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. by just over 35 %. and almost half of this total amount of capital in the sector was in the form of buffers above the regulatory minimum amount, which can, if necessary, be released as part of the prudential response to the crisis. moreover, in the wake of the global financial crisis, mortgage lending standards have been much stricter and, in the case of loans to firms, they have been much more closely tied to their efficiency. likewise important from the standpoint of the industry β s resilience has been the deleveraging undergone by the spanish non - financial private sector during this period. from 2010 to 2019 there was a decline of almost 30 pp of gdp in the household debt ratio ; and in the case of the non - financial corporations sector, its net debt fell by more than 45 pp of gdp from 2010. in any event, the most appropriate means of illustrating the banking sector β s resilience is through the stress tests we regularly perform as supervisors. in july, the ecb conducted a vulnerability analysis of the banks under its supervision. the aim was to test, prospectively, banks β resilience to the shock caused by the pandemic. the results of this exercise for spanish banks are very similar to those obtained at the banco de espana in the forward looking exercise on spanish banks ( flesb ) stress test exercise, whose final results were published in our autumn financial stability report. in the baseline scenario considered by the banco de espana β s vulnerability exercise, which includes cumulative declines in euro area gdp in 2020, 2021 and 2022 of around 1. 6 %, the reduction in the solvency of spanish banks as a whole was estimated at 2 pp for significant institutions with an international presence, at 1 pp for other significant institutions and at 0. 8 pp for institutions under the direct supervision of the banco de espana, leaving them at 9. 9 %, 12 % and 18. 7 % on average, respectively, above the prudential requirements established. under the harshest scenario, in which spanish gdp declines by 5. 7 % from 2020 to 2022, the reduction in the solvency ratio is much greater ( 3. 9 pp for significant institutions with an international presence, 4. 6 % for other significant institutions and 1. 3 % for institutions under the direct supervision of the banco de espana ), leaving average common equity tier 1 ( cet1 ) capital at 8 %, 8. 4 % and 16. 6 % | sabine lautenschlager : banking regulation and supervision β you can't have one without the other speech by ms sabine lautenschlager, member of the executive board of the european central bank and vice - chair of the supervisory board of the european central bank, at the 9th annual efr stakeholder round table on & quot ; financial fragmentation or integration & quot ;, brussels, 22 march 2018. * * * the financial crisis showed what can happen when banks are not safe and sound. so the goal is to make banks safe and sound, and avoid future crises. to that end, we have revamped regulation, and we have strengthened supervision. it β s indeed vital to work on both fronts. without supervisors, rules would have little effect ; without rules, supervisors would have no job β or at least no firm basis for doing their job. you can β t have one without the other : regulation and supervision need to be aligned. but are they? let us take a look at the euro area. in 2014, banking supervision was transferred from national to european level. and since then, we β ve achieved a lot. however, we could do more, and that brings me to regulation. how european is regulation? well, it β s true, of course, that there is a single rulebook. but by and large, regulation in europe remains fragmented to a degree that makes it hard to reap the full benefits of european banking supervision. and the problem starts with the scope of that supervision. large investment firms and thirdcountry branches are still not covered by it. this situation should be changed to restrict regulatory and supervisory arbitrage. then there are the options and national discretions contained in european regulation. some of them are still exercised differently across the euro area. it β s up to legislators to harmonise them. the same is true for fit and proper assessments. the rules here are also very diverse. and finally there are the tools for crisis management. we still have no common approach to such things as insolvency laws and moratoriums. this too needs to change. likewise, the rules for early intervention measures need to be streamlined. all this begs the question : is the banking union living up to its full potential? i would say : it β s not, at least not yet. but it could if the rules were further harmonised. now let β s turn to the global level. with basel iii finalised, | 0 |
##ification β is inevitable as more financial products are standardised and traded electronically. we are likely to see more algorithmic trading which do not require human intervention in trading decisions. as the cost of setting up trading platforms declines, trading venues including exchanges, electronic crossing networks, multilateral trading facilities will proliferate and compete for liquidity. 42. we have seen significant investments in technology to reduce latency and design in eversmarter algorithms to trade more efficiently. whether such innovations have led to more efficient markets for end - users to invest and to manage their risks are still subject to some debate. regulators worldwide also have been keeping abreast with innovative developments to understand newer forms of risks and market linkages, as well as to embrace the opportunities that these may bring. i will highlight a few examples that will be relevant to the world of exchanges. 43. i think we can expect innovations in distributed ledger technology that will be applied to the β plumbing β of financial markets, areas which we hitherto tend to take for granted. a distributed system should in theory improve resilience as it theoretically removes the risk of a single point of failure. if the clearing and settlement of equity trades can be reduced from the existing standard of 2 β 3 days to as little as 10 minutes, this will further reduce settlement risk. some have said that the near instant settlement of transactions can transform the financial system and free up billions of dollars β worth of collateral that is locked up during the trade settlement period. 44. technology can also lead to β commoditisation β of certain financial intermediation functions. just 15 years ago, the cost of brokerage for retail investors was as much as 1 %. but now our retail investors are able to access global markets at significantly lower brokerage costs. there will be no let up on cost pressure. we used to hear about brokerages such as e - trade offering stock trading at a $ 9. 99 flat commission ; now we have the likes of robinhood in the u. s. offering retail trading for free. 45. the advent of β robo advisers β also suggests that investors can access automated investment advice on their smartphones, without the need for human interface. some bis central bankers β speeches commentators believe that computer algorithms can essentially provide customized advice to investors at a fraction of costs compared to human financial advisers. 46. the interplay of new technology, different platforms and new players inevitably suggests faster and cheaper options ahead. these can impinge on the | ravi menon : building a culture of trust in the financial industry opening address by mr ravi menon, managing director of the monetary authority of singapore, at the monetary authority of singapore - singapore academy of law conference, singapore, 23 january 2015. * * * chief justice sundaresh menon justice steven chong mr timothy massad, chairman, us commodity futures trading commission distinguished guests, colleagues, ladies and gentlemen, bad behaviour in finance six years ago, the global financial crisis tipped national economies into recession and brought to their knees some of the most hallowed names in the financial industry. but the biggest casualty of the crisis could well be trust : β’ trust between regulators and financial institutions ; β’ trust among financial institutions ; and β’ trust that the public places in the financial industry β that their bankers are honest and their financial advisors are acting in the best interest of their clients. and six years after the crisis broke, the global industry continues to be dogged by shocking revelations of financial malfeasance, mis - selling, and dishonesty. β’ in the us, large banks are paying billions of dollars to settle charges against them for mis - selling mortgage - backed securities which led to massive losses for their buyers. β’ in the uk, over 13 million complaints have been made against retail banks for the aggressive mis - selling of so - called payment protection insurance ( ppi ). β’ we read of traders in banks circumventing internal rules to make outsized market bets that subsequently resulted in large losses for these banks. β’ and in financial centres across the world, including singapore, regulators have uncovered attempts by traders at several major global banks to manipulate key financial benchmarks used to set rates for loans and foreign exchange contracts. little wonder that global surveys show that levels of trust in the financial industry are lower than ever. β’ according to edelman, a public relations firm, banking and financial services ranked last among 15 industries that the public trusted β to do what is right β. 1 β’ in countries most affected by the financial crisis and its aftermath, levels of trust are lower still β barely 30 % of the public in europe trust their banks. edelman trust barometer, 2013 and 2014. bis central bankers β speeches why trust is critical to finance financial products and transactions can be quite complex and information asymmetries often place financial institutions in a more advantageous position compared to their customers. β’ trust that the bank is sound is critical for savers to keep their monies in bank accounts and for borrowers | 0.5 |
durmus yΔ±lmaz : the impacts of the current crisis on oic member countries opening speech by mr durmus yilmaz, governor of the central bank of the republic of turkey, in the meeting of the governors of the central banks and the financial authorities of the organization of the islamic conference member countries, istanbul, 3 october 2009. * * * governors of central banks and financial authorities of the member countries of the organization of the islamic conference ( oic ), dear guests, i would like to express our pleasure to host this event and such distinguished participants here in istanbul. welcome to the meeting of the governors of the central banks and the financial authorities of oic member countries, which is the only organization that gathers islamic world under one roof. what makes this meeting more meaningful is that we are also celebrating the 40th anniversary of the organization of the islamic conference and 25th anniversary of the standing committee for economic and commercial cooperation of the organization of the islamic conference ( comcec ) this year. as the cradle of civilizations for centuries and the european capital of culture in 2010, istanbul is an ideal venue for this meeting. dear guests, the current global financial and economic crisis, we have been experiencing since last year, has profound negative impacts on the economies of many countries in all parts of the world, reinforcing inspiration and need for restructuring the current order of the global community based on the principles of justice, equity, participation and peace. the efforts are in progress at the international level to build the institutional, legal and humanitarian infrastructures of the globalization that we are de - facto living during the last 20 years. the muslim world had the experience of building and maintaining a global order that embraced diversity and harmony over the regions spreading from atlantic to pacific and central asia to central africa from early 9th century till the end of 17th century where not only muslims but also all members of the humanity experienced economic, social and political integration at a global scale and, unlike the turmoil and turbulence in the rest of the world, free trade and free movement of people prevailed without any discrimination against ethnic and religious identities. as member countries of the standing committee for economic and commercial cooperation of the organization of the islamic conference ( comcec ), our goal is to make a meaningful contribution to the idea of building a sustainable and stable global order to reach peace and prosperity that embraces differences between the civilizations as a source of richness and not a reason for clash, on the principles of justice, equity, participation and | indexation behavior, persisted in the third quarter. in the third quarter, services inflation was mostly shaped by opening of schools. education services increased at a high rate due to university tuition fees. school bus fares and student residence fees raised prices of transport services and accommodation services, respectively. as the back - to - school period ended, the relative price adjustment in these groups was mostly completed. we evaluate that it is more reliable to assess the dynamics of services prices in rent and non - rent terms. 4 / 10 bis - central bankers'speeches having also a structural dimension, rents need to be handled separately due to factors such as earthquakes, urban renewal ( demolishing - rebuilding ) and limitations on rent increases. in fact, the high price increase in rents continued in the previous quarter as the contract renewal rate increased. as you can follow from the right panel, the rent increase rates obtained from both the retail payment system data and housing valuation reports remain below the cpi annual rent inflation and are receding. the decline in the reference rates in contract renewals suggests that monthly rent inflation will lose pace in the last quarter. we recommend you to read the box on this subject. the inertia in rent inflation is higher than we projected, yet we see that the deceleration in services excluding rent is more pronounced. in the industrial sector, pricing behavior of firms exhibit a clear improvement. the analysis of domestic sales price expectations in the manufacturing industry reveals that among firms expecting an increase in either domestic demand or unit costs, the ratio of those planning to increase prices has been declining steadily. the ratio of those planning to increase prices among firms not - expecting an increase in unit costs is also decreasing. in fact, the average monthly producer inflation hovers around 1. 4 percent in the last three - month period. therefore, producer - driven pressures on consumer inflation are weakening. this course in producer inflation affects goods prices in cpi favorably. you can see on the left panel that price increases lost pace considerably. despite a relative increase due to the depreciation in the turkish lira in august, core goods inflation remains low overall. the annualized underlying inflation in the last three - month period hovers around 20 percent in core goods. the moderate outlook is maintained particularly in prices of durable goods. the diffusion of price increases is as crucial as their size for the course of price - setting behavior. demand conditions affect not only the size but also the diffusion of price increases. in fact, there is a significant positive | 0.5 |
has done in the form of a symmetrical 2Β½ % target for a particular statistical measure of retail prices. so we have β instrument β rather than β goal β independence. it is sometimes suggested that this is a second best arrangement. in our national context at least i disagree with that view. the precise objective of policy - even within the confines of the concept of price stability - remains a political decision : there will always be those who argue for a somewhat higher or somewhat lower target, and the fact that the government endorses a precise target rather than just the vaguer goal of β stability β certainly strengthens our hand by allowing us to concentrate upon our essentially technical task. i am bound to say that in practice it seems to me to be rather a second order issue anyway given the narrowness of the range of definitions of β stability β that would carry conviction with the public, including financial markets. the act confers the responsibility for meeting the government β s inflation target specifically on a newly created monetary policy committee, comprising myself as chairman, the two deputy governors, two executive directors appointed by the governor after consultation with the chancellor and four members appointed from outside the bank by the chancellor. the governors are appointed as members of the committee for their full five year ( renewable ) terms ; the remaining members are appointed for three year terms which are also renewable. the committee β s policy meetings are also attended by a senior treasury official in the capacity of an observer, who may participate in the discussion - essentially to inform the committee of any relevant aspects of the government β s wider economic policies and explain the committee β s thinking to the chancellor - but he may not express a view on the monetary policy decision or, of course, vote on that decision. one can argue endlessly about the precise composition of the committee, their term of appointment and so on. the key consideration for me is that all nine members need to be genuinely independent, technical experts in the field of monetary policy or a closely related field, not representatives of any particular social or industrial grouping. the objective of policy is appropriately determined by a democratic process ; the committee β s job is, as i say, a technical one, which requires relevant technical expertise. the transparency of the committee β s decision - making process is assured by continuation of the requirements that we should produce our quarterly inflation report and publish minutes of our monthly meetings, which we have now chosen to do with just a two week delay. transparency is further enhanced by a requirement that the minutes | should record how each individual member of the committee voted on the interest rate decision. as before, it is vital for public confidence in these new arrangements that their intention is not subverted by the evolution of informal conventions - that the integrity of the procedures is respected. in this context we take great pains to ensure that the true nature of the policy debate is reflected in the minutes and that the range of views around our inflation forecast is properly reflected in the inflation report. in fact i think we probably tend to err on the side of drawing too much, rather than too little, attention to differences of opinion within the committee which are often largely a question of nuance. but it is better in my view to err on that side rather than to attempt to submerge the differences. we do not, however, attribute particular views to particular individuals. to do so would invite prepared statements and militate against the inter - active debate which is an outstanding and immensely valuable characteristic of our meetings. it would suppress the kind of β what if β discussion in which the same individual may explore alternative views. no attempt is made to concert the outcome of the policy decision ; in fact i go out of my way to discourage any kind of collusion, whether between the internal or external members of the committee - we are, and must remain, nine independent members, individually accountable for our decisions as to how we vote. this, of course, means that the committee is divided as often as not ; but although this initially led to public comment to the effect that the committee did not know what it was doing and could not make up its mind, it is now generally accepted as the natural order of things and helps to underline to the public at large that monetary policy making cannot be a precise science - however much it needs to be informed by all the science available to us. that, in our context, is i think now much easier to understand than a more consensual approach would be, but there was certainly a learning period. it has been suggested to me that the arrangements i have described somehow diminish the position of the governor. well if that β s true this governor at least welcomes it! i am sure that all of you are well aware of how finely balanced monetary policy decisions are at the margin, and that all of you have agonised, just as i have, over the right thing to do and the right time to do it. i find the cross - bearings on those | 1 |
recovery. these measures are summarized into four ( 4 ) categories : 1. extension of financial relief to borrowers. banks were given regulatory relief to enable them to grant equivalent financial relief to their borrowers in the form of more flexible and favorable lending terms, or to restructure loan accounts. 2. incentivized lending. the bsp allowed new peso loans to micro, small and medium enterprises or msmes, and large enterprises that were critically affected by the pandemic, as alternative mode of compliance to reserve requirements. 2 / 5 bis central bankers'speeches 3. promotion of continued access to financial services. policies were put in place to ensure access of deeply affected retail clients to formal financing channels. the use of information technology in carrying out financial transactions was highly encouraged during the lockdown. 4. support for continued financial services delivery. the bsp granted operational relief measures to the bsp - supervised financial institutions. these measures aim to assist bsfis in focusing their limited resources on the delivery of financial services and support their subsequent recovery efforts. the bsp also supports the passage of key structural reforms which will help propel the economy to a more solid path to recovery. ra no. 11519 or β an act extending the availability of appropriations of bayanihan 2 β was signed into law on december 29, 2020 and is valid until june 30, 2021to ensure the continuity and implementation of response measures in bayanihan 1, which granted loans to micro, small and medium enterprises ( msmes ). republic act no. 11534 or the corporate recovery and tax incentives for enterprises ( create ). the law reduced the corporate income tax outright from 30 percent to 25 percent for big firms and 20 percent for small firms. the law also rationalized the tax incentives structure, making it performance - based, time - bound, targeted and transparent. this will be the biggest stimulus package for businesses. with the resulting tax savings, msmes can continue to fund their operations and retain employees. republic act no. 11523 or the financial institutions strategic transfer act, popularly known as the fist act, aims to strengthen the financial sector by allowing banks and other financial institutions to efficiently dispose of their non - performing assets ( npas ) and non - performing loans ( npls ) to asset management firms, known as fist corporations, thereby enabling banks to extend credit to more sectors. the fist law can possibly free up 1. 9 trillion worth of loans from the sale by banks of their non - | economy β s growth under a new economic environment. we will remain steadfast in our digitalization efforts to expand our digital finance ecosystem. and we will continue to champion the promotion of the sustainability agenda in the financial system. thank you! 5 / 5 bis central bankers'speeches | 1 |
. the aim of the banking union is to establish transparency, stability and incentive - compatibility in the euro area financial market. conclusion i have outlined what we at the ecb have been doing β and what needs to be done in other key domains of european economic policy. the june 2012 summit was so important because in times of great uncertainty it provided a clear vision of what is necessary for a stable and genuine economic and monetary union. much of it is being implemented. and i am confident that the project for europe will continue bis central bankers β speeches to evolve towards renewed economic strength and social cohesion based on mutual trust, both within and across national borders, and above all stability. thank you very much for your attention. bis central bankers β speeches | ago, its benefits have been widely acknowledged. the glut of liquidity in core economies has been partly reabsorbed, as deposits and savings have returned to the periphery. interest rates in germany have increased and they have fallen in the periphery. target balances, a powerful summary indicator of fragmentation, have come down by one quarter from their peak last year. funding costs in the countries under stress have fallen substantially. both banks and firms in stressed countries have been able to regain access to market financing, both for funding and raising capital. our initiative has therefore been beneficial to all : banks, companies and households β and it has benefited both periphery and core countries. let me highlight a few features of omt that are essential to bear in mind. first, omt comes with strict and effective conditionality attached to a programme with the european stability mechanism ( esm ). the initiative is activated only if a country submits to policy conditionality that leads to policy reforms. governments are not presented with a choice between reforms or omt. omt comes only with reforms. and reforms need a disciplined process of monitoring and international surveillance for the country concerned. otherwise, there is no omt activation. second, conditionality enhances the independence and the effectiveness of our monetary policy. the reason is that conditionality is a necessary but not sufficient condition to activate omt. we would only act if the right conditions for effective use of this monetary policy instrument were in place. third, the ecb would not act to compress spreads artificially ; on the contrary, we believe that spreads should naturally reflect the underlying fiscal position of the sovereign and the economic prospects of the country. this is also why we emphasised that a sovereign needs to have market access to qualify for omt. fourth, omt does not entail a transfer of risks from periphery to core countries via the ecb β s balance sheet, over and beyond risks that are inevitable and inherent in the implementation of a single monetary policy for 17 sovereign states. the omt announcement has lowered risks for core countries : the risks of a euro area breakup ; the risks arising from target balances in such a scenario ; and the risks from market interest rates distorted by safe - haven flows. bis central bankers β speeches because of omt, the euro area is a more stable and resilient place to invest in than it was a year ago. indeed, i would say that omt is even more essential now as we see potential changes | 1 |
macroeconomic outlook and monetary policy in turkey remarks by murat cetinkaya governor central bank of the republic of turkey at j. p. morgan turkey macro and credit conference london 9 february 2017 dear participants, my speech will try to elaborate on the recent macroeconomic outlook, monetary policy framework and the coordinated policy actions to support the fundamentals of the turkish economy. 1. macroeconomic outlook turkish economy was hit by concurrent shocks in recent years. geopolitical tensions, global shocks, security related issues and a failed coup attempt have created significant policy challenges. despite the intensity and size of the shocks in recent years, the growth rate has been quite robust until recently, outpacing emerging market average by a large margin ( figure 1 ). the resilience of growth in recent years can be attributed to factors such as prudent macroprudential policies reducing the sensitivity of economic activity to capital flow volatility, dynamic domestic market, market flexibility of exports, and the fall in energy prices. figure 1. growth rates in turkey and emerging economies ( percentage change, annual ) developing countries excluding china and india turkey * - 2 12. 16 09. 16 06. 16 03. 16 12. 15 09. 15 06. 15 03. 15 12. 14 09. 14 06. 14 03. 14 12. 13 09. 13 06. 13 03. 13 12. 12 09. 12 06. 12 03. 12 - 4 * forecast for 2016 q4. developing countries excluding china and india : brazil, chile, colombia, czechia, hungary, indonesia, malaysia, mexico, morocco, peru, philippines, poland, romania, russia, s africa, thailand, turkey, ukraine. source : bloomberg, cbrt. however, the growth has posted a marked slowdown in the third quarter of 2016, following the failed coup attempt. gdp has contracted year - on - year terms for the first time since the global financial crisis. the weakness in economic activity was driven by a sharp fall in domestic demand and the sizeable drop in tourism revenues ( figure 2 ). figure 2. annual gdp growth and contributions ( percentage points ) net exports final domestic demand other * gdp - 1 - 3 09. 16 06. 16 03. 16 12. 15 09. 15 06. 15 03. 15 12. 14 09. 14 06. 14 03. 14 12. 13 09. 13 06. 13 03. 13 12. 12 09. 12 06. 12 03. 12 12. 11 | - central bankers'speeches safe, secure, and efficient payment system, we are pushing for digital payments. this includes the use of innovative digital payment rails, such as instapay, pesonet, and qr ph. building on these payment systems, we have also rolled out bills pay ph, which you can use to pay your bills, palengqr which you can use to pay your market vendors, and egov pay which you can use, if you are a taxpayer here, to pay the government. these programs have helped us surpass our goal of digitalizing at least half of total retail payments. as of end - december 2023, 52 percent of these payments were done digitally. working with the bank for international settlements, we are trying to connect our fast payment system with those of our asean ( association of southeast asian nations ) neighbors as well as india, saudi arabia, and other countries with fast payment systems. this platform is called project nexus. once this is in place in two years, this platform will make cross - border retail transactions more secure, more efficient, and less costly. meanwhile, we are painfully aware that our geography makes us especially vulnerable to climate change. just last week, we witnessed typhoon carina that made this vulnerability all too evident. hence, we have issued guidelines for the management of risks related to environmental, social, and governance issues. at the same time, we have developed a taxonomy for banks for sustainable finance. this will allow banks to tag each of their activities as environmentally or socially sustainable. economic fragmentation let me now turn to you, the consular corps for help. we need your help for one increasingly important concern - that of economic fragmentation. for decades after world war ii, increasing globalization was the norm. most governments believed in its benefits, and thus, most wanted to be part of it. but for almost two decades now, globalization has been losing ground to global fragmentation. in recent years, fragmentation has been fueled by the global financial crisis, trade wars, trade disruptions caused by the russia - ukraine conflict. as we all know, global trade is now on its back foot. according to the world bank, the average annual number of new trade agreements in the 2020s is less than half of that of the 2000s. in contrast, the number of new trade - restricting measures in 2022 and 2023 has tripled relative to 2019. this has led to a slowdown in the growth of trade. it appeared from 2020 to | 0 |
reflecting the downgrading of securitized products and persistent concern about possible further losses at financial institutions. the functioning of markets for securitized products has remained impaired as evidenced, for example, by continued decreases in the amount outstanding of asset - backed commercial paper ( abcp ) issued and sluggish trading of collateralized debt obligations ( cdos ). corporate bonds have been issued at a reasonable pace, but the corporate bond market is still undergoing adjustment as seen in increased issuance spreads. stock markets are still unstable, and stock prices declined substantially around the turn of the year. the volatility in global financial markets seems to reflect a market correction following the laxity in risk evaluation that had developed during the long period of benign economic and financial conditions. this adjustment is therefore expected to require some time to work itself out, and during the process financial institutions will have to bear a certain amount of losses. since summer 2007, organizations such as the international monetary fund ( imf ) and the organisation for economic co - operation and development ( oecd ) have released their estimates of the size of losses incurred from financial products related to subprime mortgage loans, but it is difficult to accurately grasp the amount of final losses, since the correction in the housing market is ongoing. financial institutions in the united states and europe have been posting considerable losses, and many have announced measures to boost their capital to compensate for these losses. how successful these measures are in helping financial institutions and the financial system to restore their credibility will need to be monitored closely. short - term funding markets in the united states and europe were under elevated pressures in late 2007 as financial institutions tried to secure end - of - year funds. to address this situation, on december 12 central banks in the major economies announced joint measures to ensure the stability of global financial markets. the federal reserve established a temporary term auction facility. under this facility program, the federal reserve can auction term funds against a wide variety of collateral, thereby providing funds with longer maturities to more financial institutions. moreover, it established foreign exchange swap lines with the european central bank and the swiss national bank, and based on this, u. s. dollar auctions were carried out in europe. the bank of england and the bank of canada actively conducted operations to provide ample term funds with maturities beyond year - end. the bank of japan and the swedish riksbank welcomed the action and issued a press release stating that they would also appropriately provide liquidity to money markets in | ##map ( hetr ), and the new industrial master plan ( nimp ). for the financial sector, the joint committee on climate change or jc3 was established as a collaborative platform between the regulators and players, including islamic finance players, to build climate resilience within the malaysian financial system. through jc3, we are scaling up climate finance pilot projects such as greening value chain ( gvc ) and greening industrial parks ( gip ). these initiatives not only provide an impetus to our investment prospects, but also underscore our commitment to sustainable and inclusive practices, aligned with the government's economic framework. ladies and gentlemen, in closing, i strongly believe our forum today can pave the way to realise two main outcomes : first, stronger cross - border investment linkages that serve as catalysts for economic growth and investment opportunities ; and second, wider acceptance and use of islamic finance as a vehicle to drive our efforts to transition to a greener economy. 2 / 3 bis - central bankers'speeches i look forward to the productive discussions and meaningful collaborations that will emerge from this forum. i also wish to extend our appreciation to our partners, namely, the islamic finance council uk, thecityuk and uk islamic finance - halal economy hybrid group for their warm support in making this forum a reality. my appreciation also goes to our malaysian partners β the mifc leadership council, the malaysian high commission in london, government agencies, and industry players that have worked hard to organise this event. with that, it is my great honour to now invite his royal highness sultan nazrin shah to deliver his keynote address on " sustainable future : leading the change. " thank you. 3 / 3 bis - central bankers'speeches | 0 |
##es which can then be used as raw materials in agroprocessing industries ; ii ) to free up labour for employment in modern industries, and iii ) to create a rural market for the products of domestic industry. uganda formulated the plan for the modernisation of agriculture in the 1990s but this has not been implemented effectively with dire consequences for the performance of the agricultural sector. labour productivity in ugandan agriculture is among the lowest in the world. most of the smallholder food crop sector is characterized by subsistence farming, with no use of modern inputs. the strategic objective of agricultural policy should be to help uganda β s smallholders to adopt good agricultural practices, produce more output for the market and to start to use modern farm inputs. the first step towards agricultural modernization is an effective agricultural extension service which can reach the mass of smallholder farmers and encourage them, through technical advice and demonstrations, to adopt good agricultural practices. the returns to investing in modernizing smallholder agriculture are potentially huge. the combination of adopting good agricultural practices and low input technology could enable smallholders to double their yields, which would raise farm incomes and bis central bankers β speeches generate marketable surpluses. it is a mistake to believe that ugandan agriculture can be modernized by focusing on large scale commercial farms, rather than smallholders. given the structure of agriculture in uganda, which is dominated by smallholders, large scale farms are never likely to account for more than a small share of farm output. furthermore, yield per area of land in ugandan agriculture is inversely related to farm size ; hence replacing smallholder agriculture with large scale farms is likely to reduce total farm output. 3. accelerate the demographic transition the demographic transition plays a key role in economic development. no developing country has achieved middle income status and structural transformation of the economy without undergoing a demographic transition. a demographic transition entails a fall in the total fertility rate, which reduces the population growth rate and the pulls down the agedependency rate. uganda has only just begun its demographic transition. it has a total fertility rate of 6. 1 children per woman and so has one of the highest age - dependency rates in the world, at over 100 dependents per people of working age. many of the fast growing economies of developing asia have age - dependency rates of around 50, because they began their demographic transitions several decades ago. lower age - dependency rates are closely correlated with higher savings rates and greater real spending per person on human capital development, which is crucial for structural | transformation, because it allows an economy to invest in physical and human capital. uganda β s demographic transition has stalled because insufficient effort has been devoted to population policies. across the developing world, in countries with diverse cultures ( e. g. iran, malaysia, sri lanka ), fertility rates have been brought down because governments actively promoted smaller families, made contraceptives available to all the population and invested in reproductive health and women β s education. uganda should follow these examples and prioritise population policies to reduce the fertility rate as quickly as possible. 4. private investment in labour intensive modern industries uganda β s record of attracting private investment into labour intensive industries such as manufacturing is poor, which is one of the reasons why so few formal sector jobs in medium and large scale enterprises are being created. the essence of structural transformation is a large shift in the labour force out of low productivity, informal, traditional activities into modern, formal sector industries with higher productivity. this is what is driving structural transformation in developing asia. however, such a shift in the labour force is only possible if there is private investment in the modern sector, to create jobs in high productivity industries. private investment rates in uganda are around 20 percent of gdp, but this is only half the private investment rates in developing asia. uganda β s policies to boost private investment have been ad hoc and ineffective. fiscal concessions, such as tax holidays, by themselves, are not an effective tool for raising the overall rate of private investment, even if they are successful at attracting investment in a few individual cases. to boost private investment, many different aspects of the business environment must be improved, to reduce the cost and risks of doing business in uganda. these include : reducing the regulatory burden on business and the burden of lengthy customs procedures for exporters and importers, reducing the burden caused by demands for corrupt payments, strengthening the legal system to resolve commercial disputes fairly and expeditiously and improving the infrastructure in the transport and power sectors. because the ugandan domestic market is very small, the country will become a much more attractive destination for private investment only if firms located in uganda can serve the entire east african market. but this will only be possible if non tariff barriers ( ntbs ) to intra - regional trade in the eac are removed. the customs union in the eac has not yet been properly implemented because a multitude of ntbs are still in place, slowing down trade across borders within the region. bis central bankers β speeches | 1 |
ardian fullani : recent economic and financial developments in albania speech by mr ardian fullani, governor of the bank of albania, at the joint press conference with the international monetary fund ( imf ) mission and the ministry of finance, tirana, 14 july 2010. * * * honourable participants and representatives of print and visual media, the visit of the international monetary fund mission is characterised by fruitful and intensive discussions. they were focused on the recent developments at home, their perspective in the near and far future and the role of structural and macroeconomic policies to encouraging and ensuring the sustainable development of the country. at the end of these discussions, we conclude that we share a common opinion as regards to the role and importance of prudent policies, which should have at their hart the maintenance of the basic economic balances, as an essential prerequisite for the stable and long - term growth. likely positive is the fact that the principal decision - taking institutions remain committed to perform concrete steps in due time to ensure this development. the bank of albania has already adopted this position and transparency, as a guidance of its decision - taking process in both the monetary policy and banking supervision fields. the respective explanation has composed the essence of our communication with the other players of the economy and with the public at large. allow me to deal in more details the issues discussed during these days, by summarising the opinion of the bank of albania in this regard. the economic developments of the last months carry encouraging signals, but also they show some weakness of the albanian economy and the compromises that policy - makers should realise and accept to accomplish their targets. the albanian economy, during the first half of 2010, has performed in line with our projections, being characterised by a positive, but slow growth of the economic activity. this growth is considerably grounded on the quick increase in exports, by denoting the improvement of the world economy, the more competitive position of the exchange rate, also the efforts of businesses and industries which carry out their activity in this sector to find new markets and the use of their competitive advantages. on the other hand, the domestic demand slowed down, mainly reflecting the still high uncertainty and the difficulties in the financing of the economic activity. as regards to the basic balances of the economy, this period is followed by controlled downward inflationary pressures, as well as correcting trends in the external position of the country. the economy financial health is improved, the confidence on banking system is recovered and the risk | to play in the everyday economic and financial life of the country. now that we know the already - announced objectives of the government of albania for 2018, it is understandable that 2018 is a rather challenging year to further boost economic recovery and strengthen the financial stability of albania. from this perspective, i would like to affirm that, like in 2017, in 2018 the bank of albania will continue to focus on : guaranteeing a stable economic environment, keeping inflation rates in check, and having liquid markets with low volatility. the monetary policy will aim at an adequate supply, in terms of both quantity and price. the final monetary policy objective will be unchangeable, while the accommodative stance implemented in the past years will be present during 2018. boosting credit recovery in albania. we believe that the further boosting of the economy provides a friendly environment for lending to the economy. in addition, we will continue to insist in the implementation of the joint programme for the reduction of non - performing loans. in this light, we expect the banking system to be proactive in lending to the economy. strengthening banking supervision and guaranteeing financial system stability, one of the fundamental objectives of the bank of albania activity. as in the past, we will be constantly in search of the best international rules and practices that aim at having a financially sound banking sector, capable of supporting economic development in albania. de - euroization of the albanian economy. the measures that we have jointly designed will enter into force in the first half of 2018. therefore, we should also try together to maximise the expected results, translating them in practice in greater confidence and higher use of the national currency in the economy. 2 / 3 bis central bankers'speeches continuous communication with the sector, regarding bank of albania β s decision making. the dialogue with the banking industry is considered as a crucial factor in helping to identify the problems, guaranteeing the implementation of the legal framework, and overcoming the challenges. increasing financial inclusion and deepening financial education. alongside with the regulatory and supervisory role, financial education is and will continue to be another important aspect of our everyday work. we consider it as one of the main pillars of the economic and social development of albania. concluding, i would like to reassure you that, the bank of albania will continue to be a serious and devoted partner. i wish you a successful and prosperous year for you and your families. thank you! 3 / 3 bis central bankers'speeches | 0.5 |
william c dudley : the recovery and monetary policy remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york and chairman of the committee on the global financial system ( cgfs ), at the national association for business economics annual meeting, new york city, 15 october 2012. * * * good morning. it is a pleasure to have the opportunity to speak at this nabe ( national association for business economics ) conference today. having spent more than 20 years as a business economist working in the private sector before joining the federal reserve bank of new york in 2007, i feel right at home here today. my remarks will focus on the economic outlook. i do this with some trepidation, of course. in the private sector there are two adages about forecasting that underscore the need to be humble in this endeavor : first, forecast often. second, specify a level or a time horizon, but never specify both, together. but more seriously, despite the difficulties in making accurate forecasts, we still need to understand as best we can why the economy is performing the way it is, what that implies about the economic outlook, and, how policymakers can respond to generate better outcomes. we live in a highly complex and uncertain world, but we need to make as much sense out of it as possible. as always, what i have to say reflects my own views and not necessarily those of the fomc ( federal open market committee ) or the federal reserve system. my attention today will be on three important questions : β’ why has the u. s. recovery been so sluggish and consistently weaker than expected? β’ what should we, as monetary policymakers, do it about it? β’ what other policy actions are needed to help ensure a timely transition to strong and sustainable growth? the disappointing recovery turning to the first question, u. s. economic growth has been quite sluggish in recent years. for example, annualized real gdp ( gross domestic product ) growth has averaged only about 2. 2 percent since the end of the recession in 2009. as a consequence, we have seen only modest improvement in the u. s. labor market. not only has growth been slow, it has also been disappointing relative to the forecasters β expectations. for example, the blue chip consensus have been persistently too optimistic in recent years. this is illustrated in exhibit 1 which shows how private sector forecasts for 2008 through 2013 have evolved over | connection between independence and monetary stability. many empirical studies demonstrate that central bank independence allows the monetary authority to pursue price stability more diligently, resulting in lower and less variable inflation. in brief ( with respect to maintaining the intrinsic value of money ) : institutions β in other words, independent central banks β are of key importance. hence, central bank independence is an essential requirement for monetary stability. therefore, all countries wishing to join the european monetary union are required to ensure the compatibility of national legislation β including the statutes of their national central banks β with both the treaty and the statute of the escb. this particularly applies to central bank independence. however, independent monetary policy alone cannot adequately ensure a currency β s intrinsic value in the long run. as a general principle, a stability - oriented monetary policy must be accompanied by a stability - oriented fiscal policy. the reason for this nexus is that unsound fiscal policies generally entail the risk of a conflict between monetary and budget policy. given high levels of public debt and associated high interest rate expenses, it cannot be ruled out that politicians will tend to exert pressure on the central bank in order to make it lower the real burden of public debt by easing monetary policy and, thus, allowing inflation to rise. although, in general, central bank independence countervails undue political influence, it does not itself solve the potential for conflict which can harm the credibility of monetary policy. consequently, fiscal discipline is not only a complementary condition of monetary stability, but also of overall macroeconomic stability. given the potential problems associated with fiscal imbalances, the avoidance of excessive deficits represents an essential prerequisite for the maintenance of fiscal policies conducive to monetary and overall macroeconomic stability. the need for sound fiscal policies is especially evident in a monetary union if negative spill - over effects from one member state β s budget to the rest of the union are to be avoided. this is the rationale behind the existence of the excessive deficit procedure β laid down in the treaty establishing the european community and further clarified in the stability and growth pact ( sgp ) β which aims to limit the risks to price stability that might otherwise arise from national fiscal policies. finally, having outlined the importance of sound fiscal policies, i would like to emphasise that central bank independence contributes most effectively to monetary stability when it is supported by an overall stability consensus among the general public. this has been the case in germany for many decades. political attempts to undermine the bundesbank | 0 |
zeti akhtar aziz : policy and regulation of financial inclusion welcoming remarks by dr zeti akhtar aziz, governor of the central bank of malaysia, at the unag asia regional forum on policy and regulation of financial inclusion, kuala lumpur, 6 may 2009. * * * introduction it is my pleasure to welcome you to the united nations advisers group asia regional forum on policy and regulation of financial inclusion. this conference takes place at a time when the world is confronted with addressing many issues that have emerged from the current global financial and economic crisis. whilst significant attention and efforts are being channelled to resolving the financial crisis and creating an enabling environment for the resumption of growth and job creation, we must not lose sight of the financial inclusion agenda. financial inclusion is vital for creating balanced sustainable economic growth. it provides the opportunity for all members of society to benefit from economic progress. it allows for a shared prosperity, an aspiration that is encapsulated in the united nations millennium development goals. the central bank of malaysia is most honoured to be given the opportunity to host this forum which is being held in asia for the first time. we are most honoured to have governor nout wellink, president, of the central bank of netherlands. we are also pleased to have present mr. jacques toureille, unag advisor, who will be delivering the keynote address by her royal highness princess maxima on her behalf. this forum brings together some of the best minds from different parts of the world with diverse experiences in the field of financial inclusion. i am certain that this forum will enhance our understanding of the vital issues confronting the financial inclusion agenda, and will contribute towards the formulation of new ideas in addressing the important issue of regulation and policy that will ensure the sustainability of an inclusive financial system. the financial crisis and its implications on the poor the year 2009 will likely to be a difficult year for most countries. as we enter the third year of this financial crisis, there is already a synchronised recession in the advanced economies. for most of the emerging economies however, the full effects of the crisis on their domestic economies will be felt this year. it is important to note that the financial systems in most emerging economies continue to remain sound and more importantly continue to function, providing credit and supporting the economy. the collapse of external demand has however, adversely affected the more open emerging economies. the issue of equal concern however, is the more disproportionate impact these developments will | have on the poorer economies. similarly, the disproportionate effect these developments are having on the poorer segments within a particular economy. this crisis thus brings to the forefront a number of issues concerning financial inclusion. firstly, while the crisis demands action with great urgency, the policy response to restore the functioning of the financial system and to get growth in the economy again, there also needs to be a continued commitment to the financial inclusion objective. this becomes all the more vital given the more adverse implications of the crisis on the poor segments in the economy. secondly, while the policies and regulation of financial inclusion are essential to ensure the soundness and sustainability of an inclusive financial system, of equal importance are the policies, instruments and framework to deal with distress in an inclusive financial system. this is to ensure that the strategies for resolution will provide a total solution that addresses the entire spectrum of the financial system, from that which is large and highly connected with systemic implications to that which is small and highly vulnerable. this includes measures relating to relief and support and the mechanisms for resolution to ensure the sustainability of an inclusive financial system even during unstable financial and economic conditions. in recognising the importance of financial inclusion, the united nations established the united nations advisory group on financial inclusion in 2006. the group advises the united nations and member states on issues relating to the advancement of the financial inclusion agenda on a global scale. since its establishment, many successes have been achieved. these include increasing the public awareness on the importance of financial inclusion, assisting governments in the design of regulatory systems that facilitate the creation of financial services for the poor, encouraging the of use of holistic measures to gauge the progress of financial inclusion, collecting and disseminating best practices, collaborating with the private sector to leverage on the talent and technology to further advance financial inclusion and to promote research that will galvanise new initiatives. in malaysia, financial inclusion is a high priority in our national agenda. since the establishment of the central bank, there has been a conscious policy to have an extensive commercial banking branch network across the country, to ensure the outreach, in particular, to cover the non - urban areas. malaysia now has 10. 2 branches for every 100, 000 individuals as opposed to the global median of 8. 4 branches for every 100, 000 individuals. in malaysia, more than 80 % of the population also have some form of savings account. this has also contributed to the financialisation of savings in the country. deposits as a percentage of | 1 |
turalay kenc : fostering longstanding relations β opening of the bundesbank representative office in istanbul speech by mr turalay kenc, deputy governor of the central bank of the republic of turkey, at the opening ceremony of the bundesbank β s representative office, istanbul, 26 november 2013. * * * excellency wolke, esteemed dr. dombret, distinguished participants, ladies and gentlemen, at the outset, allow me to express the pleasure and appreciation of the central bank of turkey on the occasion of the opening ceremony of the bundesbank β s representative office in our beautiful city of istanbul. it is a distinct honour for me to have the opportunity to deliver a couple of remarks before distinguished participants in this historical opening event, as this is the first representative office in turkey of a fellow central bank. first of all, the central bank of the republic of turkey ( cbrt ) is very pleased with the signing of the memorandum of understanding ( mou ) this year with your esteemed central bank. this is so, not only because the majority of the bundesbank policies have been regarded as gold standards in central banking, but also because the bundesbank is the central bank of germany that is our main trading partner and highest ranking foreign capital provider. the mou agreement manifests the commitment of both institutions to foster long standing relations. in the spirit of the mou agreement, a primary step in our cooperation is to establish high level policy dialogue with the bundesbank on a regular basis, the first of which will be held in 2014. this is timely, considering that not only will turkey assume the g20 presidency in 2015 and engage in an even closer interaction with the central banks of the g20 member states, but will also help meet the recently increased need for policy dialogues over the implementation and implications of new unconventional monetary policies. in general, the cbrt places great emphasis on bilateral relations with fellow central banks, especially those of the g20 member countries. the year 2012 is a testament to our commitment, as the cbrt opened six new representative offices, which brought the total number to ten. the first - round representative offices include those in frankfurt, ny city, london and tokyo. the ones opened later on are in moscow and sydney β to strengthen relations with other g20 presidency countries ; beijing and kuala lumpur β to strengthen relations with the asian countries ; paris β to strengthen relations with the oecd, and finally washington, dc β | durmus yilmaz : economic outlook for turkey speech by mr durmus yilmaz, governor of the central bank of the republic of turkey, at the bursa chamber of commerce and industry, bursa, 11 january 2007. * * * distinguished industrialists, businessmen, dear guests and members of the press, this is the first of the series of meetings planned for 2007, which has become a traditional platform aiming at bringing the representatives of the real sector together directly. firstly, i wish to thank dunya newspaper and bursa chamber of commerce and industry for organizing this meeting and thereby giving me the opportunity to exchange information and views about the economic outlook with the distinguished industrialists and businessmen like you. in the first part of my speech, i would like to present a general evaluation of the year 2006 with a special emphasis on inflation, and to explain our policy implementations and to share our forecasts regarding 2007 in the light of the current data available. then, i would like, once more, to mention about growth, employment and current account deficit that we have shared with the public many times, constituting the major items on the economic agenda. i will then elaborate on what should be done in this regard in the medium and long term. distinguished guests, the primary objective of the bank is to achieve and maintain price stability, as laid down in the central bank law. the central bank pursues and will continue to pursue its monetary policy objectives with determination within the context of its historical mission and responsibility, as stated in the legal framework and the guidelines that were determined in 2001. in this framework, inflation targets are determined jointly with the government ; while the choice of the monetary policy tools and their implementation principles are determined by the central bank. in other words, the central bank was provided with the instrumental independence by its law. the instrumental independence enables the central bank to design and implement its monetary policies with a medium term perspective. distinguished guests, following the establishment of the institutional and legal framework of the monetary policy in accordance with the modern central banking principles, significant steps were taken in the fight against inflation. thus, a rapid disinflation process was experienced and all of the inflation targets were attained for four consecutive years due to the macroeconomic policies, especially the fiscal policy that were implemented consistently with the inflation targets. the inflation rate of 7. 7 percent realized at the end of 2005 was the lowest figure, which was recorded in the last thirty - five years. however, price stability could | 0.5 |
benjamin e diokno : opening remarks - moa signing opening remarks by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the amlc and philippine amusement and gaming corporation ( pagcor ) moa signing, manila, 21 january 2020. * * * ms. andrea d. domingo, chairperson and chief executive officer of pagcor. atty. alfredo c. lim, ms. carmen n. pedrosa, mr. reynaldo e. concordia, and mr. gabriel s. claudio, board members and directors at pagcor. chairman emilio aquino of sec, oic erickson balmes of the insurance commission. atty. mel georgie b. racela, executive director of the anti - money laundering council ( amlc ) secretariat. guests from pagcor and colleagues from the amlc secretariat. good morning. it is my pleasure to welcome you all to today β s ceremony as we reinforce the ties between the amlc and pagcor. collaboration among agencies has always proven to be crucial in preventing and countering the abuse of the financial system domestically and globally. the latest national risk assessment notes a high sectoral money laundering threat among designated non - financial businesses and professions β including casinos which are highly vulnerable. similar to banks and other financial institutions, casinos undertake high - volume and high - speed financial activities but in the gaming context. being generally large cash - based businesses, casinos are competitive in its growth and susceptible to criminal activity. with internet - based casinos, casino junket operations, and reduced transparency of high - rollers, there is much vulnerability in identifying sources and movement of funds. thus, this calls for strict enforcement of and compliance to anti - money laundering and counterterrorism financing policies β urging the full cooperation of covered persons during the conduct of examinations β especially with the rise of philippine offshore gaming operators ( pogos ). both the amlc and pagcor appreciate the necessity of close coordination to accomplish the objectives of the anti - money laundering act of 2001, as amended, and the terrorism financing prevention and suppression act of 2012, thus promoting confidence in the integrity of the philippine financial system. with the policy of the state to ensure that the philippines shall not be used as a money laundering and terrorism financing site, the amlc, as the philippines β hybrid financial intelligence unit ( fiu ), is mandated to receive and analyze suspicious transaction reports | to the unprecedented nature of this crisis, our policy toolkit and regulatory space are far from exhausted. we stand ready to support the country β s continued recovery using the tools at our disposal. however, i would also like to point out that that these policy interventions didn β t happen in isolation. rather, these developments occurred against a backdrop of proactive reforms and policy actions over the years to crisis - proof the financial and economic system. while the pandemic may have sped up the pace of reform, these structural adjustments were well underway even before covid - 19 hit, allowing the bangko sentral to take a longer - term view of the rapidly evolving situation. when i took the helm of the central bank in march 2019, our reserve requirement ratio was among the highest in the world. that year alone, we cut the rrr by a cumulative 400 basis points β from 18 percent by the end of 2018 to 14 percent in 2019. this brought our rrr more in line with china β s 13. 5 percent. the 200 - bp reduction in april 2020 brings our rrr to the current 12 percent. even before the pandemic, i have made it my goal to reduce the rrr to single - digit level and shift to market - based instruments in order to manage overall liquidity. this goal remains to be in our policy agenda. likewise, the policy rate, which banks use as reference for their respective lending rates, was as high as 4. 75 percent when i was appointed two years ago. today, it stands at a record low of 2 percent. the other lofty goals that we have been pursuing even before the pandemic are the acceleration of digitalization and the widening of financial inclusion. i made it clear during my first year as bsp 2 / 4 bis central bankers'speeches governor that before the end of my term in 2023, i want at least half of all retail transactions in digital form and at least 70 percent of adult filipinos to own a transaction account. i β m pleased to announce that we are making great progress in achieving both goals. on the state of the economy β¦ the philippine economy appears to have turned the corner and appears set for faster growth. gdp grew by 7. 1 percent in the third quarter of 2021 following a remarkable 12 - percent expansion in the second quarter. bsp staff predicts that the economy will grow by 7. 4 percent in the fourth quarter. the development budget coordination committee ( dbcc ) agreed. | 0.5 |
it must capitalise on the progress made in future risk analysis, based on statistical databases and stress testing, to adopt a more forward - looking provisioning policy. this has already been accomplished in several areas of sectoral or geographical risk. that being said, we firmly believe that international accounting standards should move in this direction, fostering the widespread use of forward - looking provisions and thereby contributing immensely to financial stability. in a context of economic crisis, the constant strengthening of french credit institutions β financial structure gives them an appreciable safety margin, which could also allow them to play a part in the consolidation of europe β s financial industry. 2. 2 priority has rightly been placed on controlling risks and ordinary profitability the other fundamental elements that contribute to the resilience of french banks β earnings are risk management and control over operating conditions. as you know, the commission bancaire places a premium on ensuring that french banks, and credit institutions in general, generate satisfactory profits at operating level. gross operating income is the first fall - back - before regulatory capital - for satisfying provisioning requirements, which naturally become more acute when economic conditions turn down. accordingly, final operating margins must be sufficiently wide. this is also essential so that banks can tap the markets, at optimal cost and with sufficient independence, for the financing they need to develop and to secure their future. to that end, the commission bancaire makes sure that cost - to - income ratios, which measure operating expenses as a percentage of overall operating profit, are not excessive. spontaneous action by banks themselves has naturally been crucial in this respect. this trend must continue. the same applies to efforts to improve the selection, monitoring and control of risk. thanks partly to those efforts, it has been possible to confine loss - risk and provisioning requirements to securities portfolios and capital market business in general, as well as to some large corporate loans, particularly in the usa. further improvements in internal controls, at the instigation of the commission bancaire, are naturally of major importance. when the economic and financial environment is dominated by uncertainty, the only cogent strategy is to reduce the factors that produce risk. apparently there is room for further improvement in areas such as the spreading of credit risk. furthermore, stricter internal controls could be applied to capital market intermediation and to the management of specific factors such as operating risk. 3. with tighter control over processes, information systems, operations and risk, french credit institutions should | be able to cope with future developments aside from the cyclical aspects i have just mentioned, the short - term outlook is characterised by both the increasing interplay between the financial and non - financial spheres, owing to the development of new risk - transfer instruments, and by closer harmonisation of the rules applicable to different economic agents. 3. 1 careful attention must be paid to the characteristics and consequences of risk transfer transactions credit derivatives, and products and techniques like securitisation that produce similar results, are a means of reducing the loan - loss exposure of credit institutions, which are net risk - sellers. these instruments can be useful for mitigating risk exposure, provided naturally that banks act as protection buyers. however, the characteristics and consequences of the development of these products must be closely scrutinised, both by credit institutions operating in these markets and by the authorities responsible for maintaining financial stability. institutions must pay particular attention to the real impact of risk transfer. they must also keep close watch on the resulting counterparty risk that attaches to the protection seller. the question of risk transfer is also under scrutiny because of the treatment of the special purpose vehicles to which assets are sold. on this point, the accounting rules currently under review at the international level seem to focus quite rightly on the reality of risk transfer. credit institutions must therefore analyse this criterion in greater detail. the issue is also of interest to the authorities responsible for financial stability. as standardised risk - transfer instruments develop, they are likely to come into wider use. so far, market participants have not properly identified or analysed the likely knock - on effects, whether direct or indirect. for this reason, there is a vital need for improvements in the prudential reporting and market transparency of these transactions ; there is also a need for greater harmonisation of the rules and regulations applicable to institutions in different countries and to different types of company. the aim should be to record the risk where it is actually borne, both economically and financially. in addition, the authorities responsible for different financial sectors must coordinate their efforts to jointly identify where risks lie and to measure their extent. the banque de france and the commission bancaire are working to that end with their counterparts in the insurance industry and the securities markets. 3. 2 the future solvency ratio will better reflect the economic realities of banking risk the finishing touches are being put to the solvency ratio, due to come into force in 2006. the new ratio will cover a broad | 1 |
them successively. in the bundesbank, annually a large number of vulnerability checks and penetration tests take place. we detect and fix regularly weaknesses of the manufacturers or ourselves in systems and applications. the weak link : people well - known hacker kevin mitnick β who allegedly hacked into the us department of defence β s network more than one hundred times and penetrated nsa systems on multiple occasions β once said : β companies spend millions of dollars on firewalls, encryption, and secure access devices and it β s money wasted because none of these measures address the weakest link in the security chain : the people who use, administer, operate and account for computer systems that contain protected information. β i agree with kevin mitnick. this stems from the fact that, in all of the cyberattacks known to us, attackers focused their attention on people as the weak link : in other words, end users and their behaviour. that is why i think it is essential to raise awareness among users about how to handle data and it systems in a security - conscious manner β and this awareness needs to be conveyed to all those who work with such systems. each and every one of us must develop an understanding of the threats, yet internalise the fact that these threats are constantly changing and that it is possible to protect ourselves. and this applies in both the work and the private setting. in the bundesbank, we regularly discuss current threats, organize seminars focusing on cyber - security, or β like in the past year β perform a large - scale awareness campaign which dealt with subjects like β data classification ", β encryption ", β password protection ", β mobility β and β social engineering ". this means that the analysis and synthesis of vulnerabilities are our tools of choice when it comes to heightening security awareness within the company and to giving management a deeper insight into the actual risk situation. it would be desirable to establish a system of measures and metrics that renders visible the progress already made. 4. is 99 % security enough? while banks can absorb the losses incurred by the default of an average borrower, just one successful cyberattack can bring the activities of a financial market infrastructure to a standstill, causing at least immense reputational damage or in the worst case a financial crisis. the onus is therefore on banking supervisors to keep an even closer watch than they do now on the potential threats posed by cybercrime. and the central banks have a special responsibility to protect themselves from cyber | very low, namely less than 20 % by 1920. moreover, getting a mortgage loan was nearly impossible for most households since a substantial down payment was required. figure 2 : homeownership rates the netherlands. taken from van de zeeuw & kraan ( 2001 ) and eurostat. after world war ii in many countries β including the netherlands β the idea slowly emerged that more homeownership would contribute to welfare, and should therefore be further promoted. in general, the housing shortage at that time meant that governments were willing to take drastic action to stimulate access to housing. the introduction of a mortgage guarantee scheme in 1956 meant that more and more households could access the mortgage market. since the government guaranteed that the loan would be paid off, lenders were willing to take on additional risk, and were able to loosen their downpayment constraints. additionally, households that wanted to buy a newly constructed home were eligible for additional subsidies that were introduced to stimulate building - in dutch called β premiewoningen β. meanwhile homeownership and mortgage debt were steadily on the rise. by the 1970 β s 35 % of all households were owner - occupiers. and by the early 90 β s this number stood at 45 %. currently the homeownership rate in the netherlands is almost 70 %. from the 1990 β s onwards the netherlands experienced a spectacular surge in mortgage debt and house prices. from 1995 to 2008 house prices more than doubled in real terms. mortgage debt increased in the same period. from around 50 % of gdp to over 100 % of gdp, as you can see in figure 3. fout! onbekende naam voor documenteigenschap. figure 3 : mortgage debt as a percentage of gdp in the netherlands ( 1950 - 2018 ) it is in this period that households and mortgage suppliers discovered β innovative β ways to fully exploit the tax advantages of mortgage interest deduction. new mortgage products were introduced that combined interest - only mortgages - and hence, maximum deduction - with saving or investment accounts that allow for deferred amortization. at that time mortgage suppliers also gradually started to loosen their credit standards. first, by allowing households to increase borrowing by including partner income for determining the maximum mortgage. secondly, by an ongoing increase in the loan - tovalue of new mortgages. borrowing at 110 % ltv was not an exception anymore by the early 2000 β s. additionally, households started to withdraw home equity | 0 |
to put it in the context of captain cook : we need a captain ; and we need to make the tasks of this captain clear before the end of 2009. we can learn from the experience of the payments council in the uk. the governance of the european retail payment market also entails a more social, strategic and political dimension to retail payments, which, by definition, cannot be handled by a selfregulating body of banks or payment service providers alone. in some countries, best practices have emerged in the past few years. in addition to the coordination on the β supply side β, which is the role that the epc plays at the european level, national fora have emerged. these fora deal with the more social and political elements of the retail payment market, and we need to represent this to a certain extent at the european level. a new european forum could promote the goals of sepa in the context of the evolving landscape of the european retail payment market by : 1. firstly, ensuring appropriate coordination and dialogue with national structures during the migration process ; 2. secondly, promoting innovative solutions in line with the objectives of the lisbon agenda ; and 3. finally, being transparent as regards end - users and all relevant stakeholders and involving them as market partners. the creation of a european forum does not, however, dilute the continued importance of the epc, now or in the future. the european retail payment market will benefit considerably from a strong epc and an additional european forum dealing with the social, strategic and political aspects of the retail payment market. conclusion in conclusion, allow me to re - emphasise that the sepa ship has left the harbour destined for a fully integrated market for euro retail payments. the compass is set for a full single euro payments area. the eurosystem appreciates the efforts of those banks that are committed to launching sdd in november 2009 and we encourage all the others to follow suit as soon as possible. the projects for the introduction of an additional european card scheme are invited to increase their efforts and publish their concrete itineraries. payment services have stood solid as a rock throughout the turbulence of the recent months and it has been widely acknowledged that retail payments will be a cornerstone of banks β business in the years to come. therefore, it is even more important that our journey to sepa will succeed β despite the periods of nearly stand still and turbulences. competition, standardisation, innovation and the right level of regulation are the key factors contributing to a | unexpected ) aggravation of growth trends might expose the vulnerabilities and cyclical risks that have been building up. β’ third, the countercyclical capital buffer ( ccyb ) is an appropriate instrument to address cyclical systemic risks. on may 27, the german financial stability committee thus recommended activating the countercyclical capital buffer and raising it to 25 basis points. [ 1 ] the recommendation was based on analytical work by the bundesbank showing that expectations might be overly optimistic with regard to credit risk and the valuation of collateral going forward. in addition, the german banking system has been increasingly exposed to interest rate risk. 1 in europe, macroprudential policy is a national task that calls for close collaboration at the european level. macroprudential policy is a core element of the reform agenda initiated after the global financial crisis, and it plays a particularly important role in the european monetary union, which lacks a single sovereign. [ 2 ] the main objective of macroprudential policy is to prevent the build - up of systemic risk β i. e. the risk of destabilising negative externalities in the financial system β and mitigating excessive leverage of the private sector. macroprudential policy takes a macroeconomic perspective on the financial sector β s stability and resilience, and it complements other policy areas such as monetary policy, microprudential supervision, and β not least β fiscal policy. the global financial crisis and the european debt crisis showed that it is not sufficient to focus on the sustainability of public debt. rather, mechanisms that address private credit are needed to safeguard the stability of the financial system. such mechanisms ensure that excessive growth of private credit or a deterioration in the quality of credit does not pose a threat to financial stability. in germany, responsibility for macroprudential policy is shared by the members of the financial stability committee : the ministry of finance as the chair of the committee, the federal financial supervisory authority ( bafin ), and the bundesbank. this set - up institutionalizes a regular exchange of micro - and macroprudential authorities. the committee can issue warnings and recommendations when there are financial stability concerns. the committee submits an annual report to the bundestag on its activities and the stability of the german financial system. the last such report was published in may 2019. [ 3 ] the committee also communicates on important events through press briefings or press releases. in a number of countries | 0 |
and management of our financial institutions must be at the forefront of keeping their own institutions safe and sound. that our financial sector has remained so is testimony to our partnership with them in prudent risk management. 15. our financial industry has been an active partner in crafting regulation. mas places much importance on consulting the industry before setting new rules or standards. we thank the industry for giving us useful suggestions and feedback, and sensitising us to unintended consequences. and our financial institutions have been a great ally in our efforts to promote singapore as an international financial centre. 16. the 2008 global financial crisis has given the financial industry a bad name. this need not be the case. 17. let us in singapore together build a financial industry : that is economically purposeful : generating real value - added and good jobs that is socially redeeming : creating opportunities for individuals and enterprises ; and that is ethically sound : acting with integrity at all times. finally, we thank our international partners 18. at our genesis in 1971, we had no experience in central banking or financial supervision. we learnt much from other central banks β like the bank of england, bank negara malaysia, and the reserve bank of australia. bis central bankers β speeches 19. the imf seconded to mas a generous array of advisers, from whom we learnt core skills in banking supervision and economic research. i still recall the imf β s article iv consultations of twenty years ago, when i was a young economist in mas. to many of us, they were the best tutorials in macroeconomic analysis that we have ever had. 20. being part of the community of central bankers at the bis was another way in which we learnt from the rest of the world. we continue to benefit to this day from the collegial spirit of basel, working together to craft international standards, and co - operating in cross border supervision. conclusion 21. in closing, let me re - dedicate on behalf of my colleagues at the mas, our commitment to our mission : to secure for singaporeans a low rate of inflation ; to preserve the purchasing power of our official foreign reserves ; to keep our financial sector safe and sound amidst crisis and change ; and to grow singapore as a vibrant and trusted financial centre. in this, we look forward to your continued support. thank you. bis central bankers β speeches | its structure and strengthen the delivery of its director training program, so that it may better meet the increased demands placed on directors in this current environment. the continual efforts by industry practitioners, investors and regulators to improve corporate governance have enabled singapore to stay ahead of the field. the world economic forum's global competitiveness report 2009, for instance, ranked singapore first in corporate governance standards in asia. lessons from the crisis in the aftermath of crises, corporate governance standards and practices often come under scrutiny. for instance, after the enron / worldcom failures, critics pointed to the lack of independence of auditors and audit committees, and to deficiencies in accounting standards. after the bursting of the dot. com bubble, attention was drawn to the severe conflicts of interest by brokers and analysts. the recent financial crisis has been no different. indeed, reviews by international bodies and national agencies have found that weak corporate governance played a role in this crisis. for instance, the oecd report on " the corporate governance lessons from the financial crisis " 1 noted that " the financial crisis can be, to an important extent, attributed to failures and weaknesses in corporate governance arrangements which did not serve their purpose to safeguard against excessive risk taking in a number of financial services companies. " while many of the corporate governance failures that have been uncovered so far affected financial companies, many of the structural weaknesses may also be common to large and complex listed firms. it is therefore relevant for boards of other companies to reflect on these findings. let me briefly highlight a few common themes. the first relates to the quality and composition of boards. research shows that although having a good balance of directors with a range of skills and experience that are relevant to the business of the firm is an essential foundation for good corporate governance, this was also often the most neglected. a number of reports2 also found weaknesses in the implementation of effective risk management. in many cases, risk was not managed on an enterprise - wide basis and boards were not fully apprised of the level of risk facing the company. overseas regulators are now reviewing the role of boards in providing guidance on the alignment of corporate strategy with risk - appetite, as well as on appropriate internal structures in risk management. not surprisingly, remuneration practices have attracted the most public attention. the alignment of executive and board remuneration with the longer term interests of the company and its shareholders is a widely accepted corporate governance principle. nonetheless, compensation practices that rewarded staff handsomely for short - term gains | 0.5 |
done better, or where improvements can - and should - be made. for example, we have to acknowledge that the cash changeover did have some undesirable effects on prices, in connection with their conversion from national denominations into euro. the irritation caused by some disproportionate price increases, especially in parts of the service industry, in a number of euro area countries, gained a lot of unfavourable publicity. even though our statistics show that the cash changeover had a rather small one - off impact on inflation of around 0. 1 % to 0. 3 % on average across the euro area, people had the impression that inflation was much higher than the recorded change in the consumer price level. this gap between β perceived β inflation and actual inflation has gradually got smaller, though at a puzzlingly slow pace. we should not forget either that the introduction of the single european currency represented a fundamental regime shift which clearly required certain adjustments in the way monetary policy - makers communicate with markets and the public. in 1999, the ecb was a new, unknown central bank ; it had no history of decision - making. its two - pillar monetary policy strategy was a novelty in the world of central banking ; its economic environment was, and is, a heterogeneous, multi - country economy, and its political setting unlike anything we know from the nation - state. it is therefore hardly surprising that communicating the ecb β s monetary policy has been a real challenge which has meant for all of us - the eurosystem at the sending end, and the markets and the public at the receiving end a process of learning and adapting. it also took some time for the markets to fully understand our monetary policy strategy, that is, the conceptual framework on the basis of which the governing council assesses the economic outlook and the risks to price stability, takes decisions about the appropriate monetary policy stance, and explains these decisions to the markets and the public. by now, the understanding of our strategy has greatly improved, and the recent evaluation and clarification of the strategy has certainly helped to this end. the ecb today ranks as one of the most open, transparent and predictable central banks in the world, and we continually seek to improve our communication. overall, a lot has been achieved on this front, but improvements can still be made in other areas. for instance, much more progress remains to be made in respect of the integration of european financial markets. as economic theory would predict | , the single currency has eliminated exchange rate risk and lowered transaction costs. this has indeed significantly reduced borrowing costs in the euro area. deeper, broader and more liquid continent - wide financial markets have emerged, which have reduced liquidity risk premia, improved access to external finance and cut financing costs. thanks to the credibility of the ecb β s monetary policy, the euro area β s low inflation environment has reduced inflation risk premia, and interest rates have remained lower and more stable across the maturity spectrum than would otherwise have been the case. all very positive indeed, i would say, but not quite β top of the class β. if we take the deep, liquid and unified us financial markets as a benchmark, the euro area clearly still has some way to go, especially as regards the integration of equity markets, the establishment of common legal and regulatory frameworks, and the consolidation of the banking sector. so, if we add it all up and look at the euro β s scorecard after five years, i would say the result looks quite impressive. however, having extolled the successes of the euro β at home β, i do not want to create the impression that europeans have a particular penchant for navel - gazing and that europe is β obsessed with its own internal dynamics. β so now i will turn to the global impact of the euro, and notably its international role, a very fitting subject for this international symposium. iii. the international role of the euro back in 1998, before the launch of the euro, some policy - makers and economists predicted that the euro would quickly develop into an international currency. the new single currency zone would represent the world β s largest trading area and an economy with a combined gross domestic product of some β¬7 trillion. and the euro β s legacy currencies, notably the deutsche mark, had already established a certain international status. some expected - or even hoped - that the international role of the euro would rival that of the us dollar. i should add that among central bankers, we always refused to frame the discussion in such terms. five years on, where do we stand? the international role of a currency is a complex phenomenon, so let me first look at the international private use of the euro, that is, its use by international borrowers, investors and traders. afterwards, i will consider the international official use of the euro, that is, its use as an intervention, reserve and anchor currency. i will conclude with a | 1 |
could lengthen the life of the production cycle. a steady rise in the wealth of nations required a large injection of capital. 3 without access to credit, such large upfront payments of production resources simply would not have been possible. without credit, production processes are constrained to an economically inefficient scale. 4 the opportunity to borrow against future income streams reduced the constraints on the ability of entrepreneurs to invest in bigger machines and larger premises. today, access to external funding is no less important. it has the potential to spur economic innovation and allows production facilities to be operated efficiently through standing credit lines. access to credit is not only important for businesses. students can receive a loan in expectation of the higher income that they are likely to earn later in their lives. student loans permit the enjoyment of the benefits of a higher education at a time in life when income is low. credit makes promising projects possible β whether they are embodied in physical capital or in better education. for a similar classification of functions see levine ( 2005 ). see pollins ( 1954 ) or hudson ( 2002 ). see hicks ( 1969 ). see e. g. sirri and tufano ( 1995 ). the provision of screening and monitoring services is the second key function of finance. specialised screening of the quality of borrowers is an effective remedy against the problem of adverse selection in credit markets. financial intermediaries acquire, process and evaluate information about potential borrowers. in doing so, they help reduce the large costs that we β as individuals β would face if lending of savings were not intermediated. likewise, banks are more effective at monitoring the behaviour of borrowers after funds have been allocated. they can thereby reduce the costs associated with moral hazard β a situation in which asymmetric information can lead borrowers to take action that erodes the value of the loan. stock markets can also perform this duty. influential research literature claims that liquid stock markets help foster corporate governance and hence reduce moral hazard. 5 the basic intuition is straightforward. if managerial compensation is directly linked to stock market performance, either through contracts or stock ownership, managers have an incentive to select and implement actions that increase shareholder wealth. the transformation and management of risk β the third key function of financial institutions in modern societies β became the focus of attention during the recent financial crisis. i will turn to the dark side of this function later. for now, let me stress the potential value of risk management. financial markets provide savers with a large array of | area banks is at the 690 level, well below the range of 1000 to 1600 of acceptable concentration. naturally i expect this process of restructuring to be driven first and foremost by the incentives of the private sector to raise profitability and increase returns on assets. however, there may be collateral effects of the change in the institutional environment that may favour that movement. looking further ahead, a single resolution mechanism in europe will create more possibilities to use consolidation as a resolution strategy. we see this in the us where, of the approximately 500 banks that the fdic has taken into receivership since 2008, around 450 were resolved through β purchase and assumption β transactions β that is, selling parts of banks to other banks. bis central bankers β speeches that said, there are also frictions that create obstacles to closer bank market integration. these include different legal systems, corporate governance structures and tax regimes that exist in europe, as well as different insolvency procedures. further integration is needed in these areas if we are to gravitate towards a true single market in capital in the euro area. finally, the new ssm regulation introduced an important change a change in macroprudential policy - making, both in terms of instruments and decision - making. as part of the capital requirements directive iv / capital requirements regulation, the ecb / ssm will gain a series of new macro - prudential instruments. these include, among others, the counter - cyclical capital buffer, the systemic risk buffer and the macro - prudential elements from pillar 2. i am confident that they can play a role in curbing pro - cyclicality in credit developments where needed. in terms of decision - making, a european authority will be able, if necessary, to apply prudential measures to banks in both borrowing and lending countries. this is important because, to the extent that macro - prudential measures mitigate credit booms by raising banks β cost of equity, this effect can be offset if there are large inflows from abroad that lower banks β cost of debt. in other words, the ecb / ssm has the tools to address such situations as we saw before the crisis, where supervisors lacked the tools to tame domestic financial booms being largely financed from banks in other euro area countries. the future of intermediation in the euro area looking further ahead, i expect this period of structural change in the banking sector to also have a permanent effect on the structure of intermediation. in the | 0.5 |
recently, in india, a development platform with the promise to reverse several years of sub - par growth and high inflation is being pursued. the lesson to take from this is that we are not helpless in the face of economic disappointment, of high inflation and low growth. for monetary policymakers, with limited tools, this situation provides no attractive choices. but there are many appealing options available for other aspects of policy. for south africa, our present predicament should be read as an invitation to embrace reform. the national development plan provides a compelling basis upon which to build our reform agenda. let us begin to do the work. the contribution of the south african reserve bank to the national development plan is captured in the constitution of the republic of sa and i would like to end by quoting β section 224. the primary object of the south african reserve bank is to protect the value of the currency in the interest of balanced and sustainable economic growth in the republic. β thank you. bis central bankers β speeches | !! in fact, such basic motivation underlying the fccb - based funding strategy is completely antithetical to both corporate finance theory and international practice and turns the entire rationale of such funding strategy on its head! this is because the very raison d β etre of fccb funding option is to lower borrowing costs below that of an otherwise comparable plain - vanilla non - convertible foreign currency bond. the short point is that the fccb borrower is baiting the overseas investor with an equity option kicker / appetizer, embedded in an otherwise comparable plain - vanilla non - convertible bond. effectively, in this structure, overseas investor in fccb purchases an embedded option and pays an option premium in the form of lower coupon on fccb. i hardly need belabor the point that equity is always more expensive than debt capital of whatever kind, including even junk / high - yield bonds! so i would urge business and industry to fully provide domestic rupee / foreign currency resources to meet potential liability under fccbs, rather than hope that fccbs will be converted which, in fact, if anything, can be the case of overseas investors, but certainly not, of issuers of fccbs! 8. although as serious as foreign exchange risk, interest rate risk has not compelled as much attention in the indian debt market space. if only to have a sense of how significant, and serious, it can be, i invite your attention to what i said about the key policy rates rising cumulatively by 5. 25 % since march 2010 to date! just like unhedged foreign currency exposure, long - term floating rate loans represent a source of significant risk not only to businesses themselves, but equally to financing banks as they transfer interest rate risk from lenders to borrowers, effectively substituting interest rate risk of lenders with potential credit risk in terms of creating potential non - performing loans! at another level, as fixed rate loan has more certainty, and hence less risk, both for borrower and lender, it should be preferred both by borrowers and lenders alike. thus, for interest rate risk management, the base - case, risk - neutral strategy, is invariably fixed rate long - term funding by corporates. contextually, the current popular refrain in the policy debate is that absence of a competitive, liquid, deep and efficient corporate bond market has been the undoing of infrastructure financing which typically involves long - term fixed rate funding. and as to why banks cannot make long - term | 0 |
growth rates are required to reduce the levels of unemployment in a meaningful manner. role of chartered accountants in the most recent world competiveness report, the deteriorating state capacity was one of the areas that contributed to the slide in the country β s ranking to 52nd place out of 144 countries that were ranked. some of the more problematic areas identified included an inefficient bureaucracy, corruption and policy instability. on the positive side south africa was recognised to be at the forefront of governance and was ranked number one in the following areas : β’ strength of auditing and reporting ; β’ regulation of securities exchange ; and β’ efficacy of corporate boards ; it is therefore evident that south africa β s auditing and accounting professionals are among the best in the world, and i do believe that accountants have an important role to play in ensuring that some of the structural challenges in this country are addressed effectively. the profession can make a tangible contribution towards ensuring that the public sector is capacitated to deal with its many challenges, using the skills and aptitude that members bis central bankers β speeches acquire during their academic and practical training, and which include skills such as analytical ability, professionalism, integrity, understanding complexity, etc. it is also important that members of the profession respond positively to the call of public service and that members do not only become service providers to the public sector, but that they also join the ranks of the public service in order to address the shortage of skills within that sector. in this context they have much to contribute to root out corruption, design monitoring and early warning systems so as to ensure improved service delivery, institute controls that would minimise instances of wasteful and fruitless expenditure, design reports so that politicians and officials have access to accurate and timely information, and which should contribute to improved decision - making and policy outcomes. conclusion in conclusion, in order for us as a country to move forward it is important that we all own up to the responsibility that we have to ensure that south africa reaches its full potential and that it thrives and succeeds at all levels. our challenges are daunting but not insurmountable! if we all display a positive β can do β attitude and one that places the national interest first, we can achieve higher levels of economic growth, reduce the stubborn levels of unemployment and successfully address the dual challenge of poverty and inequality. the time has come for us to adopt an attitude of β south africa first β and to respond affirmatively to a similar challenge jf kennedy | francois groepe : the role of chartered accountants in grass roots development and accelerating the realisation and economic emancipation of the majority in south africa through better management of government resources and efficiently delivering services to the masses address by mr francois groepe, deputy governor of the south african reserve bank, at the launch of saica northern region trainees committee, park town, 29 november 2012. * * * i wish to thank saica and the chairperson of the saica northern region trainees committee for inviting me to speak and to be part of this momentous occasion. i believe that the topic is very relevant against the backdrop of the significant levels of inequality in our country as reflected in the most recently estimated gini - coefficient of 0, 69. the top ten per cent of the population earn approximately 58 per cent of the income and the bottom 50 per cent less than eight per cent. we furthermore have had to contend with an unemployment rate currently of 25, 5 per cent in the third quarter of this year, much of it likely structural. global economy in considering the economic conditions in south africa, one is compelled to take cognisance of global economic developments due to the impact they have on local economic developments and the risks of spillover. economic activity in both the advanced economies and the emerging market economies continue to disappoint, while continued uncertainty further weighs on the outlook. although the us recorded an uptick in growth in q3 / 2012, there is an expectation of lower growth in 2013, due to the risk of a fiscal cliff. in the event that the fiscal cliff is avoided, there remains a real possibility that the agreed settlement may include some degree of fiscal consolidation as well as an increase in the effective taxation rates, which may act as a drag on consumption expenditure. the euro area contracted in q3 / 2012 and is now in technical recession. there is a possibility that recessionary conditions may continue for two reasons, namely : β’ an accentuated drag on growth due to the continued fiscal austerity measures, amidst indications that fiscal multipliers may be higher than previously estimated ; and β’ a number of the leading indicators seem to suggest that growth prospects are tilted to the downside. unemployment levels in europe remain at elevated levels historically, the social implications of which should not be underestimated. a further concern is that cyclical unemployment could evolve into structural unemployment. this could add a further dimension to an already challenging and complex set of circumstances. emerging market economies have decele | 1 |
bankers with an opportunity to hear federal reserve staff discuss recent policy initiatives and issues that examiners are encountering in the field. in addition, the federal reserve bank of san francisco hosts consumer compliance webinars, and the federal reserve bank of philadelphia publishes a quarterly overview of consumer compliance issues that allows federal reserve staff to address questions from banks. 3 we are exploring options for building on these initiatives. it is critical to keep the communications channels open if supervisors and banks are to work together constructively. the regulation and supervision of community banks bank supervision requires a delicate balance β particularly now. the weak economy, together with loose lending standards in the past, has put pressure on the entire banking industry, including community banks. to protect banks from new problems down the road, and to safeguard the deposit insurance fund, supervisors must insist on high standards for lending, risk management, and governance. at the same time, it is important for banks, for their communities, and for the national economy that banks lend to creditworthy borrowers. lending to creditworthy borrowers, after all, is how banks earn profits. we also know that supervision imposes costs on institutions, and we recognize that new regulations and supervisory requirements may impose disproportionate costs on community for more information, see the federal reserve board β s webpage β community depository institutions advisory council. β for the purposes of the federal reserve β s supervisory programs, regional banking organizations generally are considered to be those banks and bank holding companies ( including savings and loan holding companies ) with total consolidated assets between $ 10 billion and $ 50 billion. for archived webinars and publications as well as announcements about future events, see the federal reserve bank of philadelphia β s webpage β consumer compliance outlook. β bis central bankers β speeches banks. thus, we take quite seriously the importance of evaluating the costs and benefits of new rules. supervision is conducted through the federal reserve β s decentralized structure of 12 regional reserve banks, which helps us tailor our examinations and supervision to the size, complexity, risk profile, and business model of each institution. community bankers tell us repeatedly that they are concerned about the changing regulatory environment. one particular worry is the implementation of the dodd - frank wall street reform and consumer protection act ( dodd - frank act ). it is important to emphasize that the congress enacted the dodd - frank act largely in response to the β too big to fail β problem, and that most of its provisions β regarding, for example, capital | . 1 that said, wage growth has yet to fully return to levels consistent with 2 percent price inflation on a sustained basis. that provides a nice segue to the topic of inflation, the other half of our mandate. inflation has declined significantly since mid - 2022. this drop has been broad - based, with inflation lower in all major categories - food, energy, goods, and services. the 12month percent change in the personal consumption expenditures ( pce ) price index has continued to decline, falling from its 40 - year high of above 7 percent in mid - 2022 to 2. 7 percent in the latest reading. the decline in inflation has benefited from a reduction in demand and supply imbalances, both here in the u. s. and internationally. indeed, this phenomenon is not unique to the united states. canada, the united kingdom, and the european economies experienced historically high inflation and have similarly seen relatively rapid declines in inflation as well. in fact, based on the harmonized index of consumer prices, the inflation rates in the euro area, sweden, the 2 / 5 bis - central bankers'speeches united kingdom, and the united states are all now nearly the same. while every region has its own set of conditions, global factors affected inflation in advanced economies around the world. 2 even with this good news, inflation in the united states remains too high, and in recent months there has been a lack of further progress toward our 2 percent goal. extracting the signal from the noise when it comes to inflation readings is especially challenging now, since the economy is still feeling the aftershocks of the supply chain issues and high inflation following the pandemic and the war in ukraine. i'll point to a few areas of research developed by my colleagues at the new york fed to better understand the data. the most recent reading of our multivariate core trend ( mct ) inflation measure was 2. 6 percent in march, about the same level as it was in december, and down nearly 3 percentage points from its peak in june 2022. 3 furthermore, measures of inflation expectations from our survey of consumer expectations have remained broadly stable and are generally in line with their precovid ranges at all horizons. 4 and global supply chain issues have mostly receded, according to both our global supply chain pressure index and evidence from our regional surveys of businesses. 5, 6 overall, i see some of the recent inflation readings as representing mostly a reversal of the unusually low readings | 0 |
pressoffice by households and businesses to make payments. digital central bank money would surely address the decline in the use of paper money without the complications of creating the protections required around stablecoins? yes and no is i suspect the answer. the question is a good one and should be considered ( and is being so ) but the answer is not in yet. it β s a very big question. offering a cbdc would allow broad access to central bank money in a digital form. but any launch of a cbdc requires careful prior consideration to fully explore all the issues and implications in order to make an informed decision, including ascertaining that there would be demand for such a thing. cbdc, whilst offering much potential, also raises profound questions about the shape of the financial system and the implications for monetary and financial stability and the role of the central bank. there are fundamental questions in play. what might a cbdc mean for monetary policy transmission β would it bring new tools and fuller, faster transmission of policy choices? to what extent would a cbdc β disintermediate β the banking sector, and what impact would this have on the cost and availability of credit, and the resilience of banking business models and funding? and what services and infrastructure should a central bank offer as part of a cbdc and what might best be left to the private sector? the paper from brookings in july on β design choices for cbdc β helpfully explored a number of these issues, as well as key technological points on the need for interoperability and connectivity between and among central and commercial bank systems for cbdc to function effectively. 8 such standards are even more important in a world where there might be a need for interoperability and friction - free movement between cbdc, private stablecoins and other payment mechanisms. we, along with international counterparts are considering these closely. the bank of england is exploring these issues and published its discussion paper on cbdc earlier this year, 9 setting out key considerations and an illustrative model based on a central bank core ledger and private payment interface providers offering overlay services to users. the paper received a wide range of responses. we are currently working through the responses, continuing to engage with stakeholders and look forward to setting out more information next year. we are also working closely with our international counterparts who are facing the same questions. stablecoins and cbdc are not necessarily mutually exclusive. depending on design choices, they could sit alongside | we project two - digit growth of the goods and services export in the coming years. chart 7 current account and fdi projection chart 8 budget balance and general government public debt ( in % of gdp ) ( in % of gdp ) - 2 - 4 - 5 - 10 - 6 - 8 - 15 - 20 2021 * 2022 * 2023 * secondary income primary income services goods current account fdi source : nbs. * nbs projection. - 10 2022 * 2024 * general government public debt ( l. s. ) maastricht public debt criterion budget balance ( r. s. ) source : ministry of finance. * * projection from the revised fiscal strategy for 2022 with projections for 2023 and 2024. as regards the fiscal balance, the projected deficit of 4. 9 % of gdp this year is more favourable than initially anticipated, as a result of faster economic growth and positive labour market trends. it is expected to narrow further to 3 % in 2022, and to turn into a surplus in the medium term, despite the fact that sizeable funds will continue to be channelled into infrastructure projects. this will put public debt on a sustainable downward path as of next year and contain it below the maastricht criterion. the ministry of finance estimates that public debt will amount to around 58 % of gdp at the end of the year. in the face of all challenges, the national bank of serbia has managed to increase fx reserves, as a guarantee of the domestic economy β s stability and resilience to external shocks, to record high levels. since the beginning of the year, gross fx reserves increased by eur 2. 8 bn, to 16. 3 bn at end - october, covering around six months β worth of the import of goods and services, which is twice higher than the reserve adequacy standard. ladies and gentlemen, dear colleagues, at the end of today β s address, i would like to conclude that numerous challenges from the international environment are ahead us and that the future will continue to put countries to test in terms of their readiness to face up to volatile and rather unpredictable global conditions. economic policies able to cushion the shocks arising from energy prices and significant volatility of primary agricultural commodity prices will continue to be required. overcoming the supply chain disruptions, as well as all transportlogistics circumstances that burden the global economy, will also be a challenge. what helped us a lot in navigating this crisis is that for | 0 |
koji ishida : recent economic and financial developments speech by mr koji ishida, member of the policy board of the bank of japan, at a meeting with business leaders, tochigi, 11 march 2013. * * * i. economic activity and prices a. recent financial and economic developments 1. overview i would like to start by looking at recent developments in the global economy. the global economy plunged following the lehman shock in 2008, but moved subsequently toward recovery. since mid - 2011 however, it has decelerated following the outbreak of the european sovereign debt crisis triggered by the fiscal problem in greece. thereafter, as the debt problems in major economies such as spain and italy also worsened, the euro area economy entered a severe recession and the real gdp growth rate for the area turned negative in 2012. in addition, the growth rate declined for the chinese economy, which exports a great deal to europe, and emerging and commodity - exporting economies in general were seriously affected. in these circumstances, japan β s economy has inevitably undergone significant adjustments since summer 2012, such as in the form of a decrease in production and curbs on business fixed investment due to a drop in exports. the problems in the euro area have shown signs of stabilizing, reflecting progress made since the latter half of 2012 in establishing frameworks to avert a crisis. examples include the introduction of a program called outright monetary transactions ( omts ), through which the european central bank ( ecb ) purchases government bonds issued by euro area countries facing financial difficulties, and the start of the operation of the european stability mechanism ( esm ). in this situation, markets outside the euro area have begun to factor in the bottoming out of respective economies. the international monetary fund ( imf ) has projected that the global economy will recover in 2013 and 2014, having bottomed out in 2012. 2. european economy the euro area economy, which is considered to have triggered the global economic slowdown in 2012, remains in a moderate recessionary phase. private consumption in the euro area has been on a downtrend since 2011 against the backdrop of the debt problems. car sales have been particularly weak. looking at exports and production, exports to outside the area had been solid, primarily in germany with its competitive edge, owing in part to the depreciation of the euro to date. however, these exports have more recently shown sluggish growth due to the deceleration in the global economy. as a result | temporary in nature. let me now explain our assessment in greater detail, starting with the economic analysis. real gdp in the euro area grew by 0. 1 % quarter on quarter in the third quarter of 2011. at present, a number of factors seem to be dampening the underlying growth momentum in the euro area. they include moderate global demand growth and weak business and consumer confidence in the euro area. domestic demand is likely to be dampened by the ongoing tensions in euro area sovereign debt markets, as well as the process of balance sheet adjustment in the financial and non - financial sectors. at the same time, we continue to expect euro area economic activity to recover, albeit very gradually, in the course of 2012, supported by developments in global demand, very low short - term interest rates and all the measures taken to support the functioning of the financial sector. in the governing council β s assessment, substantial downside risks to the economic outlook for the euro area continue to exist in an environment of high uncertainty. they notably relate to a further intensification of the tensions in euro area debt markets and their potential spillover to the euro area real economy. downside risks also relate to the global economy, protectionist pressures and the possibility of a disorderly correction of global imbalances. with regard to price developments, euro area annual hicp inflation was 2. 8 % in december bis central bankers β speeches 2011, according to eurostat β s flash estimate, after 3. 0 % in the preceding three months. this decline was expected and reflects a downward base effect stemming from energy prices. inflation rates have been at elevated levels since the end of 2010, mainly driven by higher energy and other commodity prices. looking ahead, they are likely to stay above 2 % for several months to come, before declining to below 2 %. this pattern reflects the expectation that, in an environment of weaker growth in the euro area and globally, underlying cost, wage and price pressures in the euro area should remain modest. the governing council continues to view the risks to the medium - term outlook for price developments as broadly balanced. on the upside, the main risks relate to further increases in indirect taxes and administered prices, owing to the need for fiscal consolidation in the coming years, and possible increases in commodity prices. the main downside risks relate to the impact of weaker than expected growth in the euro area and globally. turning to the monetary analysis, taking the appropriate medium - term perspective, the underlying pace of monetary expansion continues | 0 |
the public opinion. dear students, today is the day to celebrate for this achievement. today is the day to feel proud. your dream to successfully complete your studies has come true. now, many opportunities and alternatives await you. be courageous and wise to make your choice. wherever you are, whether in the public or the private sector, in albania or abroad, i urge you to show integrity, optimism and determination. i have only one piece of advice to everyone : never give up! live your life with courage and self - confidence! time rewards those who dream big and dare to see beyond tomorrow. this is the right way to build a better society, capable to 1 / 2 bis central bankers'speeches generate prosperity for the future generations. renounce the ambitions for a fast track to an undeserved career. it is a path that leads to a dead end. life is a journey of many unknown things and i assure you that in the long run, those that stand out for their professional ability, devotion and respect of human values, shine bright on the lifeaβ¬β’s journey. concluding, i wish you once again every success and all the best in future endeavours. congratulations! 2 / 2 bis central bankers'speeches | gent sejko : commencement address for economics graduates at university of tirana commencement address by mr gent sejko, governor of the bank of albania, at the graduation ceremony of the students of economics, university of tirana, tirana, 7 october 2018. * * * honourable prof. kule, distinguished members of the faculty, dear family and friends, most importantly dear students, it is a privilege for me to be present today in this youthful and meaningful graduation ceremony. today, you, your families and your professors at the faculty of economics have earned the right to proud for this milestone achievement. i take this opportunity to extend my most sincere congratulations to all of you for the successful completion of your university studies. this moment marks an important transition in your life. you leave the university auditoriums to enter another reality, far different from the one you have experienced till now. from tomorrow, you will face a new dimension of the human reality, a rather dynamic and complex one. as you embark on a new journey, remember that life has many stations. every time you reach one of them, the next one might be even more challenging. it is part of the journey. remember, building a successful career takes time, hard work and perseverance. my advice is to make the first steps with the energy and enthusiasm that characterise your age. be courageously free of any complexity and non - based hesitation! pass through your positive energy whenever you are : in family, work, friends and daily relations with your colleagues. show consistent and cultured behaviour, as well as respect for the law, codes and traditions! embrace innovation and fight to make a reality any dream that inspires human love, prosperity, integrity and understanding. be loyal and collaborative, and never ever give up on learning and education, for whatsoever reason. nowadays, the society is facing many social, cultural, scientific, technological, demographic and geographical changes. the ability to adapt continuously and anticipate these developments is not simply a challenge of today. it shows the need to be constantly in touch with knowledge, new scientific novelties, innovation, and various theoretical trends and their application. therefore, i strongly encourage you to never break up with knowledge and education. be assured that, wherever you may be, in albania or abroad, education will always pay you back the energy and time you have spent. personally, i consider it as an important pillar, which helps over time to shape a reputable, respected and broadly accepted figure by | 1 |
with commercial bank money or central bank money means that they cannot be used to create reliable stores of value. in addition, as pointed out in the g7 report on stablecoins issued last year, stablecoin schemes are significantly exposed to risks of various nature, including legal, financial, operational and compliance risk concerning money laundering and terrorist financing, competition law, consumer and investor protection. the risks identified must be seriously addressed if stablecoins are not to become the Β« weak links Β» undermining the safety of our payment systems. this is all the more important as some of these risks would be amplified and new risks might arise if stablecoins are adopted at a global level. stablecoins of potentially large size and reach β so - called global stablecoins β may indeed pose additional challenges of system - wide importance both domestically and internationally, for the transmission of monetary policy, as well as for financial stability. they could also have implications for the international monetary system more generally, including currency substitution, and could therefore pose challenges to monetary sovereignty. 2 β what role for regulatory and oversight authorities? in this context, it is first and foremost the responsibility of the private sector to design stablecoin schemes that do not bring undue risks to our payment systems. for that purpose, regulatory and oversight authorities have an important role to play in order to ensure that the risk management requirements to be met are clear, comprehensive and complied with, while preserving the potential for technological innovation offered by crypto - assets. to that end, they should in my view focus on three main tasks : - firstly, working on a regulatory response that preserves the positive potential impact stablecoins might have on the efficiency of our payment systems. given the rapid pace of innovation, which is also characteristic of stablecoin initiatives, this pleads for developing an agile, pragmatic and proportionate regulatory response rather than setting up an ad - hoc, unique and comprehensive framework. this would be simpler, faster to implement and to adjust, and be more likely to achieve level - playing field conditions. in the european context, this is an encouragement for building on and adapting the functional coverage of existing regulatory frameworks and, in some cases extending their geographical coverage. what comes to mind in particular is the framework for crypto - assets service providers created in france with the 2 / 4 bis central bankers'speeches pacte bill, and the european framework for e - money issuers, investment funds and financial market infrastructures. this also | order to preserve the incentives and benefits for innovation, efficiency and stability, central banks as issuers of the reference settlement asset need to revisit and possibly adapt the conditions under which they make that settlement asset available. in that perspective, central banks could, for instance, issue their money in digital form, the so - called concept of central bank digital currency ( cbdc ). this might be particularly appropriate for meeting settlement needs in central bank money between financial intermediairies. indeed, asset tokenization initiatives have proliferated among financial players, with the the risk that such developments may lead to disorderly approaches and heterogeneous adjustments of settlement processes, which are currently mainly handled through market infrastructures. the eurosystem, as a major provider of critical wholesale clearing and settlement services in euro, should therefore be open to experimenting the conditions under which it makes central bank money available as a settlement asset. to that end, we, at the banque de france, have started gaining experience with innovative solutions, including in particular recourse to dlt. experimentation is key in this area and this is why, as already announced by governor villeroy de galhau, the banque de france will launch a call for projects before the end of the first quarter of 2020. indeed, we wish to work with industry innovators and 3 / 4 bis central bankers'speeches start running experiments rapidly to possibly integrate a β wholesale β cbdc into innovative procedures for exchanging and settling tokenised financial assets. another contribution from central banks could be to help address one of the major failings of the current payment systems which is cross - border retail payments. this is one of the drivers of the development of crypto - assets such as stablecoins, and we believe we could help identify and support other concrete, useful and possibly complementary solutions. in conclusion, let me stress 4 points : it is hard to anticipate the role that stablecoins and more generally crypto - assets might play in the payment system of the future, especially since the features of these assets look set to change considerably. while it is clear that they offer opportunities to improve our payment systems, they can also bring quite material risks which must be addressed. in that context, it is first and foremost the responsibility of private sector entities to design arrangements which do not bring undue risks to our payment systems. regulatory and oversight authorities also have an important role to play in order to ensure that risk management requirements to be met | 1 |
addressing the challenges we have faced. the positive results of our work show that we are on the right direction. nevertheless, i think that for successful institutions there is always something more to do. they are guided by the medium and long - term objectives ; they invest to enhance the professional standards and increase their capacities though the preparation, strengthening of independence, accountability, transparency and good governance. this credo of ours will be a guide for our action plans in the future. thank you for your attention! 1 this memorandum was signed by the bank of albania, ministry of finance, ministry of economic development, tourism, trade and entrepreneurship and the albanian association of banks. 8 / 8 bis central bankers'speeches | research in these and other innovative areas, like green finance, will develop further and become traditional topics in central banks β research agenda. for this reason, i challenge our researchers to consider these trends in their future research agenda. continuous enhancement of research topics and methodologies is a must for a central bank. in this respect, i would like to thank ambassador maitre, the swiss government, the state secretariat for economic affairs ( seco ) and its bilateral assistance and capacity building for central banks ( bcc ) program for supporting research activity at the bank of albania. this 1 / 2 bis central bankers'speeches cooperation has been a significant instrument for improving our research work and exposing it to academic and international research community. our cooperation will continue in the future to improve research methodologies and products. we are currently working with seco toward the optimization and institutionalization of research agenda and research implementation in central banks. these important issues will be discussed in a jointly - organized workshop with all bcc partners on capacity building for central banks, in tirana in spring 2020. dear ladies and gentlemen, our see research workshop has become a cherished tradition for bank of albania and central banks of the see region. it is a great pleasure, and we are very happy to see that the workshop continues to generate interest beyond the see region and central banking community. the list of participants has expanded to include speakers from academic institutions in the eu, the us and south - eastern asia, as well as from international financial institutions. your participation is contributing to broadening and enriching our network and we hope that discussions will help our researchers to improve their work and strengthen their research recommendations. these days, your participation in the workshop takes another and even more significant meaning in the wake of the tragic consequences caused by the strong earthquake. it helps to show that, despite many losses, we are resilient and will continue to work to overcome the emotional and economic hardships of this tragic event, shed the desperation, fear and despair, and return to normal activity. i wish the workshop a great success, and all guests and participants a pleasant stay in tirana! 2 / 2 bis central bankers'speeches | 0.5 |
will have to be sorted out to avoid unwarranted fears and suspicions. more importantly, while basel 2 advances the platform for risk management more comprehensively than ever before, it is not free from some practical problems that need to be addressed. we have to be realistic and patient. given the increasingly complex transactions in which banks are continuously engaging in search of markets, a risk management system like basel 2 is consistent with the primary objective of the bank regulator, which is to incorporate those risks into capital regulation with a view to making the whole banking system safer and more stable. we cannot expect a huge system like basel 2 to be implemented without the normal teething problems. the difficulties of adaptation of the model to the practical situation prevailing on the ground in different environments are expected to spin off solutions. these solutions should not thwart financial sector development or introduce excess compliance costs out of keeping with the expected benefits. i repeat therefore that it would be reasonable for mauritius to join the mainstream of basel 2 implementation provided that, as a positive spin off for adopting basel 2 in an acceptable form, banking practices over here become more solidly entrenched and bankers find full expression in their primary job of risk taking through a hands - on approach to their activities rather than outsourcing judgment to third parties. the judgment of the seasoned banker, capable of identifying and quantifying the risk he is taking on, is a significant value addition that we should not jettison by moving on to a purely ratings based assessment of risks as advocated in the simple approach. this is why the bank of mauritius and banks are discussing in detail the practicalities of basel 2 implementation since last year and progressing the agenda on a concensual basis. finally, i would like to state that we have adopted an open attitude in this respect in mauritius. no specific basel 2 approach is mandated to any bank, irrespective of its size and complexity of its transactions. inevitably, banks will need to invest in more risk management systems responding to their present and foreseeable needs. nothing is, in my opinion, more precious and worthwhile for a bank than maintaining and developing a deep and intimate in - house knowledge of its customers for the purpose of identifying the distinct risk each one of the customers represents. with basel 2, this kind of knowledge has to be objective and systematic, and drawn up into a reliable database so that the information can be utilized, to the satisfaction of the regulator, for mitigating risks and defining the capital requirement on | ##mic. of course, the pandemic has also held productivity back for a variety of reasons. disruptions to global supply chains have made it harder for businesses to get critical inputs, limiting the productivity of labour and capital. public health restrictions have necessitated more people and space to do the same work. and rapidly changing circumstances have made it hard to plan and operate efficiently. as the pandemic fades, these forces should dissipate, creating the opportunity to increase productivity. there are two fundamental sources of growth in gross domestic product β more workers and more output per worker. we call output per worker productivity. 2 we measure workers by total hours worked, which is the product of employment and average hours worked. we call this labour input. and we measure productivity as output divided by labour input. comparing canada and the united states through the pandemic and recovery, we can see that canada β s rebound in employment has been considerably stronger. but workers in the united states increased their hours of work by much more than workers did in canada. so the recovery in labour input has been quite similar in both countries. the difference lies in productivity. productivity growth has been considerably stronger in the united states, so with roughly the same recovery in labour inputs, the united states has seen a larger increase in output ( chart 1 ). the question is why? chart 1 : canada β s labour productivity lags the united states index : 2019q4 = 100 index real gross domestic product labour input productivity canada employment average hours worked united states sources : statistics canada, us bureau of labor statistics via haver analytics and bank of canada calculations last observation : 2021q3 1 see t. mehdi and r. morisette β working from home in canada : what have we learned so far? β statistics canada economics and social reports 1, no. 10 ( october 2021 ). 2 true underlying productivity or efficiency cannot be directly observed, and it can be volatile in the short run. that β s especially valid now because of the stops and starts of the pandemic lockdowns. - 3there appear to be two related factors. public health restrictions have been more comprehensive in canada, causing temporary restraints on economic activity. 3 as we emerge from the pandemic, we should make up this difference. but the second reason could have more lasting consequences : business investment through the pandemic has been considerably stronger in the united states than in canada. indeed, us businesses have long been investing in more capital per | 0 |
battle of salamis against the persians led to an expansion of the democratic institutions already introduced by cleisthenes. in democratic athens, all citizens enjoyed equality before the law, as well as equality of vote and equal opportunity to assume political office. the population doubled during the years of pericles, with thousands of immigrants contributing to the demographic growth of athens. ancient greeks conducted free trade with almost every part of the then known world, from the black sea to sicily, right up to the pillars of hercules, in today's gibraltar, founding colonies along the way. this commercial activity allowed, at the same time, invaluable cultural exchanges. the athenians managed available capital according to demand and supply, even initiating large - scale public works when unemployment was high. they turned economic prosperity into a warm place for art, science and culture to bloom. on the antipode, ancient greece can also teach us lessons to be avoided : in particular, how the lack of unity, or division and rivalry, which was the case between ancient citystates, can bring about a devastating conflict such as the peloponnesian war, which crippled greek military strength, bringing the most culturally advanced greek city - state, athens, into decline. luckily, there stand monuments, like the acropolis you see outside, that remind us of all these and of some core developments in the history of democracy and human creativity, which first emerged at the time of pericles but remain valid and pertinent to this day. it is a miracle that we are able to behold such iconic monuments and be reminded of the values they represent, which are at the core of our contemporary european identity and shape what it means to be a european citizen today. 3 / 4 bis - central bankers'speeches speaking of what it means to be a european citizen today, i would like to say farewell to my dear colleague ignazio visco, since this is his last governing council meeting after twelve years at the helm of banca d'italia. with ignazio, we have travelled together a long journey in the last several years. during this journey, full of storms but also some sunny periods, we have appreciated his integrity, intellectual honesty, wisdom, judgement, common sense, diligence and positive attitude. he has remained a true european citizen, faithful to the euro, supporting it in its most difficult times. a central banker who believes that price stability, financial stability and full employment can coexist if the | ensuring their effectiveness and respecting the existing accountability arrangements at the national level. the bank of greece has a strong interest in the outcome of this debate, in which it actively participates, in the hope that an optimum balance will be reached. needless to say, this interest also reflects the fact that the bank of greece is both the host supervisor for incoming eu banks and the home supervisor for outgoing greek banks, which are expanding mostly to the neighbouring balkan countries, some of which are preparing to implement the eu framework. in performing its roles, as mentioned above, the bank of greece consistently follows policies that encourage the european integration process and refrains from creating unnecessary administrative burdens or erecting other obstacles, without, of course, putting the effectiveness of its supervisory tasks at risk. other regulatory initiatives β’ in parallel with the preparation for the new supervisory framework's implementation, discussions are under way regarding the revision of the directive on deposit guarantee schemes and the electronic money directive. β’ another major issue that has sparked considerable controversy concerns the so - called supervisory approval process. the debate was initially triggered by certain market participants, who fear it to be an obstacle to cross - border mergers and acquisitions. the bank of greece and the central banks of many other countries have repeatedly stated that isolated cases, in which a misuse of supervisory powers may have occurred, should not be generalised. in greece, as it is the case in the eu as a whole, the supervisory authorities base their decisions regarding the merger or acquisition by a foreign institution of a domestic bank strictly on supervisory criteria. the new decision - making structure for financial services apart from the introduction of the new capital adequacy framework, another radical change that has been introduced involves the decision - making process at the eu level for the financial sector, also known as the lamfalussy process. a new financial services committee architecture has been established. the lamfalussy approach, which was originally elaborated for the securities sector, now extends to the banking and insurance sector, as well. given the time constraint, an extensive presentation of the lamfalussy framework would probably be inappropriate. however, there is reason to underline some of its main objectives, which are : β’ to develop regulation that can adapt quickly to new market developments and practices, support integration and enhance eu competitiveness, and β’ to strengthen cross - border and cross - sector cooperation among supervisory authorities and the convergence of day - to - day supervisory practices and implementation. it is worth mentioning that the new | 0.5 |
β they say β and again and again. they β re still twice as high as interest rates in europe β and they might just as well add, they are over 150 times as high as interest rates in japan! the many more net savers β including pensioners living off the interest on their savings β take the opposite view, although they do, of course, benefit from the low inflation environment through the protection it gives to the real value of their assets. what we have to try to do is to maintain stability in the economy as a whole, by keeping overall demand continuously broadly in line with the supply - side capacity of the economy as a whole. the inflation target is not some abstract end in itself β it is the measure, or barometer if you like, of how successfully we are managing to maintain macro - economic stability in the economy as a whole in this much wider sense. the reason that our interest rates remain higher than those in the eurozone is that, despite the recent slowdown, our economy is operating closer to capacity than theirs. that β s partly why our rate of unemployment is almost half theirs β though the greater structural flexibility of the british economy is even more important in this context. the mpc sets interest rates to achieve the inflation target. we have made it clear by our actions that we are just as vigorous in relaxing policy when the risks to inflation are on the downside as we are in tightening policy when the risks to inflation are on the upside. that β s the best help that we can give through monetary policy. it does not mean that we ignore the external pressures. in assessing the prospects for the overall economy, and for inflation, we take full account of the impact of world demand and of the exchange rate, just as we take full account of all the domestic factors bearing on inflation prospects. when, as now, the external influences are having a powerful disinflationary effect, monetary policy is of course easier, and interest rates lower, than they would otherwise be. that does not β and cannot β mean that we are able to pursue any particular objective with regard to the exchange rate β or that we respond, pavlov - like, to exchange rate fluctuations. but we can, and do, aim to offset the impact of persistent external influences on the prospect for inflation so that inflation in the economy as a whole stays on track to meet the inflation target given to us by the chancellor. that is what we have been doing β and is the | context of our further move today. no - one, my lord mayor, is more conscious than i am of the limits to what we can hope to achieve through monetary policy. but by operating within those limits we have been able to achieve greater macro - economic stability, and consistently lower inflation, than we β ve seen for a generation. and that stability, together with the improved supply - side flexibility of the economy, has delivered our highest ever level of employment, and a rate of unemployment in the economy as a whole that is still close to its lowest for almost 20 years. | 1 |
john iannis mourmouras : the pandemic crisis as a challenge greece the day after opening speech by professor john iannis mourmouras, senior deputy governor of the bank of greece, at the imn's greek banking & npl management virtual event, 9 september 2020. * * * good afternoon everybody in athens and europe, good morning to new york, let me first thank the imn, especially chris and my friend jade for the kind invitation to offer a few opening remarks at today β s important webinar on β greek banking & npl management β. i wish to all of you to be healthy and stay safe and next year we all get together in athens at the imn β s real event, and not like this year β s virtual event. although the corona shock hit all countries in the world, both in terms of public health and national economy, its effects are asymmetric on both frontiers. this is because, on the one hand, the speed of governments β responses in flattening the pandemic curve differed among countries and, on the other hand, because of different initial conditions and timing of the appropriate monetary - fiscal policy mix. in europe, southern countries have been hit harder than northern ones, both in terms of the brunt of the disease and the economic recession. in my country, measures to combat the pandemic were taken by the government in a timely fashion and the citizens exhibited selfdiscipline and respected the public addresses of the greek prime minister kyriakos mitsotakis ; the total number of reported cases was equally low. greece is among the five best performers in the eu in terms of coronavirus deaths per million. the latest forecasts with regards to the greek economic outlook this year is for a recession around 7 - 8 % and for next year a recovery of around 3 - 4 %, namely not a v - recovery, similar to the rest of the eurozone. looking ahead, the economy will benefit in the coming years mainly from two drivers : a ) the catching up effect, which will be bigger as a result of a combination of the mou and pandemic years and b ) from the government β s reforms agenda and fdi. more on the positive side, last week greece held a successful bond auction, it β s fourth in 2020, to raise β¬2. 5 billion and boost state cash reserves. the public debt management agency said the sale was 7, 6 times overs | axel a weber : the global economic crisis and the challenges it poses introductory remarks by professor axel a weber, president of the deutsche bundesbank, at the morning plenary session " the global economic crisis " of the israeli presidential conference 2009, jerusalem, 22 october 2009. * * * introduction ladies and gentlemen, mr chairman thank you for the opportunity to speak to you here on the global economic crisis and the challenges it poses. these issues can be discussed from very different angles, many of which are equally interesting. however, my perspective is that of a central banker within the eurosystem and i will therefore focus on the macroeconomic dimension of the two main topics raised in the announcement to this plenary session. they are, broadly speaking, a stock - take of the economic environment, including the short - term outlook, and the long - term implications of the crisis for economic policy and the science of economics. however, i would like to add another point which i regard as a linchpin between these two areas. it is the question of how to get from the state we are currently in to a hopefully more stable equilibrium, in which the lessons from the crisis have been learnt. the issues that need to be discussed in this third, medium - term field are, in particular, exit strategies for the various policy measures taken during the crisis. in my view, the way we tackle these challenges in monetary policy, fiscal policy and at the level of the imf will be at least as important for future growth as the changes in the architecture of the financial system, adjustments to monetary policy or improvements in economic theory. but let me start with the state of the world economy. where does the global economy stand? the financial crisis caused very serious disruptions on the financial markets after the collapse of lehman brothers, and only far - reaching interventions by governments and central banks worldwide prevented a collapse of the whole financial system. despite this coordinated action, we entered the deepest global recession since the second world war. however, after an economically devastating winter half year, we have seen a remarkable stabilisation around the world in recent months. in the euro zone, the decline in gdp almost came to a standstill in the second quarter, and a slight increase quarter - on - quarter is likely in the third quarter. germany even delivered a positive surprise in the second quarter, when gdp grew by 0. 3 % on the quarter ; the outlook for the third quarter is even better given a rebound in industrial activity and the | 0 |
industry β s discussion regarding the usage of dlt would be welcome. after all, we should not forget that financial markets are a network industry. we need to make sure that useful innovations, i. e. innovations that are proven to improve safety and efficiency, do not lose momentum because market participants fail to coordinate their efforts. moreover, as an overseer, the eurosystem needs to arrive at a common understanding how the adoption of dlt could potentially affect the overseen entities and their business models. the emergence of new market actors requires reflection on issues such as how to ensure a level playing field for newcomers and long - established players, as well as an appropriate level of protection for the users. last but not least, the effects of digitalisation and new technologies such as dlt also need to be studied in the context of cyber resilience. on the asset side, access to the dlt network for the central bank β s oversight or supervisory function could be used to cover the data requirements of the overseer and ease the reporting burden of the overseen entity. it goes without saying that when accessing the dlt network, the right level of access and data protection requirements have to be respected. overall, for the eurosystem, the main objective continues to be the proper transmission of monetary policy and the support to financial stability. safe and efficient market infrastructures are key in this respect. conclusion dlt has a disruptive potential in the financial market. like the hammer that shatters glass yet can forge steel, it may bring advantages to some actors and disintermediate others. bis central bankers β speeches from a central bank perspective, in the context of our strategic reflections on the future of eurosystem β s market infrastructures, we are certainly open to new technologies and, like many market players, have launched some experimental work with dlt. bringing our eurosystem market infrastructures on dlt automatically means bringing central bank money on dlt. this may have implications on the central bank functions which go beyond the operational and technical sphere. it is therefore important to structure the discussion along the lines of who could access the central bank ledger. we very much welcome the industry β s efforts to work on standardisation and interoperability both in the payments and in the post - trade domain. it is clear that we have a lot of more thinking to do on dlt - related questions and their policy implications. before wielding the hammer we have to make sure that we have a strong | international currency. this encompasses the use of the euro for official reserve holdings and as a reference currency for exchange rate arrangements. statistics related to official reserves were published in the most recent international monetary fund annual report, and indicated that the share of the euro was around 13 % at the end of 1999. this is comparable with the weight of the legacy currencies one year earlier. the fact that stability is prevailing is consistent with the notion that central banks tend to be conservative in managing their reserve holdings. remaining in the sphere of international official reserves, the international monetary fund has recently decided on a new valuation method for the special drawing rights ( sdrs ), which comes into force on 1 january 2001. the sdr basket traditionally comprised five currencies of individual countries, including the deutsche mark and the french franc. the weight of each currency in the basket was determined on the basis of trade and financial data of these countries. in order to reflect the new economic area resulting from the introduction of the euro, the sdr basket will henceforth include the euro, instead of the deutsche mark and the french franc. its weight will be based on the importance of the euro area as a single economic entity. similarly, the euribor will be substituted for the german and french national interest rates in the determination of the sdr β s interest rate. these modifications underscore how the official international financial community is gradually adjusting to the new reality of the euro. as a last point, let me deal with the use of the euro as a reference currency for exchange rate regimes adopted by third countries. today, over 50 countries are managing exchange rate arrangements that include a reference to the euro. this involves a variety of regimes, ranging from very tight pegs ( ie currency boards ) to managed floating policies. geographically, these countries are located on the european and african continents. this is a difference with the us dollar, which is also used by a few countries outside the western hemisphere. the intensive trade and financial links with the euro area are the main factor behind the choice of the euro in the definition of exchange rate policies. for some countries, the european union accession process provides an additional impetus to select an exchange rate arrangement based on the euro. i should highlight that the choice of a euro - based exchange rate arrangement is a unilateral decision, and does not involve any commitment on the part of the ecb. however, this use of the euro as a reference currency may be seen as a sign | 0.5 |
% category i higher than the rate for category ii category absolute value of the short β term policy interest rate 0. 1 % ii category iii purchase only etfs tracking the tokyo stock price index ( topix ) financial system and bank examination dept. staff will make a briefing at the mpms when the outlook report is decided ( four times a year ). 0 % lower than the rate for category ii eligible fund β provisioning measure β’ special operations in response to covid β 19, when funds are provided against loans made by financial institutions on their own β’ special operations in response to covid β 19, when funds are provided against loans other than those for category i and against private debt pledged as collateral β’ β’ loan support program operation to support financial institutions in disaster areas β enable the bank to cut short β and long β term interest rates more nimbly while considering the impact on the functioning of financial intermediation in addition, adjustments to the complementary deposit facility will be made to narrow the gap between the actual policy β rate balances and the " hypothetical " policy β rate balances. | however, that i am not insisting on a simple shift from bank - dependent financing to capital - market - dependent financing. we will not be able to identify an optimal system for corporate financing by perfunctorily repeating such questions as : β which is more desirable, financing mainly from banks or from capital markets? β for business projects to contribute to economic growth, there has to be someone collecting and analyzing data about these projects, and assessing the risks involved and the likely rates of return. no matter how we change the overall structure of the financial system, we will always require somebody to perform this fundamental role. what is called for at present is a complete revamping of the ways in which information on risk and return is gathered and dealt with, as an integral part of building a new system of corporate governance to replace the main bank system. japan is not the only country that is searching for alternative forms of corporate governance. in the past, u. s. firms were seen as providing the role model for corporate governance. however, in the wake of a series of incidents such as the failure of enron, they too appear to be entering a new phase of corporate governance. as a result there is no particular textbook model that we can apply to for guidance regarding corporate governance, and we must work hard to produce an original one. iii. recent developments in corporate finance over the past few years there have been a number of new developments in the area of corporate finance in japan that seem to signal further changes in the future. first, firms have been reducing their levels of debt. this has been a major trend since the 1990s. the corporate sector has registered a net surplus since fiscal 1998, with savings exceeding investment, and the outstanding amount of loans extended to firms by banks has decreased on a net basis since 1994. the straightforward reasons for these debt reductions have been firms'need to get rid of the excess debts built up during the asset price bubble in the late 1980s, and also the increasing difficulty of finding new investment opportunities in the years of economic downturn. more fundamentally, both firms and banks have become increasingly aware of the need to optimize their capital and liability structures to adapt to changes in the economic environment. for firms this involves carefully assessing the risks and returns associated with projects, as well as recognizing the need to achieve an optimal structure in terms of their relative holdings of capital and interest - bearing liabilities. meanwhile, banks are striving to enhance their risk management by taking better note | 0.5 |
klaas knot speaks with mps about inflation november what has caused the recent sharp rise in inflation, and where is it heading? and what is the european central bank doing to bring inflation back to the 2 % meeting with standing parliamentary committee for finance, 24 november : what are the factors behind the current rapidly rising inflation? we are coming out of a lengthy period of low inflation. between 2011 and mid - 2021, euro area inflation averaged 1. 2 %, which is below the ecb's price stability target of 2 %. the ecb's monetary policy was therefore very accommodative for a long time, with the additional aim of preventing self - reinforcing effects via falling inflation expectations and deflation. inflation subsequently rose sharply for various reasons. starting in the first half of 2021, covid - 19 lockdowns led to shortages of manufacturing resources such as computer chips along with higher costs for container transport. this resulted in price hikes that also hit consumers directly starting in the summer of 2021. energy prices began to rise in late 2021. inflation was boosted further when the economy reopened in early 2022, with demand for goods and especially services recovering strongly and outpacing supply. russia's invasion of ukraine then caused natural gas prices in europe to skyrocket and food prices to soar. these factors came in rapid succession and persisted for longer than anticipated. consequently, inflation has now been high for longer and has gradually spread from energy to food, industrial goods and services. inflation in the netherlands has now reached 16. 8 % ( in the euro area : 10. 6 % ) in october. the price increases of energy and food are the most remarkable. more than two thirds of harmonised hicp inflation can be ascribed to energy and food. expressed in percentages : of the 16. 8 % hicp inflation in the netherlands, almost 12 percentage points are accounted for by energy ( 9. 7 points ) and food ( 2. 2 points ). Β© dnb the calculation method used by statistics netherlands creates an upward distortion of dutch inflation in the order of 3 - 4 percentage points. this distortion is largely time - shifted : consumers with fixed energy contracts will also eventually face higher gas prices. where do we see inflation going? the exceptional economic circumstances are creating great uncertainty about the future path of inflation. ecb projections call for euro area inflation to remain high in 2023, only approaching levels near 2 % in 2024. related upside risks are linked | steven maijoor : managing climate and environmental related risk stepping up the pace speech by mr steven maijoor, executive director of supervision of the netherlands bank, at the morningstar sustainable investing summit 2023, amsterdam, 12 october 2023. * * * i was with my family in greece for the summer holidays. one evening we walked through a street in athens with restaurants lined up along the street, and there was a man trying to lure tourists into his restaurant. when he approached us i told him we had other plans, but somehow i wanted to know how he was doing. so i asked him. and what i did not expect was that he started ranting, a complete stranger, about how the summers had become unbearably hot, and that the number of tourists was already declining as a result. he was very depressed about the whole situation and he confided in me that he was seriously considering moving to norway. i was shocked and sad because i saw he really meant it. and the hard truth hit home again that the climate crisis is here and now, and it is affecting the lives of real people. and on top of that, it is affecting our economies. and when it affects our economies, it affects our financial sector as well. financial institutions are exposed to climate and environmental risk. think for instance about the risk of a flood in the western part of the netherlands. don't forget we are below sea level here. serious flooding could increase a bank's credit risk following damage to collateral such as houses and other buildings. and this would then require a bank to draw on its capital reserves. that's what we call physical risk. and then there is transition risk as well. transitioning to a net - zero society will likely lead to adjusted or new government policies. it could also lead to technological advances, or changes in market sentiment and market preferences. the transition to a net - zero economy creates risk for financial institutions that are highly exposed to sectors of the economy that are unprepared. governments, for example, could impose higher taxes on greenhouse gas emissions. as a result, the revenue of an energy - intensive company could decline. and this could impact the company's creditworthiness and its ability to repay outstanding debts to banks. physical and transition risks are not only related to climate change. financial institutions are also exposed to risk stemming from the degradation of nature, and actions aimed at preserving and restoring it. nature provides services that are essential | 0.5 |
, i have expressed my views under the theme of public policy study and monetary policy management by incorporating my own experiences and providing examples of what is actually happening recently on the economic policy front. as mentioned at the outset of my speech, in economic policy, academic knowledge and practical knowledge are close or even inseparable, and public policy study that bridges the two has become extremely important. this situation is common in any country, and as interrelationships among countries β economic policies have been deepening, there is no doubt that the global network has increased its importance. therefore, it is expected that each country β s graduate schools of public policy will promote public policy study through an expansion of joint studies and exchanges between professors and between students. from a central bank β s perspective, i have great expectations for properly managing monetary policy by thoroughly utilizing the fruits of such studies. at present, there are not many economic papers that get a hit when doing an internet search with the keywords β quantitative and qualitative monetary easing ( qqe ). β however, a few years from now, the experience of japan and the bank of japan may have provided a new chapter for economics and public policy study. and i cannot help but expect that a theory worked out then will be one of the powerful weapons that central banks can use in the future to combat deflation. thank you for your attention. bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches | s commitment to continue with this provision of ample liquidity until the year - on - year rate of change in the cpi ( excluding fresh food, on a nationwide basis ) registers zero percent or higher on a sustainable basis. this commitment is unprecedented as central bank monetary policy, but stipulating the conditions beforehand has made it possible for market participants to act based on the commitment and that has contributed to boosting the transparency and effectiveness of monetary policy. reviewing the subsequent policy effects, when there were strong concerns about financial system stability, the provision of ample liquidity by the bank, which met financial institutions'liquidity demand, stabilized financial markets and maintained accommodative financial conditions, and contributed to averting a contraction in economic activity. in financial markets, the bank's provision of ample liquidity pushed short - term interest rates down to practically zero percent. longer - term interest rates have remained stably at low levels, because the commitment by the bank has led the market to expect that the short - term interest rates will remain at zero percent when prices continue to decline. now that concerns about financial system stability have subsided substantially and prices are beginning to rise, the commitment is losing its influence on the formation of longer - term interest rates. thus, the effects of the quantitative easing policy are coinciding with the effects of short - term interest rates being at practically zero percent. after the quantitative easing policy is maintained in accordance with the commitment, future monetary policy will follow the path of the processes of " reducing the outstanding balance of current accounts toward a level in line with required reserves, " " maintaining very low interest rates, " and " gradually adjusting interest rates to a level consistent with economic activity and price developments. " in explicating these processes in somewhat greater detail, with respect to the timing for changing the quantitative easing policy framework, the bank will judge whether the year - on - year rate of change in the cpi registers zero percent or higher on a sustainable basis in accordance with the commitment. assuming that developments follow the projection described in the outlook report, the possibility of meeting the conditions of the commitment and of departing from the present monetary policy framework is likely to increase over the course of fiscal 2006. in reducing the outstanding balance of current accounts, the bank will need to monitor financial market conditions carefully, because the outstanding balance of current accounts at the bank has been exceeding substantially the amount of required reserves for a long period of time. up to this point, the outstanding balance of current accounts | 0.5 |
not easy to achieve considering russia β s strong dependency on oil prices. meanwhile, the financial system is being developed and the economy dedollarized, but very cautiously and β trying to avoid radical changes β. sharp foreign capital inflows have an impact on the economy that, in transitional situations such as this one, may be costly rather than beneficial. dealing with the current trend towards exchange rate appreciation appears as an one of the most critical challenges for emerging market policy makers. one of the lessons learned from the convertibility era in argentina is that there is nothing more procyclical that an appreciated domestic currency, in terms of both public and private consumption. currency appreciation fosters current consumption at the expense of savings and, hence, investment and long - term economic growth. the paper presented by rajan yesterday is quite clear in this regard : overvaluation caused by foreign capital leads to lower returns on investment and lower growth rates. furthermore, for a country that has undergone three financial crises in the past twelve years, where macroeconomic volatility is perhaps the main factor for the low dynamism of the previous decades, preventing another crisis must be a priority economic policy objective. within that framework, the role of the exchange rate as a trigger of a crisis should be considered : currency overvaluation typically ends in a sharp devaluation with high costs for the economy. besides, it is essential not to adjust policy to temporary trends : part of the current pressure for the appreciation of emerging currencies relates to commodity prices ( through the current account ) and the investors β risk appetite ( through the capital account ), which may clearly be temporary instead of permanent forces. against this backdrop, it would be wrong to adjust monetary policy to these forces. on the contrary, it is prudent to try and prevent euphoria, taking these changes as temporary in nature. these factors may lead to nominal exchange rate overshooting, which, far from adjusting towards long - term equilibrium, may cause excessive volatility and hence distort relative price signals for savings, consumption and investment. finally, we central bankers should never forget about the general equilibrium analysis, especially when assessing the impact of exchange rate volatility on the set of macroeconomic variables in a normalization phase. in my opinion, monetary policy should be conceived under a general equilibrium approach, where fiscal solvency, the monetary balance and external sustainability are mutually determined. in this sense, the need for policy coordination is stronger in | monetary policy and uncertainty, but it is also worth noting the introduction of our central banks to the wider institutional system comprised by the national governance structure. this morning, ron mckinnon and willem buiter spoke of the changing doctrinal perspectives on central banks. i believe that there clearly emerges a positive development of the past decades, that is, granting autonomy to monetary authorities to decide on the best instruments to carry out our task. this development has been coupled with a higher transparency and accountability by central banks, something that only a decade ago was not as widespread. this teaches us a valuable lesson : the notions that we consider today as the most firmly established are the result of a specific institutional development rather than unchanging practices. we, as monetary authorities, must contribute to deepening the positive aspects of such development. here, it does not seem adequate either to think of a single β universal institutional framework, β but of useful principles such as autonomy and accountability that should be adapted to the institutional reality of each individual country. in the past years, macroeconomic discipline has been strengthened and thus the region is better prepared to face adverse scenarios than in the past decade. however, there is still much work to do in order to reduce potential sources of vulnerability in our economies. this entails a hard duty. agreement among public policymakers and analysts is not enough β there is a need for broad and lasting economic and institutional consensus to prevent policy reversal, which only leads to stagnation and frustration. thank you very much and look forward to seeing you next year. | 1 |
evolution of supervision and regulation of these activities, i ask myself whether the rules are clear in the current rapidly evolving environment, and whether the rules as they evolve are serving a legitimate prudential purpose. banks seek to understand and comply with rules because, above all, they value predictability and consistency. when a bank understands the legitimacy of a rule and establishes internal incentives to comply with it, the bank itself becomes the strongest supervisory tool that there is. but sometimes, rules are difficult to apply. this can be due to quickly evolving technologies, particularly when it comes to digital assets, but it can also be due to a lack of experience with new rules, or when the rules are not that clear in a particular context. banks should be able to know what the supervisory expectations are with respect to these new technologies in order to responsibly take advantage of them. the adoption and use of new technologies may present novel supervisory concerns, but the best way to address these concerns and encourage innovation is dialogue between bankers and supervisors before and during the development and implementation of those technologies. 6 / 8 bis - central bankers'speeches i believe the goal with digital assets should be to match oversight to risk, and to provide clarity in supervisory expectations for banks seeking to engage in the crypto - asset ecosystem. as fluctuations in crypto - asset prices have shown, there clearly are material risks associated with these assets. however, it is also an area where there has been and continues to be intense consumer demand, and we should consider whether there is a stabilizing role for banks to play in intermediation, or ensure that the competitive landscape does not create a financial stability risk by pushing activities outside the banking system, as we have seen with the mortgage industry. to be effective in this space, any clarity regulators provide will need to recognize that this is not a risk - free activity, but i believe we should allow banks to participate as long as the risks can be identified and managed appropriately and responsibly. another way to promote consistency is to continue improving the disclosures around supervisory standards. while doing so improves transparency, it also improves fairness, another of my core principles. like the due process protections enshrined in the u. s. constitution and embedded in regulatory law, fairness is fundamental to the legitimacy and effectiveness of financial oversight, including supervision. in the context of bank regulation and supervision, fairness means being transparent about expectations, which should be clearly laid out in advance ( and i want to emphasize | some of the differences we see in bank behavior likely relate to banks β individual liquidity needs and preferences. indeed, banks manage their balance sheets in part by taking into account their internal liquidity targets, which are determined by the interaction between the specific needs of their various business lines and bank management β s preferences. in any case, this picture illustrates the complexities that are inherent in understanding banks β underlying demand for reserve balances, a topic for which more research would be quite valuable to policymakers. so, what does this finding say about the longer - run level of reserve balances demanded by banks? the answer is that there is a large degree of uncertainty. in fact, the federal reserve bank of new york surveyed primary dealers and market participants last december to solicit their views about the level of reserves they expect to prevail in 2025. 12 a few features of the survey responses stand out. all respondents thought that the longer - run level of reserve balances would be substantially lower than the current level of more than $ 2 trillion. in addition, there appeared to be a widely held view that the longer - run level of reserves will be significantly above the level that prevailed before the financial crisis. but even so, the respondents did not agree about what that longer - run level will be, with about half anticipating a level ranging between $ 400 billion and $ 750 billion. it is important to point out that the fed β s balance sheet will remain larger than it was before the crisis even after abstracting from the issue of banks β longer - run demand for reserve balances. the reason is that the ultimate size of the fed β s balance sheet also depends on developments across a broader set of fed liabilities. one such liability is the outstanding amount of federal reserve notes in circulation β that is, paper money β which has doubled over the past decade to a volume of more than $ 1. 6 trillion, growing at a rate that generally reflects the pace of expansion of economic activity in nominal terms. other nonreserve liabilities have also grown since the crisis, including the treasury department β s account at the fed, known as the treasury β s general account. recent growth in such items means that the longer - run size of the fed β s balance sheet will be noticeably larger than before the crisis regardless of the volume of reserve balances that might ultimately prevail. 4 / 10 bis central bankers'speeches putting the various pieces together, figure 3 illustrates how the overall size | 0.5 |
##al narrative does not obviate the fact that important structural impediments do exist and need to be addressed. according to the latest global competitiveness report, thailand compares less favourably in terms of capacity to innovate, quality of workforce, and infrastructure. labor market efficiency has fallen 42 places in less than four years, against the backdrop of labor shortage that could worsen as the society ages. improving education and labor market reform are therefore critical as a foundation for innovationdriven development. the integration of manufacturing sector into the global supply chain needs to be a more dynamic and forward - looking process. the old days of easy wins are bygones. knowledge and vision are necessary preconditions for innovation - led growth. the current government β s reform agenda indeed places a great focus on providing the right incentives and environment for the private sector to undertake the next big leap of improving their productivity and innovative capacity. but the ultimate success will hinge on the private sector rising to these challenges and following through with their actions and ingenuity. third pillar : strengthening the economy & development ladies and gentlemen, let me now turn to the final pillar, that of strengthening the structure of the economy towards a sustainable long - term economic development. i have touched upon several real sector issues that could pose challenge to thailand β s prosperity. but there are also important financial sector areas that are no less important, despite the immediate consequences being less evident. financial development, indeed, is an integral part of economic development. the relatively small financial market in thailand means that largescale cross - border activities, especially mergers and acquisition, cannot take place without adversely affecting financial market volatility. promoting deeper financial market would help facilitate more long - term direct investment that is needed for the economy to upgrade its technological capability. financial development also entails broader banking and payment issues. for example, diversifying the sources of financing and reducing the degree of dependence on banks, would help the financial system better absorb shocks and improve efficiency of funding. upgrading the financial infrastructure and payment system is necessary for the economy to reap full benefits from regional trade integration in the new digital age. implementing financial development is not a straightforward task, and among other things, it is complicated by the need to ensure financial stability. bigger financial system can increase the system β s fragility, which if left unchecked, could undermine economic development efforts. financial innovation, in some instances, could encourage risk - taking activity that raises rather than | additional pressure. this is to say some smaller emerging markets will face an aging population and the increase in demand for wealth management, while the supply of local products are limited for diversification. this will pose challenges for inter - temporal allocation of resource and risk. thus, it is imperative that emerging markets devise a proper strategy and process to expedite reforms and develop the financial system. the second longer - term reform i want to bring up is policy institution and framework. on this, two policy institutions are of utmost important for attaining monetary and financial stability. the first is a credible monetary framework that effectively anchors the public β s expectation of inflation. the key issue here is the importance of independence and transparency of the monetary policy process. the usual case is that the lack of independence can come at a great cost in terms of lower central bank credibility and a less favorable trade - off between inflation and output volatility. likewise, weaknesses in monetary policy transparency can contribute to policy uncertainty and exacerbate the impact of shocks on macroeconomic volatility. the second important policy institution is an effective supervisory policy and domestic financial institution β s capacity for sound risk management. the logic for this is clear. with less effective supervision and limited capacity to manage risk, the ability of the economic system to absorb volatility from global markets is significantly compromised. reflecting this, emerging markets have put enormous emphasis on building up the necessary institutions with regard to effective supervision. but the challenges are many. for example, at this time, many emerging markets are facing the challenges in implementing basel ii. the objective of basel ii is to strengthen the soundness and stability of the banking system through more risk - sensitive capital requirements and rigorous internal risk assessment process. this has a direct bearing on ensuring financial stability. but because basel ii is developed from the current practice among banks in developed countries, some banks in emerging markets may have a large gap to fill. for example, in moving away from collateralbased to credit - based loan approval, banks must focus more on the ability to pay of customers and to make loan decisions in a forward looking manner. this requires a different set of expertise that focuses on risk assessment in the environment of changing economic cycle and asset quality. next is the information system which is the most important foundation for achieving financial stability through capital adequacy. whereas developed countries generally already have in place the necessary infrastructure in this regard, financial institutions in emerging countries have to build the system from the ground up, involving | 0.5 |
early to tell whether the changes on the financial markets have determined the end of β credit cycles β. y. altunbas, l. gambacorta and d. marques, β securitisation and monetary policy β, mimeo, may 2007. 4. 2 monetary policy and asset markets while the role of banks in monetary policy transmission is diminishing, other channels are gaining in importance. to the extent that financial innovation makes markets more complete and more efficient, actual and expected changes in official interest rates are readily transmitted to a wide range of financial assets. overall, the effects of policy decisions on financial markets are stronger and faster. a more immediate impact of monetary policy on a wide range of asset prices may have favourable implications, since it provides monetary authorities with a powerful instrument for affecting the economy. market expectations on future policy intentions move long - term rates and affect financing conditions, even before official interest rates are changed. the modification of asset prices affects consumption and investment decisions. if policy communication is effective, these changes may partly β do the job β for central banks. at the same time, unless we are suitably careful the consequences may be disruptive. policy actions that diverge from the pace expected by economic agents, which is built into long - term interest rates and other yields as well as into positions taken on the market, may upset markets, increase volatility and, in extreme cases, induce a simultaneous revision in positions, with potentially disorderly effects on liquidity and asset prices. the concern not to destabilize financial markets is one reason why many central banks have striven in recent years to reduce the uncertainty arising from policy decisions. they are paying more attention to proper communication of their objectives, strategies and, with different nuances and practices, future intentions. a trend to greater gradualism in policy action has emerged in all the main industrialized economies ( policy moves in excess of 25 basis points are now quite rare for major central banks ) partly in response to the greater uncertainty over the impact of rate changes on the financial markets. as the interplay between policy actions and market expectations gathers importance, we should also guard against the risk of what has been described by alan blinder as the β dog chasing its tail β. it is fundamental that we to avoid a situation in which financial markets look at the central bank and the central bank looks at financial markets, both losing sight of the underlying factors that determine inflation. in the eurosystem, we consider it | designed to reactivate market mechanisms, not to remedy the difficulties of individual banks at taxpayers β expense. it can also help restore an adequate flow of credit and thus support the economic recovery. bis central bankers β speeches the dialogue must be brought to a conclusion rapidly ; protracted uncertainty over this matter can discourage the completion of market transactions. banks must also take steps to improve the data on non - performing loans. the analyses on this subject have brought to light informational gaps that could dissuade potential buyers. data are also needed in order to improve the banks β own management of these assets. banks β corporate governance the reform of the cooperative banks is now in the implementation phase. the supervisory instructions issued by the bank of italy that complete the reform and enable the launch of the operations needed to ensure that cooperative banks with assets of above β¬8 billion comply with the new legislation came into effect on 27 june. once it is ascertained that this threshold has been exceeded, the bank β s executive bodies must, within a given deadline, draw up and transmit a plan to the bank of italy listing the initiatives to be undertaken within the 18 - month time limit envisaged by the law. in exercising its powers of authorization, the bank of italy will verify that the corporate operations proposed by the banks do not have the effect of perpetuating, under a new guise, the ownership and management arrangements that the law is meant to abrogate. another important step that must be taken is the reform of the mutual banks. while the cooperative bank reform takes account of the emergence of large, often listed, banks whose original links to their local communities had been severed, in the case of mutual banks the issue instead is to create the conditions for them to continue to fulfill their specific function, even in the current context, maintaining their mutualistic connotations and local community links. integration in banking groups is needed to favour access to capital markets in view of high credit risks, as well as to improve the quality of management, increase efficiency and keep costs down. this would not constitute a diversion from the mutual banks β original purposes but on the contrary would strengthen their ability to serve their members and their communities, among other things by providing a broader range of services adapted to their customers β needs. the completion of the reform will necessitate legislative interventions that promote forms of integration based on membership of banking groups, based on models that have been adopted in other european countries. the bank of italy is monitoring the discussion on these | 0.5 |
the operations of foreign banks in the united states. this network of partners requires a high degree of coordination. the regulatory authorities communicate constantly regarding bsa - related matters. for example, among bank regulators, there are a number of electronic systems in place that allow secure access to examination information. this allows regulators to monitor the status of organizations under their direct or indirect purview. it is also the federal reserve β s practice to notify relevant functional regulators when a supervisory action may have impact on an institution subject to their supervision. in addition, bank regulators collaborate in the development of consistent examination procedures and examiner training. the usa patriot act required a surge of rulemaking activity, and the federal reserve and its regulatory colleagues continue to advise treasury as it completes this important work. law enforcement coordination the federal reserve routinely coordinates with federal and state law enforcement agencies with regard to potential criminal matters, including anti - money laundering and financial crime activities. this coordination may occur when the federal reserve takes action to address matters that are also addressed in a criminal proceeding, when the financial condition of a bank is affected by a criminal matter, or when law enforcement draws on federal reserve staff expertise in its investigative work. the federal reserve maintains open channels of communication with law enforcement, whether through interagency working groups or informal staff level contacts. conclusion the federal reserve believes that banking organizations should take reasonable and prudent steps to combat illicit financial activities such as money laundering and terrorist financing, and to minimize their vulnerability to risks associated with such activity. for this reason, the federal reserve β s commitment to ensuring compliance with the bank secrecy act continues to be a high supervisory priority. the federal reserve has an important role in ensuring that criminal activity does not pose a systemic threat, and, as important, in improving the ability of individual banking organizations in the united states and abroad to protect themselves from illicit activities. thank you again for inviting me today to explain the federal reserve β s work in this important area. | diminishing efficacy on this market - impact dimension, so in this instance the past evidence seems like a good guide to future outcomes. however, the evidence on treasury - market impact is just a starting point. to fully evaluate an lsap, one needs to take several further steps, some of which are more open to debate. in so doing, it is helpful to clarify the specifics of the supply - demand story. one version of this story works through the market price of duration risk, which is the interest rate risk borne by an investor in long - term bonds. in this case, all bonds β including treasury securities, corporate bonds, and mbs β can be thought of as close substitutes for one another, and an lsap, by reducing the total quantity of duration in private hands, lowers the price of duration risk and so reduces the yields on all long - term bonds by an amount proportional to their duration. going further, this story might also suggest that, to the extent that equities embed duration risk, the return investors require to hold them should fall commensurately, thus giving a significant boost to stock prices. in other versions of the story, markets are more segmented, and treasury securities and other bonds are not such close substitutes, so an lsap has differential effects on various securities. in this case, an lsap that absorbs treasury supply would be expected to lower the yields on treasury securities relative to those on corporate bonds, or alternatively, to increase the corporate - treasury spread. 7 and by a similar logic, an lsap might have only a modest effect on stock prices. with this backdrop, let β s start with the efficacy side of the question. take our $ 500 billion lsap and, as mentioned earlier, stipulate that it reduces the 10 - year treasury rate by 20 basis points. a simple way to proceed would be to plug this 20 basis point change into one of our econometric models and ask what the consequences are for gross domestic product growth and unemployment. as a concrete case, if you did this exercise with the fed β s workhorse frb / us model, it would tell you that the $ 500 billion lsap should bring down the unemployment rate by approximately two - tenths of a percentage point at a two - year horizon. 8 this effect is economically meaningful. the model is due to kim and wright ( 2005 ). see woodford ( 2012 ) for an opposing | 0.5 |
since mid 2007 ; despite the significantly larger volume that has been brought to market ( graph 7 ). graph 7 deal structures have continued to evolve with further issuance of bullet tranches to manage prepayment risk. one recent deal was structured without a serial pay trigger, which has been the norm in recent years, apparently in anticipation of the changes to the apra β s prudential standard on securitisations outlined late last year. 7 2013 saw the first australian cmbs issue since 2011, and although volumes have remained low this has been followed by a further two transactions. issuance of other abs has remained strong, with 2013 recording the highest level of gross issuance on record with a sizable pick - up in australian dollar issuance. for an outline of apra β s proposed reforms to aps 120 see littrell c ( 2013 ), prudential reform in securitisation, presentation to the australian securitisation forum, sydney, 11 november. available at < http : / / www. apra. gov. au / speeches / documents / charleslittrell - australian - securitisation - forum11november2013. pdf >. one of the major thrusts of the proposed changes is the introduction in the prudential standards of the so called β skin in the game β for adi issued rmbs. rmbs issued since mid 2007 have typically included a serial pay trigger which after certain conditions are met, mainly satisfactory deal performance for several years after issuance, switch the principal payment order from paying tranches in order of seniority to paying all, or most tranches, proportionately to their outstanding amount. this feature was introduced in the market to address the higher cost on junior tranches in the wake of the global financial crisis and for adi sponsored rmbs, where the sponsor has been limited to hold no more than 20 per cent of the deal to qualify for capital relief, to cap the share of the rmbs held by the adi. bis central bankers β speeches corporates australian corporates have continued to have good access to bond markets both domestically and offshore, raising a total of $ 35. 1 billion of new bonds since the start of 2013 ( graph 8 ). while the amount issued has been less than in 2012, issuance that year was underpinned by significant bond issuance by the large australian miners. part of the reason for that strong issuance was that the miners were able to access the market at least | philip lowe : remarks at reserve bank board dinner remarks by mr philip lowe, governor of the reserve bank of australia, at the reserve bank board dinner, melbourne, 1 october 2019. * * * good evening. on behalf of the reserve bank board i would like to thank you for joining us at this community dinner. the board held its monthly meeting here in melbourne today. this was the first meeting that we have held in our new offices on collins street after last year selling our building on the corner of collins and exhibition streets. so even if we are in a different location, it is really good to be back in melbourne. as you are probably aware, at our meeting today, the board decided to cut the cash rate by a quarter of one per cent to 0. 75 per cent. this decision followed a detailed assessment of both global and domestic developments. globally, the main issue at the moment is the uncertainty generated by a series of geopolitical events, particularly the us β china disputes over trade and technology. understandably, this uncertainty is causing many firms around the world to sit and wait before proceeding with costly investment decisions. at the same time, many businesses are having to deal with disruptions to their supply chains. the result of all this is that after a period of reasonable growth in the global economy, the risks are clearly to the downside. central banks are responding to these downside risks by lowering interest rates. with inflation low β and expected to remain low β they are seeking to take out some insurance against the possibility of a noticeable slowdown in economic growth. from a longer - term perspective though, central banks have for some time been responding to fundamental shifts in the global appetite to save and invest. the underlying explanation for low interest rates globally is that the global appetite to save is high relative to the global appetite to invest. like many things in economics it comes down to supply and demand. when the global supply of savings is high relative to the global demand for funding to invest in new capital, the price of savings β or the global interest rate β is going to be low. there are certainly other factors at play as well, but savings and investment decisions are at the heart of the issue. this means that the key to a return to more normal interest rates globally is addressing the factors that are leading to the low appetite to invest, relative to the appetite to save. this is mainly a task for governments and businesses, not for central banks. whether or not this will happen, | 0.5 |
depositing and withdrawing money, sending and receiving remittances, purchasing and selling goods and services and making bills payments. the mabs - globe telecom proposal was one of nine selected from more than 70 projects submitted from 38 countries. nevertheless, even as the bangko sentral is responsive to these new developments and technological innovations, it continues to ensure that attendant risks are properly managed. thus, the bangko sentral has set in place the necessary regulations and procedures that cover electronic banking risk management, security procedures, internal controls, anti money laundering regulations, know your client requirements, as well as consumer protection. we have even created, within our supervision and examination sector, a core information technology supervisory group ( citsg ) to keep abreast with the latest developments in electronic banking. in parallel with the bsp β s liberalized branching regime, these technological innovations should enable banks to widen and deepen its reach to unserved and underserved bank clients in both rural areas and urban centers. there are other products using microfinance methodologies and technologies that are gaining interest. in our case, we at the bangko sentral ng pilipinas are reviewing the provision of housing microfinance, which can boost the financing needs of the low cost housing sector. finally, we recognize the increasing participation of large commercial players in the microfinance industry. we are seeing commercial banks and social investors providing loans, equity or assistance to retail microfinance institutions. these new linkages and partnerships should lead to a wider range of products, broader distributions systems, development of local currency capability and ability to hedge foreign currency by mfis, local capital market development for microfinance, and finally put microfinance in the economic mainstream. at the bsp, we are looking at various ways through which these partnerships can be fortified. we have conducted networking meetings between commercial banks and retail institutions ; we have also responded positively to requests from various interested parties to learn more about the intricacies of microfinance operations. and late last month, we issued circular 570 which recognizes microfinance loans of commercial banks to non - bank microfinance institutions as alternative compliance to the mandatory credit allocation of 6 % to small enterprises. this is an important incentive for banks to provide more wholesale loans that will increase the microfinance operations of retail institutions. indeed, exciting developments are happening in the microfinance sector. i am pleased to note in particular that mabs banks have kept in step | different matter. much attention has been devoted to the exercise within the industry and among bank supervisors, but no solution is at hand. best practice banks and early research at the federal reserve suggest that significant strides are being made in credit risk management, but the industry and regulators still have a long way to go. it is β and should be β the highest priority for the industry and the supervisors. last year, as you may recall, the united states and the other countries represented on the basel supervisors committee adopted new capital requirements for trading activities that are based on a bank β s internal measure of β value at risk. β that regulatory amendment represented an important shift in regulatory thinking and a greater willingness by the regulatory community to build on risk management practices of banks. with market risk, though, the basic elements of the β value - at - risk β measure were relatively well established, although most institutions still needed to strengthen certain aspects of their calculations and management processes. in that exercise, the necessary data for identifying current trading positions and measuring the historical volatility of their market values were also generally available. the mark - to - market process and short horizon of daily trading also helped greatly in evaluating the effectiveness and overall β accuracy β of the market risk models. none of these crucial elements exists today for measuring credit risk, and industry practice has not yet converged around a particular measure of credit risk, or even a conceptual definition of credit loss. some models, for example, identify a loss only when a borrower defaults, largely reflecting the view that the bank will hold the asset until it matures. if the model forecasts a default during the relevant time horizon, it then calculates an expected loss, or β loss rate, given default. β other models take more of a mark - to - market approach, recognizing the gains or losses in the economic value of a loan portfolio resulting not only from defaults or expected defaults, but also from changes in the credit quality of a borrower or from different market and economic conditions. as you can sense, model structures and assumptions become crucial. moreover, the fundamental input β a borrower β s credit risk rating β can be highly subjective and is largely determined internally within the bank. some borrowers have public debt ratings from recognized rating agencies, but most do not. even a public rating needs to be translated into the rating schedule of each bank. this lack of credit risk data is a serious weakness, with even large banks lacking enough historical default experience for | 0 |
emmanuel tumusiime - mutebile : the planned introduction of the east african monetary union remarks by mr emmanuel tumusiime - mutebile, governor of the bank of uganda, at the opening of the east african legislative assembly consultative workshop on the east african monetary union, kampala, 9 september 2013. * * * honourable ministers and honourable members of the east african legislative assembly ladies and gentlemen the issue that we have gathered here to discuss today β the planned introduction of the east african monetary union ( eamu ) β is one which will have profound effects on this region for decades to come. later this year i expect that the heads of state of each of the partner states of the east african community ( eac ) will sign the protocol for the introduction of the eamu. the protocol will pave the way for the transition to eamu over the course of the next 10 years and the complementary legal, institutional and economic reforms. the east african monetary union is a project with potentially large long term benefits for all of the economies in the eac but which also entails considerable risks. the long term success of eamu will be dependent upon major changes to public policy and in the way in which public policy is made in all partner states of the eac. a successful monetary union is only possible if each partner state is prepared to accept the pooling of its economic sovereignty. many economic decisions which are now made at the national level will have to be made at the regional level. this pooling of economic sovereignty extends beyond the loss of independent national monetary policy and exchange rates, which is of course inherent in a monetary union ; it also requires that each partner state accepts constraints on its fiscal policy and implements fully the provisions of the common market, including not just free trade in goods and services within the eac but also the free movement of capital and labour within the eac. if we do not build the requisite foundations for monetary union, the introduction of eamu may actually harm our economies. the problems which are currently being experienced by some of the peripheral members of the euro zone β greece, portugal and spain for example β which have lost competitiveness on international markets and can no longer use exchange rate depreciation to restore their competitiveness, should provide a salutary lesson to everyone involved in planning for the introduction of the eamu. without wishing to pre - empt any of the contributions from my colleagues in the eac secretariat, the ministry of finance, planning and economic | ##ao. i wish the cross - boundary wealth management connect pilot scheme a great success! thank you! 2 / 2 bis - central bankers'speeches | 0 |
must achieve something better than a result for the economy as a whole which is commensurate with average inflation and productivity. if we want low unemployment and price stability, wage outcomes must be adjusted to productivity in different sectors of the economy, indeed to the situation in individual enterprises and to different individuals. the design of pay systems and pay determination is also crucial to the distribution of resources and thus productivity and economic growth. in other words, higher productivity can create more scope for wage increases, but a functioning wage formation system can also help to improve productivity. sweden β s success in this area in the next few years will depend both on the measures taken by parliament and the government and on management and labour. parliament and the government establish the framework for the functioning of the labour market and wage formation. a more expansive financial policy would make the task of management and labour and of monetary policy more difficult in the next few years. the legal framework, for example the rules on industrial disputes, is another factor. tax and benefit systems are important and affect both wage formation and the behaviour of private individuals, ie their willingness to find work, move, etc. the spring budget bill noted that in many households it is still not profitable for unemployed persons to seek a job or for those in employment to work longer hours because of the way the tax and benefit systems are designed. these marginal effects have, moreover, increased since 1991. the system of wage agreements also has a bearing on the possibility of combining price stability and satisfactory employment growth. the fact that several agreements concluded at the national level do not include any individual pay adjustment guarantees, or very low ones, should increase the possibility of determining wages locally and gearing them to productivity development in various sectors. the cross - sector agreements that have been concluded, including the industry agreement between about 20 labour market organisations, include rules that reduce the risk of periods without valid pay agreements and the risk of conflicts. this is also a change which should help to improve wage formation. let me conclude with a classic quotation from a previous president of the us federal reserve, william mcchesney martin. he is supposed to have said that the role of the central bank was to β take away the punch bowl just when the party gets going β. that is one way of putting it. the central bank is always on its guard, always ready to pounce! but look at the story from another angle. it is in the guests β own interests not to let things get out of hand. behave | react to risks, even if they cannot be quantified within a particular analytical framework. bis central bankers β speeches | 0.5 |
will remember the controversial debate about how to convert the east german mark into the deutsche mark. in the end, wages in eastern germany were converted one to one into the deutsche mark. the then president of the bundesbank karl - otto pohl had warned β for the same reasons that hans - werner sinn put forward β that this was to the disadvantage of companies in eastern germany. however, he later acknowledged that there was hardly any alternative, as β political realities were stronger than economic logic β. the high level of unemployment in eastern germany was cushioned by transfers from the western part. while the exact amount of these transfers is difficult to calculate, hans - werner sinn once estimated that transfers paid up to the present day amount to around β¬1. 8 trillion β roughly the size of the german gdp in 1991, 4 but this number certainly comprises more than just the transfers via the social security system. a central tenet of β jumpstart β is that it would have been much cheaper to compensate employees for accepting lower wages than to compensate the unemployed for their job losses. 5 β implement distributional objectives through transfers and not by altering factor prices β was the economic principle that hans - werner sinn saw violated in the formation of the sinn, gerlinde and sinn, hans - werner ( 1993 ). kaltstart β volkswirtschaftliche aspekte der deutschen einheit. 3rd revised edition, deutscher taschenbuch verlag. ibid. sinn, gerlinde and sinn, hans - werner ( 2015 ). die deutsche vereinigung als vorbild fur europa? faz, 2 october 2015. sinn, gerlinde and sinn, hans - werner ( 1993 ). kaltstart β volkswirtschaftliche aspekte der deutschen einheit. 3rd revised edition, deutscher taschenbuch verlag. bis central bankers β speeches economic union between the two germanys. and he feared that this would allow wages to remain above the market clearing level for too long. and also the distributional objectives were only partly achieved : not least because unemployment in eastern germany is still higher than in the western part, per capita income in eastern germany is still only 71 % of that in western germany. it is this experience which explains at least partly why many german economists are sceptical about establishing a transfer union in europe, as at the european level these problems are aggravated by the fact that the balance between control and | this model over the past three decades are unquestionable. first, china β s output has grown by an average of around 10 % per year since those economic reforms began in 1978, with the economy showing remarkable resilience even during the recent global financial crisis. in terms of levels, china β s gdp now accounts for less than 40 % of us gdp in market exchange rate terms, but around two - thirds of it in terms of purchasing power parity. looking ahead, some observers expect china to surpass the united states as the world β s largest economy as early as 2020. strong and sustained economic growth has fuelled an eightfold rise in per capita income. and as a result, the poverty rate β the percentage of the population that has an income of less than usd 1. 25 per day β has declined to less than 16 %, down from 85 % when the reforms began. in other words, china has managed to lift more than 600 million people out of poverty in the last three decades. china β s export development is equally outstanding. it has increased its world market share from less than 1 % in 1980 to 8 % today, and in 2009 it dethroned germany as the world β s largest exporter. however, the apparent successes and resilience of the chinese economic model do not necessarily mean that this model will prove equally sustainable over, say, the next 15 years. indeed, it is interesting to note that some of the major long - term factors that have been driving china β s strong economic performance may reach a turning point in the not too distant future. these are ( i ) the continuous growth of demand for chinese exports, ( ii ) favourable demographic developments, and ( iii ) the sustained accumulation of physical capital. as regards the first factor, it seems unlikely that china β s export growth can continue to persistently exceed 15 % per year, given projected domestic demand trends in advanced economies. also, historical experience with export - led economies suggests that there are limits to the process of gaining market share. the turning point on the demographic side looks to be further off, but is even more critical. china β s dependency ratio β the ratio of people of non - working age to people of working age β is expected to start rising again by 2015 at the latest. this means that the number of people who cannot save and can only consume β the youngest and oldest sections of the population β will increase. this, coupled with the progressive drying - up of labour | 0 |
a rapid decrease in the use of cash is not without problems. this is only a few of the aspects that may be debated in the second session. the third topic is the future and we all want to know what it will look like. will the banks be reduced to mere suppliers of infrastructure and account holding services while other actors, the non - banks, have most of the end - user relation - ship? or will the banks win by knock - out? will the non - banks become banks over time as their activity expands? will payment services be delivered to us by apple? google? facebook? alibaba? what about bitcoin and its peers? will we simply have payment services provided by an anonymous network? in addition to having all these kinds of issue debated among representatives for market actors and authorities, we will also have the pleasure of listening to the academic perspective of professor charles m. kahn from the university of illinois. i β m really looking forward to learning more about all these topics today. bis central bankers β speeches | examples of such firms. a concrete example of such a case is m - pesa, the mobile payment service launched by safaricom in kenya. initially intended for person - to - person payments, it quickly became a success and a platform for a number of financial services. non - banks can also act as suppliers of services to the banks, e. g. payment switches routing the payment information or the outsourcing of back - end services such as the operation of large it - platforms, etc. these are all essential inputs for payment intermediation. because non - banks can enter the payment process in so many places, we have longer and more complex payment processes with more actors involved. banks, at least for some type of payment services, have less direct contact with the end - users. this development, whether we like it or not and depending on who we are, is a reality that we have to relate to. in this structural development in the payment market, there will be several challenges for commercial players, as well as for those of us working on the public side. evolvement is seldom a gradual and smooth process. this gives rise to a number of interesting issues that we have the chance to address here today. it also explains the conference agenda. three topics for the conference the first topic concerns the current development. how do the different market players view the evolving ecosystem? are the banks hurt or do they benefit from the entry of non - banks as a result of an increase of payment traffic through their systems and between their accounts? are all market players a big happy family where everyone cooperates with everyone else or is it razor - sharp competition, a dog - eat - dog market? who, if anyone, is gaining the upper hand? i β m looking forward to learning more about this type of issue in the first session. the second topic concerns the regulatory environment. the central role of the retail payments market for social welfare ensures that the authorities will want to promote an efficient outcome. how to balance cooperation and competition? how to ensure a level playing field and how to protect consumers? for example, is the current supervision bis central bankers β speeches sufficient or will we have to sharpen it in the future? central banks have an additional stake in this game. cash is one of our main products and an increased supply of services from non - banks is likely to reduce its usage. on the one hand, central bank should embrace the development from an efficiency point of view. on the other, | 1 |
and gas sectors. monetary and credit aggregates have, however, underperformed consistently falling below their long term trends. the decline in broad money ( m2 ) growth witnessed up to july 2009 was reversed and except in january and may 2010, the growth rate has been positive. m2 grew by 4. 25 per cent in october 2010 which when annualized represented a growth of 5. 10 per cent. net credit to the economy grew substantially since june 2009 although it has moderated since january 2010. in october 2010, aggregate credit grew by 19. 69 per cent which annualizes to 23. 63 per cent. credit to the private sector which grew since july 2009, and declined between january and august, 2010. since then, it has been rising. by october 2010, credit to private sector, core private sector, and government grew by 3. 86, 3. 07 and 64. 02 per cent, respectively, on annualized basis. it should, however, be noted that the decline in monetary aggregates is not peculiar to nigeria as other countries faced similar outcomes due to the global financial crisis. the good news is that the banking system has resumed lending. new credit to the economy increased from n145, 459 million in april 2010 to n173, 807 million in may 2010, n345, 998 million in june, 2010 representing increases of 19. 49 per cent and 99. 1 per cent respectively. it however, declined to n322, 275 million in october, 2010, representing decline of 6. 85 per cent. credit by non - intervened banks rose from n127, 270 in april 2010 to n145, 885 million in may 2010, and n218, 904 million in october 2010, representing increases of 14. 63 per cent and 50. 1 per cent, respectively. similarly, the intervened banks credit increased from n18, 189 million to n27, 922 million and n43, 371million, also representing 53. 51 per cent and 55. 33 per cent, respectively. the bulk of the credit went to oil and gas, manufacturing, and transportation and storage. furthermore, the stress test conducted recently on the twenty four banks has shown that the financial soundness of the banks ( both intervened and non - intervened ) has improved significantly compared to the crisis period. it is also gratifying to note that of the n500 billion approved for power and aviation sectors as well as for the refinanc | state of the nigerian banks, the cbn in june 2009, took a three pronged approach to assess the financial condition of the 24 banks. the first was the special examination exercise jointly conducted by the cbn and the nigerian deposit insurance corporation ( ndic ). this exercise highlighted inadequacies in capital asset ratios and liquidity ratios as well as weaknesses in corporate governance and risk management practices in 9 banks. these banks were found to be in a grave situation as a result of capital, liquidity and corporate governance concerns. they failed to meet the minimum 10 per cent capital adequacy ratio and 25 per cent minimum liquidity ratio. apart from accumulating high non - performing loans, these banks were seriously exposed to the oil and gas sector as well as the capital markets. poor risk management practices in the form of absence of necessary controls measures were prevalent as the board and management of the banks had failed to observe established controls. the remaining14 banks were found to be in a sound financial state and did not require the cbn to take any action. the second approach was to carry out diagnostic audit through independent consultants. the report of the audit exercise revealed greater magnitude of weak financial condition of the nine banks. all of them were β technically β insolvent with significant negative asset value. it also exposed several illegal activities that had been taking place in five of the affected banks. it was against this background that the cbn moved decisively to strengthen the industry, protect depositors and creditors, restore public confidence and safeguard the integrity of the nigerian banking industry. the initial measures / initiative taken by the cbn in conjunction with ndic and the federal ministry of finance ( mof ) included injection of n620 billion into the nine banks ; the replacement of the chief executive / executive directors of eight of the nine banks with competent managers with experience and integrity ; reaffirmation of the guarantee of the local interbank market to ensure continued liquidity for all banks ; and guaranteeing of foreign creditors and correspondent banks β credit lines to restore confidence and maintain important correspondent banking relationships. bis central bankers β speeches when the new management of the banks took office, it became necessary to also carry out further detailed and independent assessment of the financial conditions of the banks. thus, the third approach was to carry out management account audit of the affected banks by their new management. the outcome was very much in line with that of the audit report. consequently, the management took numerous actions under the cbn guidance to ensure that the banks | 1 |
manageable way. this is essential because it is about reducing inequalities and making sure that more fragile populations, households and small businesses, are not left out of economic development. of course, private actors have understood that financial inclusion might benefit improvements and have a huge role to play in such a journey. there are many areas where private actors can help : improving access to financial services, for instance via mobile devices, gathering more and better data, which allows for more tailored and better - priced products, driving down operation costs, and making relationships with fragile clients more profitable. these expected benefits should obviously not hide new risks related to financial inclusion in a digitalised world : a risk of digital divide, leaving out those who are not at ease with digitalisation, or even the risk of security issues for personal data if not handled properly. we, at the banque de france are very attentive to those issues because our institution has been entrusted by law to support financial inclusion. our contributions in that area are today quite diverse and are a major part of our mission to provide services to the public, in the line with three major objectives : improving fair access, preventing inequalities of treatment and improving financial literacy. as regards fair access, one good example is the banque de france β s involvement in the β right to an account β procedure set up by french law. if banks refuse to open a bank account for a client, he or she can make a request to us and we will designate a bank within 24 hours. this specific bank account will provide basic services free of charge. in 2019, 51, 000 people made use of that right. as regards the second objective to help preventing inequalities of treatment, the banque de france is involved in preventing and addressing households β overindebtedness issues. along with other stakeholders, we help them find solutions to their financial difficulties. in 2019, more than 150, 000 such situations were examined. the banque de france also chairs the observatory for banking inclusion, which is in charge of promoting financial inclusion and especially of monitoring the banking industry β s commitment to cap payment incident fees for all financially vulnerable customers. lastly, the banque de france promotes financial literacy, through its role of national coordinator of involved stakeholders, by providing specific tools, resources and training for social workers. ii. how do we promote sustainable innovation let me illustrate now more concretely what we do to foster sustainable innovation. our actions 2 / 5 bis central | bankers'speeches take two main forms : - the support to and implementation of regulatory frameworks and supervisory practices that foster both innovation and the stability of our financial system - our inclusion as a player in the financial innovation ecosystem 1most of the current regulatory framework was designed before the technological β disruptions β that we are now facing. it therefore seems logical to adapt it to these technological evolutions as well as to their challenges and associated risks. the same, naturally, applies to our supervisory framework and methods. the success of the payment services directives ( psd1 & 2 ) has illustrated that the european legislation can accompany new trends and trigger innovation. with new settlement assets such as global stablecoins, the adaptation of existing regimes will have to fit into a larger regulatory framework, to be adopted at a global level. these adaptations must preserve and consolidate two fundamentals of financial sector regulation : the financial stability objective and the principle of monetary sovereignty. in this respect, i would like to commend the ambitiousness of the european commission β s recent digital finance package and its priorities, in particular those to fight against the fragmentation of the digital single market for financial services and to address the new challenges and risks associated with the digital transformation. with regard to these risks, i think it is appropriate for the commission to address the complex but currently unavoidable issue of the oversight framework to be applied to critical it service providers, including cloud service providers, and the equally important matter of the supervision of issuers and distributors of stablecoins, whether they be single or multicurrency coins. the pilote regime, which is intended to allow market trading facilities and central securities depositories to be exempted, for a period up to six years, from specific existing rules listed in the regulation, in order to trade, settle and register crypto - assets on distributed ledger technology might also invite central banks to examine the conditions under which they could make available their own settlement asset, central bank money, beyond the inner circle of banks. 2 - adapting the regulatory framework will not be enough to keep up with the pace of innovation. at the banque de france, we consider it necessary to be a useful player in the innovation ecosystem, in pursuing two objectives : facilitate and experiment. and we are therefore particularly active in this regard through a variety of initiatives that have been made possible by innovative tools that the bank decided to set up in the recent years : - le lab, our innovation centre opened in june 2017, | 1 |
factors ; for example, numerous studies have found that borrowers are more likely to default when house prices have fallen and incomes decline. at the household level, such " double triggers " may induce defaults because of cash flow constraints or because continuing to make payments on a mortgage whose balance significantly exceeds the value of the house is more difficult to justify when the family budget is strained. see shane sherlund ( forthcoming ), " the past, present, and future of subprime mortgages ", finance and economics discussion series ( washington : board of governors of the federal reserve system ) ; kristopher gerardi, christopher l. foote, and paul s. willen ( 2008 ), " negative equity and foreclosure : theory and evidence ", public policy discussion papers 08 - 3 ( boston : federal reserve bank of boston, if one accepts the view that principal write - downs may be needed in cases of badly underwater mortgages, then strengthening the h4h program is a promising strategy, as i have noted. beyond the steps already taken by the h4h board, the congress might consider making the terms of h4h loans more attractive by reducing the up - front insurance premium paid by the lender, currently set in law at 3 percent of the principal value, as well as the annual premium paid by the borrower, currently set at 1 - 1 / 2 percent. the congress might also grant the fha the flexibility to tailor these premiums to individual risk characteristics rather than forcing the fha to charge the same premium to all borrowers. in addition, consideration might be given to reducing the interest rate that borrowers would pay under the h4h program. at present, this rate is expected to be quite high, roughly 8 percent, in part because it is tied to the demand for the relatively illiquid securities issued by ginnie mae to fund the program. to bring down this rate, the treasury could exercise its authority to purchase these securities, with the congress providing the appropriate increase in the debt ceiling to accommodate those purchases. alternatively, the congress could decide to subsidize the rate. a second proposal, put forward by the fdic, focuses on improving the affordability of monthly payments. under the fdic plan, servicers would restructure delinquent mortgages using a streamlined process, modeled on the indymac protocol, and would aim to reduce monthly payments to 31 percent of the borrower's income. as an | more resilient. with regard to the more cyclical component of the recent developments, without underplaying the need for structural reform in some cases, one could even draw a more constructive conclusion of current developments, namely that depreciating exchange rates, and moderation in growth patterns may actually be testimony to how responsive these economies have become, and can adjust to changes in the underlying fundamentals. furthermore, global investors may at present be relatively under - weight in emerging - market securities, strengthening the case for out - performance of the latter over the medium term. private surveys of us and eu pension funds do suggest that their allocation to emergingmarket debt has remained stable and relatively low, as a share of total assets under management, in recent years, even as the share of emerging market bonds in world market capitalisation continued to grow. in particular, global investor allocations to local - currency bonds of emerging market economies remain low, in part because of historical reasons of liquidity which nonetheless fade over time as emerging economies increasingly expand the size and maturity of their local bond market. that said, not all emerging countries retain sustainably stronger fundamentals than their developed world counterparts, and growing divergences within the broad emerging market bloc, coupled with the likelihood of less abundant liquidity over the next few years, suggest that differentiation between respective emerging markets could increasingly become the norm in coming years. whereas the immediate post - recession years had seen a strong cross - correlation between the performances of different emerging market assets, as they shared common drivers in the form of liquidity injections and interest rate expectations in the world β s major economies, such correlations have already started to wane in 2013. country differentiation gradually began to replace the proverbial β risk on, risk off β trading patterns of the earlier period. countries with relatively weaker growth, inflation and external account metrics saw their currency, bond and equity markets under - perform those with more solid fundamentals. therefore, it may not be helpful to lump together countries and call them β the bis central bankers β speeches fragile five β, when underlying dynamics in these countries could be quite different, even if they present similarities when one looks at budget deficits and current account deficits. 5. south african assets under this new paradigm this allows me to conclude with a few words on our domestic situation. domestic financial markets have faced significant challenges since the second quarter of this year. the rand has extended a depreciating trend that began in the latter half | 0 |
in the qis is a proposal itself, and we would discourage commentators from trying to discern a β central view β from the way the qis will be formulated. the truth is that there is not yet a settled β central view β on the areas we are testing, and this is why it β s so important to gather good quality data β to help to form robust and evidencebased policy proposals that can be consulted on in due course. we would not want the exercise to be taken as a signal for future decision making. the other thing to be upfront about is that we know the qis will require significant resource from firms. we will be asking for high - quality data from a wide range of firms covering different parts of the framework, and in a relatively short period of time β three months or so. we are only asking this because of how important the exercise will be in determining the eventual policy proposals, and because of the understandable enthusiasm of firms to get on with the reform β enthusiasm which we share. but i β ll say now, if there are aspects of the timetable which firms are going to struggle to meet, we would like to understand that at an early stage β so we would welcome feedback on any barriers to providing high - quality data as soon as possible. the qis will focus on areas of potential policy change which are the easiest to quantify and have a more obvious immediate balance sheet impact. the bricks, windows and foundations of the structure. there are other areas, less easy to quantify but no less important, which are also in scope of reform. i β ll cover those briefly at the end of this speech. but starting with the bricks and mortar : risk margin 3 / 6 bis central bankers'speeches firstly the risk margin. there is, i think a consensus in the uk that the risk margin as currently designed is not doing its job correctly. the risk margin is there to provide a margin over the best estimate of liabilities on the regulatory balance sheet, so that the total technical provisions represent an estimated transfer value. the principle for the risk margin is sound, and is widely accepted. but as we have made clear before, we see significant scope for reform. in particular, the risk margin is too sensitive to interest rates. and under current interest rate conditions it is too high. many annuity writers are choosing to reinsure longevity risk from their balance sheets but retain credit risk. there are a number of reasons why this can be economically attractive for | β divine coincidence β. things are different when shocks drive inflation up or down independently of demand. exogenous changes in firms β pricing power are one example β so - called cost - push shocks. shocks to the exchange rate, the economy β s supply capacity, or commodity prices also have this flavour. because monetary policy β s influence on inflation is predominantly an indirect one, via demand, in such circumstances inflation can only be controlled by delivering an opposing movement in aggregate spending. if something pushes up on inflation directly, monetary policy can only bring inflation back down by causing a reduction in spending via higher interest rates. the speed with which this adjustment is delivered is determined by the monetary policy maker guided by their remit. such circumstances have characterised the period in the uk since the global financial crisis ( chart a1 ), which entailed a large adjustment to the supply side of the economy, meaning a lower exchange rate, lower growth, and higher inflation. in contrast, the us and the euro area have seldom faced a trade - off between output and inflation stabilisation, even since the global financial crisis ( charts a2 and a3 ). all speeches are available online at www. bankofengland. co. uk / speeches chart a : divine coincidence has continued to reign in the euro area and us post - crisis but not the uk a1 ) uk great moderation inflation ( % ) financial crisis and after inflationary, with trade - off inflationary, no trade - off - 6 - 5 - 4 - 3 - 2 - 1 excess demand ( % ) disinflationary, no trade - off disinflationary, with trade - off - 2 sources : ons and bank calculations. a2 ) us great moderation financial crisis and after inflation ( % ) - 8 - 7 - 6 - 5 - 4 - 3 - 2 - 1 excess demand ( % ) - 1 - 2 sources : bureau of economic analysis, cbo and bank calculations. notes : the measure of inflation is the four - quarter change in the personal consumption expenditures ( pce ) deflator. the output gap is calculated using the cbo estimate of potential output. all speeches are available online at www. bankofengland. co. uk / speeches a3 ) euro - area inflation ( % ) great moderation financial crisis and after - 4 - 3 - 2 - 1 excess demand ( % ) - 1 sources : eurostat, imf and bank calculations. notes : the measure of | 0.5 |
amando m tetangco, jr : effective lending to smes in the philippines speech by mr amando m tetangco, jr, governor of bangko sentral ng pilipinas ( the central bank of the philippines ), at the launch of the 2012 rcbc sme initiatives, makati city, 16 may 2012. * * * the officers and staff of rcbc under the leadership of president lorenzo tan ; entrepreneurs from the sme sector ; fellow advocates in promoting access to credit ; special guests, good evening. it is my pleasure to join this launch of innovative and customer - friendly initiatives of rcbc... in support of small and medium enterprises : the phone - a - loan service and the women β s enterprise loan program. these two programs join the internet - based loan self - assessment service introduced in 2009. indeed, rcbc deserves commendation for these services that enable smes to find out early on β by telephone or internet β if their business fits in β¦ with rcbc β s sme initiatives. this is β¦ therefore β¦ a win - win program that saves time... for both the entrepreneurs seeking credit and the bank offering credit. the women β s enterprise loan program is also noteworthy for addressing the need of filipina entrepreneurs β¦ not only for credit, β¦ but also for incorporating other financial services, training and business networking. in other words, this program is designed to support the growth of smes managed by filipinas. this is a good decision. in the microfinance world, it has been proven... repeatedly... that women make exceptional entrepreneurs and have good credit discipline. that you are launching the women β s enterprise loan program on the week of the celebration of mother β s day β¦ makes your program even more meaningful. ladies and gentlemen. we need our financial system to reach out to underserved and the presently unserved. together, we should work on having an inclusive financial system that brings about inclusive growth β¦ in our country. this is the value of your sme program. as it is, the 2010 financial access survey indicated that only around 20 % of our small firms access loans from financial institutions. the figure is higher in our neighboring countries ; in malaysia, for instance, the comparable figure is 60 %. the impact of micro, small and medium enterprises on our economy and our people cannot be overemphasized. together, our msmes are estimated to employ roughly 61 % of filipino | to illustrate that, in the context of policy making, challenges and achievements are more closely interrelated than we think. as a central banker of over four decades, i have witnessed how significant economic and financial challenges / changes served to catalyze crucial and progressive reforms. stepping up to the challenges β banking sector : a case in point is the 1997 β 98 asian financial crisis ( afc ) that revealed vulnerabilities in the philippine financial system. the recognition of these weaknesses firmed up our resolve to formulate measures and implement reforms to address these concerns. the afc also highlighted the importance of reducing currency and maturity mismatches through the creation of a fully developed capital market. this triggered a whole slew of market reforms that included the development of β organized markets β, where transparency, price discovery, and more reliable benchmarks are essential elements. 1 / 4 bis central bankers'speeches then in 2007, we witnessed the outbreak of what eventually evolved into the worst financial crisis the modern world has witnessed. international financial institutions weighed down by bad debts collapsed or had to be supported by their governments to keep credit flowing to credit - starved economies. notwithstanding, the global recession that ensued was the worst since the great depression. in contrast, the philippine economy continued to grow through the global financial crisis ( gfc ) with our banking sector remaining sound, stable and liquid. indeed, this performance can be attributed to the crucial reforms that had been put in place earlier. in the aftermath of the gfc, the bsp is unrelenting in its pursuit of an even broader reform agenda aimed at further strengthening the philippine banking industry in terms of capitalization, risk management, and corporate governance. clearly, the bsp has provided the regulatory framework. in response, the banking industry stepped up the plate and aligned their standards with international best practices. in other words, the synergy worked! thus, even in the face of lingering uncertainties overseas, the domestic banking system has maintained a remarkable growth momentum. as of december 2016, total resources and deposits of the banking system have reached historic high levels ( p13. 8 trillion in resources which increased further in q1 this year and deposits of over p10 trillion ). this allowed bank lending to continue to expand by double - digit rates, most of which financed productive sectors. in addition, asset quality continues to improve with npl ratio of universal and commercial banks dropping to less than 2 % in december 2016, even better than the pre - asian financial crisis levels. | 0.5 |
njuguna ndung β u : ongoing developments in the kenyan financial sector remarks by prof njuguna ndung β u, governor of the central bank of kenya, at the kenya institute of bankers national banking & finance conference, mombasa, 3 july 2012. * * * hon. robinson njeru githae, minister for finance ; hon. kenneth marende, speaker of the national assembly ; hon. justice willy mutunga, chief justice of the republic of kenya ; hon. prof. githu muigai, attorney general of the republic of kenya ; mr. richard etemesi, chairman, kenya bankers association ; mr. john waka, chairman, kenya institute of bankers ; chief executives of financial sector regulators here present ; distinguished guests ; ladies and gentlemen : i am delighted to join you this morning at the onset of this landmark conference. at the outset, i would like to thank the kenya institute of bankers for inviting me to this forum. i also applaud all those who participated in organising this conference for their commendable efforts. ladies and gentlemen : my task this morning is to invite the minister for finance to deliver his keynote address to this gathering and also officially open the forum. but before i do so, allow me to make some few remarks on the ongoing developments in the financial sector. over the last five years, the kenyan financial sector has witnessed significant transformational developments. the kenya institute of bankers has been on the driver β s seat to spearhead these developments. let me highlight a few of these developments : the growth of technologically enabled financial services, especially through the inter - linkage of mobile phone technology platforms and banking technology platforms ; increased regional and international expansion and connectivity of financial service players as well as increased market potential to the region ; increased market awareness of customer rights and the resultant emphasis on consumer protection ; and strengthening of oversight mechanisms to protect the integrity of financial systems. the operationalisation of the national payment systems act and the financial reporting centre amongst others will strengthen the integrity and stability of the financial system ; ladies and gentlemen : these developments present not only opportunities but also significant challenges. to be able to exploit the resultant opportunities and surmount the challenges, there is need to enhance the skills and competence of our human resources. it is therefore imperative that the kenya institute of bankers and other capacity building institutions continuously interact with the market for their programmes to remain relevant. ladies and gentlemen : kenyan banks have taken the lead in positioning themselves | for the expanded market of more than 100 million people in the five east african community countries. more than ten kenyan banks have presence in the eac member countries and beyond. following the operationalisation of the customs union and common market, the bis central bankers β speeches eac member states are currently preparing for a monetary union. as part of this preparation, the eac central banks are harmonizing their supervisory rules and practices while benchmarking to global standards. this will not only facilitate integration but will also position the region as a financial hub. to facilitate effective preparations for the monetary union, kib should tailor its training programmes to satisfy the emerging needs of a dynamic regionally integrated financial sector. ladies and gentlemen : kenya β s aspiration of being an international financial centre is already receiving a boost from the increasing interest by leading global banking brands. over the last two years, four foreign banking institutions have opened representative offices in kenya, with four others in the pipeline. these representative offices allow the foreign institutions to study the market with the aim of up - scaling to fully fledged banking institutions. ladies and gentlemen, it is worth noting that capacity building by banks should not be a preserve of operational staff as has been the case traditionally, but should span across all cadres of staff including board members. in this regard, kib should review its offerings to ensure that they cut across all levels from the board to operational levels. ladies and gentlemen, it is now my pleasure to welcome our chief guest, hon. robinson njeru githae, minister for finance, to deliver his keynote address and officially open the kenya institute of bankers β national banking and finance conference 2012. honourable minister, you have the floor. bis central bankers β speeches | 1 |
loan officers may sometimes ignore valuable private information in order to mimic others when their own evaluation, their own remuneration or their own external reputation depends on their performance relative to the rest of the market. 9 this behaviour is individually rational but socially wasteful. here at the university of cambridge, the famous analogy that john maynard keynes made between newspaper beauty contests and financial market behaviour comes to mind. 10 i am also convinced that one of the main reasons behind herd behaviour in financial markets in general, particularly in times of crisis, is a lack of transparency. the fostering of transparency as concerns financial institutions, financial markets and financial products is therefore one essential policy lesson from the present crisis. our latest experience with systemic risk let me now apply the relevant elements of this framework on how to think about systemic risk to the present crisis. a particularly relevant source of systemic risk was the build - up of widespread financial imbalances β the second form of systemic risk i described β in the period of 2003 to 2007. the years prior to 2007 were characterised by low financial market volatility and risk premia, rapid financial innovation in credit markets, low interest rates across the maturity spectrum and ample liquidity conditions. in particular, rapid financial innovation led to securitisation techniques with thus far unknown complexities and to long and uncontrollable chains of intermediaries between originators and final investors. ratings agencies gained global power as the pricing of securitisation tranches was largely based on their assessment, while leverage mounted ever higher and a shadow banking system developed up largely unregulated. for a recent example, see o. castren and i. kavonius ( 2009 ), who study non - linear adjustments in a riskbased network of exposures based on euro area flow of funds data ( β balance sheet interlinkages and macrofinancial risk analysis in the euro area β, ecb working paper, no. 1124, december ). scharfstein, d., and j. stein ( 1990 ), β herd behaviour and investment β, american economic review. he noted that competitors did not have to pick β those faces, which he himself finds prettiest, but those that he thinks likeliest to catch the fancy of the other competitors β ( keynes, j. m. ( 1936 ), β the general theory of employment, interest and money β, macmillan cambridge university press ). at the same time, mark - to - market accounting rules | jean - claude trichet : systemic risk text of the clare distinguished lecture in economics and public policy by mr jean - claude trichet, president of the european central bank, organised by clare college, university of cambridge, cambridge, 10 december 2009. * * * ladies and gentlemen, i am delighted to have been invited by clare college, cambridge, to give this lecture in economics and public policy. one of the greatest challenges for economics and public policy at this time is to restore financial and economic stability, and to improve the future functioning of financial systems. a pre - condition for meeting this challenge is a deep understanding of the nature of systemic risk. and that is the topic i have chosen for this lecture. systemic risk in europe β s financial system is a very important issue for the european central bank. and as an institution of the 27, through its general council in particular, the ecb is one of the continent β s guardians of economic stability. we are charged in particular with maintaining price stability in the euro area over the medium term. but the ecb is also an active participant in the new agenda of financial stability. as you will be aware, restoring financial stability and containing systemic risk in the future are at the heart of the supervisory and regulatory reforms currently being discussed here in europe and elsewhere. i am particularly pleased to give this lecture at cambridge university, which has been an intellectual β powerhouse β for centuries. it is said that the university has more nobel prize winners associated with it than any other institution. perhaps the most well known nobel laureate from clare college is james watson, who, together with francis crick, derived the structure of dna. dna incorporates the building blocks of life. as the recent instability illustrates, we economists still need to achieve as clear an understanding of the building blocks of financial systems β not simply the institutions small and large that populate them, but also the fundamentals of the rules and incentives that drive their behaviour ; and, particularly, how they combine and interact with each other in the presence of amplification mechanisms stemming from leverage and other forces. let me mention two more recent nobel laureates in economics whose work relates to my topic today. in 1996, james mirrlees of trinity college won the nobel prize for his contributions to the economic theory of incentives under incomplete information. in 2001 joseph stiglitz, who spent time in cambridge in the 1960s, won the prize for his analysis of the functioning of markets when information is asymmetrically distributed. 1 i | 1 |
than 200 % in others ; in the degree of local market concentration ; etc. there are many more examples, some of them influenced by long - term developments, some by entrenched behavioural differences and habits. bis central bankers β speeches to apply β or even try to apply β a federal or pan - european approach to such a diversified financial system requires, in my eyes, a key precondition : to have a functioning european federation in the first place. if that is not possible then we should not try to create half - baked pan - european solutions here in the area of banking β an area which is arguably more sensitive in many aspects than that of fiscal policy and fiscal transfers. if we are not careful enough, we risk repeating the difficulties of the single currency project. the euro is a currency without a state. this means nobody knows who should pay what to whom in bad times. it is for good times only. and we now all know very well that this is the biggest shortcoming of the whole project. some believe that cross - border integration is good per se, without any conditions. i tend to believe β not least because of the current crisis β that cross - border integration of national financial systems is welcome only if each of the national systems alone is and can be sufficiently sound and stable. that β s why we at the czech national bank are so nervous about this tendency to continue separating the powers of supervisory and regulatory authorities from their responsibilities in the area of financial regulation. these powers are gradually shifting in small steps towards those who have no direct responsibility and no pots of money to pay should things go wrong in the future. and such a system is not sustainable for future bad times. i believe this is a concern shared by policy - makers not only in our country, but also in other eu countries ( such as here in poland ) and i hope that the coalition of like - minded states has the potential to grow over time. so let me repeat : until we have a full - fledged eu federation we should not build a half - baked one in the area of eu banking. and i strongly advise paying attention to the rules being prepared by the european commission ( for instance the crisis and resolution mechanisms ), which have the potential to be out of line with this proposed approach. bis central bankers β speeches | mojmir hampl : the eu banking industry speaking points by mr mojmir hampl, vice governor of the czech national bank, at the european economic congress β section : banking industry in the eu β, katowice, 15 may 2012. * * * β dzen dobry β β this is unfortunately the only thing i can credibly say in polish, so the rest will be in my imperfect english. thanks to the organizers for the invitation and for the opportunity to participate in such a distinguished panel. it is my first time here and i can only hope not the last one after i finish my presentation. given the time constraints i will focus on a just a couple of quick points to stimulate the debate. my key point is : let β s not repeat the same mistakes again and again. what i mean is this : since the onset of the current crisis there has been a constant push for a more pan - european, or β federal - like β, approach to the regulation, supervision and potentially also resolution of the financial industry in the eu. the famous de larosiere report and all its consequences, such as the three new pan - european supervisory agencies, are just direct results of this push and this way of thinking. some may recall that the czech authorities were quite reluctant to accept this approach and also the final compromise which brought these agencies into existence, and we believe we had good reasons for this. despite all the european convergence and integration, financial systems in different eu member states still look and work very differently. trying to administer them from a single centre according to a single set of rules might be like trying, say, to feed all the animals in a zoo with a single type of food. as an illustration : the recent ecfin retail banking survey says : in austria almost 100 % of house purchasing loans feature variable interest rates, while in france the share is only about 10 %. countries differ substantially in the share of owner - occupied housing and therefore in the importance of the mortgage market ; they differ in how intensively they use electronic means of payment ; in the significance of building societies and credit unions ; in tax and other incentives that the government provides for certain types of financial transactions ; in the extent to which local banks trade in various non - plain vanilla products such as derivatives ; in the share of subsidiaries and branches of foreign financial institutions and, more generally, in ownership structure in the loan - to - deposit ratio, which varies from roughly 70 % in some countries to more | 1 |
##ity ( annex ). thus, it was communicated that rbi was keeping in touch with major settlement banks and the stock exchanges to ensure that payment obligations on the exchanges were met and gave assurance of selling dollars through agent banks in order to augment supply or intervene directly to meet any demand supply imbalances. these press releases were placed on the web - site around 2. 00 p. m, but were released to wire agencies half an hour earlier and were flashed in all the tickers by 1. 30 p. m. trading had resumed by that time at 1 : 16 pm ; subsequent to the flashing of the press release, the market witnessed a quick recovery, before closing at 4505. whereas i am not claiming the entire recovery in the sensex on that day to be solely due to the communication from the rbi, it is important to understand the role and power of such communications when there are occasions when central bank communication can have immediate impact on the market - that too on a market that is not strictly under its jurisdiction. central bank communication has its flip side too. the modern day paparazzi - syndrome haunts central bankers as well. i am sure that many of the central bankers must have at some point of time must have bitterly surprised to find in the next day β s newspaper some statement that was ascribed to him or her β whereas the truth could be entirely opposite. let me illustrate this with a personal experience β one among the few i have experienced during my stay in rbi. on august 14, 2004 i was at the annual citibank - fitch debt market conference. on my entry i was chased by the journalists and one of the questions i was asked was about the future rate of inflation. to the best of my recollection i said that the present rise in inflation was predominantly driven by supply - shocks and that we were monitoring the developments carefully. to my utter surprise, a pink paper in the next day ( i. e., august 15, 2004 ) reported a story with the photographs of the president of india and mine side by side, with the following catch lines : β’ β president apj abdul kalam said on saturday that sustaining a high eight per cent growth and containing inflation, now at 7. 61 per cent, were the major challenges for the country. β β’ β meanwhile, reserve bank ( rbi ) deputy governor rakesh mohan on saturday reiterated that the authorities were expecting inflation to fall to the earlier levels of five per cent. β the story implied that | caveat emptor β principle has led to fundamental flaws in our present consumer protection architecture. from the principle of β caveat emptor β, let the buyer beware, we have to move to the principle β caveat venditor β, latin for β let the seller beware β. it is a counter to β caveat emptor β and suggests that seller can also be deceived in a market transaction. this forces the seller to take responsibility for the product and discourages sellers from purveying products of inferior quality. the principle vests the burden of proving that the shortcoming, deficiency of service was absent, on the seller of the product. so what should be the framework governing customer protection? ( chart ) we need to enshrine these principles in a customer β s charter of rights and duties of banks towards their customers. β caveat venditor β will necessitate these. last but not the least ; banks must focus on improving the skillsets of staff and front - line managers who are face of the bank for the customers. with increasing competition, banks that survive and succeed will be the ones that provide quality service. research studies have repeatedly shown that customers are willing to pay for quality service. banks that wish to stay ahead must therefore systematically build a structure that aims at providing total quality service which is superior and efficient. i wish your deliberations all success and close with the hope that, these will have an impact far beyond immediate issue. thank you for a patient hearing. bis central bankers β speeches bis central bankers β speeches complaints received in the offices of banking ombudsmen : 2012 - 2013 : complaint category wise complaints regarding non - adherence to bcsbi codes : 2012 - 2013 complaint category - wise bis central bankers β speeches bis central bankers β speeches | 0.5 |
inflation, which in turn could lead to an increasing shortfall of inflation from our objective. 1 indeed, some indicators of longer - run inflation expectations have been on the soft side in recent months. putting all of the pieces together, it appears the economy has been doing well so far this year, bolstered by confident consumers and a strong job market. and after fluctuations earlier in the year, financial markets currently appear supportive of growth, with borrowing rates low and the stock market at all - time highs. while the modal outlook is solid, the downside risks, if they materialize, could weigh on economic activity. taking into account the downside risks at a time when inflation is on the soft side would argue for softening the expected path of monetary policy according to basic principles of risk management. of course, my judgment about the actual path of policy will continue to be influenced by the evolution of the data and the risks. i am mindful that low spreads on corporate credit, together with risky corporate debt at historic highs, suggest financial imbalances are growing. we should be addressing these financial imbalances by activation of the countercyclical capital buffer, more rigorous use of stress tests, and active monitoring of leveraged lending. so what does this mean for you and the families and businesses you serve in and around 1 / 2 bis central bankers'speeches scranton? i hope and expect that the progress you have made in transforming the region β s economy will continue as the expansion extends into its 11th year. i am well aware of the challenges this area has been working to overcome since the great recession. and i am impressed by how much has been accomplished here. you have had important success in attracting new logistics jobs to take advantage of northeastern pennsylvania β s proximity to major cities. you are making important investments in the forward - looking β eds and meds β ( education and health - care ) sectors by leveraging the 19 colleges and universities in and around scranton. there are signs that these investments are paying off. household incomes in scranton are growing again. the area β s unemployment rate is close to its lowest level in the past 40 years. i look forward to hearing from the community bankers gathered here today about the outlook for families and businesses in northeastern pennsylvania and how you are helping the region invest and grow. and i am looking forward to continuing the discussions tomorrow, when i will visit with the scranton area community foundation to discuss the northeastern pennsylvania equitable transportation initiative, nepa moves, | , the federal reserve enhanced its communications by publishing these forecasts on a quarterly basis, lengthening the horizon of the projections, and providing additional quantitative and qualitative information ( bernanke, 2007 ; mishkin, 2007d ). almost two centuries ago, british economist david ricardo summarized the argument for granting operational independence to the central bank : " it is said that government could not be safely entrusted with the power of issuing paper money ; that it would most certainly abuse it. β¦ there would, i confess, be great danger of this if government β that is to say, the ministers β were themselves to be entrusted with the power of issuing paper money " ( ricardo, 1823 ). central bank should have full authority to determine the short - run setting of its policy instruments, without any external interference. 19 in addition, i believe that central bank communication is crucial in promoting public support for maintaining low and stable inflation. indeed, in a democratic society, every government agency is ultimately accountable to the public, and the establishment of transparent objectives and of a clear policy strategy plays an essential role in facilitating that accountability. the old adage correctly states that " actions speak louder than words, " and, clearly, just announcing an objective for inflation does not mean anything unless the actual policies pursued by the monetary authorities are consistent with the objective. words, however, do matter if those words help ensure that the appropriate policy actions will be taken and strengthen the public's confidence that the central bank will continue to act in a manner consistent with its long - run objectives. as i have argued here, the increase in transparency and accountability, which results from clear communication about inflation objectives and about how monetary policy will be conducted to achieve these objectives, creates stronger incentives for central banks to avoid the pursuit of short - run overly expansionary policies. this approach also helps establish a credible commitment to pursuing policies that keep inflation under control and economic activity growing on a sustainable path. the international experience my discussion so far has been pretty theoretical. but one might reasonably ask whether communication about inflation objectives and about how monetary policy is conducted to achieve these objectives actually helps strengthen the commitment to fostering low and stable inflation, and thereby produces better economic outcomes. more specifically : does communication of inflation objectives lead to increased public support for the central bank? improved inflation performance? more firmly anchored inflation expectations? over the past two decades, most of the major foreign central banks have adopted frameworks which have the overriding objective of bolstering public confidence | 0.5 |
let us call it β β pre - lehman β levels. expecting β pre - crisis β - levels to make a comeback β the time when risk was significantly underestimated β is neither realistic nor desirable. however, sustainable relaxation in the inter - bank money markets requires a sustainable return of confidence in the financial markets. in order to achieve this aim, it is necessary that the process of restoring banks β balance sheets continues, supported by public stabilisation funds. emu and the financial crisis for european monetary union, the financial crisis is certainly posing the greatest challenge in its history. when we recently celebrated the tenth anniversary of the single currency β s inception, it was often stated that the first ten years of the euro were a success story with regard to price stability, trade and financial integration in europe. however, it was also stated that the years ahead are likely to become even more challenging. one could say that emu is reaching puberty β if you have children, you will know what i mean. nonetheless, the value of monetary union has never been greater than during the financial crisis. try to imagine what would have happened without the single currency! probably, foreign exchange markets within the single market would have been driven by speculative activities. think of what happened in the early 1990s. currency fluctuations would aggravate both the financial crisis and real economic tensions β and do not forget the political turbulence implied by such currency tensions. it has been clear from the beginning of monetary union that there has been a greater emphasis on the responsibility for fiscal policies, wage policies and structural policies, which remains at the national level. in a nutshell, monetary union requires flexible labour markets and sound public finances β this holds true especially during times of crisis. with regard to fiscal policy, respecting the provisions of the stability and growth pact is of the essence. what is needed is a credible and strong commitment to reducing excessive deficits and to returning to the path of consolidation. rising cds premia on sovereign bonds have induced speculation about potential defaults on the part of emu countries. any concerns in this regard are unfounded and only purely hypothetical. while it is in general welcome that financial markets punish unsustainable public finances, it has to be acknowledged that even euro area member states with high yield spreads are currently facing favourable refinancing conditions given the unprecedented low interest rates. it should be emphasised that the β no - bail - out β rule, as stipulated in the ec treaty, is an indispen | policy. the subprime crisis in the us has often been referred to as the trigger for the financial crisis, but the root causes of the current crisis lie deeper. in a nutshell, we experienced an enormous credit boom during a period before, characterised by an extreme undervaluation of risk. this was supported by favourable macro - economic conditions β not least, interest rates that were too low for too long. excessive risk - taking was further encouraged by a lack of transparency and market failures in the process of credit risk transfer. pro - cyclicality in the institutional design of financial markets, such as capital adequacy rules, accounting rules and remuneration schemes, also encouraged extreme leverage in the financial system while they are now contributing to a fatal deleveraging. when the famous β wake - up call β occurred, financial markets panicked and suffered a massive liquidity shock. from the onset of the crisis, in august 2007, the eurosystem began supporting the financial system, especially in terms of frontloading liquidity provision during minimum reserve periods and extending the average duration of its open market operations. these measures helped financial institutions through a period of unprecedented high volatility on inter - bank markets. however, after the collapse of lehman brothers and the ensuing β earthquake β of september 2008, the eurosystem had to extend its liquidity operations vigorously in order to keep euro area money markets alive. several measures were taken in order to calm the markets, of which the temporary guarantee of full allotment at fixed rates has been the most important. furthermore, we have temporarily widened the scope of eligible collateral and we have stepped up providing relief to euro area financial institutions via currency swap arrangements with liquidity in foreign currencies. taken all together, these measures have resulted in the eurosystem assuming the role of the central counterparty in the money market. while this has saved euro area financial markets from breakdown, it is obvious that playing this role is something that cannot and should not last forever. however, the other post - lehman measures are staying in place for the time being owing to the ongoing vulnerability of the money markets. in particular, the governing council of the ecb has declared that it will continue the fixed rate tender procedures with full allotment for as long as needed and, in any case, beyond the end of 2009. while volatility in euro money markets is still very elevated, we can observe that some relevant risk - spread indicators are trending back to β | 1 |
of the core underpinnings of islamic finance which has already garnered significance in many parts of the world. the central tenet in islamic finance requires that financial transactions be supported by genuine economic activity, reinforcing the link between finance and value creation and aligning financial innovation to productive economic activity. additionally, the emphasis on risk - sharing in islamic finance strengthens the incentives for participants to screen and monitor transactions for economic viability and risks, and to institute the governance process. in malaysia, our efforts to widen the reach of such value - adding and value - based finance include the development of a multi - bank platform to match funds from potential investors with entrepreneurial ventures in the real sector. thirdly, the efforts to strengthen the supply and demand of value - adding and valuebased finance would contribute significantly towards re - anchoring the global financial system to the real economy. on the supply side, the focus on professionalism, ethics and the quality of talent would contribute to drive for positive changes in the financial services industry. in malaysia, we have initiated the financial services professional board, launched in 2014, comprising of an independent group of eminent experts from around the world is currently refining a voluntary code of ethics that may be internationally applicable across the financial services industry. a meaningful change in the culture of financial institutions requires a true commitment from the industry. a display of such commitment through the measurement and disclosure of a financial institution β s non - financial performance, such as its impact in social, environmental and governance metrics, can be a powerful tool for change. in malaysia, such a proposal is being developed for islamic financial institutions to disclose their corporate value - intent, a performance measure their commitment to value creation. greater consumer activism and bis central bankers β speeches demands for more consumer - focused corporate information reflects the increased demand by consumers for institutions to account for their behaviour and values. in terms of the demand for ethical and responsible finance, greater awareness among consumers and investors on the availability and viability of such positive finance is also needed, including among governments, corporates and the retail market. education, engagement, incentives and the alignment of legal and regulatory frameworks on the utilisation of such finance will be important to achieve this. finally, is the need to foster strong leadership at the global level that can have an advocacy and facilitative role in resolving barriers and bringing together different stakeholders to work together in a coordinated and cohesive manner. the responsible finance institute, initiated as a think tank based | zeti akhtar aziz : building financial systems for sustainable development speech by dr zeti akhtar aziz, governor of the central bank of malaysia ( bank negara malaysia ), at the global ethical finance forum β building financial systems for sustainable development β, edinburgh, 1 september 2015. * * * it is my distinct pleasure to speak at the global ethical finance forum here in edinburgh. i would like to warmly thank the scottish government and the middle east global advisors for the kind invitation for me to speak at this forum. it is a privilege to be here in the company of this distinguished and diverse gathering of professionals from the various fields that are prioritising ethical finance for sustainable development. the discussion on ethical finance that supports sustainable development is timely. in this recent decade, we have had to deal with a financial crisis of unprecedented global proportions that has stemmed in part from the prevalent ethics and culture in the financial services industry. in this period, we have also witnessed significant occurrences of misbehaviour and ethical lapses surface in the financial services profession, including the manipulation of reference rates and deliberate compliance failures. since the global financial crisis, we have now had several years to reflect on these weaknesses and to institute the much - needed reforms that have prioritised resilience and stability. having made important progress on this front, it is timely to direct our attention to developing more enduring solutions that will place the financial sector firmly back in the service of society. this calls for a closer examination of the fundamental character of modern finance β where ethical and responsible finance that is strongly anchored to the real economy has a more significant role. my remarks today will begin with some observations on the evolution of financial systems and the trends that have increased the vulnerability to financial crises, highlighting some of the key issues that have contributed to the breakdown of financial systems. finally, i would like to take this opportunity to discuss some possibilities for the future of finance. financial systems, then and now the development of finance has historically been a positive and inseparable part of world economic growth and prosperity. there is a large body of research that points to the significant benefits of financial development, recognising the economic value in financial intermediation that mobilises savings, catalyses investment, enables an efficient allocation of resources, reduces information asymmetries, and facilitates the management of risks. the transformative role of finance in economic progress is evident throughout history. the intrinsic power of finance essentially lies in its linkage | 1 |
david opiokello : basel ii and its impact on financial services in uganda address by mr david opiokello, acting deputy governor of the bank of uganda, at the opening of the 6th east african banking school, kampala, 3 july 2006. * * * background i am pleased to speak to you this morning at the 6th east african banking school annual seminar. since launching the banking school, the annual school is increasingly becoming a prestigious regional event for bankers and all other key players in the financial services sector. this is yet another commendable contribution towards capacity building and harmonization efforts within the financial sector of the east african sub - region. it is incumbent upon all of us stakeholders to continuously review the standards set by the school to ensure that we not only maintain but strive to improve them going forward. on behalf of governor e. t. mutebile, the patron of the uganda institute f bankers, i would like to formerly welcome the invited resource persons in their respective capacities and all distinguished participants. the subject i was asked to speak on namely β basel ii and its impact on financial services is a complex one and i wish to state from the outset that the implementation of basel ii remains very much β work in progress β. briefly, the basel committee on banking supervision ( β the committee β ) issued a revised capital adequacy framework which is widely called basel ii in june 2004. this framework has been endorsed by the central bank governors and heads of banking supervision of the g - 10 countries. the group of ten ( g - 10 ) is made up of eleven ( 11 ) industrial countries namely ; ( belgium, canada, france, germany, italy, japan, the netherlands, sweden, switzerland, united kingdom and united states ). the committee believes that the revised framework will promote the adoption of stronger risk management practices by the banking industry worldwide. the new accord is designed mainly for internationally active banks and is to be implemented as of year end 2006. however one year of impact studies or parallel calculations has been allowed for the most advanced approaches to be implemented as of year end 2007. the committee recognizes that the adoption of basel ii may not be the first priority for the nong10 countries. furthermore the imf and world bank are of the view that future financial sector assessments will not be conducted on the basis of adoption of or compliance with the revised capital framework. rather, assessments will be based on the countries performance relative to the requirements of the committee β s core principles for effective banking | supervision. experiences across the region and especially developing countries indicate that most countries are still at the stage of sensitization and trying to incorporate market risk under basel i. as we progress towards the implementation of this new capital framework, success will require that bank regulators, the banking industry and other relevant parties engage in a continuous and frank dialogue on its costs and benefits. as you are aware basel ii is one the activities, which is being reviewed at regional level under the auspicious of the monetary affairs committee. our proposed implementation target date is 2010. bank of uganda in this direction recently circulated a basel ii impact assessment questionnaire to all supervised banks and credit institutions. i am happy to report that varied responses have been received from the banks and credit institutions and are still being analyzed so as to come up with a basel ii activity plan. impact on financial services basel ii is a comprehensive framework for improving bank safety and soundness for three reasons. 1. it closely links the regulatory capital requirements with the bank β s risk profile. 2. it improves the ability of supervisors and financial markets to assess capital adequacy 3. it gives banking organizations stronger incentives to improve risk measurement and management. the impact of basel ii on financial services can best be reviewed by looking at its three elements or pillars. pillar 1 - the minimum capital requirements or risk focused regulatory capital requirements pillar 2 - the supervisory review process pillar 3 - market discipline under pillar 1 : the treatment of credit risk reflects more accurately the risk reducing effects of guarantees, derivatives and other risk β mitigants β through substitution and on balance sheet netting due to application of different risk buckets depending on risk category of the borrower. this will give incentives for banks to hedge credit portfolio risks. the incorporation of operational risk under pillar 1 is also a significant step, which recognizes operational failures that banks should seek to minimize. in addition, strong capital helps banks to absorb unexpected shocks and the minimum regulatory capital that accurately reflects the bank β s risk profile provides more effective triggers for prompt corrective actions. under pillar 2 : banks will be required to maintain a capital cushion above the regulatory minimums to capture the full set of risks to which the bank is exposed. these include liquidity risk, interest rate risk, concentration risk and other risks which are not captured under pillar 1. the expanded information will improve the quality of both the supervisors β and individual banks β assessment of capital adequacy. under pillar 3 : banks will be required to disclose to the public the | 1 |
denton rarawa : 2016 solomon islands money day theme β take part. save smart! β speech by mr denton rarawa, governor of the central bank of solomon islands, at the opening of the solomon islands money day program, honiara, 27 june 2016. * * * permanent secretary of ministry of education and human resources development, commercial banks ceos, primary schools represented here this morning, representatives of government ministries, state owned enterprises, members of national financial inclusion taskforce, ladies and gentlemen. a good morning to all of you. you all look so colourful. thank you for waking up early and also for taking part in the parade from honiara town council to this venue. today we are gathered celebrate two events. first is the 40th anniversary of central banking in solomon islands. cbsi turned 40 on 21st june 2016, after the solomon islands monetary authority began its operation as a legal entity in 1976. solomon islands monetary authority changed name in 1983 to the central bank of solomon islands as we know it today. the second and an important reason why we gather here is to participate in our national financial inclusion public education drive, which is normally celebrated on cbsi anniversary day. we now decided to call this event the solomon islands money day. we hope that solomon islands money day will continue to be organized each year to promote the financial education to the general public each year. this year β s solomon islands money day theme β take part. save smart! β this theme is adopted from this year β s global money week ; which we were not able to hold during the first quarter of this year. we are very excited about this theme because it carries the message that it is time that we empower our children and youths by encouraging them to take part and save their financial resources smartly. for the central bank and the national financial inclusion taskforce, this is the first ever program that is focused on financial education for our children and youth, and it is one of our national financial inclusion goals. as a matter of fact, solomon islands has commitments both regionally and internationally to facilitate financial education in collaboration with the government to integrate financial education in our school curriculum. regionally we have the 2020 money pacific goals and internationally the alliance for financial inclusion maya declaration where central bank of solomon islands is committed to champion financial education through close collaboration with the government to integrate financial education in the existing solomon islands national school curriculum from class 1 to form 3 by year 2013. work to integrate financial education in our school | curriculum has started. we will hear more about the progress made by the ministry of education and human resources development on achieving this goal when our key - note speaker delivers his address later this morning. let me share with you the outcome of the financial education we facilitated through our primary school adoption program with our three commercial banks and the six primary schools to teach financial education in their schools with a set of lesson outlines supplied by the child and youth international group. the outcome has been very positive. teachers, who taught financial education to their students, reported that the learning objectives in the lessons taught not only impacted the attitudes of their students but on them as teachers as well. they also observed a marked change in their children β s habits of spending their allowances. they note children see the value of savings, and have allocated bis central bankers β speeches their allowances towards their own bank saving accounts with a commercial bank, rather than spending them all. something else too is happening. a parent who attended the feedback session reported that the children also returned home and taught their parents about savings and other topics learnt from their classes. the parent noticed changes in children β s attitude towards money. further the adopted school teachers reported that member of classes in their schools extended their acquired knowledge on goal setting and savings towards a common goal. they all contribute an agreed sum of money towards a common β piggy bank β or β monkey β money boxes each week towards an amount for their end year school function. indeed, the idea to save little over time has caught on to these children and i encourage parents to support their children to achieve their saving goals. today the children from these adopted primary schools will, demonstrate on stage in their respective stalls what they have learnt in dramas and songs about financial education. these positive outcomes from the teachers and students in applying what they have learnt over the past six weeks encourage us to complete the mapping of the financial education learning objectives in the school curriculum. this indicates that if we can start teaching financial education in our schools, we could have a new generation of economic citizens that are better informed about financial matters than we are today. before i end my opening remarks, let me get back to this four - word theme β take part. save smart! β let me say that this theme is not all about money. it also encourages and empowers our children and youth to manage other resources as well. we make decisions on the use of resources each and every day of our lives. therefore, we need to start em | 1 |
policy, based on economic data. at the end of december, the philadelphia fed issued an example of what such a discussion might look like in a monetary policy report. we used a set of policy rules to benchmark the current stance and path of policy and discussed the implications. 4 the report showed that the federal funds rate is no longer constrained by the zero lower bound under a number of these rules. in fact, the rules indicate that maintaining the federal funds rate at the zero lower bound is unusually accommodative by historical standards. the benchmarks suggest that as the economy transitions to full employment and moves closer to its long - run inflation target, we should begin to gradually reduce accommodation by raising the funds rate target. delaying liftoff runs the risk of requiring more aggressive future monetary policy than would otherwise be needed. however, if the committee felt it was desirable to further delay the initiation of interest rate increases, such a report would provide the opportunity, indeed the obligation, for a thorough and thoughtful discussion about why discretionary deviations from the guideposts were appropriate. thus, publishing a monetary policy report with an assessment of the likely near - term path of policy rates, in conjunction with its economic forecast, would be a useful exercise and see charles i plosser, β systematic monetary policy and communication, β remarks to the economic club of new york, new york, ny, june 24, 2014 ; and charles i plosser, β monetary rules : theory and practice, β remarks to the hoover institution, stanford, ca, may 30, 2014. see http : / / www. philadelphiafed. org / research - and - data / publications / special - reports / 2014 / 1231 - using - rules - forbenchmarking. pdf. bis central bankers β speeches enhance communications. it would also provide added discipline for policymakers to stick to a systematic, rule - like approach. and it would force policymakers to think more deeply and systematically about policy and the justification for significant deviations from the guideposts. preserving independence i believe such communication would ultimately strengthen the independence of the central bank, which is the fourth and final principle of sound central banking. central bank independence leads to better economic outcomes. but in a democratic society, independence must be accompanied by accountability. transparent and clear communication of monetary policy goals and a decision - making framework help ensure accountability and preserve central bank independence. transparency can also enhance a central bank β s credibility. a central bank that is transparent | effects of lower oil prices fade. in summary, i believe the economy has returned to a more normal footing, and as such, i believe that monetary policy should follow suit. in doing so, i believe we should strengthen our commitment to four fundamental principles of sound central banking. during the past eight years, i have spoken and written frequently about ways to improve the framework we use for making monetary policy decisions. in my view, the monetary policy framework is most effective when the central bank : β’ commits to a set of clearly articulated objectives that can be feasibly achieved by monetary policy ; β’ conducts monetary policy in a systematic, rule - like manner ; β’ communicates its policies and actions to the public in a clear and transparent way ; and β’ protects its independence by being transparent and credible in pursuit of its goals. clearly articulating objectives let β s consider these four principles, beginning with clearly articulating the objectives of monetary policy. congress set our monetary policy goals in the federal reserve act, which specifies that the fed β shall maintain long run growth of the monetary and credit aggregates commensurate with the economy β s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate longterm interest rates. β since moderate long - term interest rates generally result when prices are stable, many have interpreted these goals as a dual mandate to manage fluctuations in employment in the short run while preserving price stability in the long run. in my view, this dual mandate has contributed to a view that monetary policy can accomplish far more than perhaps it is capable of achieving. i believe that assigning multiple objectives for the central bank has opened the door to highly discretionary policies, which can be bis central bankers β speeches justified by shifting the focus or rationale for action from goal to goal. that is why i have argued that congress ought to redefine the fed β s monetary policy goals to focus solely, or at least primarily, on price stability. i base this on two facts : monetary policy has a very limited ability to influence real variables, such as employment. even the fomc β s own statement of longer - run goals adopted in 2012 notes that the maximum level of employment is largely determined by nonmonetary factors, such as changing demographics and changing tax and regulatory policies that influence the labor market. conversely, in a regime with fiat currency, only the central bank can ensure price stability. indeed, it is the one goal | 1 |
the strategy for the management of the government pension fund global. the strategic plan builds on the main elements of the plan for the previous period. we will continue to place emphasis on our role as a long - term, professional owner with in - depth knowledge about the largest companies and to actively contribute to the development of international standards and principles. as from 2017, the level and composition of the gpfg β s real estate investments will be decided by norges bank β s executive board. norges bank is committed to performing its investment management assignment in a costefficient manner, taking advantage of the fund β s unique characteristics. the goal is to achieve the highest possible return within the framework of the investment management mandate. 1 return before management costs and measured in terms of the fund β s currency basket. 2 / 2 bis central bankers'speeches | s regional network contacts throughout the country report that business conditions are weakening. overall, they expect activity to fall in the coming period. at the same time, there are wide differences across industries. high investment in petroleum production is fuelling activity for companies providing goods and services to the petroleum sector. retail trade and construction activity is falling owing to the decline in consumption and low residential construction. unemployment has remained low as expected, but recruitment difficulties have eased. a looser labour market will curb wage and price inflation further out. slide : international inflation is on the way down international inflation is on the way down. most central banks have kept policy rates unchanged in recent months and according to the market's interpretation of future developments, central banks will start cutting rates in the course of spring 2024. import price inflation will slow as a result of weaker price impulses. at the same time, there are other forces that could keep inflation in norway elevated despite an easing of international price impulses. slide : wage growth is high labour costs have shown a substantial rise in recent years, and wage growth is projected to reach 5. 5 percent this year. manufacturing profitability is solid, and wage growth is set to be high next year too. the pay increases are not large compared with the rise in living costs. but businesses are facing rising costs, and we can now see that higher labour costs are increasingly driving price inflation. slide : the krone has depreciated the krone has depreciated considerably and is now markedly weaker than we projected in september. we do not have a policy target for the krone exchange rate, but the movement in the krone is of concern to us because a weaker krone means higher imported goods inflation. a weaker krone also helps improve manufacturing profitability. in today's situation, the krone depreciation could make it more challenging to bring down inflation. slide : policy rate will likely be kept on hold for some time the committee assesses that a tight monetary policy stance will likely be needed for some time ahead in order to return inflation to target within a reasonable time horizon. further out, when inflation falls back and economic conditions so warrant, the committee can start lowering the policy rate. the forecast indicates that the policy rate will continue to lie around 4. 5 % until autumn 2024 before gradually moving down. slide : inflation will recede and unemployment edge up with such a path for the policy rate, inflation is projected to slow and approach target in | 0.5 |
sure that the lively debate ahead of us on that very relevant topic is the best way to overcome the jetlag. karl popper once said that β without a free exchange of ideas there can be not freedom of thought. to find out whether our ideas are sound, we need other people to try them out on. β this is what this event is all about. so, to kick off our exchange of ideas, let me try out some thoughts on you as to how financial stability might best be achieved. 2. the roles of monetary and macroprudential policy in macroeconomic management if anybody or anything has actually emerged from the crisis a winner, it is probably the word β macroprudential β. microprudential policies such as banking regulation and supervision are still necessary in safeguarding the soundness of individual institutions. but as it turns out, they are not enough when it comes to safeguarding the financial system as a whole. for the bis central bankers β speeches management of systemic financial stability risks we need an additional toolkit β macroprudential policies. and it seems to me that this assessment is by now widely shared. the role of monetary policy in this context is, however, still being debated. while macroprudential policy frameworks are still under development, we need to take a stand on whether and how monetary policy should play a supporting role without undermining its pursuit of price stability. first, we have to acknowledge that in the world we live in, macroprudential policy can never be perfectly effective β for instance because safeguarding financial stability is complicated by having to achieve multiple targets all at the same time. while maintaining price stability translates into one single target variable, that is, the average inflation rate related to the price of a consumption basket, maintaining financial stability is more complex. risks to financial stability can emanate from different sources, such as price bubbles in specific asset markets, but also reckless risk - taking by a single but systemic player, and so on. while the level and volatility in individual prices of goods and services is usually not of much concern to central bankers as long as the impact on the price index is small, the level of and volatility in particular asset prices could lead to instability of the financial sector. this is why preserving financial stability is a multi - dimensional problem. additionally, financial and business cycles do interact and the monetary policy stance does affect risk - taking by the financial sector. indeed, some current research supports | non - financial private sectors in some countries. fourth, liquidity risk is increasing in the rapidly growing investment fund sector, with potential spillovers to the broader financial system. beyond systemic risks at the aggregate euro area level, we are also closely monitoring risks arising at the country and sectoral levels. targeted macroprudential policy measures are the appropriate policy instruments to address these country or sector - specific risks. as you know, responsibility for decisions on macroprudential measures in the euro area is shared between national authorities and the ecb. this means that we can top up the macroprudential measures taken by national authorities for those instruments that are envisaged in eu legislation. the ecb strengthened its role in macroprudential policy in 2016 and also took action to improve transparency β the governing council published its first macroprudential statement in december 2016. 3 besides the risks in some countries β real estate sectors, we noted that cyclical systemic risks in the euro area remained contained and, therefore, a broad - based increase in countercyclical capital buffers in the euro area was not warranted. this view was in line with the decisions of the national authorities, with whom we enjoyed excellent cooperation over the past year. transparency in the macroprudential policy domain was also enhanced by the launch of the new biannual ecb macroprudential bulletin in march 2016. our 2016 annual report also focuses on the actions necessary to overcome the legacy of the crisis in the banking sector. decisive action is needed at the sectoral, national and european levels. first, banks need to continue adjusting their business models to better cope with the low interest rate environment. as we show in a dedicated analysis contained in the report, the optimal strategy is likely to depend on each bank β s core characteristics. 4adjustments may include crossborder mergers and acquisitions where they allow efficiency gains. second, significant effort is needed to solve the problem of non - performing loans ( npls ). the extent and macroprudential nature of the problem calls for a comprehensive and coordinated response at eu level. while actions should be taken by stakeholders at the national level, these should be harmonised in a european blueprint for asset management companies ( amcs ), among the strategies to reduce the stock of npls on banks β balance sheets. the issue is also being addressed as a matter of priority from a microprudential perspective. 5 further enhancing the european financial framework turning now to | 0 |
mario draghi : ecb press conference - introductory statement introductory statement by mr mario draghi, president of the european central bank, and mr vitor constancio, vice - president of the european central bank, frankfurt am main, 27 april 2017. * * * ladies and gentlemen, the vice - president and i are very pleased to welcome you to our press conference. we will now report on the outcome of today β s meeting of the governing council, which was also attended by the commission vice - president, mr dombrovskis. based on our regular economic and monetary analyses, we decided to keep the key ecb interest rates unchanged. we continue to expect them to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases. regarding non - standard monetary policy measures, we confirm that our net asset purchases, at the new monthly pace of β¬60 billion, are intended to run until the end of december 2017, or beyond, if necessary, and in any case until the governing council sees a sustained adjustment in the path of inflation consistent with its inflation aim. the net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme. our monetary policy measures have continued to preserve the very favourable financing conditions that are necessary to secure a sustained convergence of inflation rates towards levels below, but close to, 2 % over the medium term. incoming data since our meeting in early march confirm that the cyclical recovery of the euro area economy is becoming increasingly solid and that downside risks have further diminished. at the same time, underlying inflation pressures continue to remain subdued and have yet to show a convincing upward trend. moreover, the ongoing volatility in headline inflation underlines the need to look through transient developments in hicp inflation, which have no implication for the medium - term outlook for price stability. a very substantial degree of monetary accommodation is still needed for underlying inflation pressures to build up and support headline inflation in the medium term. if the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, we stand ready to increase our asset purchase programme in terms of size and / or duration. let me now explain our assessment in greater detail, starting with the economic analysis. euro area real gdp increased by 0. 5 %, quarter on quarter, in the fourth quarter of 2016, following a growth rate of 0. 4 % | by 50 basis points on 8 june. the rate on the main refinancing operations has thus reached 4. 25 %. the rates on the marginal lending facility and on the deposit facilities have now been set at 5. 25 % and 3. 25 % respectively. the governing council also decided on 8 june to switch to a new tender procedure for the allotment of liquidity in the main refinancing operations of the eurosystem. i will discuss this issue later. the decisions taken by the governing council of the ecb reflected the forward - looking character of the monetary policy of the eurosystem. i should like to stress that the decisions of the eurosystem should be interpreted as responses to risks to price stability in the medium term before they materialise, rather than as reactions to a situation whereby price stability has already been jeopardised. in this respect, the recent increases in ecb rates have been motivated by a desire to avoid being compelled to take stronger measures at a later stage. i believe this is the best way to fulfil our mandate, as it is defined by the treaty, and thereby to contribute to sustained economic growth in the euro area. the sounder the growth process is, the longer will it normally last. the sounder the growth process is, the more permanent and sustained will the creation of new jobs tend to be. an important question in this context relates to the sustainability of the expansion of economic activity at current growth rates. the answer to this question has important implications for our assessment of the monetary policy stance, as it potentially affects the interpretation of some of the analysis conducted under both pillars of the monetary policy strategy of the eurosystem. at our last meeting in march, i already addressed the issue of the reference value for monetary growth. this reference value is compiled from the estimated trend growth of real gdp, the estimated trend decline in the velocity of circulation of m3 and the quantitative definition of price stability. in the light of the prospects for strong economic growth and upside risks to price stability which i have already mentioned, the question has been raised as to whether these developments would require a revision of the reference value for monetary growth. in this context, i should like to recall the governing council β s decision to review the reference value on an annual basis, and that the next review will take place in december 2000. i should also like to emphasise that the reference value is a medium - term concept and does not constitute a monetary target | 0.5 |
, precisely because of this risk. consequently, the upshot could be a clear procyclical effect. in a nutshell, we must acknowledge that non - financial risk presents certain features that can exacerbate or compound the effect of a crisis. it is also very hard to estimate and, unlike traditional risks, cannot be eliminated ; at best, it may be mitigated. this would be the key question for today : what can we do to mitigate non - financial risk to the maximum extent? in my view, the mitigation of non - financial risk is linked to the quality of internal procedures, it systems, governance structure or compliance function of a bank. in other words, it is not so much about what banks should do, but how they should do it. naturally, enhancing governance, compliance or it systems is not easy. it generally involves additional spending that adds pressure to the already beleaguered profitability of the sector. understandably, some firms see spending in these areas as an additional cost. i believe it is more appropriate to see improvements in it or governance as long - term investments. in this context, it is worth noting that we are observing adjustments in business models. some institutions might need to undergo radical transformation, while others need just fine1 https : / / www. esrb. europa. eu / pub / pdf / other / 150625 _ report _ misconduct _ risk. en. pdf 3 / 6 tune their structures. in all cases, we see digitalisation and optimisation of processes, with potential impact on the internal control functions. we also see an increased reliance on outsourcing and an attempt to implement more agile and flexible ways of working. all these trends imply changes that pose additional risks. in this regard, there are some critical elements that banks need to consider in their management of non - financial risk. let me say a few words about these elements. starting with it, i think nobody questions by now that technological change should be part of deeper considerations regarding the sustainability of the banking business model in the long term. if we look at what has happened in recent years in other sectors, there is clearly a need for the banking business model to adapt to a new reality. true, technological adaptation calls in many cases for significant investment in systems to be made. however, such investment today will be key to fostering profitability in the future. a lot of people think that it change is mainly related to the so | has shrunk the space for interest rate policy owing to the existence of a lower bound on nominal interest rates, thus making it harder for central banks to achieve our inflation aims. climate change will likely affect the natural interest rate, but it is not obvious in which direction. on the one hand, it could ( further ) depress natural rates through negative effects on productivity, such as the impact of higher temperatures on labour supply and the destruction of capital stemming from natural disasters. however, the transition towards a more sustainable economy will require substantial investment in green technologies, which may push real rates up. clearly, more analysis will be needed before we have better answers for the implications of climate change on the economy and on monetary policy. and, in this regard, we have to step up our efforts, at both the banco de espana and the eurosystem, to develop the tools and models needed for such an analysis. in addition, climate change will affect the risks of the assets held on our balance sheets. monetary policy implementation exposes us to such risks directly through holdings of assets and indirectly through collateral pledged by counterparties. in this regard, and very much related to my previous comments on the implications of climate change for the financial sector, central banks also have to step up their efforts to incorporate climate change into their risk management models and frameworks. and this, together with climate - related disclosure requirements, can decisively contribute to the correct pricing of climate - related risks by financial markets. moreover, central banks can β and probably should β use their non - monetary policy portfolios, within the natural remit of their mandates, with a view to contributing towards the goal of addressing climate change. actually, the banco de espana has led by example in recent years in adopting these considerations. since 2019, we have applied sustainability and responsibility investment principles to our non - monetary policy portfolios, which has effectively led to an increase in the share of green bonds in these portfolios. more recently, the eurosystem has agreed on a common stance on this issue, aimed at contributing to the transition to a low - carbon economy and to eu climate goals by increasing the awareness and understanding of climate risks while promoting climate - related disclosure. to conclude, we, central bankers and financial regulatory and supervisory authorities, within our mandates of guaranteeing price and / or financial stability, can and should actively contribute to global action to fight against climate change. thank you. the natural interest rate is the level of real interest rates consistent | 0.5 |
by about 5. 0 percent to us $ 21 billion. this was due to the fall in the stock of foreign direct investment ( fdi ) owing to valuation effects on equity mostly held by the mining and quarrying sector. nonetheless, fdi continued to account for the largest share of the stock of private sector foreign liabilities. private sector external debt, which accounted for about 80 percent of foreign liabilities, increased by 5 percent to us $ 17 billion due to revaluation changes in non - us dollar denominated loans predominantly in the electricity, manufacturing, information and communication as well as real estate sectors. esteemed invited guests, in terms of flows, overall net foreign liability outflows of us $ 74 million 1 / 3 bis central bankers'speeches were recorded in 2020 against net inflows of us $ 357 million in 2019. this was due to loan repayments to non - affiliates by the mining, manufacturing, electricity as well as wholesale and retail trade sectors, and the reduction in currency holdings by non - residents in domestic deposittaking corporations. however, fdi liability inflows amounted to us $ 200 million compared to us $ 860 million in 2019. reduced re - invested earnings and debt repayments, largely by the mining and quarrying sector, accounted for the decline in fdi inflows. canada continued to be the major source of private sector foreign liabilities. ladies and gentlemen, the stock of private sector foreign liabilities declined further in the first half of 2021 to us $ 20 billion due to loan repayments mostly by the mining and quarrying sector as well as revaluation effects on equity. however, a net inflow of about us $ 600 million was recorded against net outflows of us $ 295 million a year ago. this was due to the upswing in fdi inflows on account of higher reinvested earnings by the mining, deposit - taking corporation, manufacturing, electricity, as well as information and communication sectors. distinguished ladies and gentlemen, another major finding from the survey is that the stock of private sector foreign assets rose by 16 percent to us $ 3. 0 billion in 2020 mainly due to the increase in currency and deposits by the mining and deposit - taking corporations. the surge in the holdings of currency and deposits contributed significantly to the increase in foreign asset flows by 60 percent to us $ 700 million. however, fdi asset acquisitions slumped to us $ 63 million in 2020 from us $ 624 million in 2019 owing | by data on personal spending, which represents almost 70 percent of gross domestic product. continuing progress on inflation depends on lowering demand and moderating economic activity, and the retail sales and spending data suggest that progress on reducing aggregate demand may have stalled. whether or not subsequent data confirm the setback in progress last month, the fomc will do what is needed to reduce inflation to the committee's 2 percent objective over time. it is possible there may be some bumps on that path, but i assure you, the fomc's dual mandate objectives will be achieved. inflation has been elevated for nearly two years due to an excess of aggregate demand relative to supply. even though the fiscal stimulus and goods supply constraints that contributed to that imbalance have mostly unwound and the fomc has rapidly raised the target range for the federal funds rate, the labor market remains very tight and aggregate demand has proved resilient to 1 / 3 bis - central bankers'speeches considerable increases in interest rates. one implication of the strong labor market is that the fomc's maximum employment goal has been achieved and monetary policy can be utterly focused on fighting inflation. any fear that we might face two - sided risk in achieving our dual mandate was blown away by the january employment numbers. but an excessively tight labor market complicates the path toward achieving price stability, because wages are growing faster than they have in decades, at a pace that may contribute to keeping inflation elevated. we see this excess pressure in the fast growth of services prices, where labor costs are a higher share of overall input costs and shortages of workers are reportedly most acute. although inflation has been coming down since the middle of last year, the recent data indicate that we haven't made as much progress as we thought. that assessment goes for both overall inflation, and " core " inflation, which strips out volatile energy and food prices and is a good guide to future price increases. and this holds for both cpi and pce measures of inflation. core cpi inflation over the last three months of 2022 was revised up from 3. 1 percent ( at an annual rate ) to now be 4. 3 percent. similarly, the 2022 fourth quarter pce inflation data was revised from 2. 9 percent to 3. 6 percent. and the three - month rates increased in january ; even measures that trim out the largest and smallest price changes saw increases. these data underscore the view, as laid out in the f | 0 |
njuguna ndung β u : talking notes on the state of kenya β s economy talking notes by prof njuguna ndung β u, governor of the central bank of kenya, at the american chamber of commerce of kenya monthly luncheon, nairobi, 20 july 2010. * * * distinguished members of the american chamber of commerce and invited guests : 1. it is my pleasure to join you at this monthly luncheon and i thank you for inviting me. 2. this luncheon has an important timing : first, it comes after the visit of the american vice president to this country, an important visit for kenya. second, it comes soon after the minister for finance put forward the budget proposals and policies to achieve them. finally, it comes at a time when kenyans are debating and campaigning for a positive vote to a new constitution. i am very sure that since i am addressing an audience comprising mainly investors, entrepreneurs and business people who wish to live in an environment of high economic growth and low and stable prices, i am certain that the superior law is important. the constitution protects and safeguards their interests. this is how markets work β that is how development of markets and institutions takes place. the government economic agenda is guided by the strategic framework for faster development underpinned by a stable macroeconomic environment and structural reforms aimed at raising productivity and improving business climate. this is key to enhancing kenya β s competitiveness and accelerating private sector development. personally, i do believe that for growth to be achieved, it depends on investments. investments in turn depend on incentive mechanisms and legal safeguards to protect them. i believe also in strong institutions. strong institutions define the appropriate incentives that encourage prudent behaviour. this is what the superior law β the new constitution will do to institutions and give confidence to markets. 3. the kenyan economy has undergone a turbulent time from 2008 stemming from multiple shocks : the domestic political crisis ; the drought ; high petroleum and food prices as well as the global financial crisis. however, we have started to see some recovery. from the steep decline to 1. 6 percent growth in 2008 the economy recovered to post 2. 6 per cent growth in 2009. this growth was mainly supported by a resurgence of activities in the tourism sector and resilience in the building and construction industry. we do hope the greek crisis will not prolong the recession in europe β that may produce further knock - on effects in the kenyan economy. 4. economic prospects for 2010 and medium | the hipc initiative. the overriding fiscal thrust of the government, is to contain the stock of debt to a sustainable level of 40 percent of gdp. debt sustainability analysis carried out by the ministry of finance, the imf and the world bank have not found any significant risk posed by our debt levels. to demonstrate this commitment of reducing the domestic debt, the government will reduce its domestic borrowing from 5. 1 percent of gdp in 2009 / 10 to 3. 8 % in 2010 / 11. this fiscal space, as was demonstrated during the drought and global financial crises is important for propelling growth even in times of crisis β the fiscal stimulus would not have been possible β gives room for monetary policy to perform. 6. it is the central bank β s belief that the fiscal and monetary policies currently in place will enhance investor confidence by increasing expectations of economic recovery or reducing tail risks associated with the exogenous shocks that have buffeted kenya β s economy in the recent past. in particular the government expenditure programs and the current monetary policy stance are likely to have larger than normal positive impacts on demand and benefits that may persist for a significant period of time. 7. for us in the central bank, our pre - occupation is to align monetary policy with the growth and development goals while at the same time maintaining low and stable inflation β a target of 5 %. in addition, a stable and market driven exchange rate, increased efficiency in the financial system, financial stability, and a reliable and efficient national payment system. to give you some indication : inflation was provisionally 3. 2 percent for the month of june 2010. inflation expectations as indicated in the mpc market surveys are anchored at a lower level. the current exchange rate movements of the kenya shilling against other major currencies is largely a response to external developments especially the uncertainty in the euro zone market. the exchange rate in this case works as an automatic stabilizer via relative price movements. interest rate structure that carries with it cost of investment as well as inflation expectations have declined drastically since the middle of 2009. distinguished members, ladies and gentlemen 8. let me note that the current economic environment in kenya is based on policies that are market leaning and offer a level playing field for potential investors. 9. in the banking sector, our vision is to build a strong financial sector and be the financial hub of the east african community. the strength and presence of kenyan banks is now being felt in the region, specifically within the east african community where some of our | 1 |
ewart s williams : launch of managed funds study address by mr ewart s williams, governor of the central bank of trinidad and tobago, at the securities and exchange commission breakfast, port - of - spain, 25 march 2010. * * * let me first of all thank the securities and exchange commission for the invitation to make a few opening remarks at this breakfast meeting to launch this most timely study. as noted, since the start of trade and financial liberalization in the 1990s, the financial landscape of trinidad and tobago has undergone quite rapid growth and development both in terms of the structure of financial institutions as well as the array of instruments and services they provide. while the commercial banks have remained the dominant sub - sector in terms of its share in total financial assets, we have witnessed relatively strong growth in non - banking institutions such as pension funds ; insurance companies ; collective investment schemes including mutual funds ; and asset management business. to a large extent, this rapid growth has been facilitated by the significant increase in personal incomes and the search for higher returns and portfolio diversification by investors. while a significant degree of effort has been expended on developing information and reporting regimes for the banking sector, the information base for other critical segments of the financial system has lagged somewhat ( behind that of the banking system ). in an effort to fill this gap and to provide a greater array of information for investors and decision makers, the sec, in collaboration with the central bank, sponsored a baseline study in 2005 to gauge and assess the structure and performance of collective investment schemes. this study which was subsequently published in august 2007, noted the rapid rate of growth of the collective investments scheme industry, with funds under management in the mutual fund sector increasing almost fivefold in the period 2000 β 2005. it also pointed to the high concentration of funds under management ; fragmentation in the supervision and regulation of the industry and the need for a comprehensive regulatory framework for the sector. it is now five years since the baseline study on collective investment schemes was undertaken and, in the meantime, the global financial landscape has undergone significant transformation following the global financial crisis. here at home, the banking system has shown remarked resilience, the stock market performance has remained anemic, while mutual funds have continued to be attractive investment vehicles. the regulatory environment has also been undergoing major reform with the upgrading of legislation for various segments of the financial services industry. a new financial institutions bill was passed in december 2008 and new legislation covering the insurance industry, the credit union | / www. imf. org / en / publications / weo / issues / 2022 / 10 / 11 / world - economic - outlook - october - 2022 and https : / / www. imf. org / en / publications / gfsr / issues / 2022 / 10 / 11 / global - financial - stability - reportoctober - 2022 see https : / / www. bundesbank. de / dynamic / action / de / statistiken / zeitreihen - datenbanken / zeitreihendatenbank / 723452 / 723452? tsid = bbdp1. m. de. y. apt1. g. gp09sa000000. i15. a & dateselect = 2022 seite 4 von 18 deutsche bundesbank, directorate general communications wilhelm - epstein - strasse 14, 60431 frankfurt am main, germany, tel. : + 49 ( 0 ) 69 9566 33511, fax : + 49 ( 0 ) 69 9566 33077 presse @ bundesbank. de, www. bundesbank. de reproduction permitted only if source is stated. these higher energy costs can only be redistributed domestically. enterprises and households therefore face a heavier financial burden, and credit risks will rise in the future. the higher nominal interest rates represent a further cost factor. by and large, rising interest income is good news for banks whose revenues are heavily reliant on maturity transformation. the flip side of this, though, is greater risk, because higher interest rates place an additional strain on borrowers. furthermore, higher interest rates have depressed securities prices β banks have been forced to recognise impairments and have already depleted almost all their unrealised reserves. chart 3 that said, expectations about future price developments are relevant for the incentives to carry on taking out debt. so far, nominal interest rates have risen more slowly than expected inflation. this means that real interest rates are still negative on average β and financing conditions are correspondingly favourable. seite 5 von 18 deutsche bundesbank, directorate general communications wilhelm - epstein - strasse 14, 60431 frankfurt am main, germany, tel. : + 49 ( 0 ) 69 9566 33511, fax : + 49 ( 0 ) 69 9566 33077 presse @ bundesbank. de, www. bundesbank. | 0 |
gent sejko : albania's participation process in the single euro payments area address by mr gent sejko, governor of the bank of albania, at the hearing of the european affairs committee of the albanian parliament on the preparation of albanian institutions regarding albania's participation process in the single euro payments area ( sepa ), tirana, 17 july 2024. * * * honourable chair, honourable members of the committee, first of all, thank you for the invitation and the opportunity to share with you the work we have dedicated to the first step towards the economic integration in the european union. this step regards to the official submission of albania's application to the european payments council, for participating in the single euro payments area, also known as sepa. the application was sent in june, as scheduled in the action plan. given the multi - dimensional importance of sepa, i extend my gratitude for the attention expressed by this committee in the process of albania's membership into sepa. its successful finalisation will benefit from the support of all the public institutions involved in the integration processes. before delving into more details regarding the application process, allow me to briefly summarise its history and context. the work for albania's participation in sepa has started in 2021, when the bank of albania became part of the regional project " payments modernization in the western balkans ". this project originates from the agreements achieved under berlin process and aims at developing financial and economic relationships among western balkan countries, while simultaneously integrating the region into the european union. in november 2023, the european commission, to encouraging the efforts made by the countries to expand their economic integration with the european market, included the accelerated participation in sepa in their priority agenda of regional enlargement. previous assessments of the world bank experts showed that albania was noticeably prepared to start the application, since it fulfilled almost all the criteria. in particular, it was assessed that albania had made a significant progress regarding the alignment of its payment legislation with that of the european union. the commitment to start the application for membership in sepa was re - highlighted in the ministerial as well : " the western balkans toward the single euro payments area ( sepa ) ", which was held on 28 february of current year, where albania expressed its dedication to submit the application by june. the bank of albania has led and coordinated the work for submitting the application. however, to accomplish this task, the contribution and cooperation of other public institutions, | parallel, the key economic and financial indicators : public debt, external debt, 1 / 3 bis - central bankers'speeches and the non - performing loans ratio, have improved considerably. in particular, inflation is three times lower than in 2022, down to 2. 2 %, while indicators of the banking sector soundness stand at positive levels. all of these factors, have enabled β among other things β the improvement of albania's credit risk rating by international institutions. the enhanced interest of foreign investors for albania has been another positive development as well. our country has welcomed an ever increasing number of visitors in recent years, ranking third in the world for the fastest growth in tourism in 2023. likewise, foreign direct investments have picked up progressively from year to year, confirming albania's attractiveness as a compelling destination for investments. the bank of albania has actively contributed to this progress by addressing elevated inflation in a timely manner and carefully supervising the banking sector. in addition, investments for developing the payment system, innovation, and the digitalization of financial services have played a key role in strengthening economic stability and the development of the financial sector. we believe that albania's outlook remain positive. however, global trends trigger a complex environment, which poses challenges and opportunities for the future. next, i will briefly address some of them : first, one of the biggest challenges for the albanian economy is improving productivity and achieving a competition level comparable to that of european advanced countries. despite the improvements achieved so far, albania still has to work for reaching an economic structure oriented toward high - value - added sectors. second, the ageing population and the elevating shortages of the labour force is a complex challenge with consequences on the albanian economy as well as on the european and global economies. this process affects both the labour market and the long - term prospects for economic growth and the sustainability of the pension system and public debt. third, another challenge is the impact of climate change on vital sectors such as agriculture and tourism, which are sensitive to it. these two sectors, in addition to directly affecting the economic activity and employment, represent also a great potential for the development of the albanian economy in the future. an integrated approach coupled with a strategic vision is needed to addressing these challenges. in this context, i believe it is important to undertake certain steps : first, investments in the modernization of physical and digital infrastructure, the development of scientific research, the updating of managerial philosophy and practices, and the improvement of business climate in | 0.5 |
loss accounts are especially difficult to interpret in banking. and there is considerable uncertainty about what the correct business choices should be regarding scale, combinations of activities and technologies. to simplify the analysis, i will focus on the direction and pace of change rather than on a more ambitious comparison between current conditions and some ideal benchmark. enterprises need to cut costs and branch networks while at the same time converting them to higher value - added services. in the process, at least in the medium term, employment would have to fall and skills be upgraded. there is widespread agreement on the desirable features of the restructuring. there should be fewer and on average, larger financial institutions in europe. concentration, therefore, is set to increase as it is in most other geographical areas. consolidation can help to withdraw capital, to alleviate destructive competition, and to reach the minimum critical size needed to support the required expenditures on infrastructure. it can thus contribute to achieving efficient production and distribution, notably in wholesale segments such as investment banking and the processing business ( eg global custodians ). while generalisations are hazardous, it seems fair to say that in addressing these challenges, by comparison with the united states and even the united kingdom, the banking industry in continental europe has faced particularly testing conditions which may explain its relatively slow pace of adjustment. first, the degree of excess capacity appears to be greater, especially when assessed in relation to the goal of an area - wide single market. this does not emerge so much from comparisons of the number of institutions or size - concentration measures. it is, however, more apparent from indicators of profitability such as returns on assets and costs, especially labour costs, and ( on some measures ) branch density, which tend to be less favourable in much of continental europe. this may be the legacy of the more sheltered environment provided by governments. second, corporate governance structures have been less sensitive to market forces. in particular, government ownership and other forms of support have been more pervasive. in addition, for historical reasons, savings, cooperative and mutual banks have accounted for a relatively large share of the overall market. in a sheltered environment, the coexistence of different types of ownership structure was of little consequence. but with growing competition, it has become a significant factor influencing the means and incentives of the various players to adjust, and hence the speed and pattern of the restructuring. the degree of discretion enjoyed by management, the determination of acceptable profit targets, the ability and willingness to take on risks | functional operations, where very different lines of activity and business cultures are brought together. in addition, assessments have varied across countries, taking into account the specific environmental factors likely to impede necessary adjustments. the fact that, at least until recently, cross - border mergers in europe have been comparatively rare, especially in the retail segment, is difficult to assess. on the one hand, it can be judged positively in that it reflects a prevailing view of differences in business cultures and of limited prospects for increasing profits in the retail sector. cross - border mergers seen to date have tended to take place in regions where certain cultural affinities have been in place. on the other hand, the paucity of cross - border mergers may also stem less positively from obstacles that would prevent the restructuring required to reap higher profits. it is probably not a coincidence that rating agencies have tended to be less optimistic about m & a deals in those cases where the environmental impediments to cost cutting and to the adoption of potentially higher - productivity technologies have been greater. iv. lessons if the foregoing analysis is correct, a number of lessons follow, both for the official sector and for market participants. as noted, the key challenge for the public authorities is to ensure that their policies are supportive of a speedy and orderly restructuring. besides monitoring developments closely, they can make a positive contribution through policy initiative in four broad areas. first, the authorities can lessen the obstacles to the adjustment of labour and capital. some significant progress has indeed been made in reforming labour markets in europe, but this has not been uniform across countries, nor have all the steps taken necessarily been in the right direction. as regards the adjustment of capital, the issues are considerably more complex. in particular, taken at face value the empirical evidence on the benefits of m & as might suggest that an even more restrictive attitude might be justified. if m & as involving financial firms do not add value, and if at the same time the systemic risks inherent in ever larger and more complex firms are increased, then facilitating m & as through changes in take - over or, more indirectly, tax codes might not seem warranted. however, it would be rash to draw such a conclusion in view of the solace it would give to national, rather than european, interests and to the supporters of the status quo. it is particularly important to ensure that it is economic rather than political considerations that guide policy decisions ; and in this context, a number of non - transparent imped | 1 |
) : β measuring the natural rate of interest redux β, hutchins center on fiscal & monetary policy at brookings, working paper 15 lund, k., k., k. tafjord and m. ΓΈwre - johnsen ( 2016 ) : β what drives the risk premium in nibor? β, economic commentaries 10 / 2016, norges bank rachel, l. and t. d. smith ( 2015 ) : β secular drivers of the global real interest rate β, staff working paper 571, bank of england zhu, f. ( 2016 ) : β understanding the changing equilibrium real interest rates in asiapacific β, bis working papers 567 1 the spread between the money market rate and the expected key policy rate ( the interest rate premium ) can vary somewhat over time ( see lund et al ( 2016 ) for a discussion of the premium in the norwegian three - month money market rate ). 5 / 5 bis central bankers'speeches | that is consistent with balanced developments in the economy has fallen. this is reflected in the low level of global interest rates. the decline in real interest rates has been particularly marked over the past 15 β 20 years. in 2001, when inflation targeting in norway was adopted, real long - term interest rates were around 3 percent. now, the same interest rates are around zero. chart : forces driving the fall in the global real interest rate the causes of the decline in interest rates are complex. in recent years, extraordinary measures by many central banks have pushed down long - term rates. over a longer time horizon, the factors behind the decline in interest rates are more structural in nature. the savings glut in 1 / 5 bis central bankers'speeches emerging economies, particularly china and oil exporting countries, has been one important factor. savings have probably also increased in many countries as a result of demographic developments and a more uneven distribution of income. at the same time, investments in many advanced economies have been low, possibly reflecting prospects for low returns on investment in productive capital. in the wake of the financial crisis, conditions of a more cyclical nature have also contributed to the fall in interest rates. while deleveraging has pulled up savings, greater uncertainty may have dampened the willingness to invest. these developments have consequences for monetary policy. the level of the real interest rate that is consistent with balanced developments in the economy is usually referred to as the neutral interest rate. the difference between the actual real interest rate and the neutral real interest rate provides an indication of whether monetary policy is expansionary or contractionary. a real interest rate that is below the neutral rate stimulates economic growth, while a higher real interest rate dampens growth. the neutral interest rate is not directly observable. central banks must nevertheless form a perception of how expansionary or contractionary monetary policy is. in the past few decades, international estimates of the neutral real interest rate have fallen and are now at 1 percent or below in many countries ( see rachel et al ( 2015 ), laubach et al ( 2015 ), hamilton et al ( 2015 ), constancio ( 2016 ) and zhu ( 2016 ) ). obviously, international interest rate developments affect norwegian interest rate setting, particularly through the exchange rate channel. and norges bank β s estimate of the neutral interest rate has been gradually revised down in pace with international developments. the bank β s forecasts are now based on the assumption that a neutral nominal money market rate | 1 |
and his committee, for your invitation and all of your contribution and participation at this event. thank you and god bless all. | a reasonably steady 3Β½ per cent per annum over the past year or two. β’ there was an investment boom that led to over - capacity in the early 1980s. investment has been quite subdued over the past two years, and, in more normal circumstances, we should be due for a pick - up. even in current circumstances, a straightforward reading of last week β s capex survey suggests a rise in the current financial year, though it is concentrated mostly in one sector ( mining ). β’ in the early 1990s, the exchange rate appreciated sharply in the period ahead of the downturn. on this occasion, it goes without saying that the exchange rate is exerting an expansionary influence. β’ on each earlier occasion, the deficit on current account of the balance of payments widened by an amount that alarmed many people. on this occasion, it has fallen to a level not seen in more than 20 years. i will return to some of these subjects later, but before i do so, i would like to address another form of historical determinism. imbalances - united states and australia the macro - economic performances of australia and the united states in terms of output growth and inflation were very similar over the 1990s. it would therefore not be unreasonable to ask the question of why they should not also be similar in the first few years of the new century. again, i think there is a reasonably straightforward answer to that question which stresses some very big differences between the two economies. β’ the us economy exhibited in the late stages of its expansion two or three developments which arguably warranted the use of the term β bubble β : β’ the us stock market, particularly the technology sector as measured by the nasdaq, rose to exceptional heights and has since fallen. the broad indices such as the s & p 500 or the wilshire are down by about 25 per cent from their peak, whereas in australia the asx 200 is only down about 4 per cent. β’ in the united states, there was a burst of physical investment towards the end of the expansion, mainly in high technology equipment. we are now seeing the reaction to this and the consequent excess capacity, in the form of sharp falls in investment. as explained earlier, this pattern of action and reaction is absent in australia. β’ the trade - weighted value of the us dollar has risen appreciably over recent years and, despite lowering interest rates faster than any other country this year, the currency remains at a very high level. | 0 |
and overall economic development interests. central banks, therefore, monitor developments in the payment systems to assess their impact on the demand for money, monetary policy and financial system stability. in many of the saarc countries and elsewhere, the central banks have been playing multifaceted roles like operators, owners, facilitators, regulators, overseers, users and service providers of their national payment systems. through these roles, central banks have acquired expertise, skills and in - depth knowledge on the role of the payment mechanisms in the financial system and the economy. we need to make use of this expertise and share it with others in the region and elsewhere. a regional payment initiative would be a vehicle which would help to achieve this objective. central banks can advise on payment related financial policy and act as effective catalysts, together with private sector organizations, in initiating, promoting and contributing to payment system reforms. by and large, payment reforms, be it national or regional, have been promoted and led by central banks, except in few countries like canada where the private sector initiative has been significant. the central banks in the saarc region also have the ability to play the leadership or catalyst role by providing policy directions, preparing roadmaps in consultation with other stakeholders and guiding national and regional payment system reforms and taking the responsibility to develop a common payment policy framework acceptable to all countries in the region. we need to pay attention to the existing regional clearing mechanisms as well. as in the case of the asian clearing union ( acu ), if there are delays in processing payment instruments, combined with official accounting practices for payments that give rise to a float on the balance sheets of the central banks, that will contribute to inefficiency and uncertainty in the payment process. it is significant to note that such inefficiencies can extend to the central bank β s monetary operations and liquidity estimates as floating acu balances cannot be treated as part of the international reserves of member central banks. lack of clarity about rights and responsibilities regarding funds on the move is another shortcoming, especially where processing systems and accounting procedures result in long delays between the time a payment instruction is issued and the time it is cleared and settled. both at national and regional level, supervision and oversight of payment systems have always received less attention compared to the supervision of banks and financial institutions. when there are cross border payments and common clearing and settlement mechanisms, it is important to ensure that there is a well - designed supervisory system. the supervisors | times a year. statistics was one of the first areas in which such co - operation was established. this is entirely logical, since without the creation of a basic statistical framework it would not have been possible to communicate on monetary policy matters. among the most important outcomes was a creation of monetary survey. this survey made it possible to compile monetary and credit aggregates. one of the preconditions for influencing the money supply was to establish what is known as the β monetary base β. the ongoing liberalisation process meant that it was no longer important to divide the balance of payments statistics into koruna and foreign currency transactions. this classification was replaced by a standard breakdown into transactions between residents and non - residents. numerous statistics linked with regulation were gradually abolished as individual areas of economic activity were liberalised. these examples merely illustrate how the central bank β s entire statistical system was rebuilt from scratch. let me now move on to the more recent past. in 1999 we began to co - operate closely with european institutions. the main topics included monetary and banking statistics, balance of payments statistics and more recently also financial accounts, government financial statistics and general economic statistics. the development of statistics was influenced by a need to standardise each area to ensure compatibility between the eu member states and the candidate countries. hand in hand with these contacts, we began to work much more closely with the czech statistical office. in the area of statistics the czech statistical office is the natural and closest partner of the czech national bank, since these two institutions are the major producers of statistical information in the czech republic. the czech statistical office conducts a far wider range of statistical surveys, providing aggregate information on the national economy, territory, climate, environment, population, elections and other areas of life and activity of our country. the czech national bank is above all a user of economic statistics and collaborates most closely in this area. as both a user and a partner, we can affirm that the quality of the office β s statistical output has increased immensely over the transformation period. examples include the publication of national accounts according to international standards and the compilation of data on the government debt and deficit. the czech national bank focuses mainly on monetary and banking statistics and balance of payments statistics. the harmonisation of the monetary statistics with european standards was recently completed in both main components balance sheet statistics and interest rate statistics. monetary and credit aggregates and interest rates are now methodologically comparable with the data of other eu member states. speaking of harmonisation, i | 0 |
provides an adequate buffer for unexpected losses. the internal rating based ( irb ) model approach under basel ii credit risk capital computation gave a fillip to the expected loss based provisioning and unexpected loss based capitalisation. in the immediate aftermath of the crisis, in april 2009, the g20 leaders called upon the accounting standard setters to work urgently with banking supervisors and regulators to improve standards on valuation and provisioning and achieve a single set of high quality global accounting standards. the basel committee on banking supervision ( bcbs ) took it forward by publishing a document in august 2009 titled guiding principles for replacement of ias 39 that was also sent to the international accounting standards board ( iasb ). these principles state that loan loss provisioning should be robust and based on sound methodologies that reflect expected credit losses in the banks β existing loan portfolio over the life of the portfolio. the accounting model for provisioning should allow early identification and recognition of losses by incorporating a broader range of available credit information than presently included in the incurred loss model. for the purpose of these principles, expected credit losses are estimated losses on a loan portfolio over the life of the loans and considering the loss experience over the complete economic cycle. post - crisis, there is convergence of views among the prudential regulators and accounting standard setters on the desirability of a forward looking expected loss approach to loan loss provisioning. in reality, financial results do objectively worsen in an economic downturn in a way similar to the rise in unemployment rates. therefore applying an impairment model based on expected losses is arguably a faithful representation of current conditions. the iasb, financial accounting standards board ( fasb ) as well as the bcbs are actively engaged in finding a solution to this complex problem. in this context, the expected loss based provisioning approach is a topic of significant interest for the global financial markets. even when banks and accountants were making incurred loss based provisioning for identified losses, called β specific β provisions, they also voluntarily did make some sort of β general β provisions or β floating β provisions. these β general β provisions are not based on any expected loss model, but as a prudent practice to strengthen the balance sheets. the basel committee also incentivises general provision up to 1. 25 % of credit risk weighted assets by counting towards tier 2 capital. bis central bankers β speeches concepts and principles dynamic provisioning is a technique that allows banks to build up loan loss provisions when their profits are growing to draw | never happens again. no doubt, the sweeping scope and complexity of these reforms has some thinking that the new regulatory architecture is excessively tight, at least at first glance. of course, optimizing the scope and intensity of regulation was never going to be easy. the new regulatory architecture is the outcome of a political process with many trade - offs and significant differences across financial systems. accordingly, the principles behind the reforms matter more than the rules themselves β principles, complemented by a high level of supervisory vigilance. fact is, the financial world is a dynamic place, where competition is inherent to it, regardless of market structure. principles - based financial regulation sets a high bar under which competitive forces can still foster financial innovation, innovation that is more likely to be socially improving than simply evasive. bis central bankers β speeches in canada, active and vigilant supervision goes hand in hand with this principles - based approach to regulation. to help monitor potential emerging risks, we have a comprehensive radar system that includes surveillance, guidance and enforcement. canadians have found that this complementary approach to regulation and supervision is conducive to responsible financial innovation. an important objective of these g - 20 financial reforms is consistent implementation across jurisdictions, but in a manner that avoids unduly impeding financial innovation. i see such innovation in financial intermediation as essential to fostering regulatory balance between maintaining financial stability on the one hand and facilitating competitive market forces on the other hand. as people in the financial industry create new ways to do business β some call this regulatory arbitrage, which of course sounds like a bad thing β their innovations help re - set this balance, prompting regulation to adapt to positive progress in financial intermediation. there is a natural incentive behind financial innovation, since there is a lot of money at stake for those who innovate successfully. there is a lot at stake for the macroeconomy, too, because a return to sustainable economic growth around the world will require continued financial innovation. regulation must allow these natural forces to manifest themselves, albeit in a safe way. where the creative forces might take us given this context, let β s speculate about the future of financial intermediation : how will the forces of competition manifest themselves in the years ahead? let β s start with banks. some may choose to shed business lines that have relatively low riskadjusted returns. in particular, capital market activities could shrink as the risk weights associated with them increase. this has already | 0 |
amando m tetangco, jr : the 2006 bsp praise awards β a harvest of excellence speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the 2006 bsp praise awarding ceremony, manila, 25 july 2007. * * * members of the monetary board, civil service commission field officer eva olmedillo, our 2006 bangko sentral praise awardees, fellow central bankers, magandang umaga po sa inyong lahat! i am very pleased to know from deputy governor andy suratos and director dong asperilla that this morning we have a total of 460 awardees under our 2006 praise program. these are awardees who scaled the bar of excellence within the bangko sentral ng pilipinas! ladies and gentlemen, let us congratulate and thank our awardees by giving them another well - deserved round of applause! excellence is what we strive for at the bangko sentral ng pilipinas. excellence in the pursuit of our mandate to ensure stable prices and a sound banking system. excellence in the way we do things. we should be conscious of this at all times, for our actions here at the bangko sentral affect the lives of millions of filipinos. filipinos we have pledged to serve to the best of our abilities. arthur schelesinger, jr., the american historian and social critic, once said β excellence is the eternal quest. we achieve it by living up to our highest intellectual standards and our finest moral intuitions. β i hope therefore that excellence will be the constant standard at the bangko sentral. while the bangko sentral is consistently regarded as a top performing government agency, you and i know there are still many areas we can improve on. this is the focus of our ongoing strategic planning sessions. i challenge our awardees as well to expand the circles of excellence in their respective areas, to become good role models, and to serve as constant inspiration to their colleagues. never lose sight of what your awards stand for : bangko sentral β s commitment to excellence in serving the filipino people. muli, bigyan po natin ng mainit na palakpakan ang ating mga awardees! finally, let us acknowledge the significant contributions of the following to the continuing success of the bangko sentral ng pilipinas with a big round of applause : the members of our | rasheed mohammed al maraj : impact of technological innovation in bahrain address by his excellency rasheed mohammed al maraj, governor of the central bank of bahrain, at the middle east financial technology exhibition & conference ( meftec ), manama, 11 february 2008. * * * good morning ladies and gentlemen, i am pleased to welcome you to bahrain for the 4th middle east financial technology exhibition & conference, meftec as it is popularly called. this morning, as i look around, i am happy to see that this event is arousing so much interest and is attracting more and more participants each year, a clear testament to itaβ¬β’s success. i would like to thank the organizers for their efforts in enhancing and improving each event and the delegates for their participation. i wish you a pleasant stay here. bahrain, as many of you may already know, is best known for its success in banking and finance, an industry whose global reach and, indeed, penetration into every household, would not have been possible without information technology. in short, information technology has had, and continues to have, a profound impact on the way we, as individuals, live and work, on the economies of countries and on the world. while we all welcome and embrace technological innovation, the acceleration in technology also brings with it newer challenges for financial services regulators, such as the central bank of bahrain. information technology has made possible the creation, valuation, and exchange of complex financial products on a global basis and, often, in real - time. as our banks increasingly engage in these technology - driven, i would urge them to take greater precautions in managing all the risks involved. the management of risk is an issue which the cbb takes very seriously, as demonstrated by our regulatory requirements and examination procedures, which we continue to review and upgrade, when ever necessary. as the financial sector relies more and more on technology, the issue of maintaining business continuity in the face of any kind of disruptions, we believe, is essential from a business and reputational perspective. effective from the beginning of this year, all banks in bahrain are required to maintain proactive business continuity planning that ensures delivery of critical services or products is maintained even during a disruption. ladies and gentlemen, i am sure you are all eager to see what the exhibitors have to offer. i thank you for joining us today and again extend my appreciation and thanks to the organizers and exhibitors. | 0 |
β pillar 3 : enabling healthy financial sector evolution β pillar 4 : ensuring the financial sector contributes to the real economy. in many areas, cbn needs to take the lead in implementing reforms ; in other areas, cbn needs to play a key advocacy role. 3. 2 enhancing the quality of banks let me begin with the first pillar β enhancing the quality of banks. the cbn will initiate a 5 part programme to enhance the operations and quality of banks in nigeria. the programme will consist of industry remedial programmes to fix the key causes of the crisis. it will also include implementation of risk based supervision, reforms to regulations and regulatory framework, enhanced provisions for consumer protection, and internal transformation of the cbn. in the first part, the industry remedial programmes will include a set of initiatives to fix the key causes of the crisis, namely data quality, enforcement, governance, risk management and financial crime. these initiatives will be structured in such a manner that the banks do most of the work to embed new behaviours in the industry, with the cbn playing a crossindustry programme management role. a key plank of this programme is that we must hold individuals responsible for their actions, we must pursue all criminal cases to their logical conclusion and we must ensure that nobody, no matter how highly placed, is permitted to benefit from the fruits of crime. this is our commitment and we intend to stand by it no matter how long it takes and no matter whose ox is gored. in order to address failures of corporate governance in the industry, the cbn will establish a specialist function focusing on governance issues to ensure governance best practices are embedded in the industry. the reform programme will strengthen corporate governance in both banks and the cbn, embedding a culture across the industry that good governance is good business. a remedial programme will be launched to implement and monitor a new set of corporate governance guidelines incorporating a range of reforms. the reform measures will include updated corporate governance statements prepared by the banks and establishment of mandatory board committees and a definition of their responsibilities. reform measures will also include education of board directors on their responsibilities and on the unethical and allegedly fraudulent activities and the penalties they carry. amnesty period for full disclosure of ownership and related party transactions by board directors will be introduced. an extended fit and proper test will be developed to include an assessment of qualifications and face - to - face interviews. this will include a retrospective review of individuals admitted to a board in the last 10 years. an enhanced annual | of payments and the international investment position through the conduct of surveys of the global business licence holders. the bank has enlisted the collaboration of the financial services commission, our sister regulator, in this exercise. ( click here for further details on general data dissemination system and special data dissemination standard ) ombudsperson for banks i am confident that in 2009, the bank will proceed with the appointment of an ombudsperson for banks. as i have said on many occasions, for a small country of our size and the expected workload, a single ombudsperson for the entire financial services sector would have been more appropriate so that the customer does not face jurisdictional issues. financial literacy and outreach programme we started a financial literacy and outreach programme when the bank commemorated its 40 years in 2007. in 2008, talks were delivered by eminent financial sector personalities, including central bank governors. dr guy quaden, the governor of the national bank of belgium, spoke on β the first ten years of the euro. achievements. challenges. lessons for other parts of the world β. we also recently had a lecture on β applicability of international financial reporting standards to central banks β by mr ian ingram, director of internal finance from the european central bank. the bank also organised programmes in local languages on the local radio / television. the bank intends to make such programmes a regular feature. i thought i should mention here that the bank does not have a specialised unit to take care of communications, events and functions. all events hosted by the bank are co - ordinated by the governor β s office and organised by staff who volunteer for the assignment. meetings attended by the management the governor and the bank β s two deputy governors, the chief economist and the head of corporate services attended a wide range of international meetings and seminars in 2008, as part of the remit of the bank for furthering international contact and for keeping abreast of international developments with a view to improving the effectiveness and efficiency of our services. ( click here for further details on participation in international meetings and seminars ) very sadly, 2008 witnessed the tragic loss of one of mauritius β most reputed bankers, mr anil guness, who died in the terrorist attacks in the taj hotel in mumbai in november 2008 in the same week in which he last came to the bank to attend our banking committee meeting. we shall miss his wise counsel and the sound judgments he brought to the work of the state bank and within the banking sector in mauritius and beyond. | 0 |
##s that the cost of implementing the customer due diligence under the risk - based approach may be high at the early stage of implementation but the establishment of robust risk framework that commensurate with the risks of your institutions will minimise the institutions β reputational risk and would also lower the overall costs in the long - run given the ability for reporting institutions to focus resources to the right area. governance and risk culture let β s now turn to governance and risk culture. governance refers to actions, process, traditions and institutions by which authority is exercised and decision are taken and implemented. a good governance is, therefore, a mixture of legislation, non - legislative codes, self - regulation and best practices, structure, culture and management and board competency. if we take a step back and reflect, we will notice that risk governance is woven through the risk management framework. many elements of requirements for the risk management framework contribute to risk governance. for instance, the requirement for effective board audit and risk committee, regular reviews of the effectiveness of the framework and its implementation and so on. the board plays a critical role in risk governance. the board sets standards and expectations that would influence the culture and management of the business, and ultimately, the quality of risk governance. common shortcoming occurs when board fails to serve as a sufficient β check and balance β on the activities of the senior management, causing the business to focus excessively on short - term growth at the expense of long term stakeholders β interest. for this reason, bank negara malaysia places greater expectation on the roles and responsibility of board and senior management. this expectation can be found in many policy documents issued by bank negara malaysia since the past several years and specifically provided for in the financial services act ( fsa ) and the islamic financial services act ( afsa ). for an institution β s risk governance to be effective, there must be a strong risk culture which is consistent with the institution β s espoused values and risk appetite. you may asked, how does board assess risk culture? there isn β t simple and straightforward answer to this question. some institutions undertake β climate review β among its management and staff to gauge the culture whilst another approach could involve focus group. ultimately, audit, compliance and risk management functions would have opportunities in the course of their work to observe the risk culture throughout the business. from the regulator β s perspective, bis central bankers β speeches risk culture could be inferred and gauged based on the effective implementation | and level of compliance by the risk takers and the frontline staff. to improve risk culture, board and management must review the incentives and penalties in place and ensure that it is effectively implemented. among the key questions that board and management should be asking are ; does the performance management and compensation system reward good behaviour and punish bad behaviour? and how are audit and supervisory issues handled? as you already know, a weak risk culture may lead to staff resorting to β check the box β compliance exercise whilst a strong risk culture will judge the wisdom and decision of looking beyond the profit number and be able to see the medium and long term sustainability. on this note, allow me to share some of the key observations made by bank negara malaysia during the recently completed aml / cft thematic reviews on banks and insurance companies. first, the good news. in general, we observed that there was greater awareness among board and senior management on ml / tf risks and its potential implication to their reputation. from the aml / cft policies and framework implemented, there was also shift towards risk - based approach. in most of the institutions reviewed, the management of aml / cft was no longer viewed solely as a β compliance β job but more aligned and integrated with the bank β s overall risk management function. in addition, it is also worth noting that in terms of management information system ( mis ), more investments were made to either upgrade or enhance their existing mis to facilitate effective monitoring of suspicious transactions. this is encouraging. now let me share the not so good news. implementation of aml / cft policies and procedures, although has shown improvement as compared to the last review, is still an area that needs to be strengthened particularly with regards to cdd and customer monitoring. while we acknowledged that in almost all cases, cdd were conducted, the extent of due diligence in some instances were inadequate and not reflective of the level of money laundering and terrorist financing risks posed by the customers and / or transactions. we believe that to address this issue, strong risk culture must be inculcated and the performance and reward system should reflect that culture. self - regulation institutions with strong wisdom in risk governance and culture do not solely depend on the regulator and supervisor to tell them what to do. self - regulation is important, particularly for financial institutions. in performing the intermediary functions, depositors and shareholders depend on the decision and practice of the financial institutions to balance the risks and rewards in their | 1 |
. some participants in the discussion on crisis management envisage further, more extensive agreements. however, i see the danger that flexibility in financial crisis situations will be limited if such further, more extensive agreements are reached. each crisis is unique. predetermined contingency plans would restrict flexibility and could therefore impede an optimum solution being reached. this applies even more, as a private sector solution always has priority. ex ante agreements on the sharing of the financial burdens of a crisis are, in my opinion, unfeasible and problematic. to be honest ladies and gentlemen, i β m finding it difficult to think of an appropriate conclusion. i will, therefore, finish by asking you to bear my initial comments in mind. thank you very much for your attention. see : ecb, the eu arrangements for financial crisis management, monthly bulletin, february 2007, p 73 ff. | attach to an interest rate change of 25 base points at the next governing council meeting. it should be clear, however, that this probability is critically dependent on the assumption of a fixed interest rate spread between the expected onemonth rate and the deduced expected minimum bid rate. a one base point change in the assumed spread would lead to a change in the probability of a 25 base point hike by 4 base points. given the current money market distortions, however, considerable fluctuations in the spread between the one - month rate and the minimum bid rate cannot be ruled out. one reason could be tensions on the swap market owing to a decline in market participants β willingness or ability to take risks. our assessment of financial markets β uncertainty regarding their interest rate forecast could also be distorted by the current financial market turmoil because of variations in the risk premia contained in the three - month money market interest rates : in order to estimate market participants'uncertainty regarding their interest rate forecast, we derive the risk - neutral density from options on the three - month euribor future. the more certain market participants are about their point forecast on the three - month euribor, the smaller the standard deviation of the estimates should be. we therefore usually interpret a change in the expected three - month euribor distribution as indicating a change in financial markets β expectation of eurosystem policy rates. however, currently we cannot rule out the possibility that the financial market turbulence has caused volatility in the risk premium which is currently contained in the interest rate for unsecuritised three - month - money ( euribor ). in order to obtain an answer to the question of what factors are driving an expected change, we continuously analyse the development of the euribor - forward three - month eonia swap spreads. that is the difference between an implied three - month interest rate derived from euribor rates and one derived from eonia swaps. in general, this spread provides information on liquidity premiums for different maturities in the money market. financial market expectations of a steady decline in money market uncertainty would imply not only an ongoing drop in liquidity premiums but also lower premiums for time periods further in the future compared to less distant time spans. 5. 2. 2 financial - market - based expectations on important economic indicators in addition to this money - market analysis, we monitor the development of capital marketoriented measures of risk premia. assuming freedom from arbitrage in capital markets, | 0.5 |
countries in recent years. 9 accordingly, some national authorities have used macroprudential tools focused on housing, such as caps on loan - to - value ratios, to try to increase the resilience of borrowers and to indirectly strengthen the resilience of the banks and the financial system should their housing booms turn to busts. for example, policymakers in canada have not activated the ccyb in response to concerns about housing market risks, but they have lowered the maximum loan - to - value ratio for various mortgage products and capped debt - service - to - income ratios. 10 the availability of such alternative tools for limiting systemic risk may be among the factors influencing the decision to adjust, or not adjust, the ccyb in a number of countries. in this regard, it is notable that the set of macroprudential tools in the united states is limited relative to that in many other countries. 11 finally, another difference, one that is particular to the united kingdom, is the framework adopted by the u. k. financial policy committee ( fpc ) to integrate the ccyb with its structural capital requirements. specifically, under the fpc's framework, the ccyb would equal 1 percent in standard risk conditions - - but to avoid having this be a significant increase to already very high levels of capital, the fpc undertook a one - time adjustment to its other capital buffers in order to offset part of this increase. the effect of the policy is that the buffer can be varied - - both up and down - - in line with the changing risks that the banking system faces over time. this approach is an interesting deviation from the idea in the original basel discussions and the framework adopted in many other jurisdictions, in which structural capital requirements are set at levels aimed to deliver the desired level of resilience, with the ccyb raised to positive values only at times when vulnerabilities are above normal. in practice, the u. k. framework appears to have provided the fpc with additional flexibility, as it has adjusted the ccyb with evolving financial risks associated with, for example, brexit. as i examine this experience, systems similar to the united kingdom's, where the ccyb is positive during normal times, may allow policymakers to react more quickly to economic, financial, or even geopolitical shocks that occur amid otherwise normal conditions, without relying on the slow - moving credit aggregates contemplated in the original | economic growth. a few years ago, the dallas fed identified an opportunity in texas to support community partnerships, specifically in education and workforce development. working across different sectors and industries brings its own set of unique challenges. each brings different goals, operations, and even terminology to the discussion. we know that collaboration is necessary, and it is achievable. advance together provides the structure, ongoing support, and investment from external partners to support communities in strengthening their collaborative work. it takes time and skill to build deep and trusting partnerships. it also takes time and resources for communities to agree upon a common understanding of complex, local needs like improving college and career readiness or developing pathways to living wage employment. this work requires that all partners move in the same direction, toward those common strategies and goals. when communities collaborate effectively, the results can lead to broader access to economic opportunity. at team introductions we are here today to celebrate the success of our pilot participants ; i'd like to reintroduce each of them : the big country manufacturing alliance is building awareness and creating accessible pathways to well - paying manufacturing careers through training, recruitment, and retention. the deep east texas college & career alliance supports rural and firstgeneration college students in attaining postsecondary credentials that employers seek in their workforce. the education partnership of the permian basin is developing a cradle - to - career continuum of support by working to improve early childhood outcomes and college and career readiness in the region. the travis county 2 - gen coalition is expanding practices and policies to support dual generations of parents and children in education attainment and achieving long - term financial stability. conclusion as we begin today's celebration, i'd like to recognize the vision of the dallas fed team for creating this incredible opportunity for our partners. i'd also like to thank our advance together partnerships for their hard work and progress. i also want to recognize them for the work that they will continue to accomplish in their communities as they move forward. this work is challenging and will continue to build pathways to a more inclusive economy. 2 / 3 bis - central bankers'speeches 3 / 3 bis - central bankers'speeches | 0.5 |
firms : the reinsurer benefits from cross - risk diversification ; there may be tax advantages ; and so on. but there are also potential regulatory drivers : the balance between the treatment of credit risk underpinned by the ma and the treatment of longevity risk underpinned by the risk margin can incentivise this choice. whilst it is clear that reform is needed, there remains a choice of method to implement this reform. internationally, market - consistent regimes have used a variety of different approaches to risk margin calculation. the data we gather in the qis will help form proposals on the best way to implement reform which meets the objectives of the review. matching adjustment turning to the matching adjustment. the matching adjustment, or ma, has a clear link to the investment incentives for annuity writers. as such, an ma that works will be a key plank of allowing annuity writers to support the recovery and growth, both by innovating, and by investing in long - term productive assets and in assets consistent with the government β s objectives on climate change. the ma lets a firm recognise an immediate benefit today, from future returns above the risk - free rate that have not yet been earned. so getting the ma right is critical for ensuring the right level of policyholder protection in the uk, and getting it wrong could have very severe consequences. this means that any reforms to the ma will be a key determinant of success against all three of the government β s objectives for the solvency ii review. my colleague charlotte gerken discussed in april how we use the ma as part of our supervisory approach, and i won β t rehearse the points that she made today4. as a regulator, we have long believed in the core concept behind the ma. we firmly supported its inclusion in solvency ii, and we brought in a similar mechanism in our previous individual capital adequacy standards ( β icas β ) regime. there has been a lot of feedback about broadening of the asset eligibility criteria for the ma, and about simplification of the application process. we have heard this feedback, and are confident that the review can achieve improvements in these areas. if we get these changes right, the path can be smoothed for insurers to invest for the long term in a way which supports innovation and growth and is sustainable. of course as i said earlier, unless there is adequate policyholder protection, any such changes will not meet these objectives. so through the qi | important the uk insurance market is, and how large the sector is relative to our economy3. the london market is competitive, in 2 / 6 bis central bankers'speeches part, precisely because policyholders are confident their claims will be met. and as discussed, the life sector is responsible for paying retirement income to millions. this retirement income underpins a significant amount of spending, and much of it is provided in a way β via annuities β in which the investment and longevity risks are borne by insurers β so the security of that source of income and spending depends on the soundness of the life insurance sector. there is a growing degree of consensus around the world, exemplified by the work of the international association of insurance supervisors ( iais ), over the financial standards to which insurance should be held. but the consensus does not imply uniformity, and when making comparisons between regimes, it β s also important to control for the importance of the sector to the economy, the reliance consumers place on it, and the ability of firms to fail in an orderly way which causes the least damage to policyholders. provided that the foundation of adequate policyholder protection remains in place, we believe there will be scope for making changes which meet the other objectives of the review. to make tailored change to the regime which better meet the needs of the uk market and the broader economy. quantitative impact study in modern construction, modellers can render the proposed new building in 3d according to the architect β s plans. even before the building work has begun, it is possible to have a sense of what the design looks like in practice and judge whether it will deliver on the original vision. in policymaking we also aspire to get a projection of the end result, but unfortunately we currently lack the required rendering software, so instead we have to rely on impact study exercises. these exercises are vital in giving us the detailed, accurate measurements we need. for this reason we, in agreement with hm treasury, are planning a quantitative impact study ( qis ) for the solvency ii review. we intend to gather the data that will allow us to project the impact of a number of different possible designs ; this will give confidence before the proposals are finalised that the ultimate designs will really work. i β m going to cover today some of the areas we plan to gather data on through the qis, as well as the process we are planning on following. at the outset, it β s important to be clear that nothing | 1 |
glenn stevens : inquiry into competition in the australian banking sector opening statement by mr glenn stevens, governor of the reserve bank of australia, to the senate economics references committee inquiry into competition in the australian banking sector, sydney, 13 december 2010. * * * the reserve bank has provided a submission to the committee that details trends in lending, costs, margins, fees and other factual material the committee may find of use. we of course will seek to answer any questions on that submission. perhaps i should note a few general points. first, risk has been re - priced since early 2007. all of us are still adjusting to this change and its implications. it is widely held that risk was under - priced for some years before then. that is to say, investors demanded very little risk compensation in their expected returns β perhaps in some cases because they didn β t understand the risks. so financial institutions of all types could get ample funding cheaply, and this could be passed on to their borrowers. business models that took particular advantage of low - cost wholesale funding and / or securitisation were able to provide a very competitive edge to certain markets, particularly ( though not only ) to markets for mortgage lending. but investors around the world changed their attitude to risk in 2007 and 2008. the compensation they require for taking on risk has increased. wholesale funding and securitisation are now more expensive. in the case of securitisation, costs have also risen in part because some investors have left the market altogether. the increase in costs has affected all financial institutions, but to varying degrees. as such, it has also affected the competitive landscape. some business models that did well in the earlier state of the world find it harder going now. part of the competitive advantage they had has been eroded by market developments. the current relationship between variable mortgage rates and market funding costs is making it more difficult than it used to be for the lenders relying on securitisation to compete with the major banks. this changed attitude to risk has affected the locus of competitive forces. whereas four years ago the environment was one in which the competition among financial institutions to lend money was intense, more recently it has been the competition to raise money that has been intense. various other things have happened that also have a bearing on the competitive landscape, but this is a very fundamental change in the state of the world. that said, the market remains a good deal more competitive than it was in the mid 1990s and borrowers have | access to a much larger range of products. moreover, the overall availability of finance to purchase housing in particular seems to be adequate. the second theme is that, the market price of risk having risen, various players want the public purse to take on some of this higher price through various forms of support or regulatory change. the various ideas should, of course, be assessed on their merits. but an important high - level point is that, in some instances at least, it would appear the taxpayer is being asked to shoulder more risk, one way or another, in order to facilitate the provision of private finance. whether, and in which areas, that might be a good idea β and if so how much might be charged for such support β is of course for governments and legislatures to determine. hopefully your inquiries will be able to assist this process. | 1 |
inflation target. finally, there is yet no evidence of sizable second - round effects in the labour market. summing up, inflation will remain elevated for longer than we have thought, but is expected to decline to levels compatible with our price stability objective in the medium term. as you know, monetary policy is not well suited to tackle supply - side shocks. it can do it, but at a high cost for output and employment. in my view, we have so far chosen the right monetary policy path. of course, we are going to continue reviewing the evidence in our next meetings, especially the economic and financial implications of the ukrainian crisis. if needed, we will not hesitate to decide the next steps regarding the normalisation of monetary policy. on green transition that you mentioned : this is one of the megatrends that we observe. however, we also observe many other megatrends, like the digital transformation and the ageing 1 / 2 bis central bankers'speeches of the population. i have no doubt that, in the medium term, green energy will produce lower energy prices than fossil fuels, but in the short term there are transition costs, which have to do with the fact that we have not yet secured storage capacity for electricity produced from green energy. that is why we are so much dependent on natural gas. as a consequence, in the short term the transition to green energy will cause a relative price change, which will elevate the general price level. let me first reassure you that the governing council will do β whatever it takes β to achieve our medium - term price objective. consequently, if we see prospects of inflation exceeding our target in the medium term, we will act accordingly in march or later. but we will review the evidence carefully, since we do not want to repeat past mistakes of tightening too early, especially in the face of such an important supply shock like the one caused by the ukrainian crisis. second, on credibility : Ξ±fter so many years of qe, medium - term inflation expectations are 2 % or below. at the same time, wage contracts in the euro area are consistent with our 2 % inflation target, taking into account productivity growth. these imply that the credibility of monetary policy and of our 2 % inflation target is very high. third, on real interest rates : central banks can control only nominal monetary magnitudes, not real ones. we should also not forget the equilibrium real interest rate, which is determined by market forces, especially the balance between savings | yannis stournaras : normalising monetary policy in the euro area talking points by mr yannis stournaras, governor of the bank of greece, at the eurofi high level seminar 2022, paris, 28 february 2022. * * * what we observe today is mostly supply - side inflation. in fact, the acceleration of inflation mainly reflects two interrelated supply - side shocks : one comes from the pandemic. actually, we had a series of pandemic shocks, then we had an energy shock, and finally we have the invasion of russia in ukraine, which, regarding its economic implications, is also a supply - side shock. in the short term, its implications are stagflationary, but, in the medium term, the implications are deflationary, depending of course on the resolution of the uncertainty. we do not know much about the resolution of the ukrainian crisis at this moment, so we have to be cautious. in light of these supply - side bottlenecks and shocks that we observe and our supportive monetary and fiscal policies, we have witnessed an excess of demand over supply. this has taken place not only in the euro area but also in much of the world, including the us, which has undertaken a much larger fiscal stimulus than we actually have. the excess demand has pushed up the prices of energy products, including oil and natural gas. natural gas prices have also been affected very much by the invasion of russia in ukraine and are likely to increase even more in the future. this is why the above - mentioned supply - side shocks have been interrelated. it is not a coincidence that the oil price shock has occurred at precisely the same time as the covid shock. of course, as we are approaching the end of the pandemic, the supply disruptions will diminish β a process that has already started. combined with the gradual elimination of excess demand, the energy shock is likely to subside. however, the ukrainian crisis and its resolution is likely to delay this. in light of this situation, the ecb β s projections and the forecasts of all the major financial institutions, of which i am aware of, show that consumer price inflation will converge to 2 % in the next two years. also, forward measures of inflation, such as the 5 year - 5year inflation swap rate, as well as the euro area ten - year benchmark bond yield, are consistent with our 2 % medium - term | 1 |
growth at the end of last year was temporary, and we revised up our assessment of growth in the first quarter of this year. since the monetary policy meeting we have received quite a lot of new information. for example we now know that swedish exports of goods increased slightly during the first quarter after the steep fall in the fourth quarter of last year. according to statistics sweden β s figures, employment was higher and unemployment lower than in our most recent forecast. the national institute of economic research β s economic tendency survey also showed a large increase during the first quarter and the retail trade index, which rose strongly in february, continued to rise in march. all in all, new information received since the most recent monetary policy meeting shows no tendency to revise the forecast for swedish growth during the first quarter. still, i will wait to make an overall assessment of the new statistics until our next monetary policy meeting in july. monetary policy in uncertain times i have described my views of the situation in sweden and abroad. i have also pointed to a number of risks that could lead to a different development than the one we forecast in the monetary policy update. we try to determine the probability of the risks on the basis of incoming statistics. this gives us a picture of what can be regarded as a main scenario and what can be regarded as an alternative scenario. how should a monetary policymaker weigh up new and often contradictory information about the economy that indicates different paths of development? i shall conclude with a few reflections on this. as an economic forecaster, one is confronted by a constant flow of new statistics that often point in different directions. let me illustrate this by describing the circumstances of our most recent monetary policy decision in april. statistics sweden had scarcely published a gdp figure for the fourth quarter that was weaker than expected, when the national institute of economic research published a very strong economic tendency survey for march. nor is it unusual for statistics to be revised in a way that changes history and throws new light on the initial situation in the economy. as i mentioned earlier, statistics sweden revised up the figures for the number of hours worked in connection with the publication of the gdp statistics for the fourth quarter of 2011. this revision entails lower productivity growth for 2010 and 2011 than was reported earlier, and thus a new outlook on the future productivity growth trend, which has significance for monetary policy. bis central bankers β speeches new and contradictory statistics and revisions of this type create uncertainty regarding the current economic climate. personally, i am one of those people | measured in this way. during the years the interest rate has gradually been cut, expectations according to implied forward rates have substantially overestimated the level of the repo rate. after we began to raise the interest rate one and a half years ago, there has rather been a tendency for the repo rate path to be slightly underestimated. it can thus be noted that market agents have had difficulty in forecasting interest rate developments. the fact that forecasters revise their assessments is not at all strange, as new information is received all the time. this indicates that as the conditions for the real economy change and new information is received the forecasts for the repo rate path need to be adjusted. there is nothing particularly dramatic about this. it applies to all market agents, to the major banks, to the ministry of finance and also to us at the riksbank. the great uncertainty factor means that all forecasters should be humble, but this should not prevent them from making forecasts. i would therefore like to emphasise once again that the repo rate path we present in the monetary policy report is a forecast and not a promise. the riksbank cannot undertake, regardless of what happens in the economy, to follow the path published. the interest rate path is quite simply the best assessment we can make at a given point in time, given the information that is then available. new information may change the picture of the economy and then the executive board will have to rethink how we set the repo rate. the reason why we have chosen to publish our interest rate forecast despite the uncertainty over the future is largely because we believe this is the best way of explaining our thoughts on monetary policy. it also makes it easier for us to justify forecasts and interest rate decisions and to outline alternative scenarios for the repo rate. it will also be easier to evaluate monetary policy. the debate has not been slow in coming. analyses and discussions on monetary policy are now being conducted outside of the riksbank in a way that would not have been possible if we had not presented our own interest rate path. it is not, as before, primarily the current interest rate decision that is discussed, but more a question of the monetary policy fluctuations throughout the entire forecast period. the fact that the interest rate forecast may later be changed is a different, and quite natural, matter. withholding information on how we view the future development of the interest rate merely because this view may need to be revised | 0.5 |
svein gjedrem : the conduct of monetary policy introductory statement by mr svein gjedrem, governor of norges bank ( central bank of norway ), at the hearing before the standing committee on finance and economic affairs of the storting ( norwegian parliament ), oslo, 22 may 2006. please note that the text below may differ slightly from the actual presentation. the statement is based on norges bank β s annual report for 2005, inflation report 1 / 2006 and the executive board β s assessments published after the monetary policy meeting on 26 april. the charts in pdf - format can be found on the norges bank β s website. * * * i would like to thank the chairman of the committee and also thank for this opportunity to report and answer questions on monetary policy in connection with the storting β s deliberations on the government β s credit report. the account is based on the bank β s annual report, but is also updated based on the executive board β s assessments for the period to the preceding monetary policy meeting. economic policy in norway faces particular challenges. low prices for imported goods and services, combined with high prices for export goods, have led to substantial terms - of - trade gains for norway. the norwegian economy has experienced a strong positive income shock. such a pronounced improvement in the terms of trade has in fact not been observed since the first world war. real national disposable income will increase by 25 - 30 per cent in the period 2003 - 2006. so far, the increase in income has not led to a pronounced rise in price and wage inflation. businesses are using resources with steadily greater efficiency and the supply of labour has been ample. nevertheless, in the face of such strong external influences, it is demanding to smooth developments in the norwegian economy. our stabilisation policy rests on four pillars, which were established in the 1990s and in 2001 against the backdrop of the wide fluctuations in economic developments during the first twenty years of the oil age in norway. under the oil fund mechanism, increased government petroleum revenues are invested abroad. this curbs the impact of price fluctuations on domestic demand and production - and on inflation and the krone exchange rate. a floating krone exchange rate also has a stabilising effect, as the exchange rate normally appreciates in favourable periods and depreciates during adverse periods. at the same time, the fiscal rule that provides for a steady phasing - in of petroleum revenues and the inflation target | the supply of labour from other countries is important for many industries, but on the whole is no longer offsetting increased flows into benefit schemes. there is competition for highly skilled labour in the new eu accession countries. labour flows into the uk and ireland have been particularly high and labour barriers may be more restrictive in norway than in the uk and ireland. activity has picked up in central european countries, and the swedish labour market has become tighter. therefore, it is uncertain how large the supply of labour from these countries will be in the period ahead. household debt has risen sharply since the mid - 1990s. at the same time, house prices have increased markedly. to some extent, developments in the 1990s can probably be viewed as a delayed adaptation to the deregulation of the housing and credit markets in the 1980s, after many households burned their fingers in the wake of deregulation. in recent years, household income growth has been solid and household confidence in the future is very high. coupled with expectations of low real interest rate over time, this may have provided an additional boost to house prices. long periods of sharply rising asset prices and debt may be a potential source of subsequent instability in output and employment. the sharp rise in house prices and debt in other countries are probably also ascribable to low real interest rates over time. household debt is high in norway, but is even higher in denmark and the netherlands. this probably reflects a long history of well developed mortgage financing in these countries. inflation stabilised early in the 1990s after falling from a high level in the previous decade. through the 1990s, inflation generally remained in the interval 1Β½ β 3Β½ per cent. inflation has varied slightly more in the past few years. in a period of increasing cross - border labour flows, major technological advances, changes in competitive conditions and substantial changes in trade patterns, inflation will probably, with our very open economy, show somewhat wider variations, as witnessed over the past two to three years. the operational objective of monetary policy is low and stable consumer price inflation. over time, the consumer price index will provide a guide for assessing monetary policy. monthly variations in consumer prices reflect temporary conditions which monetary policy cannot control. according to norges bank β s remit, the bank shall not normally take account of direct effects on consumer prices of changes in interest rate, excise duties and extraordinary, temporary disturbances. energy prices have traditionally shown wide variations. hence, a price index that is adjusted for variations in such prices as well | 1 |
responses, even when successful in combating financial instability, may not be enough to support the resumption of trend economic growth over the medium term. why is government action aimed at financial stability not sufficient to usher in a new era of prosperity? because the broader financial architecture remains in substantial flux, as is sometimes unavoidable. confidence in markets and institutions cannot be demanded or forced by edict. confidence in a new architecture cannot be jury - rigged, even by welldesigned government actions. nor can confidence be rushed. comprehensive policy prescriptions to address financial instability are now being delivered to the ailing patient. but a dose of patience itself may be equally important to help the recuperative process. time is required for the medicines to be administered and their efficacy to be judged. new prescriptions, however well intentioned, can prove unsettling to a patient who is searching to find his footing. of course, policy must respond to serious situations as they arise ; and, during the past 15 months, these developments have been difficult to anticipate with precision. but, if the framework for policy decisions is not viewed as clear, consistent, and predictable by market participants, the resulting actions run the risk of contributing to, rather than reducing, market volatility β at the most inauspicious of times. see kevin warsh ( 2007 ), " financial stability and the federal reserve, " speech delivered at the new york state economics association 60th annual conference, loudonville, new york, october 5. finally, actions intended to help achieve financial stability should not be allowed to interfere with the establishment of a sturdy, new financial architecture. concluding remarks i am reminded of a certain omaha - based investor who says that his investment style is to be greedy when other investors are fearful, and be fearful when others are greedy. 11 i would modify the advice somewhat to make it applicable to policymakers : we should be steady when financial market participants are fearful, and fearful when markets appear steady. this call for steadiness is not some nostrum, implying that the government should be passive during times of significant economic turmoil. quite the contrary. but comprehensive policy prescriptions are most effective when they establish new rules of engagement that are clear in intent, consistent in application, and reasonably predictable in effect. this policy formulation should allow financial firms to regain their footing and market participants, more broadly, to take new, constructive actions to facilitate the availability of credit. perhaps in this way, policy | jean - claude trichet : interception of bank transfer data from the swift system by the us secret services statement by mr jean - claude trichet, president of the european central bank, at the public hearing at the european parliament on the interception of bank transfer data from the swift system by the us secret services, brussels, 4 october 2006. * * * madame la presidente, monsieur le president, mesdames et messieurs les membres de la commission des libertes civiles, de la justice et des affaires interieures, mesdames et messieurs les membres de la commission des affaires economiques et monetaires, je suis ici aujourd β hui pour vous expliquer plus en detail le role de la bce dans la surveillance de swift apres que swift a repondu aux citations a comparaitre emises par le tresor americain en vertu de son programme de traque du financement du terrorisme ( terrorist finance tracking programme ). comme je l β ai deja explique dans ma lettre du 3 aout 2006 en reponse a m. le parlementaire klinz, la bce est membre du groupe de surveillance de swift ( swift β s co - operative oversight group - og ). par consequent, je voudrais, dans la premiere partie de ma declaration, preciser les objectifs et le mandat de ce groupe de surveillance. dans un deuxieme temps, j β exposerai les contraintes juridiques decoulant des statuts du systeme europeen de banques centrales et de la banque centrale europeenne dans ce domaine, y compris le regime de confidentialite en vigueur. a la suite de la declaration de m. praet, je serai a votre disposition pour repondre a toutes vos questions. 1. umfang der aufsichtstatigkeit zunachst einmal mochte ich darauf eingehen, was die aufsichtstatigkeiten der zentralbanken umfassen und wie dies im fall von swift in der praxis umgesetzt wird. wie ihnen bekannt sein durfte, sind die zahlungs | 0 |
##rrencies of the euro. hence, the introduction of the single currency has resulted in more efficient and well - functioning markets, which benefit not only euro area residents, but also market participants outside the euro area. furthermore, this market still has great potential since the use of securities finance by the corporate sector, relative to bank finance, is still only about half that of its counterpart in the united states. the single currency also appears to be a catalyst for restructuring the european corporate sector, and for the emergence of new companies. the ongoing integration process of the national stock exchanges has also been supportive in this respect. primary issues of european equities have reached record highs, with whole new markets, such as the neuer markt in frankfurt, becoming prominent internationally. these developments can only favour those companies which may have found it difficult in the past to finance themselves, but which will now be able to raise equity more easily. in addition, a number of europe - wide equity indices have been established, thereby contributing to extending the trading possibilities and the position - taking opportunities for investors. alliances between stock exchanges should also foster the integration of stock market infrastructures. these changes are bound to intensify competition and make european markets more resilient and fit for the global economy. conclusion to conclude, the introduction of the euro has acted as a catalyst for promoting integration of financial markets in europe, and provides an opportunity to create a europe - wide securities market. the result will be more efficiently functioning markets which, in turn, will mean a reduced cost of capital and improved investment opportunities for businesses and individuals. this process will also enhance the depth and liquidity of financial markets, which in turn will promote stability. the european central bank contributes to this stability by pursuing a credible and transparent monetary policy. in fact, a consistent monetary policy that is committed to price stability is the best contribution that the ecb can make to the smooth functioning and integration of european financial markets. such a policy will be beneficial, as it will minimise the adverse effects of inflation and high inflation uncertainty, thereby creating conditions for steady and sound economic growth in the medium term. a stability - oriented monetary policy thus contributes to the smooth functioning of financial markets and to economic prosperity as a whole. | willem f duisenberg : recent developments and trends in world financial markets speech by dr willem f duisenberg, president of the european central bank, on the occasion of the 75th anniversary of the banco de mexico, mexico, 14 november 2000. * * * introduction i should like to thank the bank of mexico for inviting me to this conference commemorating the bank β s 75th anniversary. the theme of this panel discussion is a topical one. in recent years, financial markets have undergone some of the most rapid and extensive changes in any markets. we have witnessed dramatic events in global financial markets, including the asian crisis, the russian crisis, and the near - collapse of long term capital management ( ltcm ), which was a highly leveraged hedge fund with enormous trading positions. more recently, we have seen remarkable developments in stock prices around the world, and in particular in stocks in the telecommunications and internet sectors. many of these so - called β tech. stocks β, which experienced sharp price increases in late 1999 and early 2000, have seen their market capitalisation cut substantially in recent months. however, apart from market events such as these, global financial markets have also undergone major structural change in recent years. in particular, the speed and scope of such developments in the euro area following the introduction of the new currency have been remarkable. i should like to concentrate, today, on these structural issues, first of all considering global developments in brief, and then looking at recent developments in the euro area. recent trends in global financial markets perhaps foremost among recent changes in world financial markets has been their accelerating integration and globalisation. this development, which has been fostered by the liberalisation of markets, rapid technological progress and major advances in telecommunications, has created new investment and financing opportunities for businesses and people around the world. easier access to global financial markets for individuals and corporations will lead to a more efficient allocation of capital, which, in turn, will promote economic growth and prosperity. apart from this ongoing integration and globalisation, world financial markets have also recently experienced increased securitisation. in part, this development has been spurred by the surge in mergers and acquisitions and leveraged buy - outs that has taken place in markets of late, not least in the euro area. one aspect of this securitisation process has been the increase in corporate bond issuance, which has also coincided with a diminishing supply of government bonds in many countries, particularly in the united states. other interesting developments in world financial | 1 |
term policy trade offs in an environment of very low or even falling inflation, the relative β bluntness β of the monetary policy tool and the often difficult situation in terms of available information and analysis, put certain limits to the use of monetary policy for financial stability purposes. moreover, market excesses and the pro - cyclicality of the financial system are also due to factors other than excessive credit growth and high leverage. consequently, other policy tools must be employed β notably regulatory policy instruments β by the supervisory authorities in order to reduce procyclicality and also limit the emergence of systemic risks in the financial system. this assessment is also compatible with tinbergen β s rule that, in case of trade - offs between objectives, policy makers need as many ( independent ) policy instruments as objectives, in order to fully achieve them. furthermore, the extraordinary nature and consequences of the financial crisis β and here i am referring both to how close we came to a global financial meltdown and to the overall costs of the crisis for tax - payers in terms of losses in output and employment β have painfully demonstrated the need for improving and broadening the regulatory framework, by strengthening both the micro - prudential supervision of individual institutions and the macroprudential supervision of the financial system as a whole. the current crisis has revealed a general under - appreciation of systemic risks in the existing framework of financial regulation and supervision, which tends to focus on the stability of individual institutions, markets and infrastructures. the crisis also revealed that macrofinancial factors, the inter - connectedness of markets and institutions and financial globalisation play an important role in determining the size, nature and propagation of systemic risk. therefore, it essential β and there is a broad consensus on this β to establish an effective framework for macro - prudential supervision that will ensure a systematic, allencompassing and integrated analysis of systemic risks as well as the formulation of appropriate policies to prevent address such risks. the macro - prudential approach to supervision focuses on the financial system as a whole and involves the monitoring, assessment and mitigation of systemic risk, namely the likelihood of failure of a significant part of the financial system. it is important to recognise that systemic risk is partly endogenous as it depends on the collective behaviour of financial institutions and their inter - connectedness, as well as the interaction between financial markets and the macroeconomy. macro - prudential policies aim to prevent, or at least contain, the build | in public debt ) ; and of monetary and other financial policies, which reacted promptly and forcefully to the mother of all exogenous crises, ensuring that financial meltdown and a 2008 - style downward spiral were avoided. last week, the imf released their updated projections on global growth. they now expect an expansion of 5. 9 per cent this year and 4. 9 per cent in 2022. for italy, the imf β s projection for growth this year has improved from 4. 9 to 5. 8 per cent, while for 2022 it has been confirmed at 4. 2 per cent. our own expectations are similar. many advanced countries ( and, among the emerging ones, china ) have already reached, or are about to reach, pre - crisis output levels. in italy, we expect this to happen in the first half of 2022. there is unavoidable uncertainty about such projections. the latest crisis was utterly unprecedented. one can never rule out the possibility, for instance, that the pandemic will take another nasty turn, or that investor attitudes will suddenly change. and some delayed bankruptcies may well occur with the end of moratoria and other provisions. 1 / 5 bis central bankers'speeches meanwhile, fast growth has resulted in production and distribution bottlenecks, which may yet restrain further expansion, and have already pushed prices higher. we discussed this issue at length during the g20 meeting last week, and there was agreement that such bottlenecks are still likely to be transitory. this means that the markedly higher inflation rates that have recently been observed throughout the developed world can also be expected to recede over time, in part given the absence, so far, of wage pressures. as governor visco said in his introductory statement to the press conference that followed the g20 meeting, β inevitably, the widespread uncertainty surrounding the current situation requires central bank governors to monitor price dynamics closely β. he also said that β economic policies should remain supportive for as long as necessary β. last year β s crisis hit disadvantaged groups such as low wage earners, women, and the young in a disproportionate way. it also hit small enterprises and the self - employed, though with an extremely variable intensity. certain industries, especially in services, suffered a much heavier shock than average. there is evidence that in many countries, including italy, fiscal support has been broadly effective in countering the sharp increase in inequality that would otherwise have emerged. differences remain | 0 |
inflation in the range consistent with price stability over the medium term. this has turned out to be the case. while switzerland β s inflation rate of 3. 5 % is low by international comparison, it is significantly above the 0 % to 2 % range we equate with price stability. there are also growing signs that higher prices are increasingly spreading to goods and services that are not directly affected by the war in ukraine or the consequences of the pandemic. information from our delegates for regional economic relations suggests that companies can more easily transfer higher costs to their sales prices. in addition, energy prices have continued to rise overall and are increasing inflationary pressure in many sectors. this heightens the risk of second - round effects. we have therefore concluded that a significant increase in the snb policy rate is appropriate. moreover, our new forecast, which as always takes account of today β s decision, shows that a further tightening of monetary policy cannot be ruled out in the coming quarters. however, the environment continues to be subject to a high degree of uncertainty. let me now say a few words about the exchange rate. the swiss franc has appreciated in trade - weighted terms by around 7 % since the monetary policy assessment in june. this appreciation helps to tighten monetary conditions and dampen inflationary pressure. in order to set appropriate monetary conditions, we remain willing to be active in the foreign exchange market as necessary. if there were to be an excessive appreciation of the swiss franc, we would purchase foreign currency. if the swiss franc were to weaken, however, we would consider selling foreign currency. period of negative interest rates comes to an end with today β s decision, an extended period of a negative snb policy rate comes to an end. negative interest was introduced at the beginning of 2015 to counter upward pressure on the swiss franc associated with the discontinuation of the minimum exchange rate. over the past years, negative interest has helped to dampen the appreciation of the swiss franc and to ensure price stability. at the same time, we were always aware that negative interest can have undesirable sideeffects and presents challenges for many economic agents. on the whole, however, negative interest has proved its worth. the benefits for monetary policy clearly outweighed the costs of page 3 / 4 zurich, 22 september 2022 thomas jordan news conference the side - effects. without negative interest, price stability could not have been ensured and economic developments would have been significantly less favourable | . negative interest will remain an important monetary policy instrument, which we will use if needed. ladies and gentlemen, thank you for your attention. i now hand over to martin schlegel, who will speak about the mortgage and real estate markets. page 4 / 4 | 1 |
not what you pay it's the way that you pay it and that's what gets results : jockeys'pay and performance β, labour : review of labour economics & industrial relations, 13 ( 2 ), pp. 385 - 411. ferrero, a., harrison, r. and nelson, b. ( forthcoming ), β concerted efforts? monetary policy and macroprudential tools β. groves, t., hong, y., mcmillan, j. and naughton, b. ( 1994 ), β autonomy and incentives in chinese state enterprises β, quarterly journal of economics, 109 : 1, pp. 183 - 209. goodhart, c. ( 2015 ), β linkages between macro - prudential and micro - prudential supervision β, butterworths journal of international banking and financial law, 30 ( 10 ), pp. 607 - 609. holmstrom, b. and milgrom, p. ( 1991 ), β principal - agent analyses : incentive contracts, asset ownership, and job design β, journal of law, economics, & organization, vol. 7, pp. 24 - 52. all speeches are available online at www. bankofengland. co. uk / speeches kohn, d. ( 2017 ), β cooperation and coordination across policy domains β, speech given at the joint financial stability institute and bank for international settlements conference on supervisory policy implementation in the current macro - financial environment, available at https : / / www. bankofengland. co. uk / speech / 2017 / cooperation - and - coordination - across - policy - domains. leeper, e. m. ( 1991 ), β equilibria under'active'and'passive'monetary and fiscal policies β, journal of monetary economics, vol. 27, no. 1, pages 129 - 147. meeks, r. ( 2017 ), β capital regulation and the macroeconomy : empirical evidence and macroprudential policy β, european economic review, vol 95, pp125 - 141. rey, h. ( 2013 ), β dilemma not trilemma : the global financial cycle and monetary policy independence β, federal reserve bank of kansas city economic policy symposium. sargent, t. and wallace, n. ( 1981 ), β some unpleasant monetarist arithmetic β, federal reserve bank of minneapolis quarterly review, vol. 5, no. 3. svensson, l. | 50s, where the earnings β premium β flattens out a bit. for example, those aged 45 - 49 earn a pay premium, on average, of around 19 % compared with those aged 25 - 29. this pay premium is notably larger for white men than women or ethnic minorities. men aged 45 - 49 earn an β extra β wage premium of around 10 % compared with the other sub - groups. all speeches are available online at www. bankofengland. co. uk / speeches ( c ) part - time and non - permanent work. part - time work, compared with full - time employment, reduces earnings across all four sub - groups, on average by 16 %. this discount is larger for white men ( 22 % ) than for ethnic minorities and white women ( 10 % ). if employment is not permanent, this also reduces earnings across the sub - groups, with white men again being affected the most ( 10 % reduction in pay ). ( d ) children under 2. viewed on its own, having a child under 2 appears to have a positive effect on the earnings of both white men and women, of 6 % and 1 % respectively. for ethnic minority men, the effect is not statistically significant while for ethnic minority women earnings are reduced by 1 %. the results are more interesting if we interact having a child under 2 with a variable capturing full or part - time employment. while for white men, the effect on earnings is still positive, for women the effect of having a child under 2 is only positive for women working part - time. for women working full - time, having a child under the 2 reduces earnings by around 6 %. this suggests women in full - time jobs experience a β maternity penalty β, whereas men and women in part - time employment do not. ( e ) financial sector. compared to earnings in the benchmark sector ( agriculture ), most sectors have higher pay. the sector with the highest relative pay is finance, with a 46 % premium relative to the benchmark. this premium is notably higher for men than women ( 58 % versus 32 % ), although it is highest for ethnic minority men ( 76 % ). these are large pay gaps, bearing in mind these estimates take account of differences in the individual characteristics of the workers, such as age and educational achievement. ( f ) born in the uk. being born in the uk, on average, leads to slightly lower earnings than not. however, this average masks sharply opposing | 0.5 |
in the cpi ( all items less fresh food ) were 0. 8 percent for fiscal 2015, 2. 0 percent for fiscal 2016, and 1. 9 percent for fiscal 2017 ( chart 5 ). although the timing of reaching around 2 percent depends on developments in crude oil prices, it is projected to be around the first half of fiscal 2016, assuming that crude oil prices will rise moderately from the recent level. thereafter, the year - on - year rate of increase in the cpi is likely to be around 2 percent on average. concluding remarks in conclusion, let me touch on the economy of hokkaido prefecture. the economy has been recovering moderately, although some weakness has been observed in some aspects, such as the public construction sector, which largely affects small firms. turning to final demand, there are somewhat weak developments in terms of the bis central bankers β speeches decline in public investment, but a marked increase in the number of foreign visitors to japan has been underpinning demand. moreover, over the period of more than a year since the consumption tax hike, even durable consumer goods and housing investment have started to level off. meanwhile, as seen in the steady improvement in the employment and income situation, a virtuous cycle from income to spending has been operating in the region in the same way as in japan as a whole. in hokkaido prefecture, there are plenty of topics associated with encouraging tourism. for example, yoichi city became the setting for massan, a morning drama serial by japan broadcasting corporation ( nippon hoso kyokai, nhk ). in addition, the hokkaido shinkansen will commence its operation by march 2016, and it is scheduled to be extended to sapporo city. these topics show that hokkaido prefecture will receive further attention going forward. moreover, sapporo city has announced its intention to bid for the 2026 winter olympics, and this will increase the opportunity for hokkaido prefecture to display to the world its appeal. other than tourism, hokkaido prefecture has strength in the food industry on the back of its abundant agricultural and fishery resources. i have heard that hokkaido prefecture now faces problems such as lower production of raw milk resulting from increasing abandonment of farming as well as slack in unloading in the fishing industry, but i expect that production of higher value - added goods will be promoted through efforts such as healthy - do, which is the certification system of functional food that the hokkaido government is making efforts to popularize. other initiatives include promoting hokkaido prefecture as a back - up base for | about how tighter financing conditions will affect the economy, and whether the effects will be stronger or weaker than in the past. firms have not faced a steep rise in funding costs for more than a decade, while the economy has changed considerably in that time β and may still be changing after the pandemic. this means that we need to observe closely the impact of our measures over time. we might already be seeing some early indications of their effects across sectors. a marked divergence has emerged between manufacturing activity, which looks to be contracting, and services, which are expanding β especially in the leisure and tourism sectors. this can largely be explained by continued reopening effects : people are consuming more of the services they were denied during the pandemic, such as travel and eating out, while spending less on goods that they stocked up on during lockdowns. but monetary policy may also be playing a role. tighter financing conditions may already be constraining households β total spending, forcing them to substitute between sectors. and spending on durable goods is likely to be more affected by higher financing costs, as some of these are typically bought on credit. by contrast, for this summer at least, our consumer surveys show that tighter monetary policy is not going to affect people β s holiday plans. as our rate increases percolate through the economy, we will get a clearer picture of how much the tightening we have already done is biting β and how much more is needed to ensure that inflation is decisively squeezed out of the economy. conclusion let me conclude. the motto of the sparkassen is β weil β s um mehr als geld geht β. and this, in many ways, also applies to the ecb. our job is to create money and to preserve its value. but we do so because, in the long run, price stability produces the best and fairest outcomes for people and businesses. today, to return to my analogy, the airplane is still climbing β and it will keep going until we have enough speed to glide sustainably and land at our destination. but the reaction function we have laid out will help to strike the right balance for our monetary policy decisions in the future : between further tightening to tame inflation on the one hand and uncertainty about the speed and strength of policy transmission on the other. one thing, however, is certain : we will keep moving forward β determined and undeterred β until we see inflation returning to our 2 % medium - term target in | 0 |
have thus eventually been invested outside the region, such as in bonds in the united states and developed europe. to put it in a different perspective, the asian financial sector remains highly dependent on banks, indicating the underdevelopment of regional bond and other capital markets. owing to such an unbalanced market structure, asian economies are exposed to the risk that domestic asset prices become volatile because of rapid global capital flows, resulting in a sharp increase in the volatility of foreign exchange rates. also, the immature local derivatives market makes appropriate risk - taking transactions difficult, as risk - hedging instruments are limited ( slide 4 ). moreover, owing to their less - developed securitization markets, asian economies do not sufficiently enjoy the merits of the securitization schemes that attract a variety of investors depending on their risk - taking capacities ( slide 5 ). ( authorities β efforts to address vulnerabilities ) how have the asian authorities responded to these vulnerabilities? i would like to explain their efforts in three aspects. to develop local currency - denominated bond markets the first is a project aimed at developing liquid bond markets to provide a bridge between abundant local savings and local investments : the abf of emeap, and the abmi of asean + 3. the executives β meeting of east asia - pacific central banks ( emeap ) established the asian bond fund ( abf ) investment trust in 2003, and became the initial buyers by investing in sovereign and quasi - sovereign bonds in the eight member jurisdictions. when it was launched, the fund was limited to investment only in u. s. dollar - denominated bonds. however, since 2005, the fund has begun to include those denominated in the local currencies of the eight members. in addition, emeap launched an exchange - traded fund ( etf ) called the pan asian index fund ( paif ). the paif was first listed on the hong kong stock exchange in 2005, and later cross - listed on the tokyo stock exchange in 2009. 2 as part of the asean + 3 process, the authorities have launched the asian bond markets initiative ( abmi ), 3 aimed at promoting bond markets. the most notable recent achievement is the establishment in november 2010 of a trust fund in the adb called the credit guarantee and investment facility ( cgif ). the cgif plans to start its credit guarantee operations for local currency - denominated corporate bonds issued in the | euro area or eu level? or do they prefer to maintain their national seats around increasingly irrelevant tables? these are not easy questions to answer, nor easy decisions to take politically. in a system where national prestige has still a political meaning, in the sense that it brings votes, and that political accountability in europe remains based mainly at national level, it β s not easy to transfer responsibility to a higher level of government. this is a dilemma that europe, and its member states, have to face, whether they like it or not. but it β s better to have this debate out in the open than to fudge it by creating hollow structures. the problem for the eu is that its citizens do not see it as helping to solve their everyday problems. the way to address this challenge is not to choose the middle ground, which would ultimately penalise the european β construction β. either it must be understood and clearly stated that certain policies and instruments are better performed at european level and the corresponding competencies transferred to that level, as has been the case with monetary and competition policies. or those policies and instruments should remain unequivocally in the hands of national governments, and the inevitable process of coordination, even if strengthened, should not overshadow that level of responsibility. looking ahead to the next ten years, it β s better to ask some hard questions than to paper over the cracks and sow confusion. there are several areas where these questions need to be asked, especially in respect of international financial institutions and policies, and banking supervision. the time might not be ripe for making substantive changes in some of these areas. however, it will have to be made clear why certain solutions are not followed. this is what accountability is all about. let me provide an example : people are facing a variety of problems resulting from the rise in commodity prices, in particular a decline in their purchasing power. one solution β in my view, the only solution for commodity importers β is to increase productivity in the goods and services sector. there are substantial margins for improvement in the services sector, especially if one compares europe β s economy with that of the us. how can we achieve these improvements? each country can look after itself and adopt specific measures, as long as they are compatible with the single market. the eu, with the consensus of its member states, can launch its own initiative to increase competition in the services sector throughout the eu. this solution might be more efficient, but it has partly failed in the | 0 |
perhaps no better indication of the scale of this support than the paths of household and business incomes during this period. at a time when economic activity contracted more and faster than at any time since the great depression in the 1930s, household disposable income actually increased ( graph 9 ). this is not the usual pattern in a downturn, to say the least. profits also increased, partly because jobkeeper covered more of many firms'costs than their revenues declined, and partly because other tax and business support measures improved their post - tax incomes. rent and loan repayment deferrals helped as well. some individual households and businesses are facing tough times. taking each sector as a whole, though, both the household sector and the business sector are entering the expansion phase with stronger balance sheets than they had before the pandemic. this is an exceptional, and welcome, outcome. graph 9 household income and business profits nominal, quarterly $ b $ b household gross disposable income ( lhs ) gross operating surplus ( rhs ) source : abs and again, policy support clearly affects people's responses. whether it's the consumer spending response to higher incomes, the response of residential construction activity to the homebuilder program and state - based measures, or the response of machinery & equipment investment to various tax incentives, policy support has worked. monetary policy support has played a role in supporting the economy, too. others have discussed the detail of the bank's policy measures recently, so i won't repeat much of that information today. the response has come in 2 main waves. in march of last year, the board cut the cash rate to 0. 5 per cent, and later that month made a further reduction to 0. 25 per cent as part of a larger package of policy measures. financial markets were quite dislocated at that time, so the bank used its existing market operations to provide liquidity to the market and address the dislocation. as part of that march package, the board introduced several new policy measures. it set a target for the 3 - year government bond yield and provided low - cost funding to the banking system, also with a 3 - year term, known as the term funding facility ( tff ). the tff was structured to encourage lending to business, and especially to small and medium - sized firms. the initial tranche of funding under the tff was available to be drawn down until the end of october. in | of children when two years old. how does socio - economic status then affect their educational progression? some studies have found that a low - ability child from a high - status group will exhibit higher levels of attainment by the age of six than a high - ability child from a low - status group. 69 and, thereafter, the differences begin to widen further. this evidence suggests it is far better to be born rich and stupid than bright and poor. moreover, these early - stage differences in educational attainment, shaped by socio - economic background, have a life - long impact. that is why there is a very high degree of intergenerational persistence in incomes and wealth, even once account is taken of ability. as one diagnostic on that, consider the following evidence, courtesy of the commission on social mobility and child poverty : although independent schools comprise only 7 % of pupils in the uk, the independently - educated comprise over 70 % of the upper echelons of the judiciary, 55 % of permanent secretaries in the civil service and 62 % of senior armed forces officers. 70 branching of the opportunity tree starts early, it appears, and then keeps widening. at present, as with cognitive diversity, there is often a lack of recognition of these inbuilt socioeconomic biases. and, as with cognitive diversity, one reason for this lack of recognition is a lack of measurement. there is no agreed set of metrics for measuring someone β s socioeconomic background. in the uk, the social mobility and child poverty commission has begun to develop some metrics. but there is widespread recognition that we are still in the early stages of measurement. measurement would enable organisations to draw their own experiential diversity maps. as with cognitive diversity, beyond that there is potentially value in making transparent those maps to provide incentives for purposive action if experiential diversity is found to be wanting. the bank has just begun to put in place a system for measuring the socio - economic background of its recruits. in future, that might help in sketching the contours of the bank β s own experiential diversity map. some organisations have taken more purposive action still to promote social mobility. for example, some have set themselves recruitment targets for employees drawn from lower socio - economic groupings. others have put in place so - called β contextualised β recruitment, adjusting their entrance requirements to prevent filtering out of candidates based on their socio - economic background. the | 0 |
the gses. moreover, the gse regulator should be able to adjust capital requirements quickly and as needed to address developing or foreseeable concerns, rather than being required by cumbersome procedures to wait until after the damage has been done. a strong capital base would significantly reduce the implicit subsidy and incentive problems that now distort gse investment decisions ( lucas and mcdonald, 2006 ), while also increasing their safety and soundness. the establishment of a clear and credible gse receivership process, the second element, is needed to create market discipline for these companies. reform legislation should establish ( 1 ) a well - defined and mandatory process for placing a gse in receivership and ( 2 ) a method for resolving a gse once it is placed in receivership. both parts are necessary for the receivership process to be meaningful and credible. market participants should clearly understand that, once certain conditions arise, regulatory forbearance will be impermissible and a gse receivership will be established. importantly, the gse receivership process should include a mechanism for ensuring that both the shareholders and legal provisions such as prompt corrective action and the least - cost - resolution requirement probably contribute to the perception of bank debt holders that their investments are not guaranteed if the bank gets into financial trouble. recently, the federal deposit insurance corporation ( fdic ) has proposed to require that large banks maintain depositor records in a common format to help ensure that those creditors do not escape losses in the event of a bank failure. also, the ability of bank holding companies to increase their government - backed funding is limited. by law, banks cannot make additional banking acquisitions if the resulting firm would control more than 10 percent of u. s. insured deposits. this comparison excludes the temporary 30 percent additional capital currently required by ofheo because of the operational risks posed by the gses β recent accounting problems. interest rate risk depends on the degree of hedging, which is at the discretion of firm management. however, because the gses β portfolios are concentrated in the mortgage - backed securities market and thus are subject to rapid changes in market value, the risk profile of the gses can change rapidly in response to unexpected movements in interest rates. in contrast, banks hold a more diversified mix of liabilities and assets, many of which are less sensitive to unexpected changes in interest rates, suggesting that banks as a general matter are less prone to interest rate risk. regardless, little social benefit is | . public policy issues raised by gse operations i will begin by discussing gse operations and some issues of public policy raised by these activities. broadly speaking, fannie mae and freddie mac each run two lines of business. their first line of business involves purchasing mortgages from primary mortgage originators, such as community bankers ; packaging them into securities known as mortgage - backed securities ( mbs ) ; enhancing these mbs with credit guarantees ; and then selling the guaranteed securities. through this process, securities that trade readily in public debt markets are created. this activity, known as securitization, increases the liquidity of the residential mortgage market. in particular, the securitization of mortgages extended to low - and middle - income home purchasers likely has made mortgage credit more widely available. the gses β second line of business is the main focus of my remarks today. it involves the purchase of mortgage - backed securities and other types of assets for their own investment portfolios. this line of business has raised public concern because its fundamental source of profitability is the widespread perception by investors that the u. s. government would not allow a gse to fail, notwithstanding the fact that β as numerous government officials have asserted β the government has given no such guarantees. the perception of government backing allows fannie and freddie to borrow in open capital markets at an interest rate only slightly above that paid by the u. s. treasury and below that frame and white ( 2005 ) provide a general description of gses and the associated policy debates. paid by other private participants in mortgage markets. by borrowing at this preferential rate and purchasing assets ( including mbs ) that pay returns considerably greater than the treasury rate, the gses can enjoy profits of an effectively unlimited scale. consequently, the gses β ability to borrow at a preferential rate provides them with strong incentives both to expand the range of assets that they acquire and to increase the size of their portfolios to the greatest extent possible. the gse portfolios have been the subject of much controversy. first, analysts disagree about whether the gse portfolios serve any public purpose. the gses themselves argue that their purchases of mbs provide additional support to the mortgage market, particularly during periods of financial stress. in contrast, research at the federal reserve board and elsewhere has found that the gse portfolios appear to have no material effect on the cost or availability of residential mortgages. 2 at the margin, the gses finance their purchases | 1 |
christian noyer : banking in the euro area speech by mr christian noyer, vice - president of the european central bank, at the 30th anniversary of the association of foreign banks'representatives, frankfurt, 8 november 2001. * * * i am very grateful for the invitation to speak to you on the occasion of the 30th anniversary of the association of " foreign banks'representatives in germany ". your association has 117 members from a large number of countries. several of the member institutions are counted among the 30 major european banks, or among banks from elsewhere with important operations in europe. for many banks represented by your association, the topic of my speech " banking in the euro area " is part of day - to - day business. it is also day - to - day business for the european central bank ( ecb ) and the eurosystem as a whole, as we conduct our monetary policy operations and run the target large - value payment system. the further integration of the european banking system and financial markets is in the interests of both banks and the central bank. for banks, it means the liquidity benefits of deeper and wider markets and lower costs when operating in several countries. from the central bank perspective, it enhances the efficient and consistent implementation of the single monetary policy. we already enjoy the benefits of a common euro area banking system in important respects. an integrated money market exists for liquidity transfers in euro ; banks are inter - connected in a common payment system infrastructure ; and wholesale securities market activities and corporate finance services do not recognise geographical borders. however, at the retail level, international banks must still treat each country as an individual market. this is because of localised demand and country - specific banking products, and differences in conduct - of - business and consumer protection rules. the remaining differences in regulatory and supervisory practices can also play a role. i believe that few institutions understand this as well as you do, as you still have to cope with the task of navigating business through various national environments. i should like to explore this double feature of euro area banking today. on one hand, there is the challenge for central banks and supervisory authorities to respond to the emergence of a common wholesale banking system in order to maintain financial stability. on the other hand, greater integration, also in the retail field, remains an important policy objective. i should like to address the two aspects in turn, starting with wholesale banking and then moving on to the retail side. a common wholesale banking system i share the | - term deposits with embedded derivatives tailored to the needs of investors. taking into account the effects of financial innovation is a clear challenge for monetary analysis. meeting this challenge requires regularly updated tools and in - depth research based, in particular, on sectoral analysis. 2. by affecting the transmission mechanism, financial innovation is also a challenge for the conduct of monetary policy a good knowledge of the mechanisms through which monetary policy affects the economy is of crucial importance for central banks. financial innovation affects these mechanisms both by altering the channels through which monetary policy operates and by changing the overall impact of monetary policy decisions. but the magnitude of the changes and the precise effect due to financial innovation at a time when other factors such as globalisation are at work are not well known. at the present juncture research shows that financial innovation tends to strengthen the interest and exchange rate channels whereas it appears to weaken the credit channel. - financial innovation certainly contributes to stronger wealth effects and thus probably also to strengthen interest rate channel 7. this can be explained as follows : β’ financial innovation fosters faster dissemination of information and its more rapid incorporation into financial market prices. this is of course particularly true for monetary policy decisions and can therefore increase the effectiveness of monetary policy, particularly via the interest rate channel 8. β’ financial innovation contributes to an increased holding of financial assets by lowering transaction costs and facilitating arbitrage, hedging, funding and investment strategies. β’ financial innovation often relies on stronger leverage, increasing the effect of interest rate change by the central bank. one example of this enhanced impact is provided by the behaviour of hedge funds who customarily borrow short - term funds to finance their ( longer - term ) investments 9. - turning to the exchange rate channel, financial innovation results in greater integration of domestic and international financial markets, which should also strengthen the exchange rate channel as exchange rates become more sensitive to interest rate differentials between currency areas. this has been illustrated by the recent debate about cross - border carry trades 10. - at the same time, financial innovation has probably weakened the credit channel 11. several phenomena may be at play : β’ financial innovation gives firms broader access to securities markets, which may reduce information asymmetries at the source of the credit channel. bis, 1994 noyer, 2001 weber, 2007 weber, 2007 bis, 1994 ; thornton, 1994 β’ more specifically, securitisation by banks has reduced their liquidity constraints and thus further weakened the credit channel. a recently published research paper by the new york | 0 |
. as you know, in the latter part of 2008 and early 2009, the federal reserve took extraordinary steps to provide liquidity and support credit market functioning, including the establishment of a number of emergency lending facilities and the creation or extension of currency swap agreements with 14 central banks around the world. 2 in its role as banking regulator, the federal reserve also led stress tests of the largest u. s. bank holding companies, setting the stage for the companies to raise capital. these actions β along with a host of interventions by other policymakers in the united states and throughout the world β helped stabilize global financial markets, which in turn served to check the deterioration in the real economy and the emergence of deflationary pressures. one basis point equals one - hundredth of 1 percentage point. for more on these actions to stabilize markets and their effects, see bernanke ( 2009 ). bis central bankers β speeches unfortunately, although it is likely that even worse outcomes had been averted, the damage to the economy was severe. the unemployment rate in the united states rose from about 6 percent in september 2008 to nearly 9 percent by april 2009 β it would peak at 10 percent in october β while inflation declined sharply. as the crisis crested, and with the federal funds rate at its effective lower bound, the fomc turned to nontraditional policy approaches to support the recovery. as the committee embarked on this path, we were guided by some general principles and some insightful academic work but β with the important exception of the japanese case β limited historical experience. as a result, central bankers in the united states, and those in other advanced economies facing similar problems, have been in the process of learning by doing. i will discuss some of what we have learned, beginning with our experience conducting policy using the federal reserve β s balance sheet, then turn to our use of communications tools. balance sheet tools in using the federal reserve β s balance sheet as a tool for achieving its mandated objectives of maximum employment and price stability, the fomc has focused on the acquisition of longer - term securities β specifically, treasury and agency securities, which are the principal types of securities that the federal reserve is permitted to buy under the federal reserve act. 3 one mechanism through which such purchases are believed to affect the economy is the so - called portfolio balance channel, which is based on the ideas of a number of well - known monetary economists, including james tobin, milton friedman, franco modigliani, karl brunner | all, who hears about the idea that never came to fruition - - but it serves as an important check in the policymaking process. as i mentioned, economic thinking at the cea has been marked by important continuities. nevertheless, the evolution of thinking at the cea over the years has reflected the economic challenges of each era as well as continuing developments in economic research. the ideas of keynesian stabilization that were an important motivation for the employment act reached their zenith during the kennedy administration. since that time, the cea has followed the economics profession away from a belief that fiscal policy can or should fine - tune the level of aggregate demand. during the 1960s and 1970s, the economy was confronted by rising inflation pressures, a series of energy shocks, and a slowdown in the underlying pace of productivity growth. at the same time, there was considerable ferment within the economics profession, as prevailing views of the inflation process and of the government's role in economic stabilization were challenged. successive ceas agonized over these issues and over whether to use the new ideas emerging from the academy and, if so, how. since the 1980s, the cea has focused increasingly on understanding the sources of economic growth and the supply side of the economy. the focus on international issues, too, has intensified as trade and international financial flows between the united states and other countries have grown. i should also note that, despite its overtly macroeconomic origins, the cea has expanded successfully into the realm of microeconomics, particularly issues related to regulatory policy and market structure. notwithstanding these changes in focus over time, there have been important intellectual continuities. in particular, a common theme throughout the cea's history has been a belief in the importance of market forces, and this belief stands as an important legacy of the cea. 2 / 3 of course, as chairman of the council during president ford's administration, i was close to some of these debates and decisions. i was recruited to serve as chairman of the council by president nixon's economic team. as it turned out, i was before the senate banking committee for confirmation the day that president nixon resigned. president ford quickly renominated me, and i began work at the cea in september 1974. i was privileged to serve president ford, and found him to be a very effective leader. parenthetically, there are some interesting parallels between president ford and president truman. both were serving as vice president | 0.5 |
this flexibility can be used in a way that does not prejudice the achievement of medium - term price stability. importantly, this flexibility can help reduce the amplitude of cycles in activity and employment. it can also have the benefit of reducing financial stability risks, especially if cutting interest rates in response to a positive supply shock and lower inflation encourages excessive borrowing and asset overvaluation. again, i want to make it clear that the central bank does not need a broad mandate to have this flexibility. it is possible that a central bank with only an inflation mandate would achieve the same results, especially if it has a flexible, rather than rigid, inflation target. the other topic of this session is the coordination arrangements with government. i have already spoken about the agreement on the inflation target, so i would like to touch on four other aspects of the relationship between the central bank and the government. first, the government appoints all the members of the reserve bank board ( which is the decision - making body for monetary policy ). the governor has a term of seven years and often serves a longer term. other board members are appointed for at least five years and often serve multiple terms. besides the governor and the deputy governor, all members of the board are external and are prominent members of the business, academic or policy communities. the secretary to the australian treasury ( who is the most senior public servant in the treasury department ) is also a full voting member of the board. the secretary participates as an economist in their own right, not as a representative of the government, but is able to share details of the government β s fiscal and other plans. the board is apolitical and there is not a tradition of board members stepping down following a change of government. board members ( including the governor ) can have their appointments terminated only if they : become permanently incapacitated ; become bankrupt ; miss too many meetings ; or fail to satisfy their obligations regarding the governance of a public sector entity. these termination provisions have never been used and are not a point of controversy. second, there is a frequent exchange of views between the governor and the treasurer. this exchange is mostly on an informal basis, as circumstances require. the treasurer does not attend meetings of the board, nor has the right to do so. the government and the opposition support the independence of the rba and when the government is asked about monetary policy, the typical response is that monetary policy is a matter for the independent reserve bank. third, the rba is the transaction | ##a that makes decisions about intervention in the market. we rarely intervene and are transparent regarding the conditions under which we would do so. in particular, we only intervene if : ( i ) market liquidity has significantly deteriorated during a period of stress ; or ( ii ) the exchange rate has moved a long way from fundamentals, with damaging consequences for the overall economy. the last time the rba intervened in the foreign exchange market was during the global financial crisis, more than 13 years ago. so intervention is very unusual. we do not have an objective for the exchange rate, nor would it make sense to do so. in my view, adding an exchange rate objective to the central bank β s other objectives would severely compromise the achievement of those other objectives and produce, on average, poorer results. 1 / 4 bis central bankers'speeches turning now to the inflation objective, australia was an early adopter of flexible medium - term inflation targeting. from the outset, our target has been for cpi inflation to average between 2 and 3 per cent over time. we have focused on the medium term rather than the outcome in a particular year or over a specific forecast horizon. we never bought into the idea that the central bank needed to be placed into a straightjacket or surrounded by an electric fence to stop it from exploiting the short - run phillips curve. we have always had a flexible approach that allows for some variation in inflation from year to year. while financial markets are often concerned about whether inflation in a given year is 1. 7 or 2. 3 per cent, most people in the real economy rightly don β t focus too much on this. what matters for overall welfare is that people are confident that their savings and their income will not be eaten away by inflation. it is also important that saving and investment decisions can be made without inflation figuring prominently on people β s radar screens. there are various ways of achieving this, but we have found a flexible medium - term inflation target works well. in terms of the formalities, australia β s inflation target is not set out in legislation. it was originally set by the central bank, but soon after was codified in a written agreement between the central bank and the government. 2 this agreement is reviewed whenever there is a change of government or central bank governor. over the 25 years since the first agreement was signed, the language has evolved considerably but the numerical target of 2 to 3 per cent has been maintained and so too has the focus on the medium | 1 |
the low interest rates have on the bulgarian economy? the immediate effect is positive. the increased credit activity is one of the indicators for this. such a development, however, is connected with some serious challenges, for instance the profitability of the banks as a result of the diminishing interest margins. i should say that so far the bulgarian banks manage to deal with this challenge. cyclical risks are also accumulating, due to which bnb activated and subsequently increased the level of the countercyclical capital buffer for banks. in recent years we have seen a few large deals in the bulgarian banking system. do you expect the consolidation to continue in the future? is it a completely positive phenomenon? consolidation is one of the possible responses to the challenges facing the banks. i expect this process to continue. 3 / 3 bis central bankers'speeches | . what practical changes would this bring to the work of banking supervision? the changes are of a regulatory and administrative nature. a large part of them have been prepared already and we are ready for their introduction on the date of our effective accession. under the close cooperation mechanism the ecb exercises direct supervision over the largest banks and there the bnb will be involved with the participation of bnb β s experts in the supervisory teams. an ongoing active exchange of supervisory information will be established between us and the ecb concerning the other banks that will remain under bnb β s direct supervision. countries like hungary, poland and especially the czech republic are markedly against joining the eurozone at this point. is the currency board the main difference between them and bulgaria which explains this discrepancy between policies, or are there other factors at play? 1 / 3 bis central bankers'speeches this is a political decision, above all. what β s positive in our case is that this decision is based on strategic and not conjunctural considerations. practically, there isn β t a serious political factor in our country that does not support this decision. on the technical level, the monetary regime in bulgaria allows for its implementation to happen quicker and seamlessly. you said in an interview for market news this spring that the downturn in europe could turn out to be temporary, but that would remain to be seen. how would you comment the developments in recent months? uncertainty is on the rise and a lot of current data indicates a continuing economic downturn in the eurozone. this motivates the ecb to make decisions for an even more stimulating monetary policy. the technical details and the degree to which the ecb decided to step up its policy are a subject of debate, but the basic macroeconomic motivation behind these decisions is clear, in principle. responding to a question by investor. bg, bnb says that given the lev β s fixed exchange rate, delaying the entry into erm ii cannot create direct financial and macroeconomic risks for the bulgarian economy. could the opposite happen, however? is it possible for erm ii membership to be negative for bulgaria if it comes during unfavourable times for the european economy? to put it in different words, should we be in a hurry for the eurozone or should this goal be consistent with the conditions and trends for the time being? we should follow our strategic plan with a focus on the quality of the process. due to the nature of our monetary regime | 1 |
, washington, march 26. pledged for transactions under the discount window, open market operations, and emergency lending facilities. to conclude, the dodd - frank act is an important step forward for financial regulation in the united states, and it is essential that the act be carried out expeditiously and effectively. the federal reserve will work closely with our fellow regulators, the congress, and the administration to ensure that the law is implemented in a manner that best protects the stability of our financial system and strengthens the u. s. economy. | occur in the shadow - banking sector β notably, short - term collateralized claims such as broker - dealer repurchase agreements ( repos ) β bank deposits are noteworthy because, in the modern institutional environment, they are highly sticky and not prone to run at the first sign of trouble. in its simplest terms, our story is as follows : there are different private technologies for creating safe money - like claims. the β banking β technology involves meaningful amounts of capital as well as deposit insurance and thus leads to deposits that are both safe and relatively stable. the β shadow banking β technology uses less capital and manufactures safety by, instead, giving repo investors collateral and the right to seize the collateral on a moment β s notice. so shadow banking money is much more run prone than bank money. given its relatively stable nature, the banking model is better suited to investing in assets that are illiquid and subject to interim price volatility β that is, to fire - sale risk. these assets can be loans that involve significant amounts of monitoring, or they can be securities that require less monitoring. what is essential is the synergy between issuing stable types of money claims and investing in assets that have some degree of exposure to fire - sale risk. that synergy, in our view, is at the heart of the business of traditional banking. we have developed a simple theoretical model that captures the main ingredients of this story and makes some further testable predictions. it β s probably ill - advised over lunch, but i will take a crack at sketching this model for you here. however, let me start with three stylized facts to motivate the theory. stylized facts the first fact, and the one that i suspect will surprise you the least, is the strong homogeneity of the liability side of banks β balance sheets : banks are almost always and everywhere largely deposit financed. for example, in the cross section, and using year - end 2012 data, a bank at the 10th percentile of the distribution had a ratio of deposits to assets of 73. 6 percent, while a bank at the 90th percentile had a ratio of 88. 9 percent. 6 a similar homogeneity is apparent in the time series : over the past 115 years, deposits have averaged 80 percent of bank assets, with a standard deviation of only 8 percent. these patterns are in sharp contrast to those for nonfinancial firms, for which capital structure tends to be much less determinate, both | 0.5 |
adoption of the euro by the new member states will be introduced ; while, at the same time, there will be no relaxation of the criteria laid down in the treaty. following the publication of the convergence reports, consultation of the european parliament and a discussion among the eu heads of state and government, the ecofin council will decide, on the basis of a commission proposal, which member states fulfil the necessary conditions to adopt the euro. in case of compliance with the convergence criteria, more practical arrangements will then be set in motion, relating, for example, to the integration of the national central banks into the eurosystem and to the cash - changeover procedures. the fact that already today the ncbs of all the eu member states participate actively in committees and other meetings within the framework of the european system of central banks will facilitate this process. i cannot, and will not, pre - empt the analysis of the forthcoming convergence reports. let me stress, however, that once one economy fulfils all the convergence criteria set out in the treaty in a sustainable manner, i have no doubt its participation in the euro area will be highly beneficial for all parties. i thank you for your attention. | term. cross - checking the monetary analysis with the economic analysis therefore supports the case for vigilance to ensure that the risks to price stability over the medium to longer term do not materialise. the preservation of a solid anchoring of inflation expectations for the euro area as a whole at levels in line with price stability, as reflected in available surveys and indicators, has contributed to a sustained decline in risk premia across the whole maturity spectrum since the creation of the euro, thereby leading to lower levels of both short and long - term interest rates. the ecb β s high level of credibility and its stability - oriented policy have contributed to the very favourable financing conditions observed over the past few years for investors. they have also preserved the purchasing power of consumers, which is of greatest importance for all people and especially those with low incomes. it is essential that this important asset of the euro area economy is preserved. the governing council will exercise vigilance so as to continue ensuring the solid anchoring of medium to long - term inflation expectations at levels in line with price stability. such vigilance is indeed warranted, taking into account the present upside risks to the outlook for price developments and the historically low level of both nominal and real short term interest rates. as regards fiscal policy, recent information points to somewhat better than expected outcomes for 2005 in a number of countries and for the euro area as a whole. looking ahead, the targets presented in the latest round of stability programme updates are consistent with a moderate fiscal consolidation, although in some countries imbalances would still persist for a number of years. with the improvements in economic growth, determined fiscal consolidation is now even more important. in particular, countries with excessive deficits must take this opportunity to reduce their fiscal imbalances in a decisive and sustainable manner. this would strongly support the european fiscal framework as established by the stability and growth pact. delaying consolidation would be both inappropriate in the short term and risky in the longer term. adjustment efforts should be based on credible, fully specified measures as part of a comprehensive consolidation programme. moreover, windfall gains from higher than expected growth or other factors should be allocated to speeding up deficit reduction. this would help to prevent a repeat of past experiences, when complacency in good times contributed to persistent budgetary disequilibria. with respect to structural reforms, these remain an essential ingredient for improving competitiveness and growth performance in the euro area. let me also add that, given the services sector β | 1 |
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