalism with various regional groupings like comesa, eac, sadc, and ecowas. we believe that as a region, we should leverage regionalism as a means to generating efficiencies in our economies and to support development of the continent. we should also take note of the shift of power in the global economy to countries like china that has a population of about one billion people and may soon have an average per capita income of over us $ 30, 000. africa on the other hand, has a population of about one billion people, but with 54 countries, some of which have a population of less than one million people. average income of africa is about us $ 400. in order for africa to contribute effectively to the global agenda, there is need to derive a strong single voice at international level using regionalism instead of 54 varying voices. these instead generate a lot of β noise β but not necessarily β voice β. further more, for africa to compete effectively in the global trading environment, there is need to adapt technology and gain economies of scale. this also requires exploiting opportunities generated by regionalism. the recent global financial crisis provides more lessons for africa on the need to strengthen continental cooperation. as the global crisis unfolded, the developed countries saw a need to coordinate their policies with strong emerging economies under the aegis of the g20. through the cooperation and policy coordination, the g20 was able to avert a global financial meltdown and to avoid a long drawn - out global recession. it is for these reasons, that africa should also strengthen regional and continental level organisations to lead policy coordination and strengthen the voice of africa in global meetings. it will not be possible | especially in the 1970s and 1980s when the economy collapsed. the industry hung on and survived during the economic turmoil of those years and then rose, phoenix like, to recover in the 1990s. with the same spirit of enterprise, hard work and cooperation we can help to ensure that the next half century is one of prosperity, sustainable growth and structural transformation for the ugandan economy. thank you very much for listening. bis central bankers β speeches | 0.5 |
salvatore rossi : which new frontiers in banking? speaking notes by mr salvatore rossi, senior deputy governor of the bank of italy and president of the institute for the supervision of insurance ( ivass ), at the 2018 conference on " new frontiers in banking : from corporate governance to risk management ", faculty of economics, la sapienza university, rome, 16 march 2018. * * * in the banking business, the concept of frontier β and its crossing β can be intended in several ways. let β s start with size. after the global financial crisis, banking systems in the large advanced economies have undergone a substantial consolidation process. the number of small banks has decreased ; concentration ratios β measured as the share of banking system assets held by the largest five banks β have increased both in the euro area and in the united states. in italy, at the end of 2016, the share of total assets accounted for by the five largest banks amounted to 43 percent. this process is still under way, and will presumably continue in the foreseeable future. it β s not always a good thing. from a financial stability perspective, big banks should ideally be highly diversified and less exposed to idiosyncratic risks. however, the lehman crisis proved that big banks may end up holding very similar portfolios, in which case they might become more vulnerable to adverse systemic shocks. in other words, the reduction in idiosyncratic risk might come at the cost of an increase in total risk on their balance sheets. furthermore, the bigger a bank, the greater the β implicit subsidy β it enjoys in terms of higher likelihood to be rescued in case of distress, either being bailed out or, in europe, resolved rather than liquidated. it β s the well - known β too - big - to - fail β problem. all in all, big banks are not necessarily safer from a systemic perspective. it β s something that should be evaluated case by case. what about business models? another β new frontier β for the bank of the future could be a fundamental change in its business model, for instance from traditional retail banking to asset management or corporate / investment banking. the issue there is profitability, and it has very much to do with rules. the current weakness in bank profitability, particularly in europe, not only depends on macroeconomic cyclical factors, which were very unfavorable in past years, but also on the new requirements in terms of capital and liquidity, that were the regulators β response | to the excessive risk - taking of the pre - crisis era. i don β t think the banking sector could ever be back to the double - digit returns of the past 20 years. it may rather converge to a β new normal β with more low - consuming - capital activities. in any case, a sustained profitability must require cutting operational costs, as well as a lot of investment in new technologies. new technologies are probably the most important new frontier for banks, and i will dwell on them in a minute. let me first widen the topic of this roundtable a little bit, to the financial system at large. banks aren β t the only financial players, nor should they be, in perspective, the largely dominant ones, at least in countries like italy. in this country the financial structure is already evolving, though at a still moderate pace. non1 / 2 bis central bankers'speeches financial firms, especially the biggest ones, are now using equity and bond markets much more than in the past for their financial needs, although still not enough, in my opinion. but in italy we may need not just more markets. non - bank intermediaries, such as private equity and venture capital funds, are still underrepresented in the financial landscape. however, from a prudential point of view there β s a delicate balance to strike between a more articulated financial structure, which is desirable per se, and the need not to give β shadow banking β unlimited freedom. we are working, together with our colleagues in the world regulatory circles, on such a difficult puzzle. let me conclude with some words on the third and most important new frontier that i β ve mentioned before for the financial system : technology. again i β ll look at this issue from a regulatory point of view. we are observing how digitalisation is already changing the financial business. although many of our intermediaries, particularly the smallest ones, are lagging behind in the process of digitalisation, the road ahead is clear : we are talking about technologies that are well consolidated, they are not β new β anymore. fintech firms are a step forward. in a stricter sense, fintech firms are new players aiming at crowding out traditional intermediaries like banks. banks are reacting in different ways : some are buying fintech start - ups and trying to internalize them in their business models, others are establishing partnership agreements and externalizing part of their production function, others are trying to internally develop fintech - | 1 |
have got to. our assessment is that we can improve the soundness of the new zealand banking system with additional capital with no trade - off to efficiency. in making this assessment, our recent work makes the explicit assumption that new zealand is not prepared to tolerate a system - wide banking crisis more than once every 200 years. we have calibrated our β sweet spot β thinking about economic β output β and financial stability benefits. how did we arrive at this position? current levels of capital are based on international standards, and are not optimal for any one country. the standards are also a minimum. there is a clear expectation that individual countries tailor the standards to their financial system β s needs. banks also hold more capital than their regulatory minimums, to achieve a credit rating to do business. the ratings agencies are fallible however, given they operate with as much β art β as β science β. bank failures also happen more often and be more devastating than bank owners β and credit ratings agencies β tend to remember. the costs are spread across the public and through time. many large banks are foreign owned β especially in new zealand. their β parents β are subject to capital requirements in their home and host country. this creates continuous tension as to who gets the lion β s share of capital and failure management support. it would be naive to expect a foreign taxpayer to bail out a domestic banking crisis. hence, new zealand needs to assess its own risk tolerance, and decide who pays to clean up any mess and the scale of that mess. a word of caution. output or gdp are glib proxies for economic wellbeing β the end goal of our economic policy purpose. when confronted with widespread unemployment, falling wages, collapsing house prices, and many other manifestations of a banking crisis, wellbeing is threatened. much recent literature suggests a loss of confidence is one cause ref # 7821869 v2. 0 of societal ills such as poor mental and physical health, and a loss of social cohesion. if we believe we can tolerate bank system failures more frequently than once - every - 200 years, then this must be an explicit decision made with full understanding of the consequences. table 1 : the reserve bank β s tool kit rbnz tools institutional rules transparency financial requirements funding & liquidity self market regulatory permanent governance risk management attestations licensing & nz incorporation outsourcing disclosure minimum capital requirements / solvency standards conservation & counter cyclical buffers sectoral capital requirements core funding | ratio loan to value restrictions liquidity standards collateral standards / rmos lolr foreign exchange intervention infrastructure fmi rules and powers monitoring financial stability report stress testing supervision & engagement thematic reviews enforcement investigations directions monetary ocr policy crisis obr management statutory management ref # 7821869 v2. 0 time event varying figure 2 : the cost of recent bank failures on society fiscal cost as % of banking system assets uruguay korea greece finland czech japan iceland ireland netherlands slovenia sweden uk norway usa belgium austria spain denmark germany france luxembourg italy portugal source : imf ( 2013 ) systemic banking crisis database 0. 0 5. 0 10. 0 15. 0 20. 0 % of banking system assets figure 3 : the capital - output β sweet spot β ref # 7821869 v2. 0 25. 0 30. 0 35. 0 | 1 |
margins. under basel ii, risk weights on lending are required to reflect differences in risk to a greater extent. risk weights for mortgages, for example, have been sharply reduced. this will lead to a considerable reduction in capital adequacy requirements for norwegian banks. the new rules were introduced in norway in 2007, but it is likely that many banks began to adjust to the effects even before the rules were introduced. this has resulted in a fall in banks β interest margins. banks β lending margins on new mortgages are estimated at - 0. 05 percentage point at the beginning of october. as mentioned above, the money market rate is clearly higher than the key policy rate as a result of the problems in the interbank market. with normal interest rate formation in money markets, given our key policy rate, lending margins would have been Β½ percentage point. norges bank β s estimates show how low lending margins on fully secured mortgages could fall when banks have a required return on the equity underlying the mortgages of 15 per cent. lending margins are determined by expected loan losses, the loan β s administrative costs, the share of the loan financed by the bank β s equity capital, and the required return on equity. in the estimates, it is assumed that expected loan losses and administrative costs will be 0. 3 per cent of the lending volume. the method banks choose to calculate capital adequacy will affect the share of lending that is financed by equity capital. under basel i, the lending margin on fully secured mortgages is estimated to be 0. 9 percentage point. using the standardised approach under basel ii, banks will be able to operate with a lending margin on fully secured mortgages of 0. 8 percentage point. banks using the internal rating - based advanced approach under basel ii, will be able to make the largest reduction in their lending margins. as an illustration, we have assumed that the share of equity capital is 1. 5 per cent. the lending margin on fully secured mortgages could then be 0. 5 percentage point. in conclusion, we should be able to say that the decline in lending margins has probably come to an end. it will come as no surprise if lending margins rise somewhat ahead. it is now likely that a number of banks are not achieving a satisfactory return on new loans. banks may have compensated for this by having low deposit rates. however, as mentioned above, there has been a marked rise in borrowing costs. even if some of the increase should be | the entire financial system. financial institutions started to doubt their counterparties and interbank lending came to a halt. experience shows the need for tighter regulation of systemically important banks. this can for example be achieved by introducing higher bank capital and liquidity requirements for such banks. the capital requirement for mortgage lending should to a larger extent reflect the overall risk of such loans. see carmen m. reinhart and kenneth s. rogoff ( 2009 ) : β this time is different. eight centuries of financial folly β, princeton university press. justified criticism has been levelled at international banks. the focus is now shifting to government fiscal management in many countries. fiscal slippage seems to have been considerable in some european countries in particular. eu budget policy guidelines have been diluted and have not been adhered to. countries have experimented with budget frameworks and have debt - financed public investments, which require operating and maintenance costs but yield little income. with already large deficits, the crisis has destroyed state finances in many countries. economic developments over the next 5 β 10 years will be marked by the tightening measures that will now have to be implemented in these countries. however, there are exceptions. state finances in nordic countries are in order, which provides a better starting point. with ample state coffers, the norwegian economy was to a considerable extent insulated from the effects of the financial crisis in 2008 and 2009. norway has had room for manoeuvre because solid state finances secure credibility and because inflation expectations are firmly anchored. even though oil prices fell from close to usd 150 per barrel in summer 2008 to almost usd 30 at the end of the year, norway β s state finances were not called into question. in addition, oil prices increased markedly as early as spring last year. the oil fund mechanism curbs the effects of oil price fluctuations on demand and output β as well as on inflation and the krone exchange rate. the government pension fund global is also an important source of funding for public spending in the next decades. reductions in government welfare spending, which will probably be a matter of necessity with an increasingly ageing population, will be smaller than would have been the case without the fund. 5. challenges to the norwegian economy in the period 1992 β 2008 the norwegian economy experienced a long upturn. in the 2000s, the cost level started to rise, partly reflecting a sharp improvement in our terms of trade. prices for norwegian goods, such as oil, gas, metals, minerals and fish increased sharply | 0.5 |
www. cbo. gov / system / files / 2021 - 01 / pl _ 116 - 260 _ summary. pdf ; and congressional budget office ( 2021 ), β estimated budgetary effects of h. r. 1319, american rescue plan act of 2021, as passed by the senate on march 6, 2021, β summary tables, march 10, https : / / www. cbo. gov / system / files / 202103 / estimated _ budgetary _ effects _ of _ hr _ 1319 _ as _ passed _ 0. pdf. see congressional budget office ( 2021 ), the budget and economic outlook : 2021 to 2031 ( washington : cbo, february ), available at https : / / www. cbo. gov / publication / 56970 ; and congressional budget office ( 2015 ), an update to the budget and economic outlook : 2015 to 2025 ( washington : cbo, august ), p. 71, https : / / www. cbo. gov / sites / default / files / 114th - congress - 2015 - 2016 / reports / 50724 - updateonecolumn _ 0. pdf. - 3the economy towards those goals. deficit financing and debt servicing issues play no role in our policy decisions and never will. chair powell made this same point in his recent comments to the economic club of new york. 7 my objective today is to reinforce that message. this does not mean, however, that the treasury and federal reserve should never work together. my comments today will focus on the issue of cooperation β on when and how much is beneficial and on the potential costs that should not be overlooked. let me point out that there are two fronts for interaction between the treasury and the federal reserve. the first is what i will call β back office β operations. by this term, i mean the range of fiscal agency services that the federal reserve provides to the treasury by statute. 8 for example, the federal reserve maintains the treasury β s operating account, accepting deposits, paying checks, and making electronic payments on behalf of the treasury. it provides securities services on behalf of the treasury, supporting the auction, issuance, and redemption of marketable treasury securities. it also provides application development and infrastructure support services, assisting in the treasury β s efforts to improve government cash - and debt - management processes. since the federal reserve is the fiscal agent for the treasury β and to play that role efficiently and at low cost β the federal reserve and | that are ready to be activated. overall, though, the rules for small banks can be less strict than for big banks. and this is already the case : in many respects smaller banks have an easier life than the large ones β for example, in financial reporting and supervision. should a further easing of the rules be discussed, this would however throw up a difficult question : how big, or rather how small, should a bank be to be considered for this easing? what are the right thresholds? in other areas, we need greater harmonisation. that becomes apparent when you take a closer look at the european rules β they are neither uniform nor complete. certain areas of supervision which would benefit from a single european rule continue to be determined by national regulations. 1 / 2 bis central bankers'speeches let β s take the example of a british bank. in the event of a β hard brexit β the bank could lose its eu passport, which gives it access to the internal market. in order to continue to do business in the internal market, it would need to establish a base in the eu. ideally, the country in which it sets up its business should be an unimportant factor. but it is not. despite the banking union, location still plays an important role in a bank β s life. if a british bank conducts its business via a branch in the euro area, then it is subject to national supervision and national rules. this results in the bank having different capital and liquidity requirements, depending on the country where the bank has set up its branch. of course, the bank will also look closely at the different national recovery and resolution conditions. and they have only been marginally harmonised, so there is no uniform toolset for crises. for instance, i have sorely missed the opportunity to declare a moratorium recently. the examples i have mentioned show how many national barriers are still blocking the way to a european banking market. in europe too the principle for banks should be : same business, same risks, same rules. this ensures fair competition and prevents banks from exploiting regulatory differences. ultimately, harmonised rules pave the way for a stable banking market. thank you for your attention. 2 / 2 bis central bankers'speeches | 0 |
has developed into a modern financial city. one of the five - year strategic objectives identified in the city β s integrated development programme is improving the profile of johannesburg, both on the continent and internationally, as a core centre of finance, business and trade. this is to be attained by, among other things, improved liaison with key partners in the business community to define what the city can do over the longer term to help consolidate, protect and enhance johannesburg β s position in this regard. 4. a globally competitive city - region although the smallest in size compared to the other provinces, gauteng is the economic and financial powerhouse of south africa and the centre of the country β s commerce and industry. the gauteng province contributes 34, 2 per cent of the country β s gdp, 47, 2 per cent of all employee remuneration and 51, 4 per cent of all institutions β turnover. johannesburg accounts for 40 per cent of the economy of gauteng and enjoys the unchallenged status of being the economic capital of the country and the subcontinent. johannesburg is the continent β s only world city and a regional motor in the global economy. the city β s share of the national economy constitutes about 16 per cent. it is, therefore, obvious that the economic performance of a city like johannesburg becomes critical not only to the province in which it resides but to the country as whole. to a very large extent, it is the economic logic stemming out of this reality that informs the growth and development strategies of both the city and the province. central to both strategies is the strengthening of gauteng β s position as a global city - region, in recognition of the pivotal role played by cities in modern economies, political, social and environmental trends. city regions are not based on administrative boundaries but rather lay emphasis more on social and economic functional geography. also, some recent research suggests that strong city - regions are a necessary β even though they may not be a sufficient β condition for ensuring optimal economic growth. final report of a study entitled : a framework for city - regions, commissioned in december 2004 by the office of the deputy prime minister in the united kingdom. the gauteng growth and development strategy recognises the advantages of co - operating internally to compete externally. to this end, it advocates the development of a strategy to build gauteng as an integrated globally competitive region where the economic activities of the different parts of the province complement each other in consolidating gauteng as an | high and sustainable rates of economic growth and employment and maintenance of overall macroeconomic stability. thank you for your attention. | 1 |
even at the very last minute. as a true european myself, i only hope that this time will not be different! thank you very much for your attention. | njuguna ndung β u : financial sector collaboration opening remarks by prof njuguna ndung β u, governor of the central bank of kenya, at the breakfast meeting for domestic financial sector regulators, nairobi, 31 august 2009. * * * hon. deputy prime minister and minister for finance board members and chief executive officers of rba, cma and ira, distinguished guests, ladies and gentlemen : it is my pleasure to be with you this morning and i am indeed honored to be accorded this opportunity to give brief remarks at this important breakfast meeting where the domestic financial sector regulators will be signing the memorandum of understanding ( mou ) on financial sector collaboration. at the onset, allow me to extend my gratitude to the hon. deputy prime minister and minister of finance for agreeing to grace the ceremony and deliver a key note address. in the same token, let me take this opportunity to recognise the work of the technical committee on collaboration which has been instrumental in organising the event. ladies and gentlemen, the monetary affairs committee is a caucus of central bank governors under the east african community monetary union which is mandated, among others, to harmonize regulatory regimes and supervisory frameworks in the region in the banking sectors. during the 12th monetary affairs committee ( mac ) governors β meeting held in kigali, rwanda in may 2009, my fellow governors and i celebrated the execution of the mou amongst the five central banks, which was put into effect in early 2009. it was indeed pleasing for governors to note that the bank of uganda had already signed an mou with other domestic financial sector regulators in uganda. other mac governors were therefore urged to implement a similar arrangement with their respective domestic regulators by june 2010. this is to demonstrate that collaboration amongst domestic regulators is in line with regional aspirations. consequently the celebrations that we mark today will enable cbk achieve a milestone set by mac governors ahead of the set time of june 2010. i cannot thank my fellow domestic regulators enough. but for the kenyan side, let me commend rba and edward odundo for the time and effort he has put on this initiative. as you are aware, there has been increased integration of economic and financial markets globally. globalization is creating new business opportunities and opening new markets. however, the forces of globalization and the ensuing competition are prompting financial companies to engage in business operations that make group management and risk aggregation more challenging. similarly, a new concept of cross - ownership and trading is emerging in our market, thus blur | 0 |
of central bankers and supervisors β achievements towards tackling climate change, which are significant and ( ii ) discuss four important tasks that still lie ahead. i. central banks and supervisors are promptly moving ahead regarding the snapshot of risks in its first progress report, released in bali in october 2018, the ngfs unanimously concluded that β climate - related risks are a source of financial risks. it is therefore within the mandates of central banks and supervisors to ensure the financial system is resilient to these risks. β so what do we do? a. integrating climate - related risks into micro - supervision this is an ambitious but complex task, on which progress has been made in many countries. looking at the potential courses of action for supervisors, i believe that our main priority should be the disclosure of existing exposures in the financial sector, what i usually call β the snapshot of risks β. a number of supervisors have paved the way, including the dnb, the bank of england / pra and the french supervisory authority ( acpr ). the acpr published last week a second report on the exposures of french banks and insurers to climate risks. this report gives a clearer view on climate risks and opportunities : asset exposures of financial firms to physical risks remains non - material in france thanks to investments in very low risk zones ; banks β exposures to transitionrelated risks were slightly reduced between 2015 and 2017 and now represent roughly 12 % of credit risk β s exposures at default. our supervisor also has a clearer view on the blind spots in the risk management framework, which must be addressed : executive bodies are committed to embracing further climate risks at the highest level of decision - making but the degree of implication across the french financial sector is still heterogeneous ; the granularity of the analysis provided by banks and insurance companies is not sufficient. this step should be widely promoted among ngfs members, who, i believe, need to leverage best practices throughout its membership. i therefore very much welcome the supervisory handbook that will be prepared as a ngfs technical deliverable for 2019 - 20. b. integrating sustainability factors into own - portfolio management central banks must send the right signal and lead by example in their investment and disclosure policies. the dnb has signed up to the un principles for responsible investment. norges bank, which manages the norwegian sovereign wealth fund, has advocated a diversification of the portfolio and is implementing a divestment strategy dedicated to selling off some oil and gas | a much longer horizon than the usual one of one year. 2. converting our quantitative and qualitative challenges into unprecedented opportunities 2 / 4 bis central bankers'speeches our objective is to enhance the role of the financial system, not only to manage climate change β related risks, but also to β mobilise capital for green and low - carbon investments. β 14 but financing the transition to a low - carbon economy is both a quantitative and qualitative challenge. [ slide 5 ] the quantitative challenge is linked to the massive investment required in three areas : first, infrastructure and technical solutions, especially in transport, energy production and consumption and agriculture ; second, intangible goods, including continuous training and research ; and third, the adaptation and improvement of existing structures, notably the thermal rehabilitation of buildings. the needs are so considerable that public financing alone will never be sufficient : as an illustration, the estimated global needs could reach usd 90 trillion over the next 15 years for new green infrastructure alone. 15 fortunately, the private sector is already showing a growing interest in green finance. i could cite many examples, including the sharp rise in the global green bond market, + 78 % in 2017, 16 or the success of the issuance of france β s first green sovereign bond in january 2017 with eur 7 billion allocated and total demand of more than eur 23 billion, and supplemented yesterday. all this looks very promising β¦ but it is still insufficient. the systematic oversubscription of green bonds at issuance is actually a sign that there is a lack of green financial products. green markets remain niche markets : green bonds still account for less than 2 % of global debt issuance. xvii the success of the transition will also depend on our ability to broaden the sources of financing : we should not rely solely on green bonds. we also need more green loans, and more green financing in general, accessible to individuals, smes and start - ups. green financing requires an innovation - friendly framework : green securitisation, green covered bonds, green derivatives, green crowdfunding platforms and green private equity should all be promoted. in addition, we have to carefully assess the impact of existing regulations. in the face of strong pressure from the financial industry, we must not however lose sight of our main goal as supervisors, which is financial stability. so far, there is no empirical or theoretical evidence that β green β assets are less risky and could warrant lower risk weights in the form of a β | 0.5 |
elson gaskin : the frank collymore literary endowment - building on its legacy remarks by mr elson gaskin, deputy governor of the central bank of barbados, at the 26th frank collymore literary endowment awards ceremony, bridgetown, 14 january 2024. * * * good evening. in commencing, let me, on behalf of the governor, board, management and staff of the central bank of barbados, extend condolences to the family, friends, and loved ones of the late sonia williams, who on more than one occasion was a finalist in this competition. as i began to prepare for this awards ceremony, i looked back at what we have said on previous occasions as it is sometimes important to take a retrospect before moving forward. what stood out during that exercise is that we have often spoken about the role that the arts play in creating a national identity. just last year, we spoke about the fact that not only is the fcle a part of the bank's legacy, it has created a legacy of its own. the central bank of barbados'unswerving support for and commitment to the frank collymore literary endowment is precisely because we recognise that in addition to fulfilling our core mandate, we must be a part of, and never apart from, the society we serve. we see this programme as an essential part of the barbadiana that we are. one year ago, the bank was winding down its 50th anniversary celebrations and the fcle was marking its silver jubilee. the parallels between the two institutions - and i choose this word deliberately because the frank collymore literary endowment has become an institution - extend beyond celebrating milestone anniversaries around the same time. both are interested in barbados'national development. for the bank, that is primarily, but not exclusively, related to the economy. for the fcle, it is about the development of this island's literary tradition. it is a role we both take seriously, and from which comes a second parallel : our respective commitment to excellence. the central bank of barbados'vision is to become and maintain an institution of worldclass excellence, and we are working every day to internalise this vision and reflect it in not only in the many activities in which we are involved an but also in the quality with which we execute them. i am confident that the fcle and its committee also live by this ideal. over the past 26 years, the competition has become a bellwether of quality writing. | publishers, critics, and the public - at - large see winning this competition as an endorsement. i commend the judges for remaining faithful to these ideals and never compromising in their assessments of entries. 1 / 2 bis - central bankers'speeches the final parallel i'd like to draw relates to how we view our legacy. while the bank and the fcle have each created a legacy, we are not constrained by it. by that, i mean that although we respect the legacy we have built, we do not see it as static. rather, we see it as a solid foundation to be further built upon. for the bank, this includes updating our processes, including through the digital transformation we are currently undergoing. it also means adjusting how we approach fulfilling our mandate, be it through developing a strong monetary policy toolkit or finding new and creative ways to educate the public about the economy and how it impacts them, as we have through our new explainer series. for the fcle, this has meant allowing for the electronic submission of entries and, by extension, accepting entries from barbadians in the diaspora. in less than three years, this expansion proved successful, with ronald williams, a us - based writer, emerging as the first prize winner of the 24th edition of the competition in 2022. this year, the fcle has innovated again by introducing a spoken - word category. this once again opens up the competition to more artists, more perspectives, and more opportunities for talented barbadians to gain exposure. kudos to the committee for this initiative. indeed, i want to convey my appreciation, and the central bank of barbados'appreciation, as sponsor of this endowment, to the fcle committee, now ably led by dr. yvonne weekes, for your enthusiasm and tireless dedication to this programme. the bank has long been a supporter of the arts, and you have helped us to contribute to their development in a tangible way. i must also thank the writers : the stalwarts, who have contributed to the legacy i have spoken about this evening, and the first - time entrants, who heard about this competition, saw its value, and decided to participate. a special thank you to the spoken - word artists, who, by their entries, have helped us to add a new dimension to the competition. congratulations to those of you who will emerge as winners later this evening. and to those of you for whom this is not the | 1 |
david clementi : the city and the euro : innovation and excellence speech by mr david clementi, deputy governor of the bank of england, at the city seminar on'london into the 21st century'at the palace hotel, tokyo on 13 february 2001. * * * introduction the city of london is, and always has been, a centre of innovation and excellence. i want to talk to you today about the city's role in the euro markets as an example of how london proposes to maintain its standing and reputation for innovation and excellence in the 21st century. for me, it is a great pleasure to be able to talk to you about this here in tokyo. there are historic links between tokyo and the city of london, and i am glad that these links are continuing to flourish. we welcome the fact that so many important japanese financial institutions are represented in london ; and, of course, that uk - based financial institutions have operations here in tokyo. it is not surprising that there are such strong links between tokyo and the city of london, because london is one of the three global financial centres, alongside tokyo itself and new york. tokyo and new york are global centres because of their large domestic markets. unlike tokyo and new york, london's primary focus is international. london is much the largest international financial centre in europe. historically, london developed as a financial centre because of the international role of the pound sterling. but nowadays, london's role depends mainly on making markets and providing financial services in foreign currencies, like the dollar. that means that london continues to thrive only by remaining internationally competitive. and i should add that we in the bank of england take a close interest in this. maintaining the stability of the financial system and the effectiveness of the uk's financial services are key objectives for us. the city is a centre of innovation and excellence london is internationally competitive, because it acts as a centre of innovation and excellence, in a whole range of complementary ways. β’ london has a vast, critical mass of markets and financial services in commercial and investment banking, securities and derivatives, fund management, insurance and commodities. β’ london has a long track record of innovation, and a ready availability of financial skills and professional support services in law, accountancy, tax, property and communications. more than 300, 000 β’ people work in financial services in london, and nearly a further 600, 000 work in the supporting professions and services. β’ london is at the forefront of technology, with an effective | mark carney : winning the economic marathon speech by mr mark carney, governor of the bank of england and chairman of the financial stability board, at the commonwealth games business conference, glasgow, 23 july 2014. * * * accompanying charts can be found at the end of the speech. it is a pleasure to be in glasgow for the opening of the 20th commonwealth games. for the athletes, the games represent the culmination of years of training. for fans they are a chance to witness great sporting achievements. i remember attending the 1978 games in my hometown of edmonton and being mesmerised by one of its stars : scotland β s allan wells. at just 26, wells burst onto the scene, winning silver in the 100 metres, beating the reigning olympic champion in the process. he spurred scotland to gold in the 4x100 metres, won the 200 metres outright and set the stage to become the fastest man in the world two years later at the olympics. the uk economy has also had some sprint success of late and is the current holder of the β fastest growing advanced economy in the world β title. that is welcome after some difficult years, but what really matters is what comes next. the bigger prize is winning the economic marathon by achieving a durable expansion. we must replicate the sprint success of wells over longer distances, taking our lead from scotland β s liz mccolgan, who memorably won gold in the 10, 000 metres last time the games were held in scotland, before going on to win the new york, tokyo and london marathons. to understand how we β and by β we β i mean the uk, the commonwealth and the world β can win the economic marathon, i want to draw on three less athletic, but nevertheless great, scots, each of whom points us to an essential ingredient of economic success : the right policy framework ; an open trading system ; and fair and effective financial markets. in all these respects, the uk is leading the way. the right policy framework the uk β s current policy framework has its origins in the work of william paterson of skipmyre, dumfriesshire. more than three centuries ago paterson proposed the establishment of the bank of england to β promote the publick good and benefit of our people β¦ β 1 at that time the public good meant financing a war with france. over the ensuing centuries, as objectives evolved, paterson β s bank would have many guises including government banker, lender of last resort, bank supervisor | 0.5 |
of smaller banks. this is how we will ensure a single supervisory culture the length and breadth of the euro area. it is an important step towards a single financial market in the euro area. the benefits of a single financial market i β d now like to give you three reasons why a single architecture for the euro area financial market is beneficial β including for smaller german banks. first, price stability in a currency union pays no heed to national borders ; and likewise financial stability β or instability β does not stop at national borders either. the financial interrelationships are far too entwined for that to happen. without common european standards, national supervisors have an incentive to exploit lax supervision to the advantage of their location. this can lower the overall standard of supervision. second, the purpose of banking union is a single capital market. the more capital flows within the euro area normalise, the more long - term bund yields will do the same. these act as a benchmark or anchor for savings rates. third, savers are also taxpayers. as soon as banking union β with its two key elements of a single supervisory mechanism and a single resolution mechanism β is up and running, taxpayers β money will be better protected and less in demand for bailing out banks than was previously the case. this also applies to germany. banking union is therefore in no way a transfer union. with single supervision, the first benefit that banking union will bring is to reduce the likelihood of banking crises. if a bank nevertheless gets into difficulties, it must be able to exit from the market in an orderly manner. otherwise sick banks might be shored up by healthy ones. that would definitely be tantamount to a transfer regime, and would be neither in line with market rules nor economically viable. banking union creates conditions and incentives whereby in future, those who enter into a risk also bear the related costs if that risk materialises. and not taxpayers. in concrete terms, what the new resolution rules mean is that those first in line for the costs of winding down a failing bank are those who previously derived profits from it, but who by investing in it also assumed a risk. under the hierarchy of liability laid down in the bank recovery and resolution directive ( brrd ), a bank β s owners, i. e. the shareholders, will be called upon first, followed by its creditors. only then, and in extreme circumstances, can taxpayers β money be called upon. uniform rules alone cannot achieve this, however. they | the final results. this will enable market participants to familiarise themselves with the type of information they can expect. clearly defined powers many people may be wondering whether the comprehensive assessment has given the ecb too much power. the decision to entrust banking supervision to the ecb was above all a pragmatic one. legislators were looking for a viable european solution within the existing agreements. the aim was to eradicate the previous supervisory culture, in which national supervisors occasionally had an incentive to take decisions that favoured national interests in particular. this was not always conducive to financial stability in other member states or in the euro area as a whole. governments and market participants trust the ecb in its role as an established, supranational institution to supervise the banks impartially and in the best interests of europe. and many in the ecb were also somewhat sceptical to start with. when all β s said and done, our reputation is at stake. that β s why we have always insisted on certain basic principles, including a strict separation between supervision and monetary policy. these basic principles also apply during actual implementation. for example, we separate monetary policy and supervision by separating employees who are involved in supervision from monetary policy at an organisational level. supervisory work is planned and carried out by a separate body, the supervisory board. the board has already started meeting and is responsible for the ongoing preparations for single supervision. the ecb β s governing council convenes separately on issues of supervision. and we are also accountable separately for supervision and for monetary policy. bis central bankers β speeches as you know, only the most important banks will be supervised directly by the ecb. this will be done by joint supervisory teams comprising ecb employees, national supervisors and supervisors from the member states in which the banks operate on a cross - border basis. smaller banks will continue to be monitored by the national supervisory authorities. for most of you, this therefore means they will continue to be supervised by the bundesbank and bafin, which know the characteristics of both the german banking system and your banks inside out. the important thing is that all participants play by the same rules, regardless of the member state in which they are based. the ecb will ensure that this is the case. first, it will keep a close eye on the work of the national supervisory authorities and ensure that strict supervisory standards are maintained everywhere. and second, the ecb can, where necessary, take over direct supervision | 1 |
##sposable income and standard of living. second, there is diminution of real value of savings as real interest rates turn negative and return on savings does not fully compensate for price rise. third, economic agents base their consumption and investment decisions on their current and expected future income as well as their expectations on future inflation rates. persistent high inflation alters inflationary expectations and apprehension arising from price uncertainty does lead to cut in spending by individuals and slowdown in investment by corporates which hurts economic growth in the long run. fourth, if the inflation rate is increasing faster than those in other countries then domestic products become less competitive which has adverse impact on growth, employment and the balance of payments. fifth, high inflation worsens inequality due to arbitrary redistribution of income where the poor suffer the most as the rich can hedge against inflation. for a detailed analysis of this, please see deepak mohanty ( 2010 ) : β measures of inflation in india : issues and perspectives β, speech delivered at the conference of indian association for research in national income and wealth at the centre for development studies ( cds ), thiruvanthapuram, on january 9. finally, the policy measures for reducing inflation have their externalities and associated costs in terms of reduction in aggregate demand in the short to medium run. inflation dynamics milton friedman famously said, β inflation is always and everywhere a monetary phenomenon β. 3 it is believed that short - run inflation dynamics is largely dependent on supply - demand conditions and monetary expansion influences inflationary condition in the long - run. monetary expansion could be caused by persistence of high fiscal deficit and the need to finance the same by monetisation. consequently, high monetary growth could lead to continued excess demand for a prolonged period without matching increase in output and productivity. on the other hand, supply conditions have strong influence on the inflation dynamics in the short run. in a rapidly growing developing economy like ours, both structural and idiosyncratic factors could play a significant role in the determination of inflation. in the recent years, the inward looking nature of indian economy has been changing. activities in almost all the sectors in varying degrees are influenced by global factors, be it trade in commodities, provision of services, financing conditions, or consumer taste. now domestic prices are more influenced by changes in global commodity prices for a wide range of goods β a sea change from the 1970s and 1980s when crude prices were major global influencing factors. taking into account the influence of global and domestic factors, the overall w | into higher global food prices as the import demand is large. hence, imports do not necessarily lead to domestic prices moving lower. one important determinant of prices of agricultural production in india has been the minimum support price ( msp ) announced by the government for procurement of various commodities. the high increase in msp since 2007 β 08 has given an upward bias to agricultural prices ( table 5 ). reduced availability of foodgrains also tends to keep food prices high. as per the economic survey 2009 β 10, per capita net availability per day of cereals and pulses has been lower than that observed in the previous four decades. the per capita daily availability of foodgrains was 447 grams in the 1960s and 1970s, which successively increased to 459 grams in the 1980s and 478 grams in the 1990s but came down to 446 grams during 2000 β 08 and stood still lower at 436 grams in 2008. severe drought in major parts of the country during the current year has perceptibly worsened food availability further. in particular, the situation is far more worrisome for pulses : its per capita net availability per day has gone down from around 60 β 70 grams during the 1950s to around 30 grams currently. on the demand side, a major economic transformation in india in the recent years has been the surge in rural demand which has now lower dependence on the farm sector. as per the national sample survey ( nss ) data, the share of rural consumption in overall consumption was about 58 per cent in 2006 β 07. the non - farm sector consumption accounts for about 55 β 60 per cent of the total rural consumption. while farm sector demand is more prone to the vagaries of weather, non - farm rural sector has imparted more stability in the recent years due to increased focus on the rural development, particularly through enhanced outlays under various public schemes. given the stage of our economic development, the demand for food items would increase with economic growth and rise in income levels. demographic dividend which has been contributing towards india β s growth and productivity, has also raised consumption demand, particularly on food. as per the united nations projection, high - consumption cohort in the age - group of 15 β 59 individuals comprising around 65 per cent of india β s total population will continue dominate demand till 2040. thus, lower per capita availability of foodgrains and structural shortage of key agricultural commodities like oilseeds and pulses combined with the rising demand have kept food price inflation | 1 |
benchmark fixings. the gfxc drew attention to the possible consequences of these flows ahead of march quarter - end, 2 cautioning market participants to always be mindful of the impact of their transactions and to clearly understand how their orders are being handled. subsequent liaison suggested that market participants were attentive to the potential impacts. in some markets, participants looked to bring the timing of their flows forward of month - end. but while the fixings have generally proceeded smoothly, there have been occasions this year where the london 4pm fix has been associated with heightened volatility. this has prompted discussions β including amongst the gfxc and its member committees β about the fixing process. the gfxc is regularly engaging with the administrator of the w m / r fixes to relay any feedback from the committee and its members. i am encouraged by the increased engagement by them with market participants on the issues. at the same time, it remains as important as ever for users of the 4pm fix and other benchmarks 1 / 4 bis central bankers'speeches to regularly assess whether executing at those times suits their requirements. operation of fx markets more broadly, the covid lockdowns presented major operational challenges to fx market participants. these challenges were exacerbated by the market volatility, but even as market conditions stabilised, many of the operational challenges remained. however, the fx industry generally has been able to meet these challenges. a recent report issued by the gfxc summarised the experiences of both buy - side and sell - side market participants throughout this time. 3 broadly speaking, electronic trading proved effective and reliable. it is likely that the covid period will have only furthered the industry β s shift toward electronic trading. this includes the greater use of execution algorithms in many markets. from the gfxc β s perspective, the recent period has highlighted the importance of having common standards of industry practice. the abrupt change in market conditions that we witnessed this year also underscored the importance of transparency. as spreads widened, trade sizes were reduced and β last look β rejection rates rose, clients needed to understand the implications of this for their activities. review of the fx global code while the code has certainly proven its value since it was introduced, the fx market is constantly evolving. when the code was launched in 2017, the gfxc committed to undertaking a review of the code every three years to ensure that its guidance remains appropriate and | are affecting households according to their stage in life. some indebted households appear to be taking advantage of low interest rates to pay down their debts faster than has been the norm, perhaps in response to weaker prospects for income growth. those relying on interest receipts may feel compelled to constrain their consumption in response to the relatively long period of very low interest rates. meanwhile, the search for yield is no doubt playing a role in driving the strong growth of investor housing credit. this might provide some indirect support to aggregate demand, but this channel is not without risk. from mid 2010 to mid 2012, about half of the decline in the dashed line in graph 9 owed to lower owneroccupier housing credit ( net of offset accounts ), but since then it has returned to about the same level as it was five years ago ( as a share of disposable income ). for further discussion of this issue, see connolly e, f fleming and j jaaskela ( 2012 ), β households β s interestbearing assets β, rba bulletin, december, pp 23 β 32. bis central bankers β speeches in short, monetary policy is working. the transmission mechanism may have changed in some respects, and this could help to explain lower - than - expected growth of consumption and debt of late. but it is hard to be too definitive. to know more about this, it would be helpful to better understand the behaviours of different types of households using householdlevel data. to use a botanical analogy, to know more about a plant, it β s helpful to observe how its different types of cells work. bis central bankers β speeches | 0.5 |
obvious once they β ve burst. ) in a bubble, asset prices become disconnected from reasonable expectations of the future earnings of those assets. markets fail to get prices right. this mis - pricing gets reinforced and exaggerated by herd behaviour, or irrational exuberance. investors convince themselves that someone else will pay even higher prices for the assets in future. in the case of commercial buildings in the 1980s, the pace of construction was frantic, as supply rose to meet the high demand which was manifesting itself in high prices. anyone who was around at that time can remember the cranes that cluttered the skylines of our major cities. while prices for industrial properties also rose sharply in the 1980s, construction of new industrial buildings was actually fairly steady during this period. the bubble that occurred in the mid 1980s was not limited to business property. the se40 share market index doubled in one year and then halved in the following year, after the crash. nor was the bubble limited to new zealand ; it occurred in other countries too, notably in the us. figure 3 industrial property prices and the cpi annual percent change the bubble burst in late 1987 when the us share market crashed. it suddenly became obvious that asset prices had been out of line with economic fundamentals. we had witnessed a sustained period of misplaced investment, with the returns from this investment proving to be low. misdirecting resources in this manner can be very costly for the economy. the consequences for new zealand were serious. some companies went bankrupt and the economy went into a recession. it didn β t recover from this recession until 1992. in terms of the loss of output relative to potential output, this recession was probably new zealand β s second worst of the twentieth century. when the recovery did arrive, it was strong. manufacturing, much of which had been restructured and was running under new ownership and management, began to thrive. for a number of years we had double digit percentage growth in manufactured export volumes. consequently, the demand for industrial property rose sharply. in the newly deregulated environment of the labour market, employment growth was strong, and unemployment began a steady decline. the growth in service sector employment increased the demand for commercial property. the asian crisis and the drought of 1997 slowed demand for both industrial and commercial properties. but prices have lifted again in recent years, fuelled by the economic growth stemming from all the factors i mentioned earlier. in general, these recent rises do not appear to be cause for concern. as i see | any form of on - site examination of banks. these distinguishing features continue to apply under the new supervisory framework. in late 1991 we commenced a major review of our banking supervision arrangements. the review was motivated by a number of concerns. probably the main reason for commencing the review was a concern that conventional approaches to banking supervision generally make insufficient use of market disciplines as a means of promoting a sound and efficient financial system. we believed that there was considerable scope to use market disciplines to promote systemic stability. in particular, we wished to provide the market with a greater capacity to hold the directors and management to account for the sound management of their bank. and we wanted to improve the market β s ability to make well informed decisions as to which banks they would do business with. as i note later in this address, we concluded that the introduction of a well focused and comprehensive disclosure regime would go a long way towards achieving these objectives. another factor which led us to review our banking supervision arrangements was a concern at the compliance costs and regulatory distortions which can be associated with conventional approaches to banking supervision. this concern reflects our view that banking supervisors tend to have strong incentives to promote a stable financial system, without always having appropriate regard to the compliance costs and regulatory distortions to which supervision and prudential regulation can give rise. we were also concerned at the taxpayer risk involved in the traditional approach to banking supervision. although this risk is present regardless of the form banking supervision takes, it is likely to be greater where the banking supervisor, and only the banking supervisor, has regular access to financial information on a bank. it is also likely to be greater the more intensive the supervision process is. we wanted to explore ways of reducing the risk of the government being called upon to rescue a bank in distress. finally, we recognised that conventional banking supervision can only go so far in promoting a sound banking system. there are inherent limitations in the extent to which prudential regulation and supervision, even supervision which includes on - site examinations, can minimise the incidence of bank distress and failure. this is evidenced by the fact that countries with intensive supervisory regimes have not been immune from serious episodes of financial distress. indeed, we were concerned that banking supervision could even be increasing the risk of bank failure or distress, by potentially reducing the incentives for bank directors and managers to make their own considered judgements about what constitutes prudent behaviour. the new approach to banking supervision in new zealand in the light of these concerns, and following a lengthy period | 0.5 |
top priority of macroeconomic management, and put reining in inflation high on its agenda. in the first half of 2008, the pbc took the following measures to implement monetary policy : the first was to raise reserve requirement ratio to absorb excess liquidity. the pbc raised the reserve requirement ratio on many occasions. after the reserve requirement ratio was raised by one percentage point on june 7, except for certain financial institutions and quake - hit areas, the reserve requirement ratio of most financial institutions was 17. 5 percent. the rise of reserve requirement ratio absorbed a lot of liquidity, eased the inflationary pressure, avoided the rapid increase of interest rate, and contained hot - money inflows. the second was to flexibly conduct the open market operations. in light of short - term liquidity demand of the banking system and changes of fund demands of financial institutions in the first half of 2008, the pbc flexibly used a mix of instruments, rationalized their maturity structures, kept interest rate stable in the course of open market operations, guided market expectation, and conducted cash management of the state treasury when appropriate. the third was to strengthen β window guidance β and credit guidance. efforts were made to guide financial institutions to strengthen credit regulation and extend loans in a sound and balanced manner during the year, so as to prevent volatile movements of lending activities. measures were taken to encourage growth in some sectors while discouraging it in others and rationalize the credit structure. efforts were made to restrict loans extended to highly energy - consuming and highly polluting industries and industries with overcapacity. credit support was increased to some key areas, such as agriculture, rural areas and farmers, postdisaster reconstruction, small enterprises, the services industry and independent innovation, energy - conservation and environment protection projects, and credit line to small - and medium - sized enterprises was raised. the fourth was to improve the rmb exchange rate formation mechanism reform, and speed up the reform of foreign exchange system. efforts were made to deepen the reform of the foreign exchange system, appropriately guide the market expectation of rmb exchange rate, strengthen the monitoring over, analysis of and management of cross - border capital flows, and strengthen monitoring over abnormal cross - border capital flows in the trade sector and other areas ; to reform the foreign exchange system in trade in service on a pilot basis in some regions ; to allow more market participants on the foreign exchange market, and to promote the equilibrium of the balance of payments. the fifth was to | solved by the mortgage credit system. fundamental investor confidence in the creditworthiness and liquidity of the bonds is at the core of the danish mortgage credit system. it is essential to preserve this confidence and thus the safety of the system. the danish mortgage credit system plays a pivotal role in lending in denmark, and mortgage bonds are important instruments in the banks β liquidity management. in recent years, the credit rating agencies β changing views of the danish mortgage credit system have attracted much attention β by the mortgage banks and by the press. while there is general agreement that danish mortgage credit starts with an β a β, the question is how many β a β s a given business model and portfolio composition should have. today, i would like to make it clear that the purpose of regulating mortgage credit is not to ensure that all mortgage bonds are always β triple a β rated. regulation sets limits, within which the mort - gage banks must operate. where the mortgage banks choose to position their business models and risk profiles within these limits is up to the individual mortgage bank. a β triple a β rating may require a considerable margin to the limits β and if so, the mortgage banks must ensure precisely that if they want this rating. from a legislative perspective, it is fairly straightforward to make mortgage credit almost 100 per cent risk free. if the ltv limits are sufficiently low and the maturities of bonds must match the maturities of the loans, i am sure that this is possible. but at present legislation lays down minimum requirements that give the mortgage banks flexibility and room for manoeuvre. that imposes an obligation on each mortgage bank to keep a suitable margin to the limits and avoid a race to the bottom. bonds with the option of maturity extension β including if the interest rate trigger is activated β are gradually becoming the market standard as short - term bonds are refinanced. experience from the auctions shows that demand remains high β investors have accepted the new market standard. as we had expected, they do demand a modest excess yield of a few basis points, but they still bid heavily at the auctions, where bid - to - cover ratios were high in august and september. i am actually pleased to see that investors put a price on the interest rate trigger. that was basically the objective : to give investors an opportunity to calculate a price for the potential maturity ex - tension of bonds. with the interest rate trigger, it is not up to the authorities, in practice, to decide whether or not | 0 |
, the trajectory of wages and the strength of the labor market. the u. s. expansion is now in its eighth year. by historical standards, it is long in the tooth. despite this, i am optimistic that the economic expansion will continue over the next few years. first, it is important to note that economic expansions don β t simply die of old age. usually, they end either because inflation climbs and the federal reserve responds by shifting to a much tighter stance for monetary policy, or because the economy gets hit with a large unanticipated shock that the fed and the fiscal authorities cannot respond to quickly enough, or with sufficient force, to prevent an economic downturn. while economic shocks are, by their very nature, difficult to forecast, the risk that the fed will snuff out the expansion anytime soon seems quite low because inflation is simply not a problem. not only are underlying inflation trends very subdued β for example, the core personal consumption expenditures deflator has risen at only a 1. 7 percent annual rate over the past year β but the economy is not growing much above its sustainable long - term pace. thus, while pressures on labor resources have been increasing, but quite slowly. finally, the recent strengthening of the dollar will put downward pressure on import prices and limit the ability of domestic producers to raise their prices. second, the household sector β s financial condition is in unusually good shape for this point in the economic cycle. household indebtedness is relatively low, debt service burdens relative to household income have fallen to levels not seen since at least the early 1980s. moreover, household incomes are rising at a moderate pace, supported by continued job gains and some modest strengthening of wage compensation trends. if households and lenders again become comfortable with financing consumption with debt in addition to income, this will provide additional support to household spending and to the current economic expansion. the challenges in the retail space over the near term, therefore, are not likely to be a shortfall of aggregate demand from households. instead, it seems to me the challenges lie more in how to satisfy households β changing demands for goods and services, and the medium through which these demands are satisfied β whether it be brick and mortar or online. also, there is the important issue of how to retain brand loyalty in a world where information is ubiquitous and always near at hand, and it is easy to shift purchases among participants in the retail marketplace. thank you for your kind attention. 5 / 5 | action was intended to help forestall some of the adverse effects on the broader economy that might arise from the disruptions in financial markets and to promote moderate growth over time. recent developments in financial markets, including impaired price discovery, have increased the uncertainty surrounding the economic outlook. what originated as a liquidity shock could potentially give rise to increases in credit risk. the committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to meet our dual mandate, fostering price stability and economic growth. warsh, " financial intermediation and complete markets. " | 0 |
ardian fullani : monitoring of the economy to be conducted not only in the metropolis but in the regions as well article from mr ardian fullani, governor of the bank of albania, published in the ekonomia newspaper, 21 january 2005. * * * our economy has long ago been integrated in a continuous process of quality and quantity development, including an increasingly wider geographical expansion. both communities, bank and business, need to cooperate more closely with each other. in order that this cooperation becomes more efficient, we deem, as bank of albania, to play our active role not only through establishing a safe macroeconomic environment, but also by providing a range of other operations that will encourage lending activity of the banking system from one side and impact a more correct tendency of business toward more reliable projects and investments, on the other side. to this end, we estimate in our short - term and medium - term programs to give our regional branches spread throughout the country a different role from the one they played till now. we deem appropriate it β s time now for our branches not to be simply cash storerooms and distributors. also, we shall try to renounce some operations of non - central banking nature, which gradually shall be absorbed by commercial banks. our goal is these branches be changed into an advanced model of the bank of albania presence throughout various regions of the country. they will become genuine stations of information gathering about the economic and financial activity of the region, being preceded by further analyses and studies. this research work will serve not only to a more explicit monetary programming but also to the modernization of transmission elements of this policy from the higher authority to the lower authority and vice versa. i estimate that this initiative of the bank of albania to monitor the economic activity not only in the metropolis but also in other regions of the country would be of particular interest for all the interested groups. further, i would like to add some other comments on the latest developments of the banking system, which i deem have created good premises for a real expansion of this business, an expansion that will positively impact on the performance of business activities. after completion of the real time gross settlement ( rtgs ) system, the bank of albania inaugurated some times ago the initiation of a very important project on the automated electronic clearing house ( aech ). the operation of this new system will considerably increase the payment speed for the customers, knowing that the lack of this element has maintained businesses far from banks. i take this opportunity to make | sector. verified performance of economic activity at home and the information filtered from indirect indicators have shifted downward our basic projections for the economic performance for the rest of year. this shift reflects the materialisation of some risks around the previous basic projections, being expected and factorised in our scenarios. the domestic economy is expected to slow down during the rest of year, being conditioned by the weakening of the domestic and foreign demand. given the consolidated fiscal behaviour and the slowed foreign demand, the performance of the private domestic demand will determine the economic activity growth. however, its two components, consumption and investments, have not shown any recovery signal so far. expected developments at home and abroad result in a contained balance of inflationary pressures, determining a slow increase in consumer price in the future. the demand growth bis central bankers β speeches below the potential of the economy in the upcoming period will continue to exercise low inflationary pressures. at the same time, the pressures generated by supply - side factors appear contained. based on the insofar developments of the determinant factors of inflation and the projections for their development in the future, with 90 % probability, inflation will range within 1. 0 % β 3. 3 % band after 12 months. * * * based on the analyses of the information set out above, the supervisory council holds that pressures on consumer prices at home remain low over the monetary policy relevant horizon ; they have been, however, on the downside over the recent months. on the demand side, below - potential economic growth will continue to generate low inflationary pressures, while shocks from the supply side are expected to be moderate. the expected developments in economy and inflation imply that the simulating nature of the monetary policy will be retained during the period ahead. the bank of albania remains heedful to future developments and new information, ready to respond in the appropriate time and extent in order to comply with its legal mission. at the conclusion of discussions, the supervisory council decided to decrease the key interest rate by 0. 25 percentage point, at 4. 0 %. this decision aims to establish the appropriate monetary conditions to comply with the inflation target in the medium run. the monetary policy, also, provides the necessary support to simulate the aggregate demand. bis central bankers β speeches | 0.5 |
exporters. since the onset of the financial crisis, the swiss franc has appreciated in real terms by around 15 %. 18 this appreciation puts up the price of swiss exports abroad or narrows the margins for swiss exporters β or a combination of both. this will be reflected sooner or later in the export figures. indeed, in recent months, the recovery of swiss goods exports has slowed markedly ; although this is also related to a slowdown in global economic momentum. the financial crisis and financial market concerns regarding the public finances of a number of industrialised countries have increased demand for the swiss franc as a safe haven currency. the stability of the euro area is therefore an important factor influencing the swiss franc and the swiss economy as a whole. eu citizens clearly have a vested interest in the stability of the euro. the same is very much true for the citizens of switzerland. i am confident that the eu will ultimately succeed in once again deeply anchoring a culture of economic and financial stability. earlier this year, european politicians and policymakers began to take decisive action to that end. as we all know, crucial challenges lie ahead. these call for determination, courage and perseverance β not only from policy makers, but also β and most importantly β from the citizens of the eu. i am confident that the eu and the euro area will overcome these challenges. in the past, europe has always emerged stronger from periods of difficulty. jean monnet already recognised this in 1976, when he wrote in his memoirs : β europe will be forged in crises and it will be the sum of the solutions adopted for those crises. β 19 as far as switzerland is concerned, i am optimistic that it, too, will overcome the formidable challenges it faces. as with most countries, switzerland benefited greatly from globalisation and from opening up its economy. thanks to its flexibility and creativity, the swiss economy is well placed to remain internationally competitive. but the swiss people must recognise that the world does not stand still. in order to preserve and enhance our high standard of living, we must remain extremely flexible in every respect. this is where the real economy, in particular, faces a challenge : ongoing innovation and qualified human capital are of the utmost importance in a high - wage country such as switzerland. both of these factors will enable our companies to continue to bring successful new products onto the world market, many of which we aren β t even able to imagine today. monetary policy can generate neither innovation nor growth. nonetheless, the swiss | swiss economy is still not fully utilised overall. technical capacity utilisation in manufacturing remains considerably below its long - term average. although employment was up in the first quarter, the unemployment rate remained unchanged. we expect the moderate recovery to continue in the coming quarters. for 2014, we anticipate that the growth rate will remain at around 2. 0 %. as we continue to see gradual improvement in the international environment, export demand is likely to rise. over time, this should encourage corporate investment and stimulate demand for labour. the level of residential construction orders remains high. on the whole, however, we expect a considerable slowdown in the growth momentum of residential construction investment. in addition to global risks, the swiss economy also faces uncertainty at home. in the past few weeks, the snb β s delegates for regional economic relations asked companies to assess the impact of the popular initiative on curbing mass immigration on their business activity. the results suggest a tangible level of uncertainty about economic conditions. most companies have not taken any specific measures, however. monetary and financial conditions i will now turn to monetary and financial conditions. after about two years of negative inflation, consumer price inflation has been practically zero for some months now. this very restrained development is also reflected in inflation expectations. the majority of market participants expect inflation to remain unchanged in the short term. over a longer horizon of more than two years, the relevant surveys show that the expected rate of inflation is approximately 1. 0 %. these results are consistent with our assessment of the inflation outlook. bis central bankers β speeches geopolitical risks and mixed economic data in the major economies led to stronger demand for secure investments. this was reflected in falling yields on long - term government bonds. my colleague, fritz zurbrugg, will talk to you about developments in the financial markets in more detail. mortgage rates also declined again, thereby further bolstering demand for mortgage loans. however, the slowdown of momentum in mortgage lending, which has been observed for some time now, continued. this is a step in the right direction. nevertheless, imbalances remain. it is therefore still too early for an all - clear. given the high level of liquidity, money market rates remained at a low level. even prior to the introduction of negative interest rates by the european central bank ( ecb ), swiss franc libor futures slipped well into negative territory. we are closely monitoring the impact of the recent interest rate reductions in the euro area | 0.5 |
, i very much welcome your questions. bis central bankers β speeches | imf was there when ireland, portugal, greece and cyprus were under attack. in an unstable world, the imf is more necessary than ever. our crisis management tool, the european stability mechanism, deserves to be strengthened. it could become a true european stability fund, with greater resources and an independent advisory capacity. european crises would also have to be managed in a more transparent way, involving the european parliament more closely. protectionist and populist movements are gaining support among voters in europe. how should we respond to this frustration? europe was a great success when it came to building the single market and the euro, and welcoming the former communist countries. but it was unable to help workers facing globalisation and technological change. we need to take advantage of the return of growth to create a space for european rules which foster the mobility of employees, protect their rights and enable them to be educated and trained across europe. why are the ecb and the national central banks ignoring bitcoin and other cryptocurrencies, which are being increasingly used for trade? we aren β t ignoring them. at the moment crypto - currencies don β t pose any monetary risk because the amounts involved are marginal. they are speculative financial instruments which create risks of a financial or even criminal nature. the central banks are following their development very closely because they can spread very rapidly, especially in countries which are moving away from banknotes and coins. and if tomorrow the future president of the ecb was a german national, would that be a serious matter? the nationality of the ecb β s president is irrelevant. what matters is that the person can do the job. 2 / 2 bis central bankers'speeches | 0.5 |
cases. moreover, the pact has also established a framework to encourage people reaching the end of their career to keep their job or return to work. financial incentives have therefore been introduced, including a new bonus system granting a pension supplement for people continuing to work after the age of 62. this should push up the actual retirement age itself. the pact bears witness to an awareness and brings in an indispensable change of trend. according to the work done by the study group on ageing set up within the high council of finance, it is a significant stage in the process, but still not enough in itself to bring the employment rate in belgium up to a satisfactory level. * * * before summing up, i just have to say a few words about the question posed by the organisers of this debate to each of the contributors, namely, which is the best method : harmonisation or decentralisation? do these few selected examples of measures taken in belgium enable us to draw some lessons about the best strategy for continuing and speeding up implementation of the structural reform so badly needed by european economies? first of all, i would point out that this reform applies to existing situations which differ radically from one country to another, even from one region to another. these specific characteristics, which can range from the institutional set - up to the labour relations and social security system, the structure of the economy or even the preferences of the various parties involved, must be taken into account when drawing up appropriate measures, likely to get sufficient backing from society at large. faced with these arguments in favour of decentralisation, we should not overlook the importance of the common approach developed at european level, in the context of the lisbon strategy. its contribution has been primordial in making structural reform a subject of national debate. the use of benchmarking and promoting " best practice " also come into this awareness - raising effort at national level. furthermore, the european dimension helps reap the benefits of positive externalites factors stemming from close coordination of reform measures between countries, and helps keep the risk of possible " beggar - my - neighbour β policies to a minimum. in the updated lisbon strategy that they endorsed in 2005, the member states and the eu authorities have put together a useful combination of a common and decentralised approach. the broad lines are drawn up at european level while the member states are now given more responsibility in implementing reform measures. individual member states mainly have their say by adopting national reform programmes, setting out government | live in a quality environment. indeed, the overall objective of structural reform must be to raise the standard of living in a sustainable way for each of us today, and for generations to come. i believe that the diagnosis for the european economy is already well known. labour force mobilisation is relatively weak in europe - and this has certainly proved to be the case in belgium - while productivity gains have slowed down, despite remarkable scientific and technological progress. in the light of these observations, there has been a consensus for several years now - under the influence of work carried out notably by the imf, the oecd and the european commission - on the need to stimulate labour market participation, reinforce the quality of the labour force, improve the functioning of markets in goods and services, including financial services, and step up the innovation effort. this strategy was endorsed by the governments of the european union member states at the march 2000 european council in lisbon. i think we have to acknowledge that progress has been made, albeit at varying speeds from one country to another, but that there is also still a long way to go. european economies today are faced with many challenges. i am of course thinking of globalisation of the economy, demographic shifts and climate change. the current improvement in the economic climate must not be used as an excuse for postponing reforms ; on the contrary, it should be seen as an opportunity to put them into practice with even greater resolve. my expose will obviously not cover the whole issue of structural reform. owing to time constraints, i will not go into nonetheless important topics like education and innovation. in line with what has been suggested, i would like to illustrate the subject of reform with some concrete examples drawn from my country β s experience and pointing up encouraging progress, even though it is often still not enough. * * * first and foremost, in belgium β s case, reforms were carried out in areas where they were deemed most urgent. significant progress has been made towards improving the country β s public finance situation, which had become unsustainable in the 1980s, and with wage - setting, taking account of the need to remain sufficiently competitive, because belgium has such an open economy. apart from these characteristics that are peculiar to the belgian economy, reforms have also been started in the field of pensions and employment of the older age bands of the population. 1. on the public finance front, the results so far are quite satisfactory. belgium brought down its budget deficit from 8 p. c | 1 |
financial instability from time to time, and policymakers will be forced to make judgments about the costs and benefits of alternative responses with very incomplete information. in a financial crisis, the potential cost of inaction or inadequate action is possible disruption to the real economy, which would damp activity and put undesirable downward pressure on prices. such disruptions can come about because crises heighten uncertainty about the financial status of counterparties and about the eventual prices of assets. in an especially uncertain environment, lenders may become so cautious that credit supplies are cut back more than would be justified by an objective assessment of borrowers β prospects ; concerns about counterparty risk can impair the smooth functioning of payment and settlement systems, interfering with a wide variety of markets ; asset prices can be driven well away from equilibrium values ; and confidence can be undermined. these types of tail events could depress economic activity for a time and, if prolonged, could also adversely affect efficiency and productivity by impairing the ability of financial markets to channel savings into the most productive investments. although policy action may be able to reduce the odds of adverse effects or alleviate their impact, some policy responses to a crisis can themselves have important costs that need to be balanced alan greenspan ( 2004 ), β risk and uncertainty in monetary policy, β american economic review, vol. 94 ( may ), pp. 33 - 40. edward c. ettin, myron l. kwast, and patrick m. parkinson, of the board β s staff, provided valuable ideas and comments. against their possible benefits. in short, intervening in the market process can create moral hazard and weaken market discipline. if private parties come to believe in the possibility of policy actions that will relieve them of some of the costs of poor decisions or even just bad luck, their incentives to appropriately weigh risks in the future will be reduced and discipline on managers watered down. weaker market discipline distorts resource allocation and can sow the seeds of a future crisis. the possible real costs of policy actions implies that they should be taken only after the determination that, in their absence, the risk is too high that the crisis will disrupt the real economy. once that judgment is reached, the central bank and other authorities have a variety of instruments to use, and the degree of potential moral hazard created will depend on the instrument chosen. approaches that work through the entire market rather than through individual firms run a lower probability of distorting risk - taking. thus, a | came in at 2. 6 percent in july, again remaining well above our 2 percent goal. in addition, the latest consumer and producer price index reports suggest that 12 - month core pce inflation in august was likely a touch above the july reading. the persistently high core inflation largely reflects 1 / 5 bis - central bankers'speeches pressures on housing prices, perhaps due in part to low inventories of affordable housing. the progress in lowering inflation since april is a welcome development, but core inflation is still uncomfortably above the committee's 2 percent goal. prices remain much higher than before the pandemic, which continues to weigh on consumer sentiment. higher prices have an outsized effect on lower - and moderateincome households, as these households devote a significantly larger share of income to food, energy, and housing. prices for these spending categories have far outpaced overall inflation over the past few years. economic growth moderated earlier this year after coming in stronger last year. private domestic final purchases ( pdfp ) growth has been solid and slowed much less than gross domestic product ( gdp ), as the slowdown in gdp growth was partly driven by volatile categories including net exports, suggesting that underlying economic growth was stronger than gdp indicated. pdfp has continued to increase at a solid pace so far in the third quarter, despite some further weakening in housing activity, as retail sales have shown further robust gains in july and august. although personal consumption has remained resilient, consumers appear to be pulling back on discretionary items and expenses, as evidenced in part by a decline in restaurant spending since late last year. low - and moderate - income consumers no longer have extra savings to support this type of spending, and we have seen loan delinquency rates normalize from historically low levels during the pandemic. the most recent labor market report shows that payroll employment gains have slowed appreciably to a pace moderately above 100, 000 per month over the three months ending in august. the unemployment rate edged down to 4. 2 percent in august from 4. 3 percent in july. while unemployment is notably higher than a year ago, it is still at a historically low level and below my and the congressional budget office's estimates of full employment. the labor market has loosened from the extremely tight conditions of the past few years. the ratio of job vacancies to unemployed workers has declined further to a touch below the historically elevated pre - pandemic level - a sign that the | 0.5 |
spirals in asset prices and created " excessive " losses, with no relation to real underlying economic reality. such liquidity spirals may have occurred at some critical moments 7. however, it now seems that the disproportion between banking losses, on the one hand, and movements in underlying asset prices, on the other, can ( almost ) fully be accounted for by the extraordinary degree of leverage which accumulated in the financial system over the last decade. procylicality was at work, but on a much longer time horizon, and during the upward phase of the credit cycle. the following stylized facts describe what happened 8 : β’ overall leverage grew strongly during the last decade β’ there was an upward break in the trend growth around 2003 / 2004 β’ " inside " leverage ( between financial institutions ) grew faster than " outside " leverage ( in the real economy ) β’ the growth in leverage was closely associated with a dramatic increase in maturity transformation β’ risk measurement methodologies played a role in minimizing the impact of leverage in financial and risk reporting β’ accounting methodologies also played a central role. instant recognition of profits led to a disconnection in time between measuring the return on an asset and recognizing the risk ; this created a powerful incentive to take risk and strongly amplified the credit cycle. at times, cds indices appeared mispriced with implied probabilities of default clearly inconsistent with any plausible state of the global economy. see cgfs, april 2009. policy options addressing procyclicality clearly involves many policy actions. those should be part of an integrated framework of macro prudential supervision. i will briefly deal with the general approach, then discuss the instruments available to mitigate procyclicality. general approach as in many matters of public policy, there is a choice between rules and discretion in dealing with procyclicality. the rule based approach can be built on " automatic stabilizers " which would constrain institutions in their behaviour, regardless of their own individual situations. examples would include contra cyclical capital requirement, for instance, as well as dynamic provisioning. alternatively, discretionary action could consist in " top down " interventions from macro prudential authorities. they would step in and impose ( or relax ) constraints whenever they come to the conclusion that dangerous imbalances are building up ( or unwinding ). we probably cannot dispense of this second approach. the difficulty to date cycles makes it dangerous to rely purely on automatic mechanisms, | be able to both meet those requirements and distribute profits. conversely, capital dries up during downturns, when it is most necessary 9. there is clearly an asymmetry with strong equity outflows in boom times and no inflows in bad times. it is not clear that introducing counter cyclical capital requirements will suffice to counteract this very powerful dynamic, especially in bad times. it may be necessary to look at other tools in order to address procyclicality and pre - empt the build up of imbalances. those tools have to act more directly on individual and collective incentives. this is where accounting may matter most. economically, it will always remain difficult, when looking at revenues drawn from a financial investment, to distinguish excess return from additional risk taking. but financial reporting may be conceived in such a way that this distinction is prudently introduced. there is no reasonable or practical alternative to fair value accounting for tradable securities. this does not mean, however, that any single valuation gain or loss should instantly be recognized as a profit ( or loss ) and financially treated as such. there is a possibility to delink valuation from income / profit recognition. some disconnection between the valuation process β which should remain anchored on market prices β and income and profit recognition will have to be introduced, if only to account for risks which are there but have not yet materialized. dynamic provisioning is one technique for doing so, when risks are closely related to the economic cycle. valuation reserves may also be used when complexity or illiquidity creates additional risk linked to valuation. provided those adjustments are rule based and made in a fully transparent process, they would not reduce the quantity or quality of information available to investors as to the real health of financial institutions. another avenue for research would be for the regulatory system to " force " the pricing of risk in all its dimensions. there is a clear analogy with tax theory : internalizing the risk eliminates market failures. this approach would be best implemented to liquidity risk linked to maturity transformation. quantitative liquidity ratios are currently considered in a number of juridictions to be imposed on financial institutions. however, they may not protect the system against an aggregate liquidity shock, when, by definition, the demand for liquidity becomes infinite and any buffer proves insufficient. pricing liquidity ex ante in the system would reduce the probability of such a shock and create incentives against relying too much on maturity transformation. | 1 |
philip n jefferson : opening remarks - 18th central bank conference opening remarks by mr philip n jefferson, member of the board of governors of the federal reserve system, at the 18th central bank conference on the microstructure of financial markets, board of governors of the federal reserve system, washington dc, 19 october 2023. * * * it is my pleasure to welcome you to the 18th central bank conference on the microstructure of financial markets. this is the first time that this event has been held at the federal reserve board, and we are very pleased to host the conference. before i begin, let me remind you that the views i will express today are my own and are not necessarily those of my colleagues in the federal reserve system. our guests include academics from a number of institutions, both in the u. s. and abroad ; fellow central bankers, including colleagues from the bank of england, the bank of japan, and the bank for international settlements ; and friends from across the federal reserve system and from several u. s. government agencies, such as the commodity futures trading commission ( cftc ), the securities and exchange commission ( sec ), and the u. s. treasury, including the office of financial research ( ofr ). now, since this is what you have gathered here to discuss, i do not have to convince this group of the critical importance of well - functioning financial markets for the economy. in my case, coming as a macroeconomist from the academic world to the federal reserve has only reinforced that conviction. market microstructure is important central bankers, regulators, and market participants ask a lot of financial markets. we want financial markets to be effective and efficient, and to aggregate and reflect all pertinent information. we rely on these markets to help us gauge how the economy is performing, to help us measure market expectations of monetary policy, and even to help us predict how the economy might evolve in the future. we want financial markets to be deep and liquid in good times, but also to remain deep and resilient when the economy is stressed. we want financial markets to be fair, so as not to favor certain participants. and central bankers, obviously, rely critically on financial markets for the implementation and transmission of monetary policy. as we have broadened our arsenal of policy tools over the past two decades and as markets have become larger, more complex, and more diverse, i would argue that it has become even more critical for us to | treasury market have involved a lot on market microstructure and market design, including questions such as the following : is the current intermediation capacity of dealers sufficient given the size of the market? would an increase in the share of transactions that are centrally cleared help that intermediation capacity? is a decentralized dealer - intermediated market optimal, or could an all - to - all market for treasury securities be more resilient under stress? what are the respective roles of banks and nonbanks in this market? are the incentives faced by market participants naturally leading the treasury market to become more resilient over time? or would some carefully crafted intervention be helpful? as you can hear, this list of research questions contains a heavy dose of market microstructure content. why am i sharing them with you? just to make my final point : as economists focused on market microstructure, what you do is important, and what you do is immediately relevant. so, again, welcome to the federal reserve board. i wish you an excellent conference. 2 / 3 bis - central bankers'speeches 1 see nellie liang ( 2022 ), " remarks by under secretary for domestic finance nellie liang at the 2022 treasury market conference, " remarks, november 16. 3 / 3 bis - central bankers'speeches | 1 |
compared with our expectations in december, risks to the inflation outlook are tilted to the upside, particularly in the near term. if price pressures feed through into higher than anticipated wage rises or the economy returns more quickly to full capacity, inflation could turn out to be higher. in a few weeks, the march ecb staff projections will provide an updated assessment, taking the most recent data into account. this will help the governing council better appraise the implications of the surprisingly high december and january inflation figures for the medium - term outlook. in particular, we will carefully examine how higher energy prices will transmit through the economy and affect the outlook overall. two channels could be at play, pulling inflation dynamics in different directions. on the one hand, rising energy costs can drive up prices directly, by increasing the cost of production, as well as indirectly, by having second - round effects on wages. on the other hand, they can have a negative impact on the incomes of households and the earnings of companies, thereby reducing economic activity and dampening the inflation outlook. in the past, the euro area has been particularly vulnerable to the second channel, as surges in energy prices weakened the spending power of households, and reduced inflation over the medium term. obviously, in our assessment of the inflation outlook, we have to bear in mind that demand conditions in the euro area do not show the same signs of overheating that can be observed in other major economies. this increases the likelihood that the current price pressures will subside before becoming entrenched, enabling us to deliver on our two per cent target over the medium term. indeed, while moving up over recent months, indicators of longer - term inflation expectations are consistent with this expectation. survey - based measures point to inflation returning to two per cent by 2023 and remaining close to this level thereafter ; and market - based indicators stabilise around levels somewhat below two per cent. the solid anchoring of long - term inflation expectations in the euro area is a reassuring development, coming after a long period when they were subdued. 2 / 3 bis central bankers'speeches to sum up, the euro area economy has continued to recover, although growth is expected to remain subdued in the first quarter. while the outlook for inflation is uncertain, it is likely to remain elevated for longer than previously expected, but to decline in the course of this year. in our meeting last week, we confirmed the decisions we took in december. accordingly, we will continue reducing the pace of our | we last met in november, i stated that growth momentum was moderating. indeed, recent data confirm that quarterly growth slowed to 0. 3 per cent in the final quarter of 2021, which still allowed gross domestic product ( gdp ) to recover to its pre - pandemic level. the moderation in growth momentum has resulted mainly from the rapid spread of the omicron variant. the associated containment measures have dampened activity, particularly in consumer services such as travel, tourism, hospitality and entertainment. the current pandemic wave and associated restrictions are likely to continue to have a negative impact on growth at the start of this year. two other factors which we discussed at the previous hearing β namely supply bottlenecks and high energy costs β are also expected to dampen economic activity in the near term. 1 / 3 bis central bankers'speeches however, the economic impact of the current pandemic wave appears to be less damaging to activity than previous ones. moreover, the aforementioned bottlenecks will still persist for some time, but there are signs that they may be starting to ease. this will allow the economy to pick up strongly again later this year. inflation has risen sharply in recent months and it further surprised on the upside in january, with the rate increasing to 5. 1 per cent from 5. 0 per cent in december. inflation is likely to remain high in the near term. energy prices continue to be the main reason for the elevated rate of inflation. their direct impact accounted for over half of headline inflation in january and energy costs are also pushing up prices across many sectors. food prices have also increased, owing to seasonal factors, elevated transportation costs and the higher price of fertilisers. in addition, price rises have become more widespread, with the prices of a large number of goods and services having increased markedly. financing conditions for the economy have remained favourable. while market interest rates have increased since december, bank funding costs have so far remained contained. bank lending rates to firms and households continue to stand at historically low levels. turning to the risk assessment, we continue to see the risks to the economic outlook as broadly balanced over the medium term. uncertainties related to the pandemic have abated somewhat. at the same time, geopolitical tensions have increased and persistently high costs of energy could exert a stronger than expected drag on consumption and investment. the pace at which supply bottlenecks are resolved is also a further risk to the outlook for growth and inflation. | 1 |
in july, with the differences across borrowing sectors becoming more marked. the flow of loans to households remained slightly positive, whereas in the case of non - financial corporations the flow of loans was negative again. the decline in loans to non - financial corporations continues to reflect mainly a strong net redemption of loans with a shorter maturity, while lending and borrowing at longer maturities remained positive. the fall in production and trade and the ongoing uncertainty in the business outlook are likely to have dampened firms β demand for financing. given the normal lag between a recovery in economic activity and a pick - up in loans to enterprises, further weak developments in loans to non - financial corporations in the coming months appear likely. at the same time, a gradual improvement in financing conditions, as lower market interest rates continue to be passed on in lower bank lending rates, should support the demand for credit in the period ahead. against the background of highly demanding challenges, banks should take appropriate measures to strengthen further their capital bases and, where necessary, take full advantage of government measures to support the financial sector, particularly as regards recapitalisation. to sum up, the information and analyses that have become available since our meeting on 6 august 2009 confirms the view of the governing council that the current key ecb interest rates remain appropriate. in this respect, at today β s meeting we also decided that the rate for the twelve - month longer - term refinancing operation to be allotted on 30 september 2009 will be the prevailing rate on the main refinancing operations. price developments are expected to remain subdued over the policy - relevant horizon. annual hicp inflation was slightly negative in august. this reflects mainly the base effects of the strong rise in commodity prices in 2008. the return of hicp inflation to moderate positive rates is expected within the coming months. at the same time, the latest information supports our view that there are increasing signs of stabilisation in economic activity in the euro area and elsewhere. this is consistent with the expectation that the significant contraction in economic activity has come to an end and is now followed by a period of stabilisation and very gradual recovery. available indicators of inflation expectations over the medium to longer term remain firmly anchored in line with the governing council β s aim of keeping inflation rates below, but close to, 2 % over the medium term. a cross - check of the outcome of the economic analysis with that of the monetary analysis confirms the assessment of low inflationary pressure over the medium term, as | liquidity regulations and have argued that the interaction with monetary policy implementation is expected to be significant and complex. i would therefore conclude that liquidity regulation and central bank operations cannot be looked at in isolation. the new set of liquidity requirements will provide for a better monitoring of risks on banks β balance sheets and will limit the social cost of liquidity crises. it has to be combined with actions ensuring a proper functioning of the money market, such as reform and oversight of reference rates. it should be seen as a complement to regulatory reforms that improve market discipline in other segments of the banks β liability structure, such as capital buffers and the new bail - in rules for senior bond - holders and uninsured depositors. a more far - reaching question, which i did not address in this speech, is whether the increased risk - sensitivity of bank liabilities under the new regulatory regime will constrain the role of banks as providers of liquidity services to the economy, or as creators of β quasimoney β. if so, this could put undue pressure on central banks as producers of the only truly safe and liquid asset β bank reserves. this makes it even more important for governments to be fiscally responsible so that treasuries can keep or regain their role as safe and liquid instruments. going forward, central banks will continue to act as lenders of last resort, but the crisis has helped us better understand the conditions for it to be socially useful. one of these is an effective liquidity regulation that constrains the business models of banks in a way that ensures that liquidity risk is self - insured. if properly priced, instruments such as a committed liquidity facility can complement liquidity regulation while protecting monetary policy. another condition is that the resort to central bank liquidity should be expensive, bounded in time, and addresses only emergency situations. this matters particularly in the euro area, where overreliance on central bank funding, including emergency liquidity assistance, can delay the necessary restructuring and changes in banks β business models. and finally, there should remain a strict separation between capital and liquidity assistance that reflects the division of tasks between central banks on the one hand, shareholders and fiscal authorities on the other hand and avoids that monetary policy is held hostage of financial or fiscal dominance. liquidity ought to be provided to the banking system as needed, but it should not be a substitute for a lack of capital. thank you for your attention. bis central bankers β speeches | 0 |
mario draghi : bank restructuring and the economic recovery speech by mr mario draghi, president of the european central bank, at the presentation ceremony of the schumpeter award, central bank of the republic of austria, vienna, 13 march 2014. * * * summary on accepting the schumpeter award in vienna, ecb president mario draghi said 2014 and 2015 were set to be a period of recovery after two years of stabilisation and a return of confidence in the euro area. but the recovery β remains conditional on our pursuing the very policies that have brought about the return of confidence, β including growth - friendly fiscal consolidation, structural reforms and a committed monetary policy. in his speech, mr draghi drew a parallel between the policies applied in the euro area with the ideas of economist joseph schumpeter, who spoke of β creative destruction β driving innovation and productivity growth. by cleaning up and repairing banks β balance sheets, the ecb β s comprehensive assessment helps create the necessary conditions for resources again to flow to the productive economy. β by encouraging creative destruction in the banking sector, we can facilitate creative destruction in the wider economy and support the recovery. β deleveraging in the financial system was necessary, since too much debt has been built up in the run up to the crisis, but the question is what form this deleveraging should take, and at what speed it should be allowed, or encouraged, to take place. what we want to achieve, mr draghi said, is a β good β form of bank deleveraging, where equity is built up, where deposits rise and where balance sheet reduction takes the form of swift asset clean - up, rather than a slow scaling back of the loan book while rolling over bad loans. the ecb β s monetary policy is helping this process. as the recovery proceeds and inflation gradually increases towards levels closer to 2 %, the ecb β s forward guidance, firmly reiterated by the governing council in its last meeting, creates a de facto loosening of policy stance, and real interest rates are set to fall over the projection horizon. at the same time, the real interest rate spread between the euro area and the rest of the world will probably fall, thus putting downward pressure on the exchange rate, everything else being equal. the strengthening of the effective euro exchange over the past one and a half years has certainly had a significant impact on our low rate of inflation, and, given current levels of inflation, is therefore becoming | conditions necessary for resources to flow once more to the firms that use them most productively. and in this sense, by encouraging creative destruction in the banking sector, we can facilitate creative destruction in the wider economy and support the recovery. deleveraging and the real economy let me begin by outlining the challenge facing policy - makers in repairing the banking sector. looking back, there is no doubt that the business models and liability structure of euro area banks had to evolve. before the crisis, numerous banks funded their activities with too much debt and not enough equity ; and that debt involved wholesale financing that was too high relative to deposits. this model was only able to develop because of the perception of an implicit state guarantee for bank debt β a perception that is perhaps the most pervasive component of the link between sovereign and bank risks. the deterioration of sovereign credit, on one side, and the clarification of the rules regarding bail - in of bank debt, on the other, have both contributed to putting an end to a funding model that was neither desirable nor sustainable. as a result, the euro area banking system has begun a secular process of restructuring and deleveraging. from a policy perspective, the question presented to us is not whether we can avoid this deleveraging. it is universally accepted that too much debt had been built up in the run up to the crisis, by governments, non - financial firms, households and banks, and that we now have to work through the effect of the subsequent debt overhang. the correct question, in my view, is what form this deleveraging should take, and at what speed it should be allowed, or encouraged, to take place. clearly, we do not want any excessively rapid deleveraging that involves disorderly fire sales of assets. this is why two years ago, in the context of a bank funding squeeze, the ecb implemented longer - term refinancing operations. borrowing from schumpeter β s terminology, it would have been β destructive destruction β. bis central bankers β speeches at the same time, we do not want any excessively prolonged deleveraging, where banks reduce their loan book by curtailing new lending, while hoping that the underperforming assets they hold recover in value. put bluntly, this would create β zombie β banks that do not lend, and the longer this persists, the longer credit conditions will interfere with the process of creative destruction described by schumpeter. the | 1 |
automation and technological advancement. thus, trade integration could well be the mechanism that allows industrial economies to boost overall employment in the face of this new challenge. 15 last but not least, another important advantage that results from trade openness is that consumers gain access to increased varieties of goods for consumption and that they face lower prices for these goods. 16 prices decline with trade openness because of increased market competition ( or market discipline ) and also due to the incentives that trade openness generates for the adoption of new technologies that increase productivity and reduce marginal costs of production. for example, following the enactment of nafta the price of vehicles, relative to average prices, showed an important decline, particularly in the us ( graph 7 ). 17 in summary, nafta has entailed positive gains for both the us and the mexican economies. in particular, it has boosted growth and productivity by exploiting each country β s comparative advantages through a complex web of production sharing arrangements that has led to a more efficient allocation of resources across the region. this has not only allowed the region to remain source : robotics industries association. schrager ( 2017 ). feenstra and weinstein ( 2017 ) estimate that between 1992 and 2005, welfare in the united states rose by 0. 86 % due to increased product variety and the pro - competitive effects of trade on markups. us is from the bureau of labor statistics. competitive in the face of fierce global competition, but has also led to a large number of export - related jobs in both countries. it has also meant that consumers have had greater access, and at a lower cost, to a wider array of goods. 4. concluding remarks it should be recognized that trade integration does not happen without undesired side - effects. while there seems to be compelling evidence that production sharing arrangements play an important part in enhancing productivity and living standards, this process necessarily entails the reallocation of resources away from less productive tasks and toward more productive ones, which is not frictionless and may lead to an unequal distribution of benefits among different industries and sectors of the population. just as the new opportunities and gains from global value chains need to be emphasized, the new policy challenges that these negative sideeffects entail need to be recognized and addressed to ensure that everyone shares in these gains from trade. policy - makers are confronted with the need of designing and implementing policies that mitigate adverse effects on sectors of the population that do not directly benefit from either the process | . in particular, the underlying microeconomic structure of the economy also matters, since, to a large extent, it determines how productive and efficient a country is. hence, besides working towards achieving a better macroeconomic management, for a long time mexico has also pursued policies aimed at reforming the structure of the economy. as part of this agenda, during the past few years mexico has enacted a series of structural reforms whose aim is to improve human capital, enhance infrastructure, boost competition in domestic input and products markets, and strengthen institutions. preeminent among these are reforms addressing the labor market, appropriate anti - trust legislation, education, and the financial, telecommunications, oil and electricity sectors. many of these reforms are now being implemented and are expected to improve mexicoΒ΄s competitiveness and productivity, since many of them deal with sectors that provide inputs of generalized use. they are also expected to provide additional efficiency gains via the adequate regulation of sectors that behave like natural monopolies due to their network structure. this reform effort has been and will continue to be of paramount importance to the modernization process of the mexican economy as it allows mexico to achieve greater flexibility and efficiency in the allocation of its productive resources, which, in turn, is key to attaining greater economic growth. mexicoΒ΄s solid macroeconomic framework and its ambitious structural reform agenda have worked in tandem to make the mexican economy resilient to the many external shocks that have afflicted it over the last few years. in particular, the mexican economy has had to cope with a weak external demand as a result of the slow recovery in global economic activity and the stagnation of global trade that followed the global financial crises of 2008 - 09 ; it has also had to deal with the pronounced fall in the price of oil ; and it has had to face high volatility in exchange rate markets, that may be attributed to, among other factors, the uncertainty regarding the pace of monetary policy normalization in the us, as well as the us electoral process. it is worth noting that mexico is one of the few countries among the g - 20 and oecd members that has been able to register positive growth rates for 30 consecutive quarters, since mid - 2009. so it has been able to contribute continuously to the growth and prosperity of the region. 3. trade and its benefits let me now turn to the benefits that nafta has brought for its members, concentrating in mexico and the united states. the enactment of nafta in 1994 transformed the bilateral relationship | 1 |
benoit cΕure : interview in borsen - zeitung interview with mr benoit cΕure, member of the executive board of the european central bank, in borsen - zeitung, conducted by mr mark schrors, and published on 15 august 2015. * * * mr cΕure, the last two bailout programmes have failed to get greece back on its feet. what makes you think that this time everything will be different and this third programme will turn greece into a β thriving economy β, to use the expression recently employed by mario draghi, president of the european central bank ( ecb )? first of all, you have to remember where we started in 2010. back then, the greek economy was enormously imbalanced and inefficient. it was β and remains β clear that the process of getting greece back on its feet will be long and hard. however, we should also not forget that at the end of last year greece was gradually recovering. positive growth was being forecast for 2015, and the banks had been able to obtain capital from the markets in 2014. but then alexis tsipras β leftist government came to power. this year has seen a lot of trust destroyed, and reforms have been reversed. that has been a real setback. but greece can build on what it has achieved under the first two programmes, and the new memorandum of understanding has everything it needs to give the greek economy considerable support. i would like to stress two things in this regard. first, we have the right mix as regards fiscal measures. ambitious medium - term budgetary objectives have been set, without the economy being strangled in the short term. second, there is a strong focus on structural reforms. looking back, one could say that if there had been more focus on structural measures β such as the reform and opening - up of markets, improved tax collection and the fight against interest groups β from the start, that would have reduced the burden that adjustment placed on the most vulnerable in society and speeded up greece β s recovery. so, the first two programmes were poorly constructed? no, i would not say that. the information we had back then was completely different. now that greece has accepted these reforms, it is important that they are implemented in full. this is not a short - term solution aimed at obtaining money to cover the next few weeks. it should be seen as what it is : a three - year programme aimed at getting the country back | , and for that reason it is very important that society accepts the values and behaviour observed in the economy. you β ve spent the last 40 years working in the public sector in the area of monetary policy β first in paris for france, and now in frankfurt for the euro area. can you tell us something : what is money, the nature of money? money has an essential function. it acts as a store of value, it is a means of exchange and it allows people to calculate the price of everything. money is an inseparable element of civilisation, as it allows the division of labour. it is only thanks to money that we have cities at all. i would compare money to a poem, since a poem always retains its structure, just as a gold coin always retains the image stamped on it. once formed β whether written or minted β these two things should not and cannot be altered. goethe gave considerable thought to this issue, as you can see from reading faust. to what extent are you personally fascinated by money? i, personally, am not fascinated by wealth. in germany we say that money rules the world. would you, as a man of money, confirm that? no, i would not say that at all. ideas rule the world β hopefully. money is a means, not an end ; an instrument, not the ultimate goal ; un moyen, pas une fin. bis central bankers β speeches your wife recently said on german television that the question of whether she was pleased that her husband β s work was coming to an end was a β delicate and difficult question β. she also said that she hopes you find something to occupy yourself with as soon as possible. what does madame trichet mean by that? did she really say that? she knows me well. i will certainly remain active. but i will wait until i have left the ecb before deciding what exactly i will do. does she perhaps mean that jean - claude trichet cannot be happy without work? you can trust my wife on that! mr trichet, why is your signature on the euro banknotes? the euro banknotes are issued by the ecb. i therefore sign the euro banknotes as president of the ecb, on behalf of the governing council. currently there are around 14 billion euro banknotes in circulation. bis central bankers β speeches | 0 |
non - paper payments, over a period of time various systems have been put in place to meet the remittance requirements of different segments of users. the national electronic funds transfer or neft as it is popularly known, is a pan - india system today. though it began its journey a decade ago as a local eft system, it later expanded to cover larger areas. there are not too many systems of comparison even in other countries. our vision β 2018 envisages further efficiency enhancements in neft. 2 / 7 bis central bankers'speeches 15. apart from neft, the immediate payment service ( imps ) and real time gross settlement system ( rtgs ) also facilitate funds transfer requirements of users. while the former is a 24x7 immediate funds transfer system the latter is essentially a financial market infrastructure which processes large payments including customer payment transaction where value is above 2 lakh. in all these systems, a system of positive confirmation has been put in place whereby the sender is also advised or intimated about the credit accorded to the beneficiary. 16. with improvements in it systems of banks and their core banking systems, integration of various delivery channels has been made possible. the banking facilities are now easily available online including for payment purposes. the ubiquity of mobile phones, combined with cost efficiency in their usage, has led to an increase in number of mobile internet users. taking advantage of this, an increasing number of payment facilities are being integrated through the mobile channel. for instance, customers can use their net banking application on their smartphone and send money on - the - go using imps or neft. 17. while all these changes have been taking place from the perspective of customer initiated transactions, a whole set of changes have also been introduced from the perspective of government payments. from financial inclusion perspective as well as digitising government payments thus enhancing efficiency and transparency, the use of aadhaar for beneficiary identification and authentication in payments has played an important role. 18. accordingly, to facilitate bulk and repetitive government benefit payments and subsidy payments to aadhaar - seeded bank accounts of identified beneficiaries, the apbs i. e. aadhaar payments bridge system has been put in place. npci manages this system with linkage to pfms through accredited government banks and sponsor banks of nach. 19. similarly, the aadhaar enabled payments system ( aeps ) facilitates operations from aadhaar seeded bank accounts | management bis central bankers β speeches | 0.5 |
impact of its failure on the financial system ( β living will β ) ; ( iii ) to intensify supervisory oversight for sifis ; ( iv ) to strengthen core financial market infrastructures to reduce contagion risk from failure. 2 challenges imposed by liquidity rules though it is highly welcome that the new rules tackle liquidity risks, the new requirements for liquidity management could themselves become a source of instability. one reason is that the regulators β definition of liquidity is highly concentrated on government bonds. as the current environment shows, some market segments of government bonds can eventually dry up. another reason is the respective definitions of the net stable funding ratio ( nsfr ) and the liquidity coverage ratio ( lcr ). β the lcr is the main component of basel iii β s liquidity regime. it is also known as the β bear stearns rule β. it requires banks to maintain a stock of β high - quality liquid assets β that is sufficient to cover net cash outflows for a 30 - day period under financial stress. β the nsfr seeks to counter maturity mismatches in the balance sheet of financial institutions. it calculates the proportion of long - term assets, which need to be funded by longer term stable funding. while the lcr stresses the liquidity situation up to 30 days, the nsfr focuses on the situation beyond one year. assets which are liquid for more than 30 days and less than one year are not taken into account, not even on a weighted basis. however, the basel committee on banking supervision ( bcbs ) has recognized this shortcoming and is investigating the issue. in addition, there is the risk that the reformed banking regulation has damaging impact on the european model. the treatment of covered bonds, mutual funds, deposits etc. in the liquidity ratios affect the business model oft many continental european banks. one can also question whether the main victims of the new rules will not be the european universal banking model which was certainly not at the origin of the crisis but constituted an anchor of stability. finally, the lack of a resolution framework for cross - border financial institutions remains on the agenda. in spite of the insight, that the reform of regulation and supervision cannot be successful at the national level alone, it is still unclear how the costs would be distributed if a cross - border institution would get into difficulty and should need to be saved. financial stability board, macroprudential policy tools and frameworks : update to g20 finance ministers | yves mersch : international financial centers after the crisis speech by mr yves mersch, governor of the central bank of luxembourg, at a lunchconference of the blc ( business club belgo - luxembourgeois en suisse ), zurich, 23 may 2011. * * * ladies and gentlemen, it is my pleasure to talk in front of this distinguished audience about the challenges of international financial centers after the crisis. i would therefore like to thank business club belgo - luxembourgeois en suisse for inviting me to this conference breakfast. the worldwide scenery of international financial centers is in transition. the respective locations face massive upheaval as global competition and the post - crisis reforms in regulation and supervision begin to bite. in order to overcome the challenges of a changing environment and to identify the potential opportunities, it is important to distinguish between the different drivers. a large part of the challenges financial centers are facing, are due to regulatory changes, which result from the reform in the aftermath of the financial crisis. in addition there are global trends that have been going on already before the outbreak of the financial crisis and which continue to have an impact. i will refer to these major sources of change in more detail in the course of my talk, provide some experience from luxembourg, and will discuss the shortcomings and remaining challenges of the new regulatory framework. international financial centers β hit hard by the global crisis the high degree of integration and interconnectedness of financial markets contributed to the amplification and spread of the financial crisis around the world. the crisis had devastating effects on both the banking sector and the real economy, in particular in international financial centers with a high concentration of activities in banking, trading etc. they are the nodes of a global network. by consequence, the global financial crisis hit luxembourg β s open economy and internationally - integrated financial center β although relatively less than the neighboring countries, such as germany and france. luxembourg is the world β s second largest investment fund center in terms of size ( after the united states ) and the largest in terms of interconnectedness, the most important private banking center in the euro zone and europe β s leading center for reinsurance companies. moreover, luxembourg is among the 25 most systemically important financial centers in the world. at the height of the crisis, luxembourg β s sizeable investment fund industry endured substantial redemptions and its foreign - subsidiary dominated banking system experienced a sharp drop in the aggregate balance sheet as well as in the off - balance sheet positions. | 1 |
conference in chicago, we have been hearing a range of perspectives not only from academic experts, but also from representatives of consumer, labor, community, business, and other groups. we are drawing on these insights as we assess how best to achieve and maintain maximum employment and price stability. in july, we began discussing topics associated with the review at regularly scheduled fomc meetings. we will continue reporting on our discussions in the minutes of fomc meetings and will share our conclusions with the public when we complete the review later this year. 5 thank you very much for your time and attention. i look forward to the conversation and the question - and - answer session to follow. 1 these remarks represent my own views, which do not necessarily represent those of the federal reserve board or the federal open market committee. i am grateful to brian doyle of the federal reserve board staff for his assistance in preparing this text. 2 the most recent summary of economic projections is an addendum to the minutes of the december 2019 fomc meeting. see board of governors of the federal reserve system ( 2020 ), β minutes of the federal open market committee, december 10 β 11, 2019, β press release, january 3. 3 see the statement regarding monetary policy implementation and balance sheet normalization, which is available on the board β s website at www. federalreserve. gov / newsevents / pressreleases / monetary20190130c. htm. also see the balance sheet normalization principles and plans, available on the board β s website at www. federalreserve. gov / newsevents / pressreleases / monetary20190320c. htm. 4 see the statement regarding monetary policy implementation, which can be found on the board β s website at www. federalreserve. gov / newsevents / pressreleases / monetary20191011a. htm. 5 information about the review and the events associated with it is available on the board β s website at www. federalreserve. gov / monetarypolicy / review - of - monetary - policy - strategy - tools - and - communications. htm. 2 / 2 bis central bankers'speeches | the stance of monetary policy to offset some significant global growth headwinds and global disinflationary pressures. i believe this shift was well timed and has been providing support to the economy and helping to keep the u. s. outlook on track. monetary policy is in a good place and should continue to support sustained growth, a strong labor market, and inflation returning to our symmetric 2 percent objective. as long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary policy likely will remain appropriate. that said, monetary policy is not on a preset course. the committee will proceed on a meetingby - meeting basis and will be monitoring the effects of our recent policy actions along with other information bearing on the outlook as we assess the appropriate path of the target range for the federal funds rate. of course, if developments emerge that, in the future, trigger a material reassessment of our outlook, we will respond accordingly. in january 2019, my fomc colleagues and i affirmed that we aim to operate with an ample level of bank reserves in the u. s. financial system. 3 and in october, we announced and began to implement a program to address pressures in repurchase agreement ( repo ) markets that became evident in september. 4 to that end, we have been purchasing treasury bills and conducting both overnight and term repurchase operations. these efforts have been successful in achieving stable money market conditions, including over the year - end. as our bill purchases 1 / 2 bis central bankers'speeches continue to build reserves toward levels that we associate with ample conditions, we intend to gradually transition away from the active use of repo operations. and as reserves reach durably ample levels, we intend to slow the pace of purchases such that our balance sheet grows in line with trend demand for our liabilities. let me emphasize that we stand ready to adjust the details of this program as appropriate and in line with our goal, which is to keep the federal funds rate in the target range desired by the fomc, and that these operations are technical measures not intended to change the stance of monetary policy. finally, allow me to offer a few words about the fomc's review of the monetary policy strategy, tools, and communication practices that we commenced in 2019. this review β with public engagement unprecedented in scope for us β is the first of its kind for the federal reserve. through 14 fed listens events, including a research | 1 |
us to reverse our monetary policy stance at the first signs of a recovery of the financial sector. conclusion ladies and gentlemen, i have highlighted some aspects that lie at the heart of each and every central bank engaged in forecasting, and i have mentioned a number of issues that are particularly relevant to the state of play in the eurosystem in general and the bundesbank in particular. i hope that our conference will help stimulate further research into forecasting. the diversity of modelling approaches as well as their empirical testing enriches the wealth of experience see knuppel, m and g schultefrankenfeld ( 2008 ), how informative are risk forecasts? an examination of the bank of england β s risk forecasts, bundesbank discussion paper 14 / 2008. available to monetary policymakers. this helps to draw further conclusions for a robust and successful monetary policy in a continuously evolving economic landscape and, hence, helps to maintain price stability in the long run. thank you for your attention. | captures domestic consumer prices of goods and services - - for all items excluding fresh food has been at around 0 percent recently, despite the rise in energy prices. this is notably low considering that the year - on - year rate of increase in consumer prices has been at around 6 percent in the united states and around 5 percent in europe. what lies behind the weak consumer prices in japan are structural factors unique to the country, in addition to the slower recovery in demand compared with the united states and europe, mainly for private consumption. unlike firms in the united states and other countries, japanese firms continued to hoard their regular workers in particular even during the pandemic, while making use of such programs as employment adjustment subsidies. this suggests that they have the capacity to swiftly expand supply of products and services in response to a recovery in demand. in addition, a mindset and behavior based on the assumption that prices will not increase easily have remained deeply entrenched among firms and households in japan due to their experience of deflation in the past. nevertheless, the underlying inflationary pressure has been increasing in japan, albeit gradually ( chart 7 ). for instance, mobile phone charges alone have pushed down the rate of change in the overall cpi by about 1. 5 percentage points, mainly because major carriers launched low - cost mobile phone plans this spring. when excluding such temporary factors, the rate of change in the cpi seems to be increasing moderately in positive territory. meanwhile, japanese firms'price - setting stance is starting to change. looking at firms'stance regarding input and output prices in the tankan, there have been times in the past when firms found it hard to raise output prices even when input prices rose. however, this seems to have become less prevalent recently ; that is, there has been an increasing number of firms that are passing on the increase in input costs to output prices, including in overseas markets where demand has been steady. while there has been an established practice among firms in the basic materials industry, such as steel firms, to pass on a certain ratio of increase in input costs to output prices, attention is needed on the extent to which this practice will spread to other industries. iii. financial conditions surrounding firms and the bank's conduct of monetary policy financial conditions i would now like to explain the bank's conduct of monetary policy ( chart 8 ). let me first describe japan's financial conditions surrounding firms, the starting point of the transmission channel of the effects of monetary policy. immediately after | 0 |
outlook for 2006 in the light of our better - than - expected economic performance in 2005, we are confident we will be able to achieve our targets this year. among others, we expect our economy to continue to expand at a reasonable pace, led by services, industry, and agriculture sectors. nevertheless, since oil prices continue to be a concern, gdp growth rate, according to the dbcc, may range between 5. 7 % and 6. 3 %. inflation is seen to rise slightly early this year, as a result of high oil prices and the vat rate adjustment. however, the continued stability of the peso should help cushion its impact. in the second half of 2006, we expect inflation to follow a decelerating trend as cost - push pressures subside. meanwhile, market interest rates are likely to remain stable during the year, due to improving fiscal position of the government, ample liquidity in the financial system and projected modest growth in bank lending. on the external front, dollar inflows from ofw remittances and foreign investments are expected to remain strong in 2006 as deployment of more workers escalate and as more high - salaried workers get jobs overseas. this should boost our external position and further build up our gross international reserves. it also underpins our expectations of a generally stable peso in 2006. policy directions for the bsp, our principal thrust over the near term will be oriented towards responding to inflationary risks and delivering price stability over the policy horizon. the bsp will also intensify its efforts to strengthen the financial system, further enhance the effectiveness of its supervision and regulation of banks, and help promote the development of the domestic capital market. we will continue to foster an environment that will facilitate further disposal of banks β non - performing assets. for those of you in the market for real estate, i recommend you take a look at the nonperforming assets of banks that are up for sale. the rates are attractive for buyers as banks now conform with the risk - based provisioning required by the bangko sentral. our policy is to require banks that take on more risks, to have correspondingly higher capitalization. the asset cleanup of banks should spur credit and investments, thereby creating the basis for more sustainable growth in the medium term. other key financial reforms will focus on aligning prudential regulation of the banking system with international standards and best practices, strengthening corporate governance standards as well as market discipline mechanisms, and further | national government and the bsp worked hand - in - hand in providing strong to the entire nation through the grant of stimulus, relief measures and moratoria. for its part, the bsp issued time - bound regulatory and operational relief measures to bspsupervised financial institutions to aid them in carrying out their vital role in the economy. we supported the national government through the grant of short - term provisional advances. we injected approximately β±2 trillion pesos or approximately us $ 42 billion amount of liquidity to the financial system. let me highlight the three core strengths of the philippine banking system : first, the banking industry β s strong capital position. it posted stable capital adequacy ratios ( car ) at about 15. 0 percent in the past 10 years, which is well above the 10. 0 percent minimum threshold set by the bsp and 8. 0 precent minimum set by the bank for international settlements. in particular, the risk - based capital adequacy ratio of the universal and commercial banking industry stood at 17. 2 percent on consolidated basis as of end - september 2020. second, is the banks β ample liquidity buffers, which enable banks to withstand short - term liquidity shocks and to provide adequate stable funding in the medium term. in particular, the liquidity position of universal and commercial banks remained relatively stable as of end - november 2020 with liquidity coverage ratio ( lcr ) of 201. 0 percent, which is double the regulatory minimum of 100. 0 percent. 2 / 5 bis central bankers'speeches meanwhile, the minimum liquidity ratios ( mlr ) of stand - alone thrift, rural and cooperative banks continued to exceed the regulatory minimum requirement. third, is the expanding assets of banks on the back of increasing deposit liabilities. as of enddecember 2020, the banking system assets grew by 6. 1 percent year - on - year to β±19. 4 trillion. all in all, these contributed to the sustained strength and resilience of the banking sector. yet, we observe slower bank credit growth as a result of the pandemic. gross loans fell by 0. 9 percent year - on - year as of end - december 2020, in sharp contrast to the 8. 8 percent growth rate recorded in december 2019. bank lending growth continues to wane as the pandemic dampens consumer spending and limits business activities. bsp β s survey indicates a net tightening of banks β overall credit standards for both | 0.5 |
all its dimensions will enhance productivity and help to tackle the increasing competition, in national level as well as in both regional and global levels. second, investments in the development of human capital, through the improvement of the education system and the creation of specialized programs for vocational training, is crucial for empowering human capital. creating incentives 2 / 3 bis - central bankers'speeches for the return of the diaspora and improving working conditions will help curb the emigration of young people and create an environment that encourages them to build their future in albania. third, the optimum utilization of the country's natural resources, including energy, mineral, agricultural, and tourism resources, requires a planned and coordinated strategy to avoid adverse consequences. this strategy must further guide public development policies, entrepreneurial and financial resources of the private sector, as well as an efficient distribution of banking credit flows. the implementation of these measures requires close cooperation between the public and private sectors. each actor should contribute in their area of expertise, within legal frameworks and with a common approach, to ensure that these initiatives succeed. the academy plays an outstanding role in this regard. to this end, i find it appropriate to commend " luarasi " university for its valuable contribution to the education of the new generation, transforming in a short period of time into a prestigious institution of professional education. " dear guests, concluding, i would like to highlight that albania has an extraordinary potential for development. a comprehensive effort from all actors is needed to realize this potential. in this context, the bank of albania will continue to be an active partner in the country's economic development. in our vision for the future, the bank of albania aims to be the guarantor of financial stability and also a catalyst for long - term economic development, establishing the conditions for a more sustainable, competitive, and fair economy. our monetary and macroprudential policies will continue to focus on preserving the monetary and financial stability as a foundation for sustainable and inclusive growth. also, we will continue to work on the advancement and modernization of the payment system and our financial market, based on the best and most successful global practices. thank you, and i wish you a successful conference! 3 / 3 bis - central bankers'speeches | gent sejko : albania's economic outlook and the challenges greeting speech by mr gent sejko, governor of the bank of albania, at the international conference " economic development prospects, globalisation, tourism and tradition ", luarasi university, tirana, 12 december 2024. * * * honourable rector of university, dear ministers, dear academics and guests, it is a pleasure to be part of this conference, which aims to shed light on the albania's economic outlook and the challenges we face. allow me to congratulate the organizers for bringing together representatives from academia, civil society, the public sector, and the private sector. dialogue and our contribution are crucial, especially as the economic and social challenges we tackle require innovative and interdisciplinary approaches to work out the most effective solutions. the shocks we dealt with in past years β the pandemic, the war in ukraine, the energy crisis, and the inflation wave β have tested the ability of countries in preserving the economic, financial, and social stability. in addition, global transforming trends such as the acceleration of digitalization, the irreversible impacts of climate change, the retreat of globalization, and demographic challenges β including population ageing and the emigration of the labour force β are shaping a new global economic setting. albania is not immune to these changes at all. next, i will share my views in this regard, trying to find a balance between challenges and new opportunities. at the same time, i will evidence the proactive and contributing role that the bank of albania can have in bolstering the sustainable economic development of our country. dear participants, the albanian economy has shown remarkably resilient against various challenges that have marked the global environment in recent years. facing the consequences of the pandemic, managing geopolitical shocks, and dealing with inflationary pressures caused by the upsurge in commodity prices have been extremely large and complex challenges. however, albania, despite these shocks, has succeeded to maintain its economic and financial stability in addition to accelerating the economic growth pace. this progress demonstrates both the prudential macroeconomic policies management, as well as the sustainability of the country's economic growth drivers. the volume of economic activity in albania has recorded a cumulative growth of 8. 3 % compared to the end of 2019, employment and wages have gone up by 3. 9 % and 15. 4 %, respectively, while the unemployment rate has dropped to a historic low of 10. 7 %. in | 1 |
benjamin e diokno : road to recovery - turning crisis into opportunities speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the manila times online forum, 29 june 2020. * * * manila times president and ceo dante β klink β ang, chief operating officer blanca mercado, other manila times officers and staff, members of the media, ladies and gentlemen. good afternoon and thank you for inviting me to this manila times online forum. i adopted your theme, β road to recovery : turning crisis into opportunities β as the title of my presentation today. we are three and a half months into the lockdown. cautiously but surely, we are getting back on our feet. even as the covid - 19 uncertainty continues, i am optimistic that we can overcome this crisis. let me share bsp β s views on growth and recovery after this pandemic. this is a snapshot of the terrain after the outbreak of covid - 19. the domestic financial markets were racked by heightened volatility following the outbreak of the covid - 19 pandemic. we saw a sharp decline in portfolio inflows in the first two months of 2020. the stock market index noted on march 19 its lowest year - to - date record since october 11, 2011. we have had serious exogenous shocks in the first quarter β the taal volcano eruption, uschina trade tensions, african swine fever. but nothing comes close to the covid - 19 pandemic that has brought the global economy to a halt. the confluence of these shocks resulted in the contraction of the economy by 0. 2 percent in the first quarter of 2020. this is the first negative real gdp growth since 1998 when the economy wrestled with el nino and the asian financial crisis. in its latest assessment, the development budget coordination committee forecasts a full - year contraction of β 2. 0 to β 3. 4 percent ( neda, 13 may 2020 ). on a positive note, the peso appears to buck the trend as most regional currencies have depreciated significantly against the us dollar. the peso is the least depreciated currency among its peers. we have hefty gross international reserves estimated at us $ 93. 3 billion in may. we forecast that the year - end gir will reach us $ 95 billion. despite the bleak global picture, | deal with to recover lost momentum because of this pandemic. let me expound on four critical structural reform imperatives that i believe are opportunities for growth that we should seize. first is the modernization of the country β s health system to ensure efficient public health infrastructure and resilient crisis preparedness framework. this would require giving incentives for the use of science and technology in health policy decision making. it would require overhauling of the healthcare supply chain management. the government must also initiate the formulation of a national preparedness and response framework for disease outbreaks and pandemics, taking into account coordination gaps across different levels of government. second is the need to upgrade the information and communication technology ( ict ) infrastructure system and processes. technology will play a pivotal role in reshaping the means of production and the delivery of goods and services in the post - covid world. digital technology will also be critical in enabling simpler and more efficient transactions with government agencies. business transactions such as online retail, online banking, online medical consultations, and digital payments will become a necessity. all these need to be supported by a safe and reliable digital infrastructure system with robust and dependable cybersecurity protection. 2 / 4 bis central bankers'speeches third is the modernization of philippine agriculture and the government β s supply chain management system with the aid of digital technologies. this will help ensure that food and other essential goods and services are available, accessible, and affordable. fourth is the development of a highly skilled and resilient workforce by strengthening the educational system, sustained upskilling, and adequate health protection to future - proof our workforce. in this way, the country β s productive capacity can benefit more strongly from its favorable demographics. the structural reform imperatives i have outlined are outside the ambit of bsp. yet they have profound impact on the realization of the bsp β s policy thrusts. against this backdrop, what else can the bsp do? the bsp β s policy space remains sufficient. the bsp has yet to exhaust the conventional monetary instruments in its toolkit to support the liquidity requirements of the economy, should conditions warrant. given the possibility of higher defaults and non - performing loans, there may be scope to offer more debt restructuring measures. we agree in principle with the goals of the proposed philippine economic stimulus act of 2020. the act seeks to ease the plight of workers, families and businesses who were adversely affected by the covid - 19 pandemic. it | 1 |
to be β safe β β that is, an institution with a large capital base, holding high - quality assets. such a central bank would also need to be concerned about its own soundness. this led the central bank to be careful about to whom it should provide settlement accounts and to monitor these banks. in addition, it also had to weigh carefully the advantages of providing lender - of - last - resort assistance to the banking system to avoid a drop in its revenue stream against the risk of lending to an insolvent institution and making a loss that could decrease its capital base and threaten its reputation as the supplier of the ultimate settlement asset. similarly, central banks had a natural interest in ensuring the ability of the banking sector as a whole to meet the public β s demand for liquidity. the reason for this is that if it allowed a for further details see stephen millard and victoria saporta ( 2005 ) : central banks and payment systems : past, present, and future. see also ben norman, rachel shaw and george speight ( 2006 ) : the history of interbank settlement arrangements : exploring central banks β role in payment systems. solvent commercial bank to fail as a result of a bank run, it would only aggravate the situation and this could ultimately result in a more general run on the banking system and ultimately on itself. as a result, financial stability became a concern for central banks. moreover, for the central bank as the provider of the ultimate settlement asset, it was also important to maintain monetary stability. in particular, if the central bank printed more and more of its banknotes without a corresponding increase in the demand for them, the notes would fall in value relative to those of other banks. eventually, central bank money would no longer be seen as β safe β and this would undermine the confidence in and acceptability of the settlement asset. this brief historical overview demonstrates that the development of the core functions of central banks β monetary and financial stability β has been closely linked to their role in the provision of the ultimate settlement asset in the payment system. it is therefore important for central banks to have a thorough understanding of how these links work. let me share some thoughts with you in this regard. payment systems, monetary policy and central bank actions in the recent financial market developments central banks provide liquidity for different purposes. 2 to achieve their primary objective of price stability, monetary authorities supply base money to the economy. by matching the demand for base money with the supply that they | in contrast, non - banks would argue that common regulatory standards should apply to all relevant service providers in order to ensure a competitive level playing - field. in the end, the question is whether the approach to regulation should be based on functions or institutions. finally, the globalisation of finance has resulted in the expansion of cross - border financial linkages. an implication of globalisation is that financial distress is more likely to have farreaching cross - border effects. this is a natural consequence of the tighter cross - border linkages that have formed. such effects are almost guaranteed if distress were to involve one of the global players that operate across so many countries and underpin the smooth performance of so many markets. in fact, over 30 years ago, even the failure of a small bank active in fx transactions was sufficient to have significant cross - border ramifications β so significant as to act as a catalyst for the establishment of the basel committee on banking supervision. the knock - on effects of distress at one of the current large global players would presumably be much bigger. conclusions let me briefly conclude, ladies and gentlemen. central banking and payment systems are inextricably linked. central banks all around the world are involved in payment systems and market infrastructures in many different ways owing to their roles and responsibilities in relation to monetary policy and financial stability. indeed, payment systems disruptions would not only affect financial stability, but may potentially also have an impact on monetary policy implementation. central banks have found ways of safeguarding price stability, while at the same time ensuring the smooth functioning of the payment system, by drawing a clear line between providing intraday liquidity for payment system purposes and providing credit for monetary policy implementation. moreover, the sufficient availability of collateral is important today as a contribution of central banks to financial stability. the roles of central banks in the field of payment systems are changing in a number of ways as a result of progressing globalisation, increasing complexity, and the emergence of new players and services : β’ the approach of central banks to analysing financial stability is changing. a comprehensive view of the key sources of risk and vulnerabilities facing the payment systems and market infrastructures cannot be formed without taking due account of developments at the global level, such as the emergence of cross - border payment systems and offshore centres. issues and questions relating to the location of payment systems and market infrastructures are also gaining in importance for central banks. β’ central banks have started interacting and cooperating with new interlo | 1 |
lim hng kiang : trade links and business opportunities for singapore congratulatory remarks by mr lim hng kiang, deputy chairman of the monetary authority of singapore and minister for trade and industry, at the daiwa securities group 35th anniversary, singapore, 25 june 2007. * * * your excellency mr takaaki kojima, ambassador of japan to singapore, mr. shigehara suzuki, president & ceo daiwa securities group inc., mr. shin yoshidome, president daiwa securities smbc, distinguished guests, ladies and gentlemen. good evening, i am delighted to be here this evening for the joyous occasion of daiwa securities group β s 35th anniversary in singapore. this marks yet another important milestone for daiwa, and your continued commitment to singapore. daiwa β s growth story in singapore set up in 1972, daiwa has grown from strength to strength over the years. from the early collaboration in 1971 with development bank of singapore to issue the first asian dollar bond, daiwa has over the years expanded to provide a full spectrum of financial services. today, all of daiwa β s major business units are represented in singapore, covering securities brokerage, investment banking, asset management and more recently, wealth management as well. singapore has also grown to become a key node in daiwa β s overseas network, managing your business operations in south asia & oceania. i am encouraged to hear that on the occasion of daiwa β s 35th anniversary celebrations, you have also announced plans to boost activities in singapore and the region. i understand these new activities include m & a and private equity investments. these are all very positive developments and you will be joining a vibrant community of financial institutions here in singapore. japan and the region β s recovery and growth daiwa β s increased focus in south asia attests to the dynamism of the region. not only has the region shown resilience, it is now powering ahead. led by asean economies such as vietnam, which is surging ahead strongly, india, pakistan and the middle east too are beckoning out to investors with their growth prospects. trade and investments within the asian region, and between asia and the middle east continues to grow. notably, japanese foreign direct investments into asean has been increasing steadily again since 2003. in fact, it has reached more than us $ 6. 4 billion1 which even outpaced that into china in 2006. the japanese economy too, continues to impress. economic | investors buying commodity futures, because they could profit from a socalled roll - yield. this yield can be interpreted as a risk premium priced into the futures contract to compensate the holder for bearing the commodity price risk. however, if the number of investors ready to bear this risk increases significantly, the risk premium could disappear or even turn negative. in fact, for some time now, the near - term structure of many commodity prices has experienced a change from backwardation to contango. it seems to me, there may well be a connection between this change from backwardation to contango and the growing trend to invest in commodity futures. contrary to other commodities, gold has typically been in contango. the reason is that there is plenty of gold around and plenty of market participant - including central banks - willing to lend it. as a consequence, gold lease rates are usually lower than usd interest rates and gold futures prices higher than spot prices. the roll yield is thus negative, which is one of the reasons why investment in gold futures did not generate the same returns as investments in broad commodity future price indices. so what return should we expect from investing in gold? history shows that gold has been able to keep its value in real terms, but compared to bonds or equities, no real return has been realized ( graph 2 ). for instance, metals economics group ( 2005 ) estimates that expenditures for commercial nonferrous metals exploration increased from a 12 - year low of usd 1. 9bn in 2002 to usd 5. 1bn in 2005, a level just slightly lower than in 1997, when expenditures were at their highest level. source : watson wyatt in gfms gold survey ( 2006 ). graph 2 : cumulative returns on gold, bonds and equities in usd since 1871 us equities : 7. 1 % p. a. us t - bonds : 4. 6 % p. a. gold : 2. 5 % p. a. us cpi : 2. 4 % p. a. 1871 1881 1891 1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 fourth argument : gold mine hedging is " passe " as you know, in the second half of the 1990s, gold mines increasingly sold their future production on a forward basis. in doing so, they pushed up gold supplies by more than 10 % per year, thus reinforcing the already negative price trend. as from 2001, mining companies increasingly abandoned this type of price hedging | 0 |
first quarter of this year reflected higher energy costs, only a small part of which companies apparently were able to pass through into higher prices. rising natural gas prices, resulting from a significant shortfall in gas storage brought about by growing domestic demand and a limited ability to import, have been a particular concern. but since the start of the year, spot prices for natural gas have fallen significantly as the earlier run - up in prices induced a dramatic rise in drilling, a boost to output, and curtailed demand. falling spot prices are being reflected, with a lag, in lower contract gas prices paid by u. s. businesses. electric power costs continued to rise through may, but overall energy prices paid in april and may were down from the levels of the first quarter, suggesting some easing in pressures on profit margins from energy this quarter. we are also experiencing a decline of retail gasoline prices, which also had been rising sharply over the past couple of years. that run - up was of particular concern because in the past steep increases in the price of gasoline have arguably undermined both the real purchasing power and the confidence of consumers. this effect has likely been an avenue through which previous spikes in the price of crude oil have slowed economic activity. the jump in gasoline prices from march through may was wholly the result of a twenty cent per gallon surge in gross refining margins. by contrast, refinery acquisition costs of crude oil changed little over that period. in recent weeks, however, refinery margins have declined noticeably, easing gasoline prices at the pump, especially here in the midwest. the widening of refinery margins this spring, in turn, reflected shortfalls in refinery capacity, which had been exacerbated by a number of breakdowns. after rising to a peak in the early 1980s, the capacity of operable refineries fell substantially by the middle of that decade and held about flat from then through most of the 1990s. upgrades of existing facilities in the 1990s served only to offset a decline of more than 20 percent in the number of refineries. accordingly, a refinery operating rate that languished at around 75 percent in the first half of the 1980s has risen to effectively full - capacity operations currently. the pressure on these facilities impeded the conversion of the substantial buildup of crude oil inventories that occurred since early march into gasoline and, as a consequence, gasoline prices at retail continued to increase through early may. as was the case in 2000, some sharp regional differences in gasoline prices have emerged again this | than might otherwise have been the case ; much of the innovation in oil development outside opec, for example, has been directed at overcoming an increasingly inhospitable and costly exploratory environment, the consequence of more than a century of draining the more immediately accessible sources of crude oil. one measure of the decline in the marginal cost of additions to oil availability in recent years is the downdrift in the prices of the most distant contracts for future delivery of light sweet crude oil. spot prices have soared and plunged, but for the most distant futures contracts β which cover a time frame long enough to seek, discover, drill, and lift oil β prices generally have moved lower over the past decade. the most distant futures prices fell from a bit more than $ 20 per barrel just before the gulf war to $ 17 to $ 18 a barrel a year ago. the current six - year futures contract has risen, on net, over the past year and has been a little above $ 20 per barrel in recent days. arguably, however, this rise is related less to technology and the structure of underlying marginal costs and more to uncertainties about how quickly the new practices will be exploited to expand opec's productive capacity. going forward, there is concern that opec may choose not to expand capacity adequately from their large proven reserves. the long - term marginal cost of extraction presumably anchors the long - term equilibrium price and, thus, is critical to an evaluation of the magnitude and persistence of any current price disturbance. over time, spot prices are inexorably drawn back to the long - term equilibrium price, as the balance between underlying supply and demand is restored. a premium over long - term marginal costs doubtless exists for oil because so much of the world's crude oil reserves are in areas where disruptive turmoil is always a latent threat. the longer - term outlook for natural gas prices is less tied down by history or current practice. unlike oil, the natural gas consumed in the united states, as you know, is almost solely produced in the united states and in canada, from which last year we imported 16 percent of our 23 trillion cubic feet of demand. the story of gas supply in the united states, in contrast to oil, is thus largely a domestic one. compared to oil, the industry is relatively new. natural gas is more difficult to transport in its gaseous form through pipelines and particularly challenging in its cryogenic form when transported as a liquid. it ' | 1 |
the euro coins, more than 37. 5 billion coins or 90 % of the coins now in circulation with a total value of around eur 12. 4 billion had been frontloaded. broadly speaking, sub - frontloading β the pre - delivery by banks to retailers and other professional target groups β represented an overall amount of 10 to 20 % of the frontloaded amount. given that, in terms of transactions, around 70 % of banknotes are put into circulation via automated teller machines ( atms ), the quick adaptation of these machines was one of the key factors for a smooth changeover. in total, more than 200, 000 atms either on site in bank branches or off site, for example in shopping centres, had to be converted. this was achieved within less than one week. as a result, on average, 75 % of all cash transactions were already effected in euro after only one week. on the whole, the euro banknotes and coins were introduced considerably faster than originally foreseen, not least because of the favourable attitude of and quick acceptance by european citizens. i should like to mention that the changeover has also been smooth outside the euro area. the euro banknotes were received positively in third countries. information to the public has been generally adequate and euro banknotes were readily available in banks and exchange offices, in most cases. with regard to the frontloading of central banks outside the euro area, i should mention that 26 central banks, mainly in central and eastern europe, the mediterranean area and in africa, requested to be frontloaded with euro cash. the total value of the euro banknotes provided to these central banks and to wholesale banks outside the euro area amounted to some eur 4 billion. overall, the eurosystem is proud of and grateful to all actors β contributions to this historic process. the enthusiasm of the european citizens to get hold of euro cash can be seen as a clear vote for a united europe. recent global economic developments let me briefly review the current international environment. i feel quite some relief that the world economy has proved relatively resilient to the shock of the terrorist attacks in september of last year. the events of 11 september and their aftermath undoubtedly increased uncertainty, and for some time contributed substantially to the already ongoing deterioration in confidence in most countries. however, there are now more and more signs that the global economic downturn may have come to an end around the end of 2001. at the current juncture, a mild recovery is generally expected | willem duisenberg : china and the euro area in a global perspective address by dr willem f. duisenberg, president of the european central bank, at the symposium of the people β s bank of china, beijing, 25 february 2002. * * * governor dai, ladies and gentlemen, it is a great pleasure to be here in china and i feel especially honoured to be invited to deliver a speech at the people β s bank. first, i would like to wish you all a very prosperous new year, under the sign of the horse. i would also like to take this opportunity to thank governor dai and his staff, among other things, for their hospitality and for having prepared such an excellent programme for our delegation. ever since china opened up to the outside world in 1978, it has been a major trading nation thanks to social and economic reforms. the process has turned china into a major economy and strengthened it as a political power. in 2000, the size of the chinese economy, measured in terms of gdp, passed the usd 1 trillion mark, and is now ranked fifth behind the united states, the euro area, japan and the united kingdom. to accompany china β s growing economic and financial weight in the international community, the eu is committed to further developing a comprehensive partnership with this country. the ecb is playing its part through co - operation in both international and bilateral meetings. for example, we meet regularly with other central banks in the context of the imf, g20 and bis to exchange views on global economic and financial issues. in fact, i have already met governor dai once this year ( actually, last week ) in hong kong, at a bis special governors β meeting. europe and asia also co - operate closely through the asem ( asia - europe meeting ) process, launched in bangkok in 1996. this has now developed into a broad forum for in - depth consultations between european and asian partners and has prompted a range of co - operation initiatives. for example, in april this year the ecb will be organising a seminar on β regional economic, financial and monetary co - operation : the european and asian experiences β. of course, i would also like to recall that the eu has long been in favour of china joining the world trade organisation, as it now has done, for which i should like to congratulate you. on a bilateral basis, four summit meetings between the eu and chinese leaders have been held since 1998. leaders exchanged views on eu - china relations | 1 |
bitcoin supply and requiring miners to solve complicated mathematical problems. these computational tasks are becoming more and more complex in order to make it increasingly difficult to create new bitcoin. in your recently published op - ed for the frankfurter allgemeine sonntagszeitung, you, mr thiele, impressively calculated that a bitcoin transaction consumes β and i quote β as much as 460, 000 times more power than a standard credit transfer. this is precisely why bitcoin mining tends to gravitate towards countries with cheap electricity. but the increased energy consumption does nothing to increase the stability of bitcoin. quite the opposite, in fact : the value of crypto tokens is highly volatile, as we have seen over the past few weeks. indeed, even amid the market turbulence we have experienced recently, bitcoin is currently around six times more volatile than the s & p 500, and 13 times more so than gold. that naturally makes it less than ideal as a means of payment. after all, if you β ve got a payment instrument that β s soaring in value, you β ll want to keep it for yourself, and if its value is plummeting, you β ll be hard pressed to find any takers. bitcoin is inefficient, both economically and environmentally. the price of bitcoin is gyrating as much as it is because there β s no value basis β unlike, say, a gold coin, crypto tokens have no intrinsic value. nor is there any issuer who uses its assets to guarantee that customers can withdraw their bank deposits in cash on demand, or who stakes its entire reputation on keeping the value of money stable, as is the case with banknotes. in short, crypto tokens are more of a speculative plaything. buy them and you risk losing some, or perhaps even all of your investment. a growing chorus of voices, alarmed by the potential losses associated with digital currency, are calling for crypto tokens to be regulated, if not banned outright. 2 / 5 bis central bankers'speeches yet potential losses in value alone do not warrant a ban. in the interests of consumer protection, however, i do think that more information needs to be made available for investors. that is why, for instance, germany β s financial watchdog bafin has already issued a consumer warning highlighting the risks involved in what are known as initial coin offerings. icos | and services, the malaysian insurance industry has continued to transition towards information technology - driven solutions, as well as, leveraging on more efficient payment and settlement systems such as e - payments. this has significantly enhanced the delivery of personalized and customized insurance solutions, made possible through the utilization of new delivery channels, including those that are internet - based. in the area of general insurance for instance, the successful implementation of e - cover notes for motor insurance policies led to vast improvements in service efficiency, better enforcement of cash - before - cover regulations as well as reduction in premium collection fraud. in the area of capacity building, human capital development is key to the future development and growth of the financial sector. as competition intensifies, the role of human capital in defining the areas of comparative advantage will become more prominent. recognizing these trends, bank negara malaysia launched the international center for leadership in finance ( iclif ) in 2003 to accelerate the development of top management talent for the corporate and financial sector within the asian region. at the management trainee level, the bank has initiated the financial sector talent enrichment programme or in short fstep, a joint collaborative effort undertaken with the industry and training institutes aimed at boosting the supply of well - trained and competent personnel for the financial services industry. this is complemented by the international centre for education in islamic finance ( inceif ) which was established for the purpose of meeting the increased demands of islamic finance professionals as well as conducting research and consultancy in islamic finance. i would very much like to encourage you to take the opportunity of participating in some of these programs. finally, no less important an area for consideration in re - engineering financial sector development, is consumer education and protection. today, we experience growing consumerism as well as changing consumer preferences and expectations in tandem with increased education levels and growing personal wealth. these and other developments collectively reinforce the need for greater financial literacy to ensure the efficient functioning of the financial system. an important aspect of bank negara malaysia's regulatory strategy and approach therefore, has been to ensure that the continued growth of the financial sector is underpinned by fair market practices and conduct. in this regard, initiatives undertaken by bank negara malaysia in the insurance sector have been primarily directed towards enhancing product transparency and disclosure, improving sales practices, raising the bar of professionalism for insurers and intermediaries, as well as strengthening the consumer protection framework. apart from promoting sound and fair market practices, considerable efforts have also been made | 0 |
william c dudley : the importance of financial conditions in the conduct of monetary policy remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the university of south florida sarasota - manatee, sarasota, florida, 30 march 2017. * * * it is a pleasure to be here today. i would like to thank the university of south florida for sponsoring this conference. as always, what i have to say today reflects my own views and not necessarily those of the federal open market committee ( fomc ) or the federal reserve system. 1 one aspect of today β s event is the dedication of a financial laboratory to help students learn about financial markets, which i think has great value. knowledge of how financial markets operate is an important aspect of financial and economic literacy, and it leads to greater financial security over time. for example, one important lesson is that when the promised returns on an investment offering are extraordinarily high, it is because the investment is either very risky or fraudulent. when investing, it is important to remember that if it seems to be too good to be true, it likely is! today, i want to take the opportunity to talk about the importance of financial markets in influencing the economic outlook and, in turn, u. s. monetary policy. this is a subject near and dear to my heart. nearly 20 years ago β when i was working in the private sector β my colleagues and i introduced an index of financial conditions. 2 i believe that my long - standing focus on financial conditions has, over time, helped me become a better economic forecaster. and, i am pleased that economists and analysts increasingly incorporate financial conditions into their assessments of the economic outlook. as i will argue, financial conditions in the united states play an important role in influencing economic conditions. because movements in financial markets are a major factor influencing broader financial conditions, it is necessary to understand how financial market developments can affect the economic outlook and, therefore, the appropriate setting of monetary policy. but, this story gets more complicated, as the setting of monetary policy, in turn, affects market developments and financial conditions. this two - way feedback is an important feature of the interaction between financial conditions and monetary policy. to begin, let me be clear about what we mean by β financial conditions. β focusing on the united states, financial conditions can be broadly summarized by five key measures : short - and longterm treasury rates, credit spreads, | term interest rates and financial conditions often appear to be larger and more persistent in the united states than in most other advanced economies. there are several reasons for this. first, the u. s. financial system depends less on its banking system to 2 / 6 bis central bankers'speeches intermediate financial flows than in other countries. the share of credit supplied by the banking sector fluctuates around 50 percent in the united states, which is much lower than in the euro area, japan and the united kingdom ( exhibit 2 ). second, in contrast to most other countries, u. s. residential housing is financed mainly by 30 - year fixed - rate mortgages, rather than β as is the case in most other countries β adjustable - rate mortgages with rates that much more closely track their central banks β short - term interest rate targets. third, the equity market plays a much more important role in the united states than elsewhere. the total market capitalization of the u. s. equity market is considerably higher than in the euro area and japan ( exhibit 3 ). because the evolution of financial conditions can diverge from the path of the federal funds rate, financial conditions need to be carefully considered in the conduct of monetary policy. however, i want to reiterate that what we care about is not financial conditions themselves, but rather their influence on economic activity. accordingly, we should care much more about longer - term movements in financial conditions than about higher - frequency, transitory movements. that is because behavior in firms and households will be influenced much more by how financial conditions evolve over time, rather than by where they happen to be at a particular moment. to emphasize this point, let me give two contrasting examples β one where financial conditions moved sharply but not persistently, and another where financial conditions moved systematically over a longer time period. we will see that it is the long - lived movements that have the largest influence on the economic outlook. for the first example, consider the u. s. equity market in 1987. the s & p 500 index began the year at 242, shot up to a peak of 337 in august ( an increase of almost 40 percent ) and plummeted to a trough of 225 in october ( a fall of 33 percent ). when the stock market fell more than 20 percent on october 19th β which came to be known as β black monday β β many feared that the decline would lead to a recession. after all, that crash was the largest - ever one - | 1 |
14 with an initial outlay of βΉ 2000 crore to provide refinance assistance with a view to mitigating the bis central bankers β speeches housing shortage in urban areas. the uhf refinance scheme covers urban housing loans upto βΉ 10 lakhs ( where the annual household income of borrower is upto βΉ 4 lakhs and the unit cost is βΉ 16 lakhs or unit size is upto 60 m2 ). out of an allocation of βΉ 2000 crore under uhf, an amount of βΉ 890 crore has been deployed till date. special refinance scheme for urban low income housing ( lih scheme ) 30. the lih scheme has been designed with the objective of augmenting the flow of institutional housing finance to the low and moderate income segments in urban areas. the scheme provides refinance at fixed concessional rates for long tenures in respect of housing loans extended to target beneficiaries in urban areas. what more 31. there are several more things to ensure that the real estate and housing sectors grow at the desired pace and direction. first, to be effective and efficient, housing finance systems need to be supported by explicit legal institutions and instruments. these are not only necessary to acquire and transfer ownership rights in real estate, but also represent the foundation for the orderly functioning of mortgage lending. legal arrangements must also take into account the additional layers of complexity raised by the mobilization of collateral in the secondary mortgage market. 32. secondly, there is also a felt need for financial innovation with respect to the loan products. one such product could be savings induced home loan or a home loan deposit. the willing consumers may be induced to generate a savings balance by way of monthly or periodic deposits. this will enable creation of a track record for repayment of a future home loan product. once the customer reaches a threshold balance, the financial institutions can consider sanctioning of a housing loan. the balance in the account could act as collateral or the margin. the amount deposited every month would act as the base to assess the repayment capacity of the customer for the purpose of calculating the monthly repayment instalments. 33. thirdly, the credit risks originating in the housing sector, particularly low ticket housing segment, should also be internalized through proper insurance schemes for banks and other lenders. the various stakeholders should aim at timely completion of projects, delivery of houses / flats to target segments without cost escalations and with valid titles and all necessary clearances. | a pilot basis and on a small - scale to start with, relates to credit counselling. sometimes, people get into debt out of some ignorance or bad luck. they can be advised by some well - trained people how to get out of the problem with minimal distress, by renegotiating, rescheduling of liabilities, etc. such schemes exist in other countries and we have studied them. we are experimenting in this area in maharashtra in a small way. we intend to launch pilot projects in other regions also and the ap state government expressed strong interest in the program. so, in credit counselling also, andhra government may be the first in the country to formally sign - up for an initiative. with these words, let me thank you for giving me an opportunity to talk in my mother tongue, telugu for the first time in a public lecture as governor. perhaps this may be the first public lecture in telugu by any governor and i am happy and grateful to you for the privilege and opportunity. i wish the village and trust all the best. let me again congratulate shri yarlagadda ranganayakulu foundation for this excellent initiative. i wish them and families all the best in all their noble endeavours. | 0.5 |
a permanent goal. inflation inflicts several burdens on a society : Β· overall, it introduces uncertainty into economic decisions and profit seeking. Β· it reduces the discipline of price and market systems. Β· it has negative effects on the cost of capital. Β· it directs resources to unproductive activities. in periods of high inflation, investments in real estate and financial investments become more desirable. Β· growth declines as inflation rises. in countries with high inflation, it has been observed that most resources are directed to the financial system. it is also known that the financial system undergoes a relative expansion during such periods. resources which have accumulated in the financial system cannot be rechannelled by the financial system to more productive sectors. a stable financial system and stable prices therefore represent the normal environment that central banks are committed to pursue and maintain. a central bank that stabilizes prices increases its credibility. a central bank that protects the value of the currency also helps increase the credibility of the country. the success of the monetary policy implemented to stabilize prices depends on whether or not the financial system is stable. and the price stability and financial system stability that are the primary responsibilities of the central bank are necessary for achieving economic growth in the medium term. let me mention some qualities that a central bank should have : Β· it should have continuity. central banks should not be diverted from their permanent goal of price stability by short - term political pressures. Β· it should be competent. a central bank should be completely professional. it should be technically dedicated in its structure, thorough and clear in its expression, and transparent in its actions. Β· it should be a responsible institution. in other words, it should be an institution that is reliable and able to justify its monetary manoeuvres. these are the characteristics of a modern central bank. central banks that have these qualities will unquestionably occupy a distinguished place in the international environment of the 21st century. i am sure that its long experience, accumulated knowledge and proficient staff make the central bank of the republic of turkey an institution that can fulfil these expectations. i am proud of this institution. i owe a great debt of gratitude to my colleagues, who have greatly contributed to our accomplishments and to our policy implementation. | , which prompted the us fed to begin to consider slowing the pace of extraordinary monetary policy accommodation it has been providing. this does not mean an imminent tightening of policy by raising short term interest rates, but rather beginning to cut back on the pace of asset purchases, currently at us $ 85 billion per month. the reaction to the announcement by the fed in may that tapering would begin relatively soon took many analysts and market participants by surprise, and underlined just how nervous markets are, and how elevated the uncertainty is. what was meant to be an orderly adjustment threatened to become precisely the opposite, despite the assurances by the fed that tapering would be done in a responsible manner. long - term bond yields and mortgage rates in the us increased by about 100 basis points. the spillover effect on emerging markets was intense, with bond yields generally increasing by more than in the us, as bond flows reversed sharply β since may about us $ 20 billion has flowed out of emerging bond markets, with r17 billion net sales by non - residents in the domestic bond market between 22 may and the end of august ; and emerging market currencies, including the rand, depreciated markedly across the board. although there was a general expectation that tapering of quantitative easing would begin in september, there was a great deal of uncertainty around the pace and timing, and the period between the may and the september fomc meeting was highly volatile. in the event, the fed refrained from tapering in september, out of concern about the slow pace of recovery in the us labour market ; the unresolved fiscal issues in the us which could lead to further fiscal contraction when the debt ceiling is reached, possibly in mid - october ; and the negative impact of tight financial conditions and higher long term interest rates on the nascent housing market recovery in the us. the reaction of the markets to this surprise was dramatic, with strong recoveries in bond and equity markets, while the dollar weakened across the board. however, it is inevitable that the fed will have to begin tapering at some stage, and markets are likely to react or over - react to any data coming out of the us that is likely to have a bearing on us monetary policy decisions. we have been given a taste of what is to come, and we are in for a difficult and bis central bankers β speeches volatile period ahead. this is unchartered territory, and whatever the us does is going to have spillover effects onto the | 0 |
##b in particular, are doing everything they can to support the functioning of the financial system. moreover, market participants and other actors should be assured that the cooperation within the global network of central banks has been excellent and highly conducive to addressing the ongoing challenges. thank you for your attention. | handbook of macroeconomics, elsevier, vol. 2a : 923 β 1012. laeven, luc, and fabian valencia ( 2012 ). systemic banking crisis : an update. imf working paper 12 / 163, washington dc. rey, helene ( 2013 ). dilemma not trilemma : the global financial cycle and monetary policy independence. voxeu. org / article / dilemma - not - trilemma - global - financial - cycle - and - monetarypolicy - independence verein fur socialpolitik ( 2015 ). leitlinien und empfehlungen des vereins fur socialpolitik fur ex post wirkungsanalysen. september. www. socialpolitik. de / docs / vfs - leitlinien _ ex _ postwirkungsanalysen. pdf wissenschaftlicher beirat beim bundesministerium fur wirtschaft und energie ( 2013 ). evaluierung wirtschaftspolitischer fordermaΓnahmen als element einer evidenzbasierten wirtschaftspolitik. berlin. 1 see, e. g., basel committee on banking supervision ( 2010 ). 2 for an evaluation framework applicable to a range of regulatory policies in the european union, s e e ec. europa. eu / smart - regulation / guidelines / toc _ guide _ en. htmec. europa. eu / smartregulation / guidelines / toc _ guide _ en. htmec. europa. eu / smart - regulation / guidelines / toc _ guide _ en. htm. the german economic association ( verein fur socialpolitik 2015 ) and the academic advisory council to the german ministry of economics ( wissenschaftlicher beirat 2013 ) have likewise developed criteria for good, evidencebased policymaking. 3 for a review of this discussion, see buch and holtemoller ( 2014 ). 4 examples include the health systems evidence from the mcmaster health forum ( www. healthsystemsevidence. org ), the cochrane library ( www. cochranelibrary. com ), or, for development economics, j - pal ( www. povertyactionlab. org / ) or the international initiative for impact evaluation ( www. 3ieimpact. org ). 5 buch, busssiere, and goldberg ( 2017 ) | 0 |
and cheap settlement solutions for europe. let me close my remarks by telling you a little story from china that might be good to keep in mind for future phases of the t2s project : once upon a time there was a host who offered his guests a pot of wine. as there didn β t seem to be enough for everyone, one guest suggested that each of them should draw a snake on the ground and the first guest to finish the snake should drink the pot. one guest finished his snake and was about to start drinking, when he said : β i can add some feet to it. β while he was still drawing, another guest finished his snake, grabbed the pot and drank the wine, whereas the guest who had added feet to the snake didn β t get any wine at all. to come back to t2s, i believe that a big challenge in the next phase will be to resist the temptation to β add feet β to t2s in the sense of too much specific features and thereby spoil it all. let us take the chinese story as a warning and let us continue to keep t2s lean, even if this implies compromises and sacrifices! this is the only piece of advice i want to give to β my advisors β, with whom i am very, very satisfied. i hope that all the pieces of the puzzle of opinions, letters of intents and decisions will be put together in the next few weeks so that we get the β green light β for our future cooperation with you. | by lek 69. 3 billion, compared to the growth by lek 52 billion over the previous year. in 2006 the annual credit growth was 56. 7 percent, providing good support for economic needs. the relatively high pace of banking system lending to the economy has also continued over the first quarter of the current year, drawing our attention, as the regulatory authority of the banking activity, to the need to monitor any risks this expansion may comprise. more concretely, this growth has led to decrease of capital adequacy rate and liquidity ; however, banks have continued to be well - capitalised, liquid and profitable. quarterly stress - tests carried out by us have indicated that the country β s banking system is flexible against any probable shocks relating to exchange rate, interest rates or credit quality. the bank of albania has continued to prudentially monitor the rapid credit growth, enhancing its banking supervision. in this framework, the establishment of the credit registry, expected to be carried out within december 2007 is of special importance. currently, we are working for completing the legal framework that will enable the registry establishment and functioning. at the same time, the decision is already made on selecting the company that will provide technical solutions to the registry. we are confident that all these measures will contribute to the maintaining of credit quality and the financial stability of our country. wishing you a fruitful workshop, i give the floor to mr. watson. thank you! | 0 |
alejandro diaz de leon : climate change and its impact on the financial system remarks by mr alejandro diaz de leon, governor of bank of mexico, at the conference on climate change and its impact on the financial system, mexico city, 5 december 2019. * * * good evening everyone. on behalf of banco de mexico, i am pleased to welcome the participants of the conference on climate change and its impact on the financial system. it is a great pleasure for banco de mexico to collaborate jointly with cemla, the center for latin american monetary studies, the ngfs, network for greening the financial system, and the university of zurich in organizing this meeting. the sessions that comprise the conference cover some of the main topics in climate change and its economic and financial impact. climate change and environmental degradation constitutes a challenge at national and global levels and is a source of financial risk. climate change is presenting challenges related with extreme weather events, rising sea levels, declining productivity of agriculture and fisheries, trade and supply chain disruptions, the degrading of ecosystems, reduced welfare of communities due to air and water pollution, and even mass migrations in the territories most adversely affected. in some emerging and low - income economies, poverty, an inadequate institutional framework and a weak rule of law has created a fertile ground for a predatory behavior that has significantly degraded the environment, in some cases irreversibly, deteriorating both the welfare and development opportunities of the population affected. call for global action the growing recognition of climate change consequences is influencing the core tasks of central banks. for banco de mexico, the sound development of the financial system, one of our key objectives, requires from the central bank, not only to foster financial stability and better services for the benefit of households and corporates, but also to eradicate financing and risk management practices that avoid recognition of environmental and social negative externalities and risks. globally, the voices behind this call for action are expanding rapidly. multilateral organizations are focusing increasingly their portfolios on green and sustainable activities and several central banks are in favor of decisive action. ngfs, the network for greening the financial system, was originally set up by 8 central banks and now has 51 central banks and financial supervisors together with 12 observers. the fact that this technical expert group was just created two years ago, highlights the global commitment to address climate related risks in the financial sector. the ngfs supports an orderly transition towards a low pollution and low carbon economy by promoting best practices, improving data availability | ##rsion could become exacerbated by geopolitical events. in this context, mexico β s fiscal stance should be fortified, and its monetary policy must continue to employ complete flexibility in order to consolidate the convergence of inflation to the permanent target, thereby shielding the economy with stronger macroeconomic fundamentals. see banco de mexico ( 2016 ). β encuesta sobre las expectativas de los especialistas en economia del sector privado : julio de 2016, β august. bis central bankers β speeches | 0.5 |
, and by 2035 we will be the first developing country to become a hyperaged society by the definition of the world health organization β meaning 20 percent of the population will be over the age of 65. this change will have implications on at least two fronts, both very important to the business sector : labor force, and consumer spending. impacts on labor force let me first start with implications on the labor force. the thai labor force has already passed its peak in 2013 and will only keep declining. for businesses, the shrinking and aging labor force will have an impact especially on labor - intensive sectors such as textile, apparel, leather, and wood and furniture, which account for around 7 percent of the value - added in the manufacturing sector. businesses, particularly those that are labor - intensive, will need to rethink business models and find ways to increase productivity, be it through process automation or focusing on r & d to create higher value - added products and services. retaining and retraining employees will also have to become an integral part of businesses. impacts on consumer spending the second implication of demographic shift will be on the market, as consumers β spending will change, both in terms of value and composition. thailand β s aged dependency ratio β the ratio between population aged 65 and over to the working age population β is projected to increase from less than 20 percent today to more than 50 percent twenty years from now. this demographic shift would impact the country β s productivity and present a challenge to the country β s fiscal sustainability, as nearly half of thai people are not enrolled in retirement plans. with the majority of the people having high household debt, low savings, and little financial security, aging population will add more burden to households in the form of increased spending for elderly care. moreover, people tend to consume less as they grow older. a study by tdri found that thais in their 50s will decrease their consumption by more than 20 percent when they are in their 60s. aging population will introduce a dramatic change to the consumer market. but this is also an opportunity : the domestic market for the seniors will become larger. in 2017, consumption of thai population older than 50 is worth 2. 8 trillion baht or around 18 percent of the gdp. this will only continue to grow, creating a large niche market for businesses. realizing this will open doors for many opportunities ahead. the demand for products focused on senior lifestyles such as orthopedic shoes and anti - slip floorings will grow. | there are a number of reasons why this is so but, for me, an important reason is that the more prescriptive the code is, the easier it is to get around. rules are easier to arbitrage than principles. moreover, the more prescriptive and the more precise the code, the less people will think about what they are doing. if it β s principles - based and less prescriptive then, as i just said, market participants will have to think about whether their actions are consistent with the principles of the code. so, we have worked with the industry to produce a principles - based code rather than a set of prescriptive regulatory standards. it will not impose legal or regulatory obligations on market participants, nor will it supplant existing regulatory standards or expectations. but we do expect the principles in the code to be understood and adopted across the entire fx market. our approach to adherence has a number of dimensions. we laid out our overall approach to adherence to the code in new york in may last year. 6 we will provide a more comprehensive description of the suite of mechanisms to support adherence alongside the release of the code in may. one critical dimension is market - based adherence mechanisms. an important element of discipline should come from the market itself and we are working closely with market participants on this. the adherence to a voluntary code will only come about if firms judge it to be in their interest and take the practical steps to ensure the code is embedded in their practices. such practical steps would include training their staff and putting in appropriate policies and procedures. we have provided a draft statement of commitment for firms to publicly demonstrate their adherence to the code. one reason for a public demonstration is that firms are more likely to 3 / 5 bis central bankers'speeches adhere to the code if they believe that their peers are doing so too. that is, an important source of pressure to adhere should come from other market participants. without blaming them for what occurred, more scrutiny from counterparties about how their fx transactions were being executed may have helped to reduce the incidence and severity of the market abuses that occurred in the past. one reason for this lack of scrutiny was that fx transactions were sometimes regarded as ancillary to the core business, notwithstanding their potential impact on returns. this attitude seems to be in decline, though it still persists. ultimately the success of the code in promoting integrity and restoring confidence in the wholesale fx market lies in the hands of its participants. another aspect of | 0 |
useful to have a more gradual application of financial sanctions to provide clear incentives for appropriate macroeconomic policies. concluding remarks policy - makers in individual euro area countries have to come to terms with the realities of being part of a monetary union and adjust policies accordingly. this means pursuing sound and sustainable fiscal policies, preventing the build - up of macroeconomic imbalances and ensuring that the economy has the necessary shock - absorption capacity β and in particular flexibility β to ensure a smooth adjustment to country - specific developments. in that respect, ambitious and front - loaded structural reforms are essential. the eu 2020 strategy can play a useful role in that respect. of course, the ultimate responsibility for effective reform lies with national governments who have to ensure the economic flexibility and growth potential necessary to reap the full benefits of being a member of the euro area. some loss of sovereignty is part of the reality of sharing and benefiting from a common currency. if this is not acknowledged in time, it may imply an even larger loss of sovereignty at a later stage. the ecb considers it fundamental to set up an effective surveillance mechanism in the euro area in order to prevent challenges similar to those experienced currently by some euro area countries from re - emerging in the future. it is equally important that markets can play their disciplinary role in an efficient manner. this requires transparency in the surveillance process and the realisation of markets that the no - bail out clause does indeed constitute one of the binding constraints of emu. as in the past, the ecb will continue to deliver on its mandate and ensure price stability for the euro area over the medium term. this will provide an important anchor of stability to each individual euro area country, an anchor which is particularly valuable for those countries undergoing a difficult adjustment process. individual member states will benefit from this stability. at the same time, they have the responsibility to ensure the smooth functioning of the common currency area. this requires further efforts in all euro area countries to make sure that, in terms of monetary policy, one size does indeed fit all. bis central bankers β speeches | 2 % this year to close to 3 % in both 2000 and 2001. consumer price increases, as measured by the harmonised index of consumer prices ( hicp ), have recently resumed their upward trend, as expected. in october the annual rate of change in the overall hicp was 1. 4 %, up from 1. 2 % in september and august owing to higher price increases for food and non - energy industrial goods. the impact of higher oil prices on energy prices in the hicp, which had accounted for most of the upward pressure since june 1999, was countered in october by more moderate increases in other energy components. some additional counterweight to the upward movement in goods prices came from a further moderation of increases in prices in the services sector. in general, the overall upward trend is expected to continue until early 2000 as a result of the increase in oil prices since spring 1999. forecasts available suggest that price increases will nevertheless remain below 2 % in the course of 2000 and 2001. however, the actual developments will very much depend on the behaviour of a number of factors, and in particular on wage developments remaining in line with price stability. in addition, our assessment has to take due account of prevailing uncertainties. on the upside, these relate to, inter alia, the behaviour of money and credit aggregates, the developments in oil prices and the path of the effective exchange rate, all of which are closely monitored with regard to their impact on price stability. on the downside, main factors are linked to the effects of deregulation and liberalisation. in conclusion, the current monetary policy stance should ensure a sustainable expansion of non - inflationary economic activity in the euro area. in line with its monetary policy strategy, the governing council will remain vigilant with regard to any risks to price stability arising either from domestic or from external sources and act in a timely manner. let me now give the floor to the vice - president to introduce some of the additional topics we discussed during our meetings. the governing council today also took a decision on the subject of the minimum reserve system. as you may be aware, interbank liabilities are not subject to reserve requirements. in this respect, the ecb allows those credit institutions which cannot provide evidence of their interbank liabilities - in the form of debt securities issued with an agreed maturity of up to two years or money market paper to apply a standardised deduction to the aforementioned liabilities in the computation of their reserve base. | 0 |
benjamin e diokno : 2021 annual anti - money laundering / counter terrorism financing summit message by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), for the 2021 annual anti - money laundering / counter terrorism financing summit, hosted by the anti - money laundering council and fintelekt, virtual, 21 november 2021. * * * welcome to the virtual 2021 annual anti - money laundering / counter - terrorism financing ( aml / ctf ) summit, hosted by the anti - money laundering council and fintelekt. it is a pleasure to come together with you as we carry on with the crucial task of fighting and preventing money laundering and terrorism financing. in 2017, the amlc approved the second national risk assessment β or nra β report, covering the years 2015 and 2016, to reinforce the philippines β aml / ctf regime. the second nra found that the level of national money laundering threat is high, arising from the predicate crimes of drug trafficking ; graft and corruption ; fraud ; tax crimes ; smuggling ; intellectual property law violations ; illegal manufacture and possession of firearms, ammunition, and explosives ; and environmental crimes. banks and money service businesses were identified to be the sectors primarily and widely used by criminals to launder the proceeds of crimes. the level of national money laundering vulnerability, on the other hand, is medium. casinos have high vulnerability, while money service businesses and pawnshops have mediumhigh vulnerability. the rest of the sector is medium. however, terrorism threat in the philippines is high. likewise, terrorism financing vulnerability and terrorism financing threat are both high as such organizations appear to have a systematic and established method of raising funds for their operations. based on the overall evaluation of factors, the national money laundering and terrorism financing threat is high ; while the national money laundering and terrorism financing vulnerability is medium. thus, the level of money laundering and terrorism financing risk is medium - high. this assessment is definitely a cause for concern, but the amlc has bolstered and implemented risk - mitigation aml / ctf strategies and initiatives, even in the face of the pandemic. the amlc continues to protect the integrity of the philippine financial system pursuant to the anti - money laundering act of 2001, as amended ; the terrorism financing prevention and suppression act of 2012 ; and, just recently, the anti - terrorism act of 2012. allow me to go over | some ongoing initiatives and projects by the amlc and our partners from the public and private sectors. first. the amlc is closely coordinating with law enforcers, such as the national bureau of investigation and the philippine national police, as they are the primary investigators for predicate crimes. for the first eight months of 2021, the amlc has filed a total of 85 cases, varying from civil and criminal cases and involving over php1. 31 billion and other assets. further, the implementation of the national anti - money laundering and countering the financing of terrorism strategy for 2018 to 2022 β or nacs β continues to progress. the nacs is aimed at coordinating efforts of relevant agencies in combating money laundering and terrorism 1 / 3 bis central bankers'speeches financing. the nacs has also integrated the international co - operation review group ( icrg ) action plan to ensure a whole - of - nation approach in addressing our country β s shortcomings in its aml / ctf system. second. the amlc is sharing its studies with law enforcement agencies and partner covered persons to increase awareness of money laundering and terrorism financing typologies and red flags. these risk assessments, strategic studies, and typologies include the following : 1. first, terrorism and terrorism financing risk assessment, which is an update of the second national risk assessment, particularly on the understanding and assessment of terrorism and terrorism financing risks ; 2. second, foreign terrorist fighters study using suspicious transaction reports ; 3. third, money service business : 2021 money laundering and terrorism financing sector risk assessment, which indicates how certain services and products of msbs are exploited by criminals to facilitate and expand illegal activities ; 4. fourth, real estate sector : a money laundering / terrorism financing / proliferation financing assessment, which examines the potential criminal threat environment and vulnerabilities associated with the real estate sector ; 5. fifth, an assessment of the philippines β exposure to external and internal threats based on suspicious transaction reports for 2018 to 2020, which looks into the country β s risk and exposure to money laundering, terrorism financing, and different predicate offenses by gathering information on the generation, movement, and behavior of illicit funds and by evaluating the threats originating within and outside the country β s jurisdiction ; 6. sixth, an analysis of suspicious transaction reports with possible links to tax crimes, which is a study on the potential exposure of the philippines to tax crimes prior to the inclusion of tax evasion as a predicate offense to money laundering by | 1 |
( q4 2012 ) still ranks one of the lowest in the region. 4 this would suggest that the risk of excessive leverage is less and the threat to financial stability is likewise lower, should asset prices correct. the third challenge involves going the distance in the pursuit of the reform agenda. 1. we are implementing the capital adequacy framework of basel iii in january 2014. we will also be closely studying the other building blocks of the basel iii reform agenda to see how and when we can incorporate these into domestic regulatory environment. 2. capital market reform will be a priority. this will include ensuring that an appropriate market infrastructure is in place. the infrastructure will not only improve the quality of markets, which will help mitigate financial stability risk. but infrastructure will also promote the absorption of the inflows, which will ultimately lead to an expansion of the economy. by improving financial intermediation in the system, a well - functioning capital market will help unlock the economy β s productive potential and strengthen its capacity to withstand shocks. right now, we see an economy that is on an even keel, on surer footing, poised for higher growth, riding on a momentum of change that offers the promise of not only stronger growth but also one that is more inclusive and more durable. note : latest available : indonesia 40. 2 ; malaysia 133. 3 ; singapore 151. 8 ; thailand 129. 4 ; japan 221. 2 ; china 153. 1 ; korea 104. 1 bis central bankers β speeches the challenge is to keep the momentum of positive change strong. the appropriate response to current favorable winds is not to sit back and relax, not to pop champagne corks as william asked this morning, but to treat them as an ideal opportunity to strengthen the underpinnings of the economy β s foundations. the bsp will strive to have monetary policy that will provide an environment where credit and liquidity growth will remain supportive of economic growth while maintaining price stability. we will also continue to work on reforms that will deepen the financial system. we will continue to monitor financial and asset markets and be responsive to emerging risks. we will continue to work with the government in pushing the agenda for reforms to ensure macroeconomic stability. bis central bankers β speeches | amando m tetangco, jr : focus on the central bank of the philippines β core mandate of promoting price and financial stability opening statement by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the foreign correspondents association of the philippines ( focap ) forum, manila, 4 december 2006. * * * i am pleased to address you in this forum organized by the foreign correspondents association of the philippines. your continued interest in the philippine economy has greatly helped in shaping the quality of information provided to the international community. fora such as this offers us an excellent opportunity to engage various stakeholders in policy dialogue. my short remarks today will focus on the bsp β s core mandate of promoting price stability and financial stability and how the institution has responded to the challenges facing it. as fed chairman bernanke aptly puts it β monetary policy is most effective when it is coherent, consistent, and predictable, while at all times leaving full scope for flexibility and the use of judgment as conditions may require β. this highlights the fundamental role of transparency and communication in inflation targeting. the more that the public understands the logic of our policy framework and decisions, the more we are able to better manage inflation expectations and the more their behavior will facilitate the achievement of the price stability objective. an encouraging development is that inflation has been on a decelerating trend beginning the second quarter of this year, much earlier than expected. what is bsp β s view on the inflation outlook? in our third quarter inflation report, released in october, we noted that our short run prognosis points to subdued supply pressures and uneven demand conditions. subsequently, on november 2, the monetary board decided to maintain the bsp β s key policy rates. at the same time, the tiering scheme on banks β placements with the bsp under the rp / rrp and special deposits accounts windows was restored. this measure is intended to encourage banks to seek alternatives to placing their excess funds with the bsp such as lending to the public. looking ahead, the bsp is fully aware that it still has to contend with the obvious danger to inflation posed by oil prices and the potential surge in liquidity growth from strong foreign exchange inflows. as risks to inflation are judged to remain tilted on the upside, the bsp will continue to keep a close watch on incipient inflationary pressures, especially those emana | 0.5 |
to crystallize the elements that investors look for : optimized product offerings, high returns, good governance and strong regulatory and legal frameworks. for the 2018 edition, three countries β angola, cameroon and senegal β joined the index, thus bringing the number of countries tracked to 20. the country measures were also broadened to include elements of financial inclusion and levels of investor education. south africa topped the index this year again, followed by botswana, kenya, mauritius and nigeria. while some may dwell on the fact that mauritius ranks fourth among the twenty countries, i invite them to examine the positive elements underlined in the report, and like we say, the glass can also be half - full rather than half - empty : the level of foreign exchange reserves which has grown substantially in mauritius. today, we have a level of gross official reserves of about usd6. 3 billion, representing nearly 10. 6 months of imports of goods and services, which we manage judiciously under a legal mandate of security, liquidity and, then, return. on that point, i would like to stress that mauritius is a notable exception with regard to investment in complex assets. as quoted in the report β there is a wide range of investment options and relatively strong demand for more complex assets, including different types of derivatives products β. [ unquote ]. the report commends mauritius for its strong legal and regulatory framework and highlights that mauritius is amongst the top countries as regards market depth, market transparency, tax and regulatory environment as well as the legality and enforceability of financial markets master agreements. 2 / 3 bis central bankers'speeches the africa financial markets index comes at an opportune time when positive changes are being witnessed on the domestic financial landscape. mauritius aims to double the size of its financial sector as spelt out in the government β s vision 2030 document and the financial sector blueprint. we have broadened the access to the purchase of government and bank of mauritius securities by the public. the development of a secondary market for risk - free instruments has helped individual investors to benefit from the increase in yields registered since the start of 2018. today, treasury bills and bonds are proving to be viable alternative investment instruments to term deposits. increased accessibility and enhanced public awareness has led to a three - fold increase in the amount of securities held by individuals, from rs1. 8 billion as at end - december 2017 to rs6 billion currently. you may recall that the african development bank along with bloomberg | positioning ourselves a notch or two higher on global financial markets and bringing to ourselves a share of the total incomes generated by the 270 trillion dollar global derivatives market. in addition to the scope that may thus be given to our financial market by fetching international derivative trades to our shores, we will be gradually building up, among business operators, core skills that accompany the development of the derivatives market in general. this is the context in which this workshop and others that will follow it assume a relevance of their own in defining a more diversified future profile of our financial market. i can then look forward to a strong spirit of innovation in developing financial market instruments in this context. this process will no doubt be reinforced by continuous training and the experience gained by our operators through actual operation on the markets. having encouraged you thus to engage in derivative trading to give greater scope to financial business undertaken from mauritius, we can consider the positive spinoffs this will result in as we progress in this area in the future. let us stop and take a look at the challenges of persevering in this line of action. it is generally acknowledged that derivative markets have a positive fallout on underlying markets in so far as they help to redistribute risk and increase market efficiency and liquidity. derivatives have become an indispensable part of a modern financial system and will so remain so long as uncertainties will have to be provided for. in the context of new capital standards being introduced currently for banks, credit derivatives are seen as risk mitigating factors against portfolio risk to the extent they serve to lower capital charges of banks. healthy financial sector development is thus supported by this activity if only by increasing the scope for risk management. the resulting control over volatility in portfolios of financial institutions has, in turn, the effect of improving the risk appetite of market participants for a higher volume of business. in one of shakespeare β s plays, it was said that β security is mortals β chiefest enemy β the size and speed with which derivative markets have grown in the recent past to overcome uncertainties have also given rise to certain apprehensions surrounding derivatives themselves. given also the totally liberalized markets of today, allegations have been made that derivatives would, in fact, be adding to market volatility. this has not been tested and proved. it is therefore not advisable to press down the growth and development of derivative markets and thus risk stifling their development due to such fears. as a regulator, the bank of | 0.5 |
toshihiko fukui : elaboration on the bank of japan β s assessment of the economic and financial situation summary of a speech by mr toshihiko fukui, governor of the bank of japan, at a meeting with business leaders, nagoya, 13 december 2004. * * * the japanese economy has been in a recovery phase since the summer of 2003. with the recent release of weak economic indicators mainly related to exports and production, market participants seem to have become a little bearish about the economic outlook. we believe, however, that the current slowdown in the pace of recovery is temporary, and that the economy is likely to move gradually onto a sustainable growth path. today, i will elaborate on the bank of japan β s assessment of the economic and financial situation, and the thinking behind the conduct of monetary policy. developments in overseas economies let me start with overseas economies, which provide the background to japan β s economic activity. overseas economies, the united states and china in particular, are expected to continue expanding, albeit at a slower pace. the u. s. economy is continuing its expansion supported by domestic private demand, including household consumption and business fixed investment. it seems to be emerging from a soft patch : the pace of increase in household consumption has picked up again, and growth in employee numbers has been recovering albeit with some fluctuations. looking forward, the u. s. economy is expected to continue expanding steadily despite the fact that tax cuts have run their course and crude oil prices remain at high levels. the chinese economy is continuing to show robust growth underpinned by steady demand at home and abroad, and still seems to be overheating. since this spring, the public authorities have taken administrative measures to deal with this overheating. furthermore, the people β s bank of china raised its policy rates for the first time in nine years at the end of october 2004. we continue to closely monitor the effects of these measures on the economy. the current economic situation and the sustainability of the economic recovery although growth in exports and production has been sluggish since the summer of 2004 and the annualized growth rates of real gdp for the april - june and july - september quarters of 2004 have both turned out to be more or less flat, there are several reasons for believing that a recovery mechanism remains in place. first, exports and production are expected to resume trending upward. their recent sluggish growth has been attributed to the lagged effect of the slowdown in | although crude oil prices have recently stopped rising, they remain at historically high levels. we need to continue closely monitoring their impact on economic activity and prices, including the effects of their past rises. in foreign exchange markets, attention has been paid to the downtrend of the u. s. dollar. concern about the u. s. twin deficits is often cited as a reason for the weaker dollar. the u. s. economy, however, continues to maintain high growth, and with inflation rates remaining low due to increased productivity, it is still providing golden opportunities for investors in increasingly global financial markets. confidence also remains high that fiscal and monetary policy will be directed toward securing sustainable economic growth. given this situation, the united states is not experiencing difficulty in financing its deficit. having said this, we need to carefully monitor foreign exchange rates and their impact on the economy since speculation may cause short - term volatility in foreign exchange and other financial markets. let me briefly comment on the recently released gdp statistics, which some see as confirming the weak economic recovery. the recent introduction of the chain index method for calculating the gdp deflator resulted in a downward adjustment of the real gdp growth rate from the figure calculated using the previous method. the problem with the previous method was that the base year was fixed, and this caused an increasing downward bias in the gdp deflator the further it moved away from the base year. the chain index method, which revises the weighting of various goods and services every year, has thus been introduced to reflect changes in the economic structure more appropriately. gdp statistics, which describe overall economic conditions, have their own properties and limitations like any other statistics. since our evaluation of the economy has incorporated these properties and limitations, the introduction of the new calculation method is not thought to affect our overall assessment of the economy. progress in structural adjustments supporting economic recovery the difference between this recovery and the two previous recovery phases since the bursting of the bubble is that, in both the corporate sector and the financial system, there has been progress in dealing with the structural factors affecting the japanese economy, and as a result, the private sector has become more proactive. companies have made steady progress in addressing the structural problems of their excess holdings of debt, labor, and capital, and at the same time have made efforts to formulate business models generating high value added. corporate profitability has therefore improved considerably. ratios of current profits to sales in fiscal 2004, for both manufacturing and non - manufacturing | 1 |
two coins out of each spanish dollar, thus rendering them at once more useful in new south wales and much less useful elsewhere. but macquarie β s initiatives in granting a charter to the bank of new south wales in 1817, and those of governor darling in rescuing it from disaster in 1826, were perhaps more important milestones in the early financial development in this country. according to trevor sykes β account, 5 both of these actions were contrary to the policy of the british government. these appear to have been occasions when the lags in implementation of official policy β measured by the time taken for a request for instructions to reach london by sailing ship, be considered and then answered by return ship, too late to influence the decision β helped to produce a superior outcome! around the world, governments groped towards a sustainable solution for combining the benefits of financial intermediation with stability. progress was not necessarily always steadily in the right direction, 6 but one of the key developments was the gradual evolution of the institution we would today see sykes, t. ( 2003 ), β tulips from amsterdam β, in t. richards and t. robinson ( eds ), asset prices and monetary policy, proceedings of a conference, reserve bank of australia, sydney, pp. 194 β 202. see chapter 1 of sykes, t. ( 1988 ), two centuries of panic, allen & unwin, sydney. rondo cameron, for example, in claiming that the british financial system contributed to the industrial revolution between th th the mid - 18 and mid - 19 centuries, argues that this contribution was in spite of, rather than as a result of, policy actions of recognise as the central bank. in a number of countries, these institutions had begun life as a means to finance military expeditions by governments of not altogether unquestioned creditworthiness, 7 but they gradually became central players in the efforts to foster stability in normal times, and to restore it after something went wrong. bagehot β s classic, lombard street, 8 remains one of the best accounts of this in the case of the bank of england. the notion of the lender of last resort, and the idea that the central bank should look to the interests of the system rather than any commercial interest of its own, were slowly developing. it was, of course, to be some time before the central bank had fully evolved into the current form, even in the most advanced economies. in our own case, the central bank did not really have a fully | system stability. 9 this is a natural response to the circumstances, but it is really a refocusing on one of the key original purposes of the central bank. all of that history is a backdrop to the financial trends of the past decade, to which i now turn. the british governments of the day. he writes : β at almost every point at which banking and monetary policy might have been used constructively to promote economic growth, the authorities either made the wrong decision or took no action at all. β see cameron, r. ( 1967 ), ( ed. ) banking in the early stages of industrialization : a study in comparative economic history, oxford university press, new york, p. 58. for example, the bank of england was granted its charter β establishing it as britain β s first limited liability banking entity β in 1694 after raising Β£1. 2 million for the government to fund expenditure in the war with france. bagehot, w. ( 1873 ), lombard street : a description of the money market, henry s. king and co., london. it is not mere coincidence, by the way, that this came at the same time as the macroeconomic instability concerns of the 1960s, 1970s and 1980s receded. better macroeconomic stability has coincided with, and in all probability encouraged, a dramatic increase in the size and complexity of financial activity. financial and economic trends in australia in the past decade the most prominent financial development of the past decade has, of course, been the change in the structure of the balance sheets of households. much has been said about this and so any description here can be brief. the essence of the story is that in the early 1990s, two decades of chronically high inflation in australia ended. interest rates declined as a result. in fact, they returned to levels last seen in the low - inflation period in the 1960s. but in the intervening period, of course, the australian financial system had changed out of all recognition, a result of liberalisation, competition and innovation. no longer was the potential borrower for housing on bended knee to a stern - faced bank manager, the way they had been in earlier periods of low rates. now, lenders were under more competitive pressure to grow their balance sheets. having pursued the corporate borrowers in the 1980s, with rather mixed success, they were now looking to households as a source of growth. we can all recall the advertisement for one major bank in which the formerly stern manager pract | 1 |
prasarn trairatvorakul : the outlook for thailand β s economy in the face of concerns about the slowing us recovery and europe β s debt crisis address by dr prasarn trairatvorakul, governor of the bank of thailand, at the foreign correspondents β club of thailand, bangkok, 3 november 2011. * * * distinguished fcct members and guests, ladies and gentlemen, first of all, i would like to thank the fcct board for inviting me to share my view on thailand β s economic outlook in the face of the u. s. economic slowdown and the eurozone β s sovereign debt crisis. actually, the organizer β s original intention reflects very well what was in the back of everyone β s mind over the past few months when we talked about key challenges to the thai economy. but as all of us here today might agree, things have changed so dramatically over the past month alone, with the country now being swept over by the flood. while our feet need to stand firm weathering through and recovering from the flood together as a nation, our eyes cannot lose focus on what happens in the u. s. and the eurozone. i think it is fair to say that what happens in the u. s. and the eurozone will likely reshape the global financial and economic landscape over the years to come. and for thailand, these factors and their implications on the global economy will also determine whether the recovery from the flood will be a rosy or a painful one. so, my talk today will be divided into two parts. first, i would like to touch briefly on the bank of thailand β s latest view on domestic growth in short and medium term. then i will delve more deeply into concerns in the u. s. and the eurozone, along with the likely implications on thailand β s recovery. ladies and gentlemen, i would like to first share with you the bank of thailand β s latest economic projection and our outlook for the thai economy. despite the fact that we have less than two months to go for 2011, the bank has just revised down its growth projection for the thai economy this year, from 4. 1 percent in july β s assessment to only 2. 6 percent in october β s. this significant downward revision reflects the severity and the broad - based impacts of the flood, which has brought about a halt in agricultural and manufacturing production in affected areas, and has also disrupted production chains in other areas as well | . while some of these factors have been with us for a number of years now, more recently, the downside risks facing the global economy have been compounded by the outcome of the british referendum vote, or brexit, as it is more commonly referred to. as a result of brexit, the global outlook for 2016 β 17 has worsened, as the vote added significant uncertainty to an already fragile global economic environment, and is likely to affect confidence and weigh negatively on consumption and investment. i should add that brexit has also highlighted the importance of inclusive growth, an issue which was highlighted in the latest g20 communique. bis central bankers β speeches the imf noted that prior to brexit, economic data and financial market developments pointed to an improvement in the outlook for a few large emerging markets and a modest upward revision to global growth for 2017 ( 0. 1 percentage point ). in the aftermath of brexit, however, the imf downgraded global growth projections by 0, 1 percentage points for both 2016 and 2017 to 3, 1 and 3, 4 per cent respectively. advanced economies were primarily responsible for the more pessimistic outlook, with the imf revising the united kingdom β s 2017 outlook downwards by almost a full percentage point, while the euro area β s outlook was downgraded by a lesser 0, 2 percentage points. with the exception of sub - saharan africa, where the imf downgraded its outlook by over 1 percentage point for 2016, mainly on account of adverse developments in nigeria and south africa ( the two largest economies ), the outlook for emerging markets has generally remained steady, with stronger than expected recoveries in russia and brazil in the forecasts. although the contribution of emerging markets to global growth has dwindled in recent years, they continue to account for around 58 per cent of global gross domestic product ( gdp ) and therefore remain significant. given that the brexit outcome was generally unanticipated, the outcome was initially followed by heightened financial market volatility and renewed risk aversion. emerging market economies were subjected to a strong negative impact from brexit, however, the emerging markets most strongly affected have been those that are highly dependent on the eu as an export market, like south africa. notwithstanding the short term financial market volatility, financial markets have since recovered and asset prices have rallied. this development was supported by a good level of preparedness by major central banks | 0 |
central bank of kenya 7th kenya bankers association annual banking conference thursday, september 27, 2018 keynote address by dr. patrick njoroge, governor, central bank of kenya as prepared for delivery good morning! i want to begin by thanking the kenya bankers association ( kba ) for inviting me to speak at this auspicious annual banking conference. i applaud kba for organizing this conference for the last seven years, and contributing to thought leadership on topical banking sector issues. the theme of the conference β β credit market dynamics in an evolving regulatory and market participants β environment β β is quite apt given the conjuncture β where the global, regional and national financial markets are today. for instance, in kenya, there has been considerable discourse recently on the cost and availability of credit. the discussion is now morphing to the potential role of disruptive non - traditional credit providers that leverage on technology, but discussions about consumer protection in these new environments has not gathered much steam. however, i am informed that these issues will be discussed during the conference and i look forward to the findings. the year 2018 has been a year of anniversaries. on august 7, we marked twenty years since the bombing of the american embassy in nairobi, just a few steps away from the central bank building. and just a few days ago, on the 21st of september, we marked the fifth anniversary of the westgate attack. both of these were tragedies, marked with sombre reflections by our fellow citizens. we marked another recent anniversary that is less familiar to many ordinary kenyans, but one that is felt acutely by practitioners in the financial sector. ten years ago, on september 15, 2008, the storm that had been brewing for a year finally broke. lehman brothers, a company that had been in existence for one hundred and fifty eight years, shut its doors. ordinarily, companies come and go. after all, creative destruction is the mantra of the day and only the fittest survive. new blood, new ideas and new companies are essential to the health of capitalism, and, conversely, old ideas and old companies must be discarded when the time comes. but, of course, lehman was different. the canary in the coal mine was dead. the deluge was upon us. the effects of the global financial crisis were deep, powerful and lasting. some are being felt to this very day. the ordinary citizen β wanjiku β may not give you the precise details of what | well as participated in several cgbs conferences. there are also other speakers whom we anticipate hearing from over the next few days, who are not here this morning but who i would also wish to recognize at this time. β’ mr. franz mcconney the regional head of operational risk at the firstcaribbean international bank who will be providing some industry perspectives on risk management and governance in a financial group ; and β’ mr. gregor heinrich, the chief representative at the bis americas office located in mexico city, who will be joining us on friday and will address the seminar on the on the role and work of that office. we welcome and thank all the speakers for joining us this week and look forward to your respective contributions to the subject at hand. to our supervisory colleagues from across the caribbean, β¦ and i note that we have representatives from nine regional jurisdictions ( other than jamaica ) β we are pleased to be your hosts over the next few days and trust that the dialogue, experiences and approaches shared will serve to advance our individual and collective efforts to enhance our framework and capability to conduct effective conglomerate and consolidated supervision. the matter of consolidated supervision is very much at the forefront of the supervisory agendas of our member countries. in recent years we have seen growth in financial groups not only in our domestic markets but also in our regional markets, as institutions have sought to defend and increase market shares, gain competitive edge and increase margins. this growth has accelerated significantly in recent years, facilitated in particular, by technological innovations and the lowering of trade barriers. most notably for us here in the caribbean, the advent of the caribbean single market and the prospect of the eventual single economy, has seen the removal of certain legal, economic and trade barriers, making it a bit easier for regional financial integration. over the past decade a number of large regional groups have emerged : β’ through diversification into non - deposit financial services ; β’ through mergers and acquisitions of banking and non banking financial entities ; as well as β’ through cross border forays. first caribbean international bank readily comes to mind as one such group, as does rbtt / guardian life, sagicor / life of jamaica, national commercial bank / aic to name some β all regional conglomerates with a presence in several regional markets and with product offerings spanning the gamut of financial operations β¦. here i speak of not only banking, but securities dealing, insurance, money services, pension fund management, and mutual funds. β¦. and even as we gather | 0 |
gas markets have been a long time in coming. little more than a half - century ago, drillers seeking valuable crude oil bemoaned the discovery of natural gas. given the lack of adequate transportation, wells had to be capped or the gas flared. as the u. s. economy expanded after world war ii, the development of a vast interstate transmission system facilitated widespread consumption of natural gas in our homes and business establishments. by 1970, natural gas consumption, on a heat - equivalent basis, had risen to three - fourths that of oil. but in the following decade consumption lagged because of competitive inroads made by coal and nuclear power. since 1985, natural gas has gradually increased its share in total energy use and, owing to its status as a clean - burning fuel, is projected by the energy information administration of the united states to maintain that higher share over the next quarter century. dramatic changes in technology in recent years, while making existing natural gas reserves stretch further, have been unable, in the face of inexorably rising demand, to keep the underlying long - term price for natural gas in the united states from rising. * * * over the past few decades, short - term movements in domestic prices in the markets for crude oil have been determined largely by international market participants, especially opec. but that was not always the case. in the early years of oil development, pricing power was firmly in the hands of americans, predominately john d. rockefeller and standard oil. reportedly appalled by the volatility of crude oil prices in the early years of the petroleum industry, rockefeller endeavored with some success to control those prices. after the breakup of standard oil in 1911, pricing power remained with the united states - first with the u. s. oil companies and later with the texas railroad commission, which raised allowable output to suppress price spikes and cut output to prevent sharp declines. indeed, as late as 1952 u. s. crude oil production still accounted for more than half of the world total. however, that historical role came to an end in 1971, when excess capacity in the united states was finally absorbed by rising demand. at that point, the marginal pricing of oil, which for so long had been resident on the gulf coast of texas, moved to the persian gulf. to capitalize on their newly acquired pricing power, many producing nations in the middle east nationalized their oil companies. but the full magnitude of their pricing power became evident only | lisa d cook : global linkages - supply, spillovers, and common challenge speech by ms lisa d cook, member of the board of governors of the federal reserve system, at " global linkages in a post - pandemic world " 2023 asia economic policy conference, sponsored by the federal reserve bank of san francisco center for pacific basin studies, san francisco, california, 16 november 2023. * * * thank you, sylvain, and thank you for the opportunity to speak to you today. 1 it is fitting and timely that today we are gathered here to talk about global linkages. it is fitting not only because we are beside the golden gate - where, just a few blocks away, one can marvel at the massive cargo ships making their way to port - but also because this conference has once again brought together scholars and friends from as far away as shanghai, atlanta, and fontainebleau. and it is timely because the discussion of the ties that bind us is as important as ever. to start off this conference on global linkages, i am going to discuss supply shocks, policy spillovers, and common challenges faced by monetary policymakers in recent years and going forward. when the global pandemic hit in the spring of 2020, economies around the world shut down or sharply limited activity, especially for inperson services. also, it quickly became apparent that shutdowns in any one economy were exacerbated by reduced availability of supplies from other economies. policymakers around the world faced the common challenge of supporting incomes and limiting the scarring from temporary shutdowns in activity. the response was similar across countries : fiscal support, particularly to help those most in need, although the magnitude differed, in part because of differences in fiscal space. initially aimed at preventing sharp financial and economic deterioration, monetary policy easing was later extended to support the nascent economic recovery. policy rates were cut to or held near zero in both advanced and emerging market economies. a wide range of central banks also bought assets to support market functioning and provide stimulus once overnight policy rates hit their effective lower bounds. as economies gradually reopened, demand surged, especially for goods. but supply chains were slower to recover, leading to a global surge in inflation. that surge was followed by a further upswing in inflation after february 2022, when russia's invasion of ukraine caused a shock to global supplies of commodities, including oil and natural gas, food and fertilizers, and numerous manufacturing inputs. | 0.5 |
the interest rate, the country β s economy can grow out of its problems and sovereign debt will remain stable even with some degree of fiscal deficit. the formula also provides an answer to the question of why sovereign debt rose so rapidly in many countries. the term indicated by the circle is known as the snowball effect and depends on the difference between the interest rate level and gdp growth. low growth or a fall in gdp results in a rising debt burden. when debt approaches an unsustainable level, investors will demand higher compensation for new loans and interest rates on loans will rise, hence the snowball effect. ( see chart : fiscal deficit and public debt. ) large deficits have a direct impact on sovereign debt. from 2007 to 2010, fiscal deficits in euro area countries rose from 0. 6 per cent of gdp to 6. 6 per cent. in the same period, public debt rose from 66 per cent of gdp to 85 per cent, and there are prospects that debt will approach 100 per cent of gdp in the next few years. fiscal deficits in the uk and the us will reach 11 β 12 per cent this year and public debt is rising rapidly to high levels. in order to rein in this development, fiscal tightening must be implemented and government budgets must be brought into surplus. this can be particularly costly in downturns. several european countries have recently announced tax increases and cuts in expenditure. this typically involves raising the retirement age, broad - based wage reductions and lower welfare spending. these sharp measures may well boost growth capacity in these countries in the long term, but in the short run they will result in lower demand for goods and services and probably lower activity. since several countries are tightening fiscal policy at the same time, export markets may also shrink. however, reduced fiscal deficits will hopefully restore confidence in economic policy so that growth in household and corporate consumption and investment resumes. ( see chart : sweden and finland in the 1990s. ) there are examples of heavily indebted countries that have stopped the snowballing process before it led to default. the banking crisis in the early 1990s left sweden with a substantial fiscal deficit. lower tax revenues, increased social security expenditure and rescue measures for banks brought the deficit close to 11 per cent of gdp in 1993. sweden β s public debt rose to 80 per cent of gdp. fiscal consolidation continued for several years and resulted in stabilisation of government debt and provided room for its eventual reduction. the see michael hoel and jan | prices have continued to rise. debt growth remains high. the economic upturn has continued this year. high petroleum investment, the international upturn and higher commodity prices have boosted output and earnings in the manufacturing sector. statistics norway β s business tendency survey indicates continued favourable prospects for norwegian manufacturing. activity is expected to increase in service industries and the construction sector in the near term. capacity utilisation in the norwegian economy now appears to be close to a normal level. in manufacturing, capacity utilisation is close to its historical average. according to norges bank β s regional network, about 40 per cent of companies will have some or considerable difficulty in increasing production. even though growth in the norwegian economy has been high for a long period, substantial pressures have not yet emerged in the labour market. the rise in the number of employed in the first half of the year was fairly modest in relation to output growth. this may be due to lagged effects of the sharp fall in sickness absence through 2004. in many companies, the large increase in available person - hours was probably not fully utilised immediately. a considerable share of output growth may be the result of improved utilisation of company workforces. according to the quarterly national accounts, employment rose by 0. 5 per cent from the first half of last year to the same period this year. measured by the 1 / 7 labour force survey ( lfs ), the number of employed rose by 12 000 from may to june and by a further 2 000 from june to july. the use of foreign labour has increased in the year that has passed since the enlargement of the eu. the scope is relatively moderate, but appears nonetheless to have reduced bottleneck tendencies in some industries where demand has increased sharply. traditionally, many workers from our neighbouring countries have contributed when the labour market in this country has been tight. in 2001, close to 30 000 persons resident in sweden were employed in norway for all or part of the year. swedes who have registered as residents of norway come in addition. an increased supply of labour from new eu member states to norwegian enterprises may lead to a higher - than - normal increase in potential output for a period. many of the foreign workers work for a shorter period in norway without being employed in a norwegian enterprise. examples include foreign contractors and self - employed in the construction industry who carry out various building projects in norway, as well as others who carry out other types of projects. aker kvΓ¦rner, for example, | 0.5 |
##gilance and awareness of trends of serious crimes in the country and emerging threats impacting the system. it also calls for effective responses in the form of more robust, agile controls to address these identified trends and threat in a timely manner. from the national risk assessment 2020 undertaken by members of the national coordination committee to counter money laundering and to assess and facilitate the understanding of ml / tf risk exposures, it was found that the top five high - risks crimes that pose substantial ml / tf threats to the country are corruption, fraud, smuggling, illicit drug trafficking and organised crimes. corruption remains a systemic issue, and is particularly insidious, since it facilitates and sometimes enables others significant crimes such as fraud, drugs, human trafficking and environmental crimes. the assessment also indicated that the banking sector is exposed to high level of ml / tf risks. with banks as the nexus between all financial and non - financial sectors, the banking platform has become an ideal channel to be abused for criminal activities including corruption. 2 / 4 bis - central bankers'speeches in this regard, it is crucial that banks understand these key risk drivers to accurately assess whether their current systems are sufficiently adequate in the face of such risks and deploy their resources more strategically to focus on addressing specific, high - risk areas. some best practices for control measures include improving the ability to deter illegal fund flows within the system, conducting swift identifications of illegal transactions and prompt submissions of suspicious transaction reports ( str ). banks are also highly encouraged to make good use of technological advancements to develop more holistic monitoring and risks detection systems, allowing for more prompt alerts and sophisticated red flag systems and stronger compliance to anti - money laundering & counter financing of terrorism ( aml / cft ) requirements. it goes without saying that savvy systems alone are not the one - stop solution. this must be complemented by continuously maintaining and upgrading relevant competencies of aml / cft personnel through investments in training. ladies and gentlemen, i would like to take a moment here to commend the industry on the strides it has made in the aml / cft space over time. in particular, strs received from the banking sector has steadily improved in quality over the years. there is no doubt that these strs and the overall cooperation of banks with the relevant authorities have been useful in supporting enforcement activities by law enforcement agencies. this includes supporting macc's investigations through timely responses to orders, provisions of documents and witnesses. | marzunisham omar : launch of association of islamic banking and financial institutions malaysia's integrity year 2023 speech by mr marzunisham omar, deputy governor of the central bank of malaysia ( bank negara malaysia ), at the launch of association of islamic banking and financial institutions malaysia's ( aibim ) integrity year 2023, kuala lumpur, 14 february 2023. * * * assalamu'alaikum and a very good morning to distinguished guests. it is with great pleasure and gratitude to aibim that i am able to be with you today to speak on a topic that is close to my heart. integrity, as this audience is aware, is the cornerstone of any well - functioning financial system. throughout history, we have seen the damaging consequences from bank runs, financial market meltdowns and other financial shocks that occur when the public can no longer count on financial institutions to do the right thing in private. and yet, cases of corruption and financial mismanagement continue to abound. trust is central to banking. if we already know how badly things can go when trust breaks down, why is integrity β or rather, the lack thereof β still an issue in 2023? anybody here who has ever had to make a difficult life decision may understand why. integrity is not a given. it cannot be written or codified into existence. integrity requires continuous personal and institutional reflection of what our values are. above all, it demands of us the strongest form of ethical courage to stay true and consistent to these values, especially when it is much easier to do otherwise. the 2022 corruption perception index published by transparency international report showed that malaysia is ranked 61, compared to 51 in 2019. while malaysia has placed priority on addressing corruption and strengthening governance and integrity in recent times, for example through the national anti - corruption plan, it is imperative for all stakeholders to actively play their role in this very important endeavour. ladies and gentlemen, integrity holds an even more foundational place within islamic finance. upholding high standards of ethical behaviour and personal integrity at all times are not simply actions that guarantee good governance or financial stability. in our shared faith, they are virtuous ends within themselves. many verses of the quran and hadiths emphasise the importance of integrity. one such example is in sahih al - bukhari 7138, where the nabi muhammad s. a. w. said : " surely! every one of you is a guardian and | 1 |
also has to be a stable unit of account for the value of the goods and services that are exchanged. and it should also be used as a long - term store of value, for example for saving. cryptocurrencies such as the much - discussed bitcoin do not perform these functions adequately, if at all. trust is the very essence of a stable currency. this trust cannot evolve without a solid framework, including a state governed by the rule of law, a sustainable economic and fiscal policy, and also an independent central bank. cryptocurrencies that have no link to a conventional currency ( the swiss franc for instance ) display a high level of price volatility. they are more of a speculative investment instrument than a means of payment capable of retaining its value. the chart on the right - hand side of the slide illustrates this. compared with exchange rates, commodities and equities, cryptocurrencies are subject to very high volatility, and investors must be aware of the financial risks they are taking on when buying them. cryptocurrencies therefore do not meet the requirements of a currency. however, this does not mean we can simply dismiss them out of hand, for behind all of the hype there is an array of technological innovations. particularly important among these is the distributed ledger technology, known as dlt for short and often also referred to as blockchain. in other words : it is important to make a clear distinction between cryptocurrencies as assets, and the underlying technology, which does indeed have potential. dlt could facilitate solutions in various areas of the economy that would enhance the safety page 2 / 8 and efficiency of digital information flows. a distributed ledger is essentially a decentralised and synchronised database that allows participants to read, write and save information. dlt makes it possible to unequivocally define ownership structures within a computer network, without the need for a central third party. these facets also give rise to interesting possibilities for the financial sector, and dlt is therefore regarded as one of the biggest innovations in the fintech area. today i would like to look at the effect fintech innovations could have on a key element of the financial system, namely the financial market infrastructure. the financial market infrastructure, fmi for short, comprises trading platforms, securities settlement systems and payment systems via which financial transactions are conducted electronically. the fmi is generally not in the spotlight. nevertheless, | institutions. equity capital is key to the stability of the banks as it constitutes their main buffer for absorbing losses. under the new rules, banks have to satisfy higher capital requirements in terms of both quantity and quality. since last year, these institutions have been required to hold cet1 capital equal to 4. 5 % of their risk - weighted assets. this was followed on 1 january by an additional 0. 625 % for the capital conservation buffer, which is set to rise to a total of 2. 5 % by 2019. from 2019, when it is possible for all instruments to be deployed in full, banks and savings banks will have to hold cet1 capital equal to at least 7 % of risk - weighted assets. this is a significant increase compared with the 2 % minimum ratio that applied until the end of 2013. what is more, the other new capital instruments, which include the countercyclical capital buffer and the additional buffers for the most significant institutions, also need to be backed by cet1 capital. the new rules will help make the banking system more stable as a whole. at the same time, however, it goes without saying that the new rules also place a cost burden on the banks. this is by no means unintentional in the case of buffers for the most significant institutions : as their systemic importance puts them at an advantage in terms of funding costs, this burden levels the playing field at least in part. however, some observers fear that this is also detrimental to the real economy. they argue that the new rules are making it more expensive for banks to lend and are therefore concerned that the institutions will be forced to reduce their lending activities in the future. the basel committee was well aware of the impact that the new rules would have. it was for this reason that the committee also established transitional periods with the aim of rendering it easier for banks and savings banks to make the necessary adjustments. these apply to both the qualitative and the quantitative aspects of the new capital requirements. for example, the capital instruments that are no longer eligible for inclusion in cet1 capital will not be excluded in one fell swoop ; instead, they will be phased out over a period of several years. furthermore, increasing requirements regarding the level of capital to be held will be introduced only gradually. but the basel committee has also come in for criticism in response to these transitional periods β in the eyes of some government representatives and market observers, they appeared to constitute too great a | 0 |
a timely manner should be a key priority for eu legislators. second, we strongly welcome the intention of the legislator to give central banks of issue a role in the regulatory framework for ccps, commensurate with their responsibilities. as i have said, this is of crucial importance, considering the fundamental impact ccps can have on monetary policy. at the same time, the involvement of the central bank in the regulatory framework should 3 / 4 bis central bankers'speeches not put into question either its independence or its discretion to define the scope of its monetary policy. we are confident that the eu legislator will fully recognise this imperative. thank you for your attention. 4 / 4 bis central bankers'speeches | institutional setting for financial regulation and supervision with the lamfalussy framework has been a milestone in this respect, coupled with improvements to the eu legislative framework for financial services, including in particular the adoption of the financial services action plan and the respective follow - up policy for the period 2005 - 2010. however, the first full review of the lamfalussy framework by ecofin in december 2007 demonstrated that the new institutional setting has not yet reached its full potential. while the review confirmed the widely shared assessment that the lamfalussy framework has greatly enhanced the eu regulatory and supervisory process in recent years, it also underlined that the optimal level of cross - border convergence and cooperation has not yet been attained. in order to move forward, the december 2007 ecofin pointed to the need to : ( i ) strengthen the roles, tools and decision - making procedures of the eu committees of supervisors ; ( ii ) enhance the supervisory arrangements for cross - border financial groups by improving the functioning of the supervisory colleges formed by the competent home and host supervisors ; and ( iii ) consider introducing a reference to the eu in the mandates of national supervisors. the ecofin council set out a specific roadmap for achieving progress on these issues by the end of 2008. the eurosystem strongly supports these initiatives. indeed, from the inception of the lamfalussy framework we have argued that this innovative institutional approach provides an appropriate basis for achieving the heightened degree of cross - border convergence and cooperation which is required. one of the key advantages of the lamfalussy approach is the combination of a decentralised set - up with cross - border coordination at eu level. a decentralised approach is in line with the national responsibilities for safeguarding financial stability β relating not only to financial regulation and supervision, but also to financial stability monitoring and assessment, crisis management, and deposit insurance β while also allowing for the benefits of geographical proximity and the established experience and knowledge of local authorities to be drawn upon. at the same time, it is clear that the accompanying coordinating mechanisms need to be sufficiently strong, and this has not been the case so far. therefore, a key priority on the eu financial services policy agenda is the effective and timely implementation of the measures that will allow the full benefits of the lamfalussy framework to be reaped. let me now turn to the work underway on enhancing securities clearing and settlement that is underway in europe. given the existing fragmentation of the securities market infrastructure the post - trading costs of | 0.5 |
to see what i have called β tit - for - tat β inflation [ 9 ] β with both parties trying to offset any real income losses [ 10 ] β we could see a negative spiral taking hold. monetary policy transmission the ecb cannot allow this to happen. and since profits are ultimately influenced by the business cycle, it is our responsibility to restrict demand enough to prevent such a spiral. that should, in turn, lead to slower margin growth and lower wage demands while reducing pressure in the labour market. but to gauge whether rates are sufficiently restrictive, we need to know how much traction our policy tightening is having β and is likely to have β on spending in the economy. that is why policy transmission is the third element we are looking at. so far, our rate hikes are being transmitted forcefully to bank borrowing [ 11 ] and lending rates β faster even than during previous hiking cycles. for the euro area, bank lending rates to firms currently stand at 4. 2 %, up by 267 basis points since may last year. this is their highest level since january 2009. bank lending volumes are also weakening, leading to a sharp contraction in money growth. from november onwards, monthly lending flows to firms have been negative on average. money ( m3 ) has also seen negative flows, causing its year - on - year growth rate to plunge from almost 12 % in mid - 2020 to 1. 9 % in april this year. and banks report that credit standards are tightening, which heralds lower lending flows to come. in the ecb β s latest bank lending survey, the pace of net tightening in credit standards was at its highest level since the sovereign debt crisis in 2011. this is the desired effect of our policy : we want financing conditions to tighten. and, so far, it has not been at the expense of bank performance, with the positive impact of higher rates on banks'interest margins outweighing the negative impact on volumes. but we know that our rate hikes have not yet been fully reflected in financing conditions. and we are also aware that recent financial market tensions may have intensified the tightening by increasing bank funding costs and encouraging more risk aversion. so we need to monitor carefully how this pass - through process is playing out. and if the recent tensions do leave a lasting footprint on markets, a given level of rates would mean tighter financing conditions β and that would have to be reflected in the level at which rates peak. at the same time, there is also uncertainty | clearly highlighted by the financial crisis. given the experience of the past year, i believe that indirect supervision, as is being carried out by the ecb, can be of great benefit β to banks, to their customers, to the stability of national financial centres and to the real economy. but i will come back to that later too. now, going back to finding a name for the β less significant β institutions. how should we refer to these 3, 200 banks? as you β ve probably noticed by now, i β ve opted for the term β small and medium - sized institutions β β and this decision was preceded by a lengthy discussion. for those of you who represent a small or medium - sized bank, i hope that you are happy with this description ; it will see us through the rest of the evening. having now resolved the naming problem, we can turn our attention to some slightly more straightforward issues. i will address two topics this evening. β’ first, the challenges now facing small and medium - sized banks ; and β’ second, the cooperation between the ecb and the national authorities in supervising small and medium - sized banks. the challenges β weak profitability and low interest rates whether national or european, supervisors are always interested in banks β stability. and the most important components of a stable bank are capital, liquidity and profitability. capital serves as a buffer for losses β the higher it is, the more losses a bank can absorb before it collapses. if we want to assess a bank β s stability, we should first look at its capital. the capital ratios of small and medium - sized institutions in the euro area are gratifying. the average tier 1 capital ratio is 15. 2 %. bis central bankers β speeches in germany, the tier 1 capital ratio of this group of institutions is slightly below average at 14 %, but is still significantly above the regulatory requirements, which, as a supervisor, i find reassuring! and if we now look at how tier 1 capital ratios have developed recently, we can see another welcome development. they are stable. in the first instance, that is somewhat surprising, given that the balance sheet total of small and medium - sized banks has increased slightly, while capital has marginally declined. in fact, tier 1 capital ratios could reasonably have been expected to fall too. the fact that they remained stable can be explained by the reduction in the riskiness of banks β balance sheets β because this is the basis for calculating tier 1 capital ratios. that | 0.5 |
a long time the main interest of central banks in payment systems came from computer experts. payment systems used to be viewed merely as β computers β that cleared and settled payment obligations. in the late 1980s the focus started to shift towards the financial risks, i. e. credit and liquidity risk inherent in payment systems. slowly it became common knowledge that payment systems could be a source of systemic risk by providing a channel through which the failure of one participant to meet its payment obligations could be passed on to other participants. in their own best interest and under the influence of the overseers operators started to protect their systems against financial risks - in most cases by building real - time gross settlement systems ( rtgs ). today almost every country is operating an rtgs system. there is now a widespread consensus within the private sector and the central banking community about the kind of operational requirements and financial risk controls that are necessary to make a payment system safe. a main contributor in this area has been the committee on payment and settlement systems ( cpss ) at the bank for international settlements ( bis ). as a standard - setting body the cpss has, for instance, drafted the core principles for systemically important payments systems. the core principles are a testimony of the consensus about standards for safety and efficiency in payment systems. the cpss has also played a leading role in raising the awareness of the risks involved in the settlement of foreign exchange transactions. it has also followed and to some extent promoted the cls project since its beginning. the safety of the clearing and settlement infrastructure has been a long - standing concern of the overseers. together with the financial industry they might even have enjoyed some pride while looking at what was achieved in terms of efficiency as well as safety and soundness of operations by the industry. but clearly, since september 11, 2001, a new awareness of vulnerability has grown on us all. those tragic events have made us rethink our approach vis - a - vis safety and operational risk. i think we all suddenly realized we had to reassess the vulnerability of our institutions and systems and, where necessary, improve their resilience. vulnerability - a quick survey ensuring that companies, consumers and investors have confidence in their ability to effect transactions and access their funds, securities, and other financial assets is of the highest importance in times of crisis. therefore it is clearly in the private and public interest to ensure that, in the event of any large - scale disruption, systemic consequences are minimized. however | , minimizing systemic consequences requires knowing the major vulnerabilities of the financial system. with this knowledge the responsible parties in the private sector as well as in central banks and government can in principle take adequate precautions and remedies. three sources of vulnerability can be identified. a first source of vulnerability is economic concentration among large and complex financial institutions. this may strike you as odd. but size is a potential source of vulnerability and industrial consolidation usually increases size. the financial industry has been experiencing numerous mergers and acquisitions. this has resulted in financial services offered by an increasingly small number of large and dominant players. even if only one of these players were to stop functioning well the financial system as a whole might suffer. the second source of vulnerability is geographical clustering. financial institutions are heavily clustered in a limited number of important international financial centers. economic concentration and geographical clustering tend to add up. a huge number of firms, among them the industry β s giants, may be affected in one and the same location by one and the same disruptive event. a third source of vulnerability is the large degree of connectivity and interdependency of the financial sector. y2k and the terrorist attacks of september 11, 2001, highlighted this type of vulnerability. one key lesson learnt was that vulnerability extends beyond these systems since they crucially rely on utilities such as electricity and telecommunications or on service providers like s. w. i. f. t. let me sum up again. there are three major sources of a financial system β s vulnerability : economic concentration, geographic clustering, and connectivity and interdependency. the latter are an obvious characteristic of financial networks. networks contribute to increased efficiency and facilitate risk management. at the same time they also can act as channels as well as origins of systemic crisis. from vulnerability to resilience hand in hand with a new awareness of the vulnerability of the financial system, those responsible for its safety and stability in private firms, in financial market infrastructures as well as in the regulatory agencies have recently been taking a new hard look at the financial system β s capacity for resilience. in retrospect the y2k problem was a first mild but nevertheless rather valuable test. the y2k test was mild in the sense that everybody had enough time to prepare for it. what helped in y2k was the clear deadline. all the contingency and communication networks could be set up before the event. many of us gathered here today knew | 1 |
##ing to hedge developing interest rate gaps rapidly shed receive - fixed swaps and treasuries, and these actions markedly aggravated last summer β s long - term interest rate upturn. in recent months, mortgage rates have risen further, suppressing much of what is left of incentives to refinance, thereby increasing mortgage duration to its current elevated level. this suggests that the vast secondary market for home mortgages has largely adjusted to the recent increases in mortgage rates. moreover, the expectation of federal reserve tightening has apparently already induced other significant balance sheet adjustments as well. an unwinding of carry trades is notably under way at least judging from the shift in the trading portfolios of primary dealers. in addition, a swing toward a net short position on ten - year treasury note futures among investors has been the largest since the inception of the contract in the 1980s. * * * economic developments going forward will determine the level and term structure of interest rates. federal funds futures prices already reflect expectations of a substantial firming of policy by the federal open market committee ( fomc ). unlike 1994, there has been an appreciable increase of market rates in anticipation of policy tightening, though history cautions that investors β anticipations of the cumulative magnitude of policy actions and their timing under such circumstances are far from perfect. lastly, let me emphasize that recent financial indicators, including rapid growth of the money supply, underscore that the fomc has provided ample liquidity to the financial system that will become increasingly unnecessary over time. the committee is of the view, as you know, that monetary policy accommodation can be removed at a pace that is likely to be measured. that conclusion is based on our current best judgment of how economic and financial forces will evolve in the months and quarters ahead. should that judgment prove misplaced, however, the fomc is prepared to do what is required to fulfill our obligations to achieve the maintenance of price stability so as to ensure maximum sustainable economic growth. | alan greenspan : central bank panel discussion - economic developments remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, at the international monetary conference, london ( via satellite ), 8 june 2004. * * * one of the defining characteristics of the recent business expansion in the united states has been the evident reluctance of corporate managers to expand spending and hiring aggressively in response to and in anticipation of continued cyclical growth. a substantial rebound in business spending had been a hallmark of most past economic expansions. judging by the pickup in capital spending in recent quarters, businesses are becoming more confident in the strength and durability of the cyclical upturn. still, over the four quarters ending in march, corporate investment in capital and inventories likely fell short of rapidly rising cash flow for the first time, over a comparable period, since the mid - 1970s. corporate debt expansion has accordingly been tepid. indeed, corporate net bond issuance was negative in may. the exceptional reluctance to expand payrolls also appears to have waned this year, and businesses are once again hiring with some vigor. but for nearly three years prior, managers sought every avenue to forestall new hiring despite rising business sales. their ability to boost output without adding appreciably to their workforces, appears to have reflected a backlog of unexploited capabilities to enhance productivity with minimal capital investment, a delayed effect of the capital goods boom of the 1990s. even now, the proportion of increases in temporary workers relative to total employment gains has been unusually large, suggesting that business caution remains a feature of the economic landscape. this hesitancy on the part of businesses to expand risk - taking, as i have noted in the past, is an apparent consequence of scandals surrounding corporate accounting and governance, an aftermath of the stock market surge. although there is no compelling evidence that corporate governance risk has fully subsided, with time, it should. an increased willingness to borrow, and ample liquid assets, should provide a further lift to capital investment and, with it, economic activity. * * * with concerns of deflation now presumably safely behind us, developments ahead are likely to be dominated by the paths of productivity growth and profit margins - assuming, of course, the always latent danger of terrorism in the united states remains in check. profits of nonfinancial corporations as a share of sector output, after falling to 7 percent in the third quarter of 2001, rebounded to 12 percent | 1 |
muhammad bin ibrahim : monetary policy autonomy β intricacies, instruments and independence luncheon address by mr muhammad bin ibrahim, governor of the central bank of malaysia ( bank negara malaysia ), at bank negara malaysia's monetary policy conference 2017 " monetary policy autonomy : intricacies, instruments and independence ", kuala lumpur, 24 july 2017. * * * monetary policy was thought to be a relatively simple and straightforward business. it was widely concluded that all that the central bank needed to do was conduct monetary policy in a way consistent with the inflation - target and ensure that employment levels are satisfactory. life should have been easy for central banks. the holy grail of monetary policy was achieved. central banks had finally understood how monetary policy should best be conducted. this was one of the primary explanations for the great moderation β the period of prolonged macroeconomic stability that preceded the 2007 β 2008 global financial crisis. today, the situation is markedly different. conducting monetary policy is anything but easy. for the advanced economies, despite almost 10 years of easy monetary policy, inflation is still persistently below target and economic recovery remains slow and fragile. the latest enigma is strong growth devoid of inflationary pressure. for open economies, especially in emerging markets, we are left to manage the spillovers of extraordinary policy measures implemented in the advanced economies. these spillovers have had tremendous implications on emerging market central banks through macroeconomic and financial instability, financial and foreign exchange market volatility, and more importantly, the ability and autonomy of central banks in the region to conduct monetary policy. so much attention has been focused on the advanced economies β the growth recovery, policy trajectory and political uncertainty. not enough has been discussed on the countries at the receiving end of these uncertainties, and the difficult circumstances under which emerging market central banks have had to operate in recent years. this will be the focus of my remarks today. i intend to describe a few reasons on why it has been a real challenge for emerging market central banks to conduct monetary policy in recent years than in the period prior to the global financial crisis. i will then discuss the policy thinking and tools from the perspective of an open economy when facing the challenges that emanate from global policy - spillovers. lastly, i will share my view on the importance of having utmost autonomy in policy - making and suggest what we and the global community can possibly do to improve independence in policy decisions. global developments since the crisis have added extra layers of complexity in policymaking for most | is integrated into a chip card and combined with credit and debit card functions. the other route to success is to link the electronic purse function more specifically to a particular type of purchase which people have to make in their everyday lives. that has been demonstrated in hong kong by the success of the octopus card. as at end - september, 5. 6 million octopus cards have been issued, recording 3. 8 million transactions per day. at this level, octopus must be one of the largest stored value card systems in the world. as regards electronic delivery channels, five banks have already launched transactional websites in hong kong, and a further twelve have told us that they are at the planning and development stage. mobile phone banking is also very much a live issue. once y2k is out of the way, i think that we will see a spate of further activity in this area. this reflects the fact that banks are increasingly becoming aware of the need to supply the e - banking product while hong kong has a population very ready and willing to accept new technology. moreover, with 200, 000 km of fibre optic cabling, linked to more than 1, 500 buildings, hong kong has one of the finest telecommunications infrastructures in asia. the financial infrastructure is also one of the most advanced. on the legal front, the government has already introduced a draft bill into the legislative council to facilitate electronic commerce by granting legal recognition to digital signatures and by establishing a licensing system for certification authorities. hong kong post is establishing a public key infrastructure for hong kong and will launch its certificate authority service before the end of this year. the hkma welcomes and fully supports these initiatives. implications for banks the prospects for e - banking in hong kong are therefore favourable. however, there are also risks to be managed, and i shall be looking at these more closely. banks are of course already used to dealing with at least some of the issues that crop up in an electronic banking environment, and so have built up experience and expertise to deal with these. however, i do believe that the internet, because of its low cost, global reach and versatility raises the stakes for the banks β both in terms of the opportunities it presents as well as the risks. strategic risk in talking about these risks, let me start at the top β with the issue of strategic risk. in other words, will the bank get it right? will it make the right choices when it comes to investing in e - banking or will it waste money | 0 |
search for key words such as'green'and'environmental'in funds β prospectuses. controls include fund age, fund size, lagged flows and standard deviation of returns. share and interaction - time - esg fixed effects are included and standard errors are clustered at share level. emir : european market infrastructure regulation. promisingly, green bonds are roughly twice as likely to be held cross - border than other european bonds. and esg funds appear more stable, with investors less likely to withdraw funds following negative performance than investors in other types of funds ( chart 3, right panel ). scaling up green finance could therefore generate the twin benefits of supporting the low - carbon transition and supporting financial integration in the euro area. but it is important to avoid complacency. further growth in sustainable finance may be inhibited if concerns about greenwashing are not adequately addressed. there are substantial data gaps surrounding direct and indirect emissions and forward - looking information such as targets for emission reduction. these gaps should be closed as a matter of urgency, which requires mandatory, harmonised and audited disclosure standards. moreover, green finance remains a relatively small segment of the market. for europe to unleash its full potential for financing the green transition, it will need to redouble its efforts to mobilise capital market funding. in particular, equity funding has been shown to be important for incentivising green innovation and supporting the reallocation of resources to greener activities. [ 8 ] yet further growth in green finance is likely to be constrained by the same shortcomings that hinder integration in eu financial markets more generally. so progress towards a genuine capital markets union is vital. climate risks do not stop at national borders. the capital markets architecture in the eu needs to recognise that and adapt accordingly. products with official eu seals, such as the forthcoming eu green bond standard, will need proper monitoring to ensure compliance and build trust. further efforts are required to harmonise the tax treatment of capital market assets, to better align the efficiency of national insolvency frameworks and to ensure similar levels of investor protection across countries. conclusion let me conclude. strengthening financial integration within the european union is vital to protect our economy from shocks and financial instability. the risks posed by climate change make action more urgent. but they also provide an opportunity. putting in place the necessary architecture for a full capital markets union can help promote green finance β an area where the eu is already a leader. this will not | the disaster on the year - on - year annual growth rate at the end of that quarter. in principle, one mitigating factor may be insurance, which in the past has helped support aggregate demand and hastened reconstruction following disasters, reducing the overall impact on economic activity ( chart 2, right panel ). in practice, however, there is already a substantial insurance β protection gap β. only one - third of climate - related economic losses in the euro area are currently insured, a situation that could worsen with climate change. more frequent and severe natural disasters are likely to increase insurance claims, which may result in higher insurance premiums and potentially lead to lower insurance coverage, further widening the protection gap. green finance as a driver of financial integration a substantial amount of finance will be needed for there to be a smooth transition to meet the ambitious goals for a carbon neutral economy. but we also need a robust financial system capable of maintaining the flow of credit even if asymmetric shocks happen or if the transition is a little bumpy. that brings me back once more to the importance of financial integration. progress has certainly been made in stepping up sustainable finance. since 2015, the assets under management of environmental, social and governance ( esg ) [ 7 ] funds have almost tripled, the volume of outstanding green bonds has risen tenfold, and the amount of catastrophe bonds has almost doubled ( chart 3, left panel ). chart 3 investments in esg funds sources : artemis, bloomberg finance l. p., emir data, epfr global, lipper and ecb calculations. notes : left panel : data on catastrophe bonds are copyright to www. artemis. bm, steve evans ltd. to avoid end - of - year effects, the outstanding amount of emission - related derivatives is the notional value of open positions reported under emir as at the end of november. 2015 values are not included due to data unavailability. see footnote 19 in alogoskoufis et al ( 20201 ), op. cit. for data limitations. the right panel shows the relationship between net flows as a share of a fund β s lagged total net assets and lagged fund returns. it is based on a sample of 1, 452 and 8, 337 nonesg fund shares, and 131 and 1, 017 esg shares, of corporate bond and equity funds domiciled in the euro area between january 2016 and september 2020. green funds are identified using text | 1 |
by pronounced volatility of the dinar, although the nbs intervened by selling eur 3. 7 bln net cumulatively over three years. since 2013 to date, eur 1. 4 bln net have been sold in interventions, at significantly weaker daily volatility of the dinar exchange rate against the euro, with special attention paid to movements in the fx market and the spillover of effects from international markets. by responding in a timely fashion, the nbs aims to mitigate short - term and temporary shocks affecting exchange rate volatility, while being mindful of the need to rationally spend fx reserves. i believe this is also underpinned by the data that we put forward β eur 3. 7 bln ( for the same period ) versus eur 1. 4 bln in interventions, net. it is noteworthy that β unlike in the earlier times, the achieved and maintained relative stability of the exchange rate is an important pillar for the improvement of the business and investment climate. thus, last year as well, the nbs was carefully monitoring and assessing the magnitude of external shocks, responding when necessary in order to cushion these shocks at home. depending on the direction and intensity of pressures, we intervened in the fx market on both sides β as both the buyer and the seller of foreign currency. having bought eur 970 mln and sold eur 450 mln in 2015, we ended the year with fx reserves of the nbs and of the republic of serbia bolstered by more than half a billion euros. the stability of the national currency is also conducive to a higher degree of dinarisation of the financial system, which is a common objective of us all. economic policy makers have long been advocating a greater use of the dinar, but the growth in dinar deposits and dinar lending to households has been particularly noticeable only lately. it may sound little to some, but if we say that dinar savings are 2. 6 times higher today compared to end - 2012, this result is no longer so negligible. the share of dinar in total savings is still not high, but it climbed from 1. 9 % to 4. 3 %. more than two thirds of new household loans ( 67. 5 % ) in 2015 were extended in dinars. we are happy to see that the achieved price stability and the relative stability of the exchange rate have encouraged dinarisation, but we know it is a | achieved so far allow us to reaffirm yet again the nbs β s commitment to actively contributing to economic recovery, higher employment and the standard of living in the period ahead, while at the same time safeguarding price and financial stability. the results speak for themselves. we expect them to be acknowledged, just as we expect that all of you, people of influence, resolve and knowledge will help our nation to overcome that feature of temporariness, of not being persistent in either financial reforms or in its presence on the world political scene. thank you. bis central bankers β speeches | 1 |
especially in the north of the country and in some specific sectors. for this year, we estimate that gdp will grow in the range between 3. 25 % and 4 %, which compares with the 3 % to 4 % expected in march. this combines the actual activity data known so far with annual rates of change for the second half of the year that are lower than those of the first half, reflecting a higher comparison base for the same period of 2017 and the aforementioned moderation in the pace of growth in final domestic demand. beyond this year β s forecast, our view on the evolution of growth in the 2018 - 2020 period and our assessment of capacity gaps in the economy has not changed much. for 2019 and 2020, the projected ranges are unchanged. thus, we continue to expect that in 2019 the economy will grow between 3. 25 % and 4. 25 %, and between 3 % and 4 % in 2020 ( figure 4 ). we continue to estimate that the economic recovery is grounded on a favorable external scenario, a clearly expansionary monetary policy, the completion of the adjustment of mining and housing investment and the absence of important macroeconomic imbalances. as a working assumption, we assume that in 2018 the economy will receive a fiscal impulse consistent with the current budget, including the adjustments announced by the administration. going forward, we assume that expenditure will follow the path of gradual fiscal consolidation defined in the fiscal policy decree just issued by the authority. with these figures, on average our economy will grow above potential in the period 2018 - 2020, closing the activity gap during the policy horizon, as we projected in the march report. also, our estimate for the economy β s potential growth continues to lie between 2. 5 % and 3 % and it will gradually approach trend growth β between 3 % and 3. 5 % β to the extent that the rate of investment recovers, short - term constraints disappear, and resources are reallocated to more productive activities. come september, as has been the case for some years, we will reassess these estimates. the projected evolution of activity considers an external impulse slightly lower than that estimated in march, due to less favorable financial conditions and lower terms of trade associated to the oil price hike. activity and inflation data of recent months have consolidated the differences between the cyclical position of the united states and the other developed economies. thus, while in the united states there seem to be no gaps and incoming data on prices and wages show more clear inflationary pressures | contrasts with prices of 63, 59 and 56 dollars that were considered for the same years last march. as for copper, the average price estimates for 2018, 2019 and 2020 are practically unchanged at 310, 295 and 285 cents of dollar per pound, respectively. towards the statistical closure, the price of the metal climbed to about 330 cents per pound and, according to market reports, has been affected by the uncertainty surrounding possible labor - related downtime in some mines. in the baseline scenario, this increase is assumed to be temporary, so it does not modify the average price projections. should a mine paralyze, it could be necessary to review both the projected copper price and other macroeconomic variables for chile. the prices of oil and copper combined, plus those of other chilean exports, determine a less favorable trajectory of the terms of trade in the policy horizon. thus, between 2018 and 2020, the terms of trade will accumulate a decrease of the order of 3 % compared to a fall of 2 % estimated in march ( figure 10 ). on the side of inflation in chile, the annual variation of the cpi and the cpi excluding food and energy ( cpiefe ) levels remains around or slightly below 2 %, without showing significant differences than expected in march. as has been the trend of recent quarters, cpiefe inflation has been dominated by the evolution of the exchange rate, the persistent capacity gaps in the economy and the indexation of some prices to lower inflation rates ( figure 11 ). in the baseline scenario, we continue to expect cpiefe inflation to have a slow convergence to 3 % β not very different from what we expected in march β, while for headline inflation we foresee it reaching 3 % sooner than we thought then. in the former case, this is consistent with an economy that, beyond recent data, will close its capacity gaps over the next two years, and with a real exchange rate that, as i said, will return to near its historical average during the policy horizon. for headline inflation, its faster achieveent of 3 % is explained by the increase in fuel prices measured in pesos ( figure 12 ). regarding monetary policy, the board estimates that the monetary stimulus will remain as it is and will begin to be reduced as macroeconomic conditions continue to drive the convergence of inflation to 3 %. as a working assumption for the monetary policy rate, for the short term we assume a trajectory similar to that shown in the financial brokers survey available at the close of this report. for the | 1 |
of shared responsibility within a partnership of european courts. it respects the division of tasks between european and national legislation and can take the views of the european court as the basis for its judgement. conversely, the european court of justice will observe the limits of its jurisdiction and not intervene in the remit of the federal constitutional court. legal and political cooperation between the public administrations of the member states and the institutions of the european union functions when we respect each other and trust that we will act in the interests of our respective mandates and in accordance with the applicable law. this trust forms the basis of cooperation between member states and between member states and the european union and its institutions. it is based on the democratic values we share and which are explicitly laid down in the copenhagen criteria for new member states. we should preserve this trusting relationship β which supports europe as a diverse, complementary whole, founded on the european treaties. bis central bankers β speeches | managing financial crises and alternative courses of action proliferate. politicians, whether or not they have the authority over the decision to intervene, want to satisfy themselves that intervention is justified and what is proposed is the right way forward. often the process of arriving at a consensus takes time and meanwhile the problem worsens and the effectiveness of the actions to be taken is eroded. i believe therefore that those responsible for the maintenance of monetary and financial stability should have the necessary emergency powers to do what is required independently and promptly. there is of course the need for transparency and accountability when exercising these powers to ensure appropriate checks and balances. at a time when many jurisdictions and international forums are reviewing the financial regulatory structure, the ability or inability of the financial authorities to take unusual action, independently and promptly, to protect the public interest should be addressed. my fourth and last issue is an involvement. this concerns the extent to which the authorities should be involved in the development of the financial infrastructure. i am sure you are aware of the huge amount of public money spent in all jurisdictions in the development of the physical infrastructure, building highways, bridges and airports to take people and goods from one place to another safely and efficiently, thus facilitating the conduct of economic activities for the benefit of all. authorities, however, seem to devote only disproportionately small amounts of resources to the development of the financial infrastructure to move money and financial instruments from one entity to another safely and efficiently for the purpose of enhancing financial efficiency that promotes economic prosperity. to some extent, the development of the financial infrastructure can be left to the market, with swift being a sterling example of private sector initiative in this area. but many of the important elements of the financial infrastructure are public goods, the provision of which, in a form that serves the public interest best, may not be financially viable for the private sector. furthermore, the conflict i mentioned earlier often comes in, affecting the willingness or the enthusiasm of the financial intermediaries to develop and use a financial infrastructure that promotes financial efficiency. i believe this is one of the main reasons why x in t + x in the settlement of some financial transitions is still a number other than zero, or why t + x is still not replaced by rtgs dvp even though the technology to do so has been available for some time. very simply therefore there is a case for the authorities to get involved, as a developer or a service provider, when a private sector solution that is in the public interest | 0 |
improvement. the world bank β s annual doing business report examines business regulations in, at last count, 189 economies on the basis of 36 indicators. china is currently ranked in 90th place. there is therefore still room for improvement. this can be achieved, for instance, by forging ahead with agreements to use common standards and dismantling barriers to market entry. achieving a mutual understanding of corporate culture in the various markets can be aided through personal contact. more and more chinese delegations are coming to germany every year. one of the objectives of these visits is to examine and gain an understanding of small and medium - sized family businesses and their structures. after all, this organisational structure is often cited as a blueprint in reforming the chinese growth model β even though it could never be adopted in every single aspect. in china, it is intended that a corps of small and mediumsized private enterprises will provide β new β, more qualitative growth and boost the innovative power and competitiveness of chinese enterprises. over the past decade, china has been attempting, through various channels, to support the established enterprises by offering fiscal incentives such as tax breaks. at a meeting between the chinese president and the federal chancellor during the former β s visit in march 2014, both countries agreed to establish a high - level financial dialogue. this took place for the first time in the spring of this year in berlin. the aim of the meeting between the finance ministries and the central banks is to institutionalise cooperation, also in financial matters. this concerns, among other things, not only issues of financial supervision and regulation, but also international cooperation within the g20. an outcome of the meeting is that assistance is to be provided for investment by small and medium - sized enterprises and the cross - border settlement of securities and derivatives is to be made easier. i expect that these trade relations will become even closer and that financial relations, too, will continue to deepen. bis central bankers β speeches | dismantled. so far, the chinese side has been acting very prudently in these matters and i assume that will remain the case in the future. the barriers are being dismantled by the constant expansion of existing programmes to promote cross - border renminbi transactions. this is where programmes with investment quotas for institutional investors are playing a key role. furthermore, the merger of the bis central bankers β speeches shanghai and hong kong stock exchanges allow foreign investors limited access to the capital market of the mainland. investors are increasingly using the renminbi as an investment currency. also establishing the renminbi as a reserve currency has been the declared aim of the chinese government since as long ago as 2009. china β s interest in the renminbi being included in the basket of currencies for the special drawing rights ( sdrs ) of the imf is therefore understandable. it is also clear that the currency basket should reflect the world economic balance of power. and, in that respect, china has now undoubtedly become an economic heavyweight. at present, the currency basket is based on the us dollar, the euro, the japanese yen and the pound sterling. for a currency to be accepted into the sdr basket, it must be significant for international trade, serve as an internationally widespread medium of payment and be freely usable. inclusion in the sdr basket is currently reviewed at regular intervals in accordance with the existing criteria. the outcome of the evaluation and the relevant decision are expected before the end of this year. many commentators acknowledge the country β s liberalisation efforts. the availability of market - based exchange rates and interest rates is essential so that the currency basket can go on fulfilling its intended purpose. furthermore, the chinese central bank announced on 11 august 2015 that the daily fixing of the exchange rate against the us dollar would be more closely geared to the price on the previous evening. the renminbi subsequently depreciated markedly and can now fluctuate more freely. some voices in the media interpreted this as yet another deliberate attempt to manipulate the exchange rate with the aim of inducing an artificial devaluation. as they see it, china is supporting its own exporters by artificially boosting competitiveness. however, it is also a further liberalising step by the chinese government. even the imf has praised the move, as this reform of the exchange rate fixing procedure gives greater weight to market forces. the use of the renminbi is forging ahead in other areas of the capital market as well | 1 |
should avoid unnecessary destruction of value. 1 / 4 bis - central bankers'speeches in view of these considerations, the post - crisis resolution frameworks seek to combine the preservation of systemic stability and the continuity of financial services with market discipline and the avoidance of taxpayer - funded bailouts of failed banks. this is also the main idea behind the bank recovery and resolution directive. in europe, the adoption of the bank recovery and resolution directive, which introduced a harmonised set of rules for the resolution of banks across the union, was followed two months later by the adoption of a very closely related instrument specifically aimed at the euro area, namely, a regulation establishing the second pillar of the euro area banking union, the single resolution mechanism. the first pillar of the banking union, the single supervisory mechanism, contributes significantly to enhancing bank resilience by applying very high prudential standards in a consistent manner to all supervised institutions operating in the euro area and by reducing risks to the system. however, despite enhanced regulation and supervision, bank failures will inevitably occur. the responsibility for preparing for and dealing with this eventuality lies with the second pillar, the single resolution mechanism. as we all know, this is an integrated, multi - level administrative mechanism, comprising a central component, the single resolution board based in brussels, and the national resolution authorities of the member states of the banking union ( including, by the way, the bank of greece ). the single resolution mechanism is responsible for both resolution planning and the actual implementation of resolution measures once a bank is deemed to be failing or likely to fail. to finance its resolution actions, it has access to a single resolution fund, which is pre - funded with contributions from the banking industry. the creation of the single resolution mechanism was a bold and decisive step towards the integration of european banking markets. subsequent events, including the handling of the failures of banco popular and sberbank, have confirmed its value. at the same time, through the efforts of the single resolution mechanism, banks in the union have become more resolvable and thus safer. not only have they built up their loss - absorbing capacity, but they have also developed their skills in all aspects of resolvability. moreover, the single resolution fund is now fully funded and mutualised, having reached its target amount. but this does not mean that all is well and that we should rest on our laurels. as last year's unfortunate events in the us, the uk and switzerland have shown, there is | nicholas c garganas : exchange - rate regimes on the road to emu : lessons from greece β s experience luncheon address by mr nicholas c garganas, governor of the bank of greece, at the seminar on β monetary strategies for accession countries β, hungarian academy of sciences, budapest, 28 february 2003. the references for the speech can be found on the bank of greece β s website. * * * ladies and gentlemen, i would like to thank magyar national bank, the institute of world economics of the hungarian academy of sciences, and the center of european integration studies of the university of bonn for inviting me to speak to you today. in contemplating the subject of this seminar, one is struck by how dramatically things have changed in the course of a decade. in 1992 and 1993, when the exchange rate mechanism - or erm underwent a series of speculative attacks, the prospects of a european monetary union were viewed, by many observers, with considerable skepticism. this skepticism was not without foundation. after all, hadn β t there been previous false starts on the road to emu? hadn β t the werner report prescribed a european monetary union by the end of 1970s? yet, here we are today, having fulfilled the dreams of pierre werner and his colleagues and having celebrated the fourth birthday of emu. today, i would like to address some lessons from the experience of greece, the newest member of the euro area, in its quest for emu membership. i will confront what appears to be a dilemma. as we have heard this morning, much of the economics profession appears to have been converted to the β hypothesis of the vanishing middle β ; for economies well integrated into world capital markets, there is little, if any, middle ground between floating exchange rates and monetary unification. effectively, this hypothesis rules out intermediate regimes. yet, a requirement for entering the euro area is participation in erm ii, which is, after all, an intermediate regime. how can this dilemma be resolved? the retreat from intermediate regimes before i discuss greece β s experience, let me address the reasons underlying the retreat from intermediate regimes. what has caused this retreat? first, an explosive increase in capital flows during the 1990s has made the operation of intermediate regimes problematic. as has already been discussed at this seminar by jorge braga de macedo and helmut reisen, according to the thesis of the impossible trinity, developed in the 1980s, under a system of pegged exchange rates and free capital mobility, it is not | 0.5 |
few years, the composition of these capital flows has changed quite significantly, providing some contrary evidence to the hypothesis that the banks fund the current account. i don β t think there was any particular problem with the structure of these capital flows previously, nor do i think there is one now. graph 2 in 2010, the net inflow to the australian banking sector was close to zero ( graph 2 ). indeed, over the last three quarters of 2010, the australian banking sector was a net repayer of its offshore liabilities. that is, maturities exceeded issuance. this did not reflect a lack of appetite for australian bank paper, as the cost of issuance was broadly flat or even slightly indeed, australia has recorded a current account deficit for much of its history. bis central bankers β speeches lower over the period. instead, as i discussed in a recent speech, 11 it reflected the fact that the banks had less need for wholesale borrowing given the conjuncture of fast deposit growth and subdued asset growth. the terming out of the banking sector β s funding is also evident in the decline in the stock of short - term foreign liabilities but an increase in their longer - term liabilities. graph 3 this picture is reinforced if we include flows into australian non - bank securitised assets ( graph 3 ). after net inflows amounting to around 1 β 2 per cent of gdp through the first half of the 2000s, there have been net outflows over the past three years. this change in net flows reflects the sharp drop - off in global appetite for securitised products as the problems in the us housing market came to the fore. the decline in demand for australian securitised assets in part reflects the fact that a lot of the buyers of the paper pre - june 2007, structured investment vehicles, are no longer around. 12 recent developments suggest appetite for these assets is growing again, both on - and offshore. in 2010, while the banking sector β s net offshore borrowing was zero, the current account deficit, while narrower than earlier years, was still 2Β½ per cent of gdp. an increase in foreign purchases of australian government debt and decreased australian investment abroad offset the decline in net capital inflow to the banking sector. turning to the current account side of the balance of payments, the notable development has been the shift in the trade balance from deficit to surplus as the much - commented - on rise in debelle g ( 2011 ), β collateral, | reporting obligations could be made. asic would then have to develop the associated derivative transaction rules, which would be subject to a regulatory impact study and further industry consultation. it would also be necessary to license at least one trade repository to operate in this jurisdiction. as a result, it could be well into next year before any mandate is actually in force. the effectiveness of the regime will also require a range of responses from market participants. if the transition to new arrangements, whether or not triggered by the issuance of a mandate, is to occur on an acceptable time - frame, institutions should already be making the operational and organisational changes needed to move towards greater use of centralised infrastructure. based on the council agencies β market assessment and ongoing dialogue with stakeholders, i β d like to identify five areas in which more work will need to be done. first, international banks and the large domestic banks have already had to begin making the transition, in part in response to regulatory reforms already underway in some jurisdictions. in the case of central clearing, efforts to date also reflect the economic incentive of an emerging price differential between cleared and non - cleared transactions. this work is ongoing. international banks active in the australian market are generally already actively clearing australian dollar - denominated interest rate swaps via offshore entities that participate in lch. clearnet β s london - based swapclear service or cme clearing in the united states. in most cases, the large domestic banks have taken the initial step of concluding client - clearing agreements for some of their otc derivatives business. for several of these institutions, the transition to central clearing for this segment of their business is having profound implications for the organisation of their operations. indeed, these institutions have been confronted with a number of legal and operational issues, such as clearing agreements that often contain more restrictive contractual terms than in their existing isda master agreements with bis central bankers β speeches bilateral counterparties. they have also had to adjust to new operational dependencies on the clearing participants through which they channel their business. for the council agencies, the experience of these institutions has illuminated a number of issues that may warrant further consideration, and which may shape the design of derivative transaction rules should mandatory clearing be imposed. second, it is evident that in the absence of similar pressures, smaller and more domestically focused institutions are generally at an earlier stage in this process. given the complexity of the required adjustment, these institutions are encouraged to accelerate their transition plans. in the case of central clearing, it | 0.5 |
target. in contrast, if the transmission mechanism from the fed funds rate to financial conditions and onward to real economic activity were completely predictable, then there would be no need to focus on financial conditions as an intermediate target variable. the level and path of the fed funds rate matters, but it also matters how this gets transmitted to the real economy through the financial sector. over the past 15 years, there have been two important instances in which the relationship between the fed funds rate and financial conditions have diverged significantly. the first was the late 1990s technology stock market bubble and its aftermath. the second was the mid2000s credit market bubble that culminated in the recent financial crisis. during these episodes, the relationship between the fed funds rate and financial conditions was particularly unstable. as a result, developments in the financial markets became very important in the conduct of monetary policy. in my comments, i am going to assume that inflation expectations are always well anchored so that i do not need to distinguish between the real and nominal fed funds rate. in this respect, i would note that financial conditions indicators have implications for β taylor rule β formulations for monetary policy. as you all know, taylor - type rules provide a shorthand metric for the appropriate stance of monetary policy. in such rules, the fed funds rate is set at a level equal to the equilibrium real fed funds rate, plus the inflation objective, plus the weighted deviation of output from its potential and of the inflation objective from actual or, if forward looking, expected inflation. often, analysts and economists assume that the equilibrium real fed funds rate is equal to 2 percent, its long - term historical value. although, in principle, such rules allow the equilibrium rate to be time varying, it typically is assumed to be constant. i have always been uncomfortable with this usage of a 2 percent equilibrium real rate assumption because it ignores the possibility that the equilibrium rate changes in response to technology shocks or in response to changes in how monetary policy is transmitted via the financial system to the real economy. for example, in the late 1990s, when trend productivity growth shifted upward, it seemed logical that this would also push up the equilibrium shortterm real interest rate. that is because higher productivity growth, by raising the return on capital, spurs greater investment, thereby driving the equilibrium rate higher. similarly, if stock prices rose sharply in response to higher productivity growth, this should also lead to a higher equilibrium real rate through the effect of greater stock market wealth on consumer spending. higher stock prices meant | devices in highlighting what is important. one loses that benefit when the number of variables becomes large and the indexes become complex. fourth, it would be interesting to know how financial conditions indexes for other countries and regions would differ. the authors focus only on the united states. thus, it is difficult to know whether the value of financial conditions indexes are specific to the united states or should be applied more broadly. fifth, i thought the paper could have gone further in exploring the implications of its results. the focus of the paper is on how to construct a financial conditions index that does a good job of forecasting economic activity. the paper does not tackle the implications for monetary policy stemming from developments in financial conditions as measured by the new fci. if financial conditions evolve in an unanticipated way, how should this influence the conduct of monetary policy? in particular, the authors note that during the 2003 β 06 period, financial conditions tightened less than expected given the rise in the fed funds rate and, during the 2007 β 08 period tightened even as the federal reserve slashed its fed funds rate target. these results raise a number of interesting questions. in particular, does the behavior of the new fci imply that the federal reserve should have tightened more aggressively during the 2003 β 06 period or eased more aggressively during the 2007 β 09 period? the paper β s results seem to imply this, but it would be interesting to see whether this is the case or not. it also would be useful to know how qualitatively important these differences are. if the differences are worth only a few basis points on the fed funds rate, then having a good indicator of financial conditions is not going to be a very important input in the formulation of monetary policy. in contrast, if a shift in financial conditions implies that the fed funds rate path was β off β by a hundred basis points relative to what actually occurred, then this obviously has big implications for monetary policy. the development of equilibrium models that incorporate financial conditions in a meaningful manner might prove helpful in answering these types of questions. 5 in addition, i would like to know how the various linkages have changed over time. is the linkage between the fed funds rate and financial conditions as measured by the new fci see, for example, tobias adrian and hyun shin, manuscript in preparation for the forthcoming handbook of monetary economics, volume 3, currently circulated as federal reserve bank of new york staff reports, no. 398, october 2009. the work | 1 |
grievance mechanisms. besides, customers also desire proper handling and maintenance of their accounts, and privacy of their personal financial information. for cost effective and quick redressal, sbp has issued necessary guidelines to the banks regarding complaint handling along with institutionalization of the banking mohtasib pakistan. the state bank has also taken considerable interest in enhancing the capacity of its own human resource as well as that of the banking sector that is an important element for ensuring the effective implementation of the regulatory requirements. sbp through its subsidiary, nibaf, is providing world class training and arranging specialized courses in banking, economics and finance. further, sbp also encourages its employees to gain international certifications like the cfa, to boost their professional capacity. i am confident that the steps taken by the sbp to promote financial literacy and inclusion and capacity building of the banking sector professionals will be highly useful in creating a professional, sound and vibrant financial culture. similarly, the regulations to promote corporate governance are also expected to promote corporate ethics in the banking sector. it bis central bankers β speeches is now up to the young generation β like many of you to improve the skill - set and take keen interest in striving for excellence and maintaining professionalism. the state bank looks forward to working with you and the whole community towards achieving our shared goals of economic growth and social prosperity. thank you. bis central bankers β speeches | during this year has decided to place under temporary administration the insurer " kosova e re ". this decision is a continuation of a series of measures taken by the cbk to increase the sustainability of the insurance sector, in order to ensure a stable sector and in accordance with the legal requirements of the cbk. regarding the pension sector, despite the decline in the value of investments at the beginning of the pandemic, the performance of international financial markets has steadily improved in recent months and the value of the decline in the value of these investments has already recovered. the return on investment of the kosovo pension savings trust by the end of september 2020 was positive at a rate of 12. 5 percent. the economic recovery package envisions injecting a significant amount of money into the economy ( around β¬ 220 million ) enabling pension contributors to withdraw 10 per cent of their pension savings. the cbk has played a very important role in the operational realization of this process by providing the funds with the data of the bank accounts of the pension contributors through the register of bank accounts in order to validate the accounts of the contributors, and to eliminate the errors of possible in making the 10 percent payment. * * * despite the situation created due to the pandemic and not very favorable conditions in international markets, the central bank of the republic of kosovo has managed to maintain its financial stability and good performance of the institution. the cbk remains committed to continue its activity in the service of stability and development of the country's economy, creating the conditions for the development of a stable financial infrastructure, in line with contemporary developments in this field, including the development of new segments of the financial system such as the capital market, which requires a broad interinstitutional interaction. also, the cbk remains committed to base the development of the financial system on the principles of developing sound competition and free movement of capital, thus promoting the continuous increase of efficiency in the financial system. let me express my gratitude to the organization for security and co - operation in europe ( osce ) and the office of the language commissioner for awarding the 2020 β best practice in law enforcement for the use of languages " for the cbk. also, i would like to inform you that the cbk this year has continued with the announcement of the competition, already traditional, for the award " young economist ", in which case i would like to thank and congratulate all candidates for the works they have submitted within this | 0 |
provision measures have improved system liquidity in the past weeks and stabilized broad funding conditions. however, risks to the growth outlook continue to be tilted to the downside and currently a ushaped recovery is expected. the challenge, therefore, is to provide tangible boost to the economy through the appropriate combination of fiscal response and monetary measures. rest assured, macroeconomic policy measures are in place to address downside risks associated with the covid - 19 pandemic. in line with this, the bsp will continue to work with market participants and relevant government agencies to ensure that its policy responses remain timely and appropriate particularly during these challenging times. thank you. 2 / 2 bis central bankers'speeches | / 4 bis central bankers'speeches | 0.5 |
patrick njoroge : credit information sharing for innovation and financial inclusion speech by dr patrick njoroge, governor of the central bank of kenya, at the 3rd regional credit information sharing ( cis ) conference, nairobi, 23 february 2016. * * * mr. henry rotich, cabinet secretary, the national treasury ; dr. louis kasekende, deputy governor, bank of uganda ; dr. charity dhliwayo, deputy governor, reserve bank of zimbabwe ; mr. wagara melchior, 1st vice governor, bank of burundi ; representatives of the bank of mexico, bank of zambia, bceao ; representatives of the world bank and ifc ; mr. habil olaka, ceo, kenya bankers association ; mr. charles ringera, ceo higher education loans board & chairman, cis kenya distinguished guests, ladies and gentlemen : good morning. it is a great pleasure to be here with you today, to welcome all of you to the 3rd regional credit information sharing ( cis ) conference. in particular, i extend a special welcome to representatives of central banks from various countries around africa and from mexico. that we gather once again for the third regional conference is evidence that cis is increasingly becoming a critical aspect of the financial system. ladies and gentlemen : the theme of this conference β cis for innovation and financial inclusion - mikopo kisasa! β is indeed timely as it resonates with the objectives we have set to drive the kenyan financial sector. these objectives include innovation, lower cost of credit, transparency and disclosure. having an inclusive financial sector goes beyond mere access to financial services to include consumer protection and making sure that the duty of care owed by financial institutions to their customers is well executed. in addition, the provision of sufficient information to assist consumers in making informed financial decisions is a fundamental enabler in enhancing financial inclusion. as you are all aware, information asymmetry in the financial sector is very prominent and as such one of the hindrances to deeper financial inclusion. to eradicate this, transparency in the pricing of credit by commercial banks and other financial institutions cannot be over emphasized. it is in this regard that the central bank of kenya has started publishing the average lending rates for various loan products as well as the overall average weighted lending rates by commercial banks. this will enable the borrowing public to make informed borrowing decisions, which in turn will facilitate a competitive banking sector with high quality and reasonably priced products. i know that the topic of low cost of credit has been over | 12. 10. 2022 economic prospects and impact on the financial system global managers meeting / kpmg paris margarita delgado deputy governor [ i am very pleased to join you at this global meeting to share my views on these challenging times and on how the current situation might affect the financial system in the near future. first of all, it must be acknowledged that our capacity to accept, digest and adapt to the shocks we have recently seen has been remarkable. at the same time, such profound and sudden changes mean that any forecast we publish becomes outdated very soon. you might agree with me that, nowadays, the only thing that is certain is that we live in uncertain times, and we must deal with this. let me start by briefly reviewing the economic situation and the outlook for the euro area. it is worth remembering that the current inflationary pressures first emerged in mid - 2021, right after the reopening of the economy following the global vaccination efforts, and have continued through to 2022. three factors have contributed to this. first, commodity prices started to increase, in part driven by the significant recovery in demand. second, supply bottlenecks began to emerge, mainly in maritime trade, but also in other sectors such as semiconductors, due to the post - pandemic rebalancing of consumer preferences that led to a demand push at a global level, as well as the emergence of supply - side constraints due, for example, to covid - related containment policies in key hubs, such as chinese ports. as a result, by the first quarter of 2022, inflation in the eu was already at its highest level since the creation of the monetary union. lastly, in this unstable scenario in which supply and demand had yet to adjust, the outbreak of war in ukraine fuelled further instability in the inflation outlook and hindered the economic recovery that was starting to take hold in early 2022. europe is particularly exposed to the economic repercussions of the russian invasion of ukraine. first, the continent has close commercial ties with ukraine, a supplier of primary goods such as grain, sunflower oil or corn. these products are widely used in the european agriculture, farming and food industries. second, and most importantly, russia continues to play a major role as an exporter of energy products to europe ( mainly oil and gas ), and remains of key importance for some european countries. russia is the euro area β s main supplier of natural gas and oil : in 2019 | 0 |
the risk - sharing properties of cross - border trade in nominal bonds. 32 moreover, in an environment of price stability but persistent rapid money growth and rising leverage, financial liberalisation and integration could lead to the accumulation of financial imbalances over a number of years, increasing the probability of a boom - and - bust cycle in financial markets with repercussion on price stability over the longer term. this possibility implies that monetary policy should place increased emphasis on the preservation of price stability over longer time horizon extending beyond the medium term. with regard to the analytical framework, globalisation can, in principle, affect market structures, agent β s behaviour and inflation dynamics, thus requiring close monitoring and careful assessment of its effects. the economic analysis employed by the ecb to assess the short - to - medium term risks to price stability could be subject to greater parameter or model uncertainty as well as increased measurement error associated with unobservable variables, such as potential output, which underlie the assessment of real activity and inflation pressure. however, the econometric evidence in the euro area has not yet identified significant indirect effects, reflecting structural or behavioural influence of globalisation on inflation dynamics. nevertheless, the complexity of economic analysis has increased and its task has become more challenging, and there is clearly a need to better understand and measure the impact of globalisation. in a period of potentially significant structural change in the product and labour markets, crosschecking the assessment of risks based on economic analysis by monetary analysis becomes more important. this proposition is conceptually correct. unfortunately, the influences of financial globalisation on money and credit growth imply that, in practice, monetary analysis is also becoming more challenging and requires increased sophistication. it is necessary to rely on a wide range of analytical tools and models in order to identify the underlying trend in monetary developments and to assess its implications for price stability. at the same time, as i already stressed, in an environment of increased global financial integration, a deeper and broader analysis of developments in monetary liquidity can enhance our understanding of potential risks to financial stability which, if they materialise, can have repercussions for output volatility and price stability over the longer term. for these reasons, pertinent research at the ecb will be further strengthened, including the analysis of the interactions between financial globalisation and innovation, on the one hand, and monetary and market liquidity, on the other, and their potential implications for monetary policy and financial stability. | countercyclical capital buffer. this is a potential capital add - on to bank capital should the committee decide to increase the capital requirement of the banking sector as a whole during an upswing, and should the ratio of credit growth to gdp6 be above its long - term trend. this would then be reversed during a downswing. up to now, this requirement has been set at zero, as the credit gaps are very low. at present, the focus of the fsc is on identifying any vulnerabilities that could cause systemic risk. this is done by monitoring potential risks to the system through assessing various macroprudential systemic risk indicators. these indicators include macroeconomic, financial sector, market - based as well as other qualitative indicators. should any mitigating actions be required, the fsr bill provides the south african reserve bank. ( 2016 ). β a new macroprudential policy framework for south africa β. gross domestic product page 10 of 12 sarb with the powers to advise and / or direct financial regulators to take certain actions ; this is done through the fsc. having these additional responsibilities comes with its own set of challenges. the expanded mandate of financial stability in itself may have implications for central bank independence. compared to financial stability, monetary policy decisions, while not easy, are nevertheless more straightforward and better understood by the public. these decisions generally involve the use of one tool ( the interest rate ), and there is a clear objective. it is important to appreciate that financial stability is not an end in itself but rather a means to an end, generally regarded as an important precondition for sustainable economic growth, serving the constitutional mandate of the sarb. a financial stability mandate is however more complicated, as it is a shared responsibility. the political economy aspect of this comes out strongly when we distinguish between crisis prevention and crisis management or resolution. the policy tools are more directed at particular sectors, and may therefore be more politically sensitive as the distributional impacts are more apparent than in the case of monetary policy. there could be perceptions of particular institutions or sectors being favoured over others. in particular, crisis management generally involves lender - of - last - resort facilities and / or providing some sort of assistance to banks that need it. these are inevitably quasi - fiscal decisions or actions, as they either directly involve government money or could lead to losses on the central bank balance sheet, which are potentially losses for government. as we saw during the global financial crisis, | 0 |
also involve trading in emerging market currencies, it would be prudent to obtain comfort that foreign exchange trading practices are in line with best practice. conclusion in conclusion, while a lot of work remains to be done, it is nonetheless very encouraging to note that key steps have been taken by regulators and financial institutions alike to tighten behavioural standards in the industry. it is equally encouraging that south africa, while largely sheltered from the global financial crisis, is embarking on measures to limit the risk of such crises occurring locally in the future, including strengthening market conduct regulations as part of the move to a twin peaks system of regulation. nonetheless, the future evolution of the financial industry will bring new challenges for regulators and professional bodies alike. i will only mention a few potential examples here. much has been written, for instance, about the growing role of non - bank institutions in financial intermediation, and indeed, one potential consequence of stricter regulation of banks may be to shift a greater share of transactions towards the non - bank sector. extending codes of good behaviour and governance to a broader swathe of financial market players will be a continuing task for regulators and professional bodies. another example is the changing world of information technology, and how it can bring new players into the financial system. will internet and cellular telephony companies become the major providers of financial services in the next twenty years, as more people complete financial transactions on their mobile phones? similarly, will the main centres of financial transactions migrate towards regions and countries which up to now, like china and india, have been held back by the low liquidity of their markets and the existence of capital controls, even though their share in the world economy has been growing fast? it is too early to answer, but these may be just examples of new, non - bank institutions and new major financial centres that will over time, play a larger role in global financial transactions. as such, they will have to join in the endorsement of codes of good practice, if the industry and indeed the world economy are to continue on the path to greater and safer prosperity. i therefore encourage the aci to keep up the good work, to continue building your organisation and being a constructive partner in the continuous effort of building a professional culture that is characterised by adherence to the highest standards of ethical conduct. thank you. bis central bankers β speeches | remains far from the hoped - for recovery. structural reforms to improve opportunities for small businesses and job seekers would increase investment and productivity, and should therefore complement the current macroeconomic policy stance of the bank. food price inflation and the exchange rate in 2015, due to favourable oil price shocks, inflation averaged 4, 6 per cent. in contrast, inflation outcomes have exceeded 6 per cent this year because of food and petrol prices. the bank expects headline inflation to average 6, 7 per cent in 2016 and 6, 2 per cent next year. food prices are increasing due to the drought, whereas petrol prices are increasing because oil prices have risen off the extremely low levels prevailing at the start of 2015 and a weaker exchange rate. the drought, like oil price movements, is a supply - side shock to inflation. domestic price increases in maize, south africa β s staple food, have been extreme. since 1 january 2015, yellow maize prices have increased by almost 70 per cent while white maize prices have increased by more than 130 per cent over the same period. 5 in total, food prices make up 14 per cent of the consumer price index, and this measure increased by 11, 3 per cent calculated as change in real gross value added at basic prices. as traded up to 20 may 2016 on the south african futures exchange ( safex ). bis central bankers β speeches in april 2016, up from 4, 3 per cent ten months earlier. food inflation is forecast to peak at 12 per cent in the final quarter of this year. dry conditions since 2015 have caused a long period of herd culling, which increased the shortterm supply of meat and temporarily suppressed meat price inflation β thus, although grains inflation has accelerated since june 2015, meat price inflation accelerated this year. meat price dynamics were an important reason why food inflation rose at a slower - thanexpected pace last year. however, this trend has reversed in 2016, as food inflation rose faster than we had anticipated in the first four months of the year. furthermore, the rising cost of meat inputs and the lower supply of animals to the market are likely to push meat prices significantly higher over the course of 2016. food prices are not solely determined by domestic supply and demand ; they are increasingly influenced by international food prices and therefore by the exchange rate. 6 this is not necessarily negative. although south africa is a net food exporter, we do not have a comparative advantage in all food production. thus we rely on international prices, which are predominantly us | 0.5 |
from digitalization, and pursuing an international dialogue will be fundamental ( especially via the fin - net network of the european commission that connects the adr systems operating in the banking, financial and insurance sectors and is therefore an important forum for cross - border discussions ). the evolution underway also requires discussion between all the national competent authorities, at both national level, thanks to the coordination board at the ministry of economic development and, as we said before, in international fora too. 2 / 4 bis - central bankers'speeches dialogue between adr and the civil justice system is also very important ( in italy there has long been a successful collaboration with the scuola superiore della magistratura, which i truly believe could be interesting at international level too ). a comparison of various adr systems in terms of structure, operations and customer care, but also of functions could provide some interesting insights. the international situation increasingly shows that adr entities perform important functions ( apart from resolving individual disputes ) : consultancy, financial education, data aggregation and putting pressure on the market. given the changes in the ecosystem, it is also interesting to understand if and how these functions have evolved. we are always on the lookout for new insights and trends arising from international debate and are ready to intercept potential best practices to provide us with inspiration ( subject, of course, to internal regulatory constraints ). we also firmly believe in the exchanging of experiences ( which now that the pandemic has eased, we have an opportunity to promote ). the delicate topic of the effectiveness of adr systems ( a quality requirement set by the adr directive ) is particularly interesting. it will also be fascinating to see what is surfacing from the latest academic debate on this and to understand how leveraging technology, especially artificial intelligence applied to alternative dispute resolution systems, could help to improve their effectiveness. the abf has made ample use of technology since it was founded : its procedures are completely digitalized, and it has had a portal since 2018 that allows people to communicate with the system online ; work is underway to open the portal to intermediaries as well to make the procedures even more efficient. the bank of italy is experimenting with the use of artificial intelligence at the abf : work is underway on the abeftech project that aims to apply machine learning and text analysis techniques to help with the work of the banking and financial ombudsman ; this project follows a similar ai tool ( called esptech ) already implemented for managing the complaints | riccardo faini memorial conference italy β s lost productivity and how to get it back bank of italy, via nazionale 91 opening remarks by ignazio visco governor of the bank of italy rome, 13 january 2017 i am pleased to welcome all participants to this conference to remember professor riccardo faini. i first met riccardo in 1978 when i presented a paper written with stefano micossi in the famous monetary workshop held by franco modigliani and stan fisher at mit ( riccardo was then a phd student with giampaolo galli and luca barbone β¦ ). we met often in the following years inside and outside of italy, socially and professionally, exchanging views and commenting on each other writings. indeed, issues related to the topic of today β s conference β long - standing poor productivity dynamics in italy β happened to be at the centre of a couple of professional exchanges between us in the mid - 1990s and early 2000s, which i would like to briefly share with you. in 1994, at a seminar on β the new frontiers of economic policy β ( le nuove frontiere della politica economica ) organised by the innocenzo gasparini institute for economic research ( igier ), i discussed β along with luigi spaventa β a paper by riccardo on wage and productivity differentials ( stesso lavoro, diverso salario?, i. e. β same jobs, different wages? β ) between northern italy and southern italy β the mezzogiorno. the starting point of riccardo β s analysis was that a convergence in nominal wages between the two regions since the late - 1960s had not been accompanied by a parallel convergence of productivity levels ; the ensuing higher unit labour costs in southern italy were thus contributing to higher unemployment there. in order to achieve more wage flexibility in southern italy β s labour market, riccardo β s main proposal was to introduce a third type of wage bargaining arrangement β a regional one β to complement or replace bargaining at the centralised and firm levels, with a view to bringing closer wages and productivity levels while addressing higher unemployment in the south. in my comments i raised some criticisms, but on one major point we were in close agreement, namely that the issue of lower productivity ( and higher unit labour costs ) in southern italy should be addressed not only by reforming the labour market but also by implementing broader structural reforms to overcome well - known distortions of the general institutional | 0.5 |
is clear that we are at the beginning of this new phase in the indian banking. the recent measures announced by the government and the reserve bank of india for opening up india β s banking sector to international investors will further increase the pressure of competition. at the same time there is renewed emphasis by the government on the social sector together with thrust on rural and agricultural lending. caught between the competitive pressure, both domestic and external, and the politics of development, banks will have to be on their toes, become even more efficient in managing funds and in meeting the needs and demands of customers. economic outlook and banking sector β s performance during the last couple of years, global growth has been above the forecast in almost every region stimulated by strong monetary and fiscal measures. the domestic economic outlook is also bright with the real gdp growth rate surpassing 8 % last year and estimated to be around 7 % in the current year. industrial performance also improved considerably with a strong manufacturing growth for the second consecutive year. inflation rate has been under control, barring some hiccup for a short period. aided by a good macro economic environment, banks β bottom line has improved significantly over the last three years. however, let us not forget that a major contributor to the windfall gains has been treasury profits fuelled by a secular decline in interest rates during the three years period from 2001 to 2004 and consequent profit booking on sale of government securities. from the current year, with the hardening of interest rates, this trading component of profits is no longer going to shore up banks β profitability. on the contrary, most banks have been required to provide for the decline in the market value of their investments portfolio. thankfully, one offsetting factor has been the strong pick up in the credit off - take due to buoyant demand in the economy and revival of industrial activity, which have resulted in substantial increase in banks β core interest income. globalisation β a challenge as well as an opportunity currently, the most important factor shaping the world is globalisation. the benefits of globalisation have been well documented and are being increasingly recognised. integration of domestic markets with international financial markets has been facilitated by tremendous advancement in information and communications technology. but, such an environment has also meant that a problem in one country can sometimes adversely impact one or more countries instantaneously, even if they are fundamentally strong. there is a growing realisation that the ability of countries to conduct business across national borders and the ability to cope with the possible | downside risks would depend, inter alia, on the soundness of the financial system. this has consequently meant the adoption of a strong and transparent, prudential, regulatory, supervisory, technological and institutional framework in the financial sector on par with international best practices. all this necessitates a transformation : a transformation in the mindset, a transformation in the business processes and finally, a transformation in knowledge management. this process is not a one shot affair ; it needs to be appropriately phased in the least disruptive manner. high capital inflows : not an unmixed blessing as you all know, liquidity position in the financial sector has been quite comfortable in the recent times. the buoyant capital market coupled with an appreciating rupee vis - a - vis us dollar has been attracting large foreign institutional inflows during the last two years. while we have an all time high foreign exchange reserves of more than $ 140 billion, high capital inflows pose a big challenge to monetary and exchange rate management. in this context, operationalisation of market stabilisation scheme ( mss ) has given an additional instrument for liquidity and monetary management. to sum up the challenge, i would like to quote a statement of dr. y. v. reddy, governor, reserve bank of india, which he made at the annual meeting of bank for international settlement ( bis ) on june 28, 2004. and i quote, β β¦.. special defences need to be put in place for ensuring financial stability in the case of countries like india that are faced with the prospect of volatile capital flows. the issues relating to cross - border supervision of financial intermediaries in the context of greater capital flows are just emerging and need to be addressed. β interest rate risk for indian banks β profits under pressure the rapid and relatively substantial rise in rupee interest rates in recent months has brought into focus the market risk faced by indian banks. your own bank β s current years profits have been badly affected due to increased provisioning requirement on the investment portfolio. your fourth quarter results have shown massive losses due to mark to market ( mtm ) losses on your g - sec portfolio. the story is not much different for most of the public sector banks. the benchmark 10 - year yield on government securities has risen from 5. 2 % in may last year to around 7. 2 % at this point. the spike in interest rates has affected the trading profits of banks. we in | 1 |
to hold capital commensurate with the actual risks of such transactions. recent market events highlight why a robust and independent assessment of risk on the part of banks is so important. the enhanced risk - sensitivity of the basel ii advanced approaches creates positive incentives for banks to lend to more - creditworthy counterparties and to lend against good collateral, by requiring banks to hold more capital against higher - risk exposures. the federal reserve's role as the nation's central bank reinforces our belief in the importance of maintaining prudent and risk - sensitive capital requirements for financial institutions. financial stability is enhanced when banks'regulatory capital measures adequately reflect risk, as well as when banks continually improve their risk - management practices. since the basel ii regime is far superior to the current basel i regime in aligning regulatory capital requirements with risk and fostering continual improvements in risk management for our largest and most complex banking organizations, i believe it will contribute to a more resilient financial system as a whole. in addition, let me emphasize that the basel ii regulatory capital framework establishes a more coherent relationship between regulatory measures of capital adequacy and the day - today risk management conducted by banks. that is, it builds on risk - management tools, such as credit - risk rating systems and economic capital, that are already in use at sophisticated financial institutions. as a result, basel ii will be better able than the current system to adapt over time to innovations in banking and financial markets and will reduce incentives for arbitrage that arise from the gap between what the regulators require and what sound economic risk management requires. moving ahead with basel ii implementation next steps for supervisors i used the analogy of running a marathon earlier, describing how the final rule represented a finish line of sorts for the u. s. banking agencies. alas, i'm afraid that we cannot rest because in fact we have simply passed the baton from the runner in the first stage of the race β rule finalization β to the runner in the next stage β implementation. successful implementation of basel ii will require additional hard work and determination. as most of you know, the agencies have for some time been preparing for basel ii implementation by working to integrate basel ii into our day - to - day supervisory processes. with completion of the final rule, we must now be ready to pace ourselves through another long, intensive, but ultimately rewarding, effort. the agencies are already working hard to foster consistency across banks and across the agencies. we are building | a third area of uncertainty concerns the broader macroeconomic risks to the inflation outlook. one risk is a possible substantial tilt up in the growth of compensation per hour as workers try to offset some of hit to their real incomes from higher energy prices at a time of relatively full resource utilization. a second risk is a possible slowing in underlying productivity growth from the substantial gains of the past decade toward the more subdued pace of the preceding quarter century. if both possibilities were to be realized over the next year, unit labor costs could surge, putting severe upward pressure on prices. profit margins are elevated and competitive pressures could force firms to absorb a good portion of those cost increases. but they would not do so willingly or completely. to the extent that firms were able to exercise pricing power and maintain margins, rising costs would feed through to greater inflation. this is not, however, what i expect to happen. as i noted already, productivity has been well maintained and despite mixed signals, the growth of labor compensation does not appear to be accelerating noticeably. but i will be paying close attention to developments in costs as well as in prices as i update my inflation forecasts in the future. in sum, i see risks on both sides of my expectations that the growth of economic activity will slow modestly on balance over the next year or so, leaving the economy producing at about its sustainable potential. but unless activity slows unexpectedly, and after the rise in retail energy prices, the risks may be skewed a little toward the upside on inflation. because the economy is producing at a reasonably high level and activity is most likely on a solid upward track, my focus at this time is naturally on keeping inflation contained. our economy works best when households and businesses do not need to take account of persistent increases or decreases in the general price level in making their decisions about spending and production. low inflation also makes policymaking easier because a high degree of confidence by households and firms that inflation will remain low gives the federal reserve added latitude to move aggressively against any economic weakness that may develop. and a lesson of the 1980s is that it is costly to wring inflation out of the system once it becomes entrenched. i do not know what path of rates will, in fact, be required to accomplish our objectives. obviously, we are considerably closer to where policy needs to be than we were sixteen months ago, but we are not yet at a point where we can stop and watch the economy evolve for a while. but you should appreciate that | 0.5 |
clarity of our communications. for example, as noted in the minutes of our september meeting, we have been discussing potential approaches for providing more information β perhaps through the sep β regarding our bis central bankers β speeches longer - run objectives, the factors that influence our policy decisions, and our views on the likely evolution of monetary policy. 7 fiscal policy turning now to fiscal policy, since the onset of the recent recession and financial crisis, the federal budget deficit has widened significantly. as a result, federal debt held by the public has increased relative to our national income to a level not seen in the past half - century. these budget developments have reflected both the weak economy, which has depressed revenues and pushed up expenditures, and the fiscal stimulus that was implemented to help ease the recession and support the recovery. so long as the economy continues to recover, the deficit should narrow over the next several years as a growing economy boosts revenues and reduces expenditures and as the policies put in place to provide economic stimulus continue to wind down. even so, the federal budget is on an unsustainable path over the longer run, in large part because of the aging of the u. s. population and fast - rising healthcare costs. if current policy settings are maintained, the ratio of federal debt held by the public to national income would continue to rise in coming decades. it is crucial that the federal budget be put on a sustainable long - run trajectory, and we should not postpone charting that course. a failure to put in place a credible plan to address our long - run budget imbalance would expose the united states to serious economic costs and risks in the long term and possibly sooner. timely enactment of a plan to eliminate future unsustainable budget gaps will make it easier for individuals and businesses to prepare for and adjust to the changes. in addition, the sooner our longer - term budget problems are addressed, the less wrenching the adjustment will have to be and the more control that policymakers β rather than market forces or international creditors β will have over the timing, size, and composition of the necessary adjustments. at the same time, it is important to recognize that too much fiscal tightening in the near term could harm the economic recovery. significant near - term reductions in federal spending or large increases in taxes would impose an additional drag on the economy at a time when aggregate demand is already weak. we need, and i believe we have scope for, an approach to fiscal policy that puts in place a well - timed and | of recent developments can drive equity prices to levels that are unsupportable even if risks in the future become relatively small. such straying above fundamentals could create problems for our economy when the inevitable adjustment occurs. β testimony of alan greenspan before the committee on banking and financial services, u. s. house of representatives, july 22, 1999. for example, stock prices rose following the completion of the more than 300 basis point rise in the federal funds rate in the twelve months ending in february 1989. and during the year beginning in february 1994, when the federal reserve again raised the federal funds target 300 basis points, stock prices initially flattened. but as soon as that round of tightening was completed, prices resumed their marked upward advance. from mid - 1999 through may 2000, the federal funds rate was raised 150 basis points. however, equity price increases were largely undeterred during that period despite what now, in retrospect, was the exhausted tail of a bull market. stock prices peaked in march 2000, but the market basically moved sideways until september of that year. such data suggest that nothing short of a sharp increase in short - term rates that engenders a significant economic retrenchment with all its attendant risks is sufficient to check a nascent bubble. certainly, 300 basis points proved inadequate to even dent stock prices in 1994. been calibrated to prevent the late 1990s bubble while preserving economic stability is almost surely an illusion. 7 instead of trying to contain a putative bubble by drastic actions with largely unpredictable consequences, we chose, as we noted in our mid - 1999 congressional testimony, to focus on policies β to mitigate the fallout when it occurs and, hopefully, ease the transition to the next expansion. β 8 * * * during 2001, in the aftermath of the bursting of the bubble and the acts of terrorism in september 2001, the federal funds rate was lowered 4 - 3 / 4 percentage points. subsequently, another 75 basis points were pared, bringing the rate by june 2003 to its current 1 percent, the lowest level in 45 years. we were able to be unusually aggressive in the initial stages of the recession of 2001 because both inflation and inflation expectations were low and stable. we thought we needed to be, and could be, forceful in 2002 and 2003 as well because, with demand weak, inflation risks had become two - sided for the first time in forty years. there appears to be enough evidence, at least tentatively, to conclude that our strategy | 0.5 |
organisations benefit from a risk appetite framework and concurred that it is necessary to align risk appetite with the goals and strategies of the business. however, the majority of respondents stated that the development of a formal risk appetite within their organisation was driven by regulatory and legislative obligations. while it is, of course, necessary to fulfil the regulatory requirements in this regard, it is disappointing that the benefits arising from the successful implementation of risk appetite framework are not more widely appreciated. indeed, it is these benefits that drive so many non - financial services organisations which are not bound by such requirements to invest considerable time and effort in implementing an effective risk appetite framework. the central bank also recognises that there is no β one - size - fits - all β approach to the implementation of risk appetite within an organisation. it is widely acknowledged that risk appetite is organisation - specific and should reflect the nature, scale and complexity of the entity. it is this very diversity that prompted the central bank and the institute of directors in ireland to invite you here today to open discussions regarding the role and benefits, as well as the challenges, of risk appetite and to share practical experiences and lessons. conclusion the support for this forum and the large number of attendees present this morning reflects the positive attitude of directors, senior executives and risk management professionals towards advancing the understanding of risk appetite. thank you for your attendance this morning and i hope that this morning β s discussions lead to a clearer vision as to both the role and the benefits of a clearly articulated and embedded risk appetite framework. i would also like to thank maura quinn and her team at the institute of directors in ireland for agreeing to co - host todays forum with the central bank and for their invaluable support and assistance arranging today β s event. bis central bankers β speeches | risk appetite statement should be viewed as a positive and dynamic document which will allow an organisation to demonstrate that deliberate choices are made within a consistent risk framework. in the most effective risk cultures, risk management informs the decisions made throughout the organisation. well defined roles and responsibilities of staff, for risk taking and incident reporting, together with appropriate training, will embed risk culture within the organisation. decision makers must be accountable for their actions, and firms managed accordingly. bis central bankers β speeches international focus on risk appetite since the global financial crisis, there has been increased focus on risk management standards and, more specifically, on risk appetite as evidenced by work undertaken by the financial stability board ( fsb ). following a peer review on risk governance, in november 2013 the fsb published β principles for an effective risk appetite framework β which sets out key elements for an effective risk appetite framework, an effective risk appetite statement, risk limits, and defining the roles and responsibilities of the board of directors and senior management. the fsb principles are broad enough to allow financial institutions to develop a framework that is tailored to their institution, that reflects their business model and structure, and that can be adapted to changes in the economic and regulatory environment. on the industry side, in 2009 the iif published β implementing robust risk appetite frameworks to strengthen financial institutions β, which noted that risk appetite frameworks are an essential tool of risk management and highlighted the need for extensive judgment and challenge on the part of boards and management in this respect. it is the role of board of directors to which i now turn. the role of directors the financial stability board lists in its 2013 principles 12 tasks and responsibilities for the board of directors of financial firms with respect to the risk appetite framework. it starts with the approval of the framework, and ensuring its consistency with business and capital plans, continues with holding management accountable for the identification of risk exposures and for the escalation of breaches in risk limits, and ends with the establishment of internal and external safeguards and assessment of the risk framework. in september 2014 the financial reporting council in the uk published a revised corporate governance code ( β the code β ) along with two associated guidance documents. in respect of risk management the code has been amended to require directors to β confirm in the annual report that they have carried out a robust assessment of the principal risks facing the company, including those that would threaten its business model, future performance, solvency or liquidity β. it also requires directors to describe those | 1 |
, try to shift the payments onto the other countries. problems of another type have come to the fore with the past year β s weakening of the euro. when the mood is negative, every potential problem gets an airing regardless of its weight in practice. difficulties in small countries, for example in connection with inflation being considerably higher than in the core countries, can then be presented as a threat to the whole, with consequences for the euro β s exchange rate. rules and processes for promoting cohesion all the problems and risks i have mentioned were essentially well - recognised and thoroughly discussed before the emu was formed. various rules were therefore constructed to prevent what is called destructive diversity. the maastricht treaty, for instance, includes rules to prevent excessive government debt being dumped onto others. this is explicitly prohibited by the ban on government financing in the central bank. the treaty also rules out privileged access to bank loans as well as bail - outs by other countries or the eu as a whole. the most important concrete instrument for promoting cohesion is, of course, the eu β s convergence criteria for emu participation : low inflation, low interest rates, a stable exchange rate and balanced government finances. much has been said and written about these criteria. i have already suggested that perhaps it is not just these criteria as such that are the key to a monetary union that functions properly, although the part they have played in disciplining policy in a number of member states should not be underestimated. but i do believe they have had the important effect of contributing to a greater consensus than before on issues of stabilisation policy. the maastricht treaty β s institutional requirements concerning formal central bank independence and the legal infrastructure of the financial sector have also contributed to the consensus that has been achieved and which i believe is central for the proper functioning of emu. a remarkable degree of economic convergence throughout the eu was achieved in the second half of the 1990s. if one excludes greece, the gap between the highest and lowest rates of inflation among eu countries narrowed from 10 percentage points in 1990 to 1 % point in 1997. in 1995 the gap in the public finances extended from a deficit of almost 8 % of gdp in sweden to a deficit of 2. 3 % of gdp in denmark. by 1997 the gap had narrowed to a 0. 1 % surplus in denmark and a 3. 0 % deficit in spain. the emu process also led to more similar levels of interest rates. in many countries the instrumental | , for example the corporate sector, the level of technical development, wage bargaining systems and competitive pressure. economic shocks will therefore affect them differently. problems may also arise if economic policy in one country is markedly different from the general direction. in sweden, for example, the economic differences from the eu countries in the 1970s and 1980s were in large measure a consequence of self - imposed stabilisation problems. if a shock does hit a single country, a monetary union eliminates the possibility of mitigating its effects by adjusting the exchange rate. neither can this be done by implementing a national interest rate policy. instead, wages and prices need to be as flexible as possible so they adjust and counter the impact of the shock. wage formation is accordingly of major importance for enabling the countries in a monetary union to harmonise their business cycles without being hit by unemployment. another type of problem in a monetary union can come from differences in the construction of fiscal policy. a national currency and interest rate are no longer available as clear indicators of market confidence in a country β s economic policy. this means that a part of the forces which previously tended to discipline pressure for fiscal expansion and counter unduly large budget deficits no longer acts. that applies in particular to small countries, in that their mistakes can be concealed, at least for a time, in the overall development of the monetary union β s exchange rate and interest rates. the opposite applies if the large countries commit economic policy mistakes - the consequences are liable to hit the entire union. in theory, perhaps problems of this kind should not be all that grave. if a euro country β s budget is markedly underbalanced and money is distributed to the inhabitants, they ought to be prudent enough to set aside some income to cope with the strains that are bound to come when, sooner or later, the government finances have to be consolidated again. but things don β t work like that in practice, at least not sufficiently so. short - term budgetary expansion therefore normally leads to increased consumption and that in turn is liable to result in higher inflationary pressures throughout the euro area. all else equal, the end result will be that the ecb is forced to tighten its stance a little more. in that way, a less disciplined policy in one or more member states to some extent hits all the countries in the union. in the extreme case, it is conceivable that a country might deliberately refrain from managing a debt problem and, when the crisis becomes acute | 1 |
market in which he would sell his products. a feature of the market is that it is driven by the consumer who is considered the sovereign. if the consumer does not need a product, no one could force him to buy it, even when it is supplied free of charge. hence, the goods and services that are produced by micro - businesses should always meet the requirements of the consumers. how can a micro - entrepreneur identify the market requirements? what proxies can he use for that, if he does not have direct information on the same? a problem which he would face in this respect is that he has to produce for the future. hence, any information relating to the past may be a poor guide for that. this is not a problem unique only to micro - businesses. it is equally relevant to big producers as well. but the advantage for such big business firms is that they have the benefit of the results of consumer preference surveys conducted by various institutions. such survey results are expensive and beyond the financial capacity of micro - businesses. yet, without the benefit of such results, it would be a pure gambling for a micro - business to get into the production of these goods and services. in a world where information is costly, this would be a serious blow to the potential micro - entrepreneurs. what this means is that if correct information is not available, micro - businesses are doomed to fail. hence, in the delivery of microfinance, it is equally important to arm the micro - entrepreneurs with accurate market information regarding the consumer preferences. though such information may be costly to a single user, it may not be so if all micro - entrepreneurs get together and acquire the necessary information wholesale. such information could be kept in an information bank maintained at microfinance institutions. since it is not advisable to provide such information free of charge, due to the potential moral hazard problem, a fee should be charged from the users. in addition, microfinance institutions too could conduct such market research and disseminate the required information among their customers. that should also be provided at a price. another important requirement of micro - businesses is the need for preparing micro - business plans. the necessary technical know - how for this is not available with the ordinary micro - entrepreneurs. it requires them to prepare the estimates of cash flows, market sales, funding requirements, legal and marketing aspects and business disaster management techniques etc. once they are put into a generally accepted format, then only they would be acceptable to the | and many others that will be highlighted during the rest of this summit will be taken up by the banking community and service providers and that they will work closely with the spc to take the region β s payment system development process forward. thank you. | 0.5 |
favourable. i also expect investment to play a stronger role as growth driver, in line with the consumption recovery. this will be a welcomed development to promote a more balanced economy. the slower domestic demand has also been mirrored by moderate growth of private credits. nevertheless, the banking system is strong, with the bis ratio of 15 percent at end - july 2007, while net npl amounted to 4. 4 percent of total loans. the return on asset which stood at 1. 3 percent during the first quarter of 2007 fell to 0. 7 percent for the first half of the year, reflecting provision in accordance with ias39, the new accounting standards as you know, to strengthen the capital base. meanwhile, qualitative improvements have resulted from much tighter board of director oversight and accountability, as required by the bank of thailand. on the non - bank side, non - bank credit card companies have been competing more strongly for market shares. to prevent default risks and npl, and to safeguard against the overall financial stability, we have strengthened efforts to communicate to and raise awareness with the general public on this issue. regulatory measures were also put in place to ensure that consumers were protected and well - informed, including the prescription of rules, procedures, and conditions for credit card business, including interests and service fee charges as well as debt collection. turning to macroeconomic stability, latest data for august showed headline inflation at 1. 1 percent and core inflation at 0. 7 percent. on the exchange rate, while the baht movement has reflected largely external developments, there have also been internal drivers, which include large surplus in current and capital accounts. during the first 7 months of this year, the balance of payments recorded a surplus of 5. 9 billion us dollar in total. overall, international reserves rose to over 74 billion us dollar at end - august, close to 3. 6 times of short - term external debt. in the absence of pressure on internal and external stability, monetary policy has become more accommodative. the monetary policy committee cut its policy interest rate in total by 175 basis points since the beginning of this year. the aim is to stimulate domestic demand to offset moderating export growth in light of the slower us economy and baht appreciation. nevertheless, exports would still remain an important driver of growth for next year. and, the latest economic forecast projects the thai economic growth to lie between 4. 5 - 6. 0 per cent in 2008, while core inflation is expected to stay comfortably | needed for long - term economic efficiency, going forward, the appropriate degree of opening or pacing through time will remain an issue for controversial debate. ladies and gentlemen, the third part of my talk today focuses on β international rules of the game β. on trade and financial integration, we all have to wait for the resolution of wto negotiations. in the meantime, thailand and asean have made progress on a number of free trade arrangements with japan, china, korea, australia, and new zealand. within asean, more progress on the asean blueprint, which lays out the strategic plan to achieve further trade and financial integration within 2015, is in the pipeline. on this topic, i also like to share with you an observation that asian emerging markets, in general, rely increasingly more on trade integration because it is judged to be a safer mode of risk - sharing with the world. while benefits from trade integration are universally appreciated, net benefits to overall economic development from the international financial integration have not been so apparent in asia. as a result, while the pace of financial integration has far outstripped trade integration in advanced economies, it has only managed to keep pace with trade integration in emerging markets. turning to the financial sector side, nowhere are the international rules of the game closer to my heart than the international standards for banking supervision. early this year, the bank of thailand β s capacity and performance in supervising financial institutions has been assessed against international best practices in the context of the joint imf / world bank financial sector assessment program or fsap. this fsap assessment confirmed the strength and capacity of our supervisory process, which have been significantly strengthened over the past decade. moreover, the fsap assessment also strongly supports our goal to ensure that our regulatory and supervisory responses keep pace with the financial intermediaries and the products they offer. in this endeavor, the bank of thailand has put emphasis on robust stress testing, enhanced counterparty risk management, and safe and efficient market infrastructures. our financial and legal infrastructures will continue to be strengthened particularly through the introduction of a number of legislations and amendments. the new deposit insurance act and the financial institutions business act are in the pipeline. specifically, the financial institutions business act will stipulate prompt corrective action and grant the bank of thailand power to conduct supervision on a consolidated basis. in addition, it will also foster supervisory independence and the ability to supervise a broader set of systemically important institutions, including non - banks, as well as provide the | 1 |
globalization of trade in goods and services are not controversial among economists. polls of economists indicate that one of few things on which they agree is that the globalization of international trade, in which markets are opened to flows of foreign goods and services, is desirable. but financial globalization, the opening up to flows of foreign capital, is highly controversial, even among economists, despite benefits of the sort i just mentioned. for example, in his best - selling book globalization and its discontents, nobel laureate joseph stiglitz is very critical of globalization because he sees the opening up of financial markets in emergingmarket economies to foreign capital as leading to economic collapse. even jagdish bhagwati, one of the leading economists defending globalization of trade ( after all, his book is titled in defense of globalization ), is highly skeptical of financial globalization, stating that " the claims of enormous benefits from free capital mobility are not persuasive. " 1 george soros, the prominent financier, opens his book on globalization with a chapter entitled " the deficiencies of global capitalism. " one reason for the controversy is that opening up the financial system to foreign capital flows has led to some disastrous financial crises causing great pain, suffering, and even violence. these crises can arise when bad policies encourage excessive risk taking by financial institutions, policies that rich elites in the developing countries often advance for their own profit. there are those ( including stiglitz and bhagwati ) who put the primary blame for the failures of financial globalization in emerging - market economies on outsiders, specifically on the international monetary fund, or what they refer to as the jagdish bhagwati ( 2004 ), " the capital myth : the difference between trade in widgets and dollars, " foreign affairs 77, no. 3 p 7. wall street - treasury complex. the evidence has brought me to the conclusion that institutions like the imf or the u. s. treasury are not primarily to blame, although neither are they blameless - public and private financial institutions active in the international capital markets have often aided and abetted poorly designed financial globalization, although that was not their intention. another objection to focusing on financial development and globalization as key factors in economic growth is that it is far from clear that emerging - market economies are finance constrained : in other words, they often do not have trouble getting money for investments. but throwing money at investments does not work. indeed, as the experience of recent years | β are realized over time. when overinvestment occurs, market returns respond, new investment slows, and the capital stock eventually adjusts. in the end, productivity is higher than it would have been otherwise. in contrast, as we have seen, when the innovations heavily involve the financial sector, the unwinding of any resulting boom can quickly begin to entail more far - reaching and deeper effects on the functioning of credit markets and, thus, can pose a more serious threat to economic stability. although we are far from having written the final chapter on the current situation, we can identify several challenges that it has raised for central banks. the challenges for central banks the most immediate and important challenge is to take actions that will help restore the financial system to productive functioning and put our economies on a path to growth and price stability. government authorities and central banks have responded to the current crisis with forceful and innovative measures to rebuild confidence in the financial system, improve the ability of financial institutions to raise capital from private sources, and free up the flow of credit to businesses and households. for central banks, these measures have entailed lowering policy interest rates and opening or expanding liquidity facilities to banks and others to augment the credit that private parties are unable or unwilling to extend to each other. although we have seen signs of improvement, financial market functioning remains impaired in many ways, and we will need to continue to consider whether additional steps are needed to re - open credit flows and support the economy. when, in the future, the financial system stabilizes and our economies start to recover, central banks will need to decide how best to phase out these extraordinary liquidity actions and credit - market interventions. in many cases, the rates charged for credit under these facilities have been set to be attractive when markets are disrupted, but uneconomical for users once more - normal functioning returns, and usage should naturally decline as risktaking returns. but, in addition, we will need to decide the appropriate timing of the windingdown of many of the special lending facilities. the actions taken by the federal reserve to intervene directly in some financial markets, such as the commercial paper market, are clearly emergency operations only. except in the most extreme circumstances, when market functioning breaks down and systemic risk reaches unacceptable levels, central banks should distance themselves from decisions about the allocation of credit among private parties. the most critical challenge policymakers are facing involves deciding what steps they can take to minimize the risk that such a severe financial | 0.5 |
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