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speeches one way to facilitate coherence and clarity is for central banks to express long - term guidance for their future actions in a form that may approximate a policy rule. there is evidence that periods when monetary policy is rule - like largely coincide with good economic performance. 13 this should not be interpreted as using a rigid, mechanical rule for monetary policy, but a way to make it systematic and predictable. with long - term guidance, specifics are secondary as long as they lead to the goal and policy makers follow through. deviations from strategy under extraordinary circumstances can be clarified when they are warranted. 14 challenges for emerging economies emerging economies confront their own challenges for appropriately conducting monetary policy. on the one hand, these countries need to control inflation, especially in light of long histories of significant price instability. during the postwar period, developing economies have commonly lagged advanced countries in these efforts, frequently because of fiscal dominance. to this day, some countries still suffer from high inflation and struggle to control it, within relatively weak macroeconomic policy frameworks, especially in matters related to fiscal discipline. on the other hand, emerging - market authorities have always had to consider the decisions of major central banks and the effects on their economies. in the present context, loose monetary stances in advanced nations may have triggered spillover effects on emerging economies via capital flows, including ample foreign - currency ( fx ) lending, and rises in financial asset prices. expectations for the unwinding of lax policies have started to turn the tables on these impacts, as reflected by a weakening trend for emerging market currencies, among other tendencies. 15 in the attempt to moderate these effects, many financial authorities have responded with measures frequently justified as macroprudential policies. in particular, initially, many central banks cut policy rates. in fact, there is evidence that in recent years monetary policy in emerging economies has tended to become looser than what would have been granted by their own price stability mandates. many economies also implemented fx intervention to accumulate international reserves, while some added capital flow restrictions. 16 recently, several countries have reversed these measures. barriers to capital flows have been relaxed and international reserves have been used, while monetary policy has frequently remained accommodative, potentially implying contradictory policy directions. in some cases, however, monetary stances have begun to be tightened. a concern in some emerging economies is high pass - through from currency depreciation to inflation. trying to counteract external monetary policy effects may have resulted in some | engender adverse impacts. some may take time to surface. but if significant problems arise, policy can lose effectiveness. furthermore, monetary policy can be time - inconsistent, and to avoid difficulties from this issue, the intentions of decision makers must be transparent. an explicit long - term strategy goes a long way to facilitate coherence and clarity. emerging economies confront specific challenges in the wise use of monetary policy. many of these countries have histories of high inflation and are struggling to leave it behind. also, they must act within the world scenario in such a way that they do not deviate from the objective of price stability. bis central bankers β speeches | 1 |
suspected unlawful and criminal cases have been transferred to the mps. besides, approximately 100, 000 individuals voluntarily gave up conducting banking business when the verification result indicated inconsistency. the online verification has brought about primary social effect. it is anticipated that the development and operation of the online verification system will have a great role in deterring crimes. at present, the cases of online verification stand at more than 1, 200, 000. the operations of the system remains stable while responding to verification with a relatively fast speed, as well as various businesses are well dealt with. the online verification is promoted in a stable and orderly way. iii. taking effective measures to comprehensively implement the use of real names for bank accounts. the state council leaders have always paid great attention to developing and promoting the online verification system. they have required the pbc to closely cooperate with the mps to improve this important infrastructure work. next, we will take effective measures to promote the implementation of the real name system in every respect by applying the online verification system. improve the relative rules and regulations, as well as working mechanism of the online verification so as to give gull play to the role of the system. we should perfect the relative rules and regulations on online verification based on the experience we have drawn on in order to give more practical instruction to banks with which they are able to execute the online verification more efficiently and conduct relative banking business. we will establish and perfect a mechanism to verify the feedback toward suspicious information, shorten the cycle of feedback verification, and normalize the required procedures so as to keep open a channel to verify the feedback from the system toward suspicious identity information. at the same time, we will strengthen publicity to improve the awareness of the public in terms of the online verification system and the use of real names for bank accounts, and deepen the online verification work so as to give full play to the role of the system in areas of implementing the use of real names for bank accounts, normalizing the order of economy and finance and protecting the legitimate rights and interests of the public. strengthen supervision on the promotion of the online verification system to ensure that every banking outlet has the capacity to execute online verification. now, a small number of banks, particularly rural credit unions could not connect to the system because they do not have enough technical resources. moreover, some banking outlets that connect to the system could not recognize photograph as noted in id card because their terminals could only recognize characters. next, the pbc will continue to | primary responsibility for what has happened, close attention must be given to their culture, their governance and their remuneration practices. the recent g30 report on β banking conduct and culture β a permanent mind - set change β 8 reminds us that management focus needs to become a permanent, fundamental, and integral part of how business is invariably done rather than being addressed through a series of ad - hoc initiatives. brexit as i and others have spoken about brexit9 on multiple occasions recently, and it will be discussed in later sessions, i will only cover it briefly now. we are only in the foothills of the potential testing of the resilience of the financial system that a hard brexit will cause. it has short - term and long - term implications for the structure of the irish economy and the irish financial system. any form of brexit will be damaging for ireland, with a hard brexit especially so. recognising these risks, the central bank has been focused on brexit risks since before the 2016 uk referendum. in recent months, we have stepped up our work on mitigating the most material β cliff - edge β risks of a hard brexit. from a financial regulation perspective, our work has sought to ensure : the financial system is resilient enough for a hard brexit not to cause significant financial stability risks ; that financial services providers are discharging their responsibilities by taking all necessary steps to protect their businesses and customers to the risk of a hard brexit ; that risks to consumers are mitigated to the greatest extent possible ; and we are delivering a proportionate, robust, efficient and effective authorisation process in line with european regulatory norms, for those firms seeking authorisation in ireland as a result 3 / 5 bis central bankers'speeches of brexit. for insurance, i am satisfied that the majority of firms covering the vast majority of policies written are taking appropriate action. however, there are some remaining risks of consumer detriment. the central bank has worked with the department of finance to support the drafting of legislation to protect customers of insurance products in event of no deal brexit. the draft legislation provides for a temporary run - off regime, which will allow certain uk / gibraltar insurers and brokers to continue to service existing insurance contracts with irish policyholders in the event of a β no deal β β brexit. even with this mitigation, there will be negative consumer impacts | 0 |
of a century. speaking of structural reforms, and the successful reforms carried out by the netherlands, it seems fitting that professor boeri, who is known as a forceful exponent of economic liberalisation and structural reform in europe, and in particular in his own country, will be conducting his fellowship at the netherlands institute for advanced study located in wassenaar, where, 25 years ago, the decisive wassenaar agreement was signed, steering the course towards change and initiating the remarkable and substantial recovery of the dutch economy. the main outcome of the wassenaar agreement was the establishment of wage moderation, which, in turn, helped firms to restore profitability and stimulate both investment and employment. 3 prior to this agreement, the netherlands had been gripped in a wage - price spiral. however, through this agreement, which considerably diminished wage indexation, a platform for the remarkable turnaround of labour - market performance was created. in addition, a continuum of supportive policy frameworks aimed at reforming labour market institutions was adopted, thereby ensuring the underpinning of wage moderation. 4 the expansion of the part - time and temporary agency work sector in the netherlands, combined with the implementation of effective policies, has resulted in both greater flexibility in the labour market, and job certainty for part - time and temporary agency workers. moreover, it has assisted in alleviating the β insider - outsider β characterisation of the european labour market. furthermore, the steady reduction in tax wedges and reforms of the benefit system, in particular, the shortening of the maximum duration of unemployment benefits and the reforms governing the disability scheme which were implemented over several years, have also helped increase the labour market β s performance. what the netherlands and all successful reformers have in common is that they have, in parallel, successfully reduced product market regulation. this has led to more effective employment growth following an increase in labour supply, as wage moderation has fed through to jobs as opposed to rents. 5 on this score, the proposed policies to further enhance the innovative environment of the netherlands should be commended. in summary, a successful reform programme is more than just the sum of the individual reform policies due to the synergies that are created. additionally, and as professor boeri has recently pointed out, 6 there can be no steps backward in undertaking and implementing reforms, particularly with the need for greater flexibility in this era of rapidly changing economic environments. being here in amsterdam today, on this given occasion, i should also like to take | distortions arising from high and volatile inflation, the development of growth and employment are ultimately determined by the structural features of an economy. well - designed structural policies promoting flexibility in product and labour markets, enhancing education and training and fostering research and development are, therefore, crucial for the long - run performance and smooth functioning of an economy. this holds particularly true in a monetary union like the euro area, where national monetary and exchange rate policies are no longer available as adjustment mechanisms. recognising the need for sound structural policies, the member states have established a comprehensive reform agenda in the context of the lisbon strategy aiming at enhancing the growth and employment potential of the euro area countries. yet, while there have been some remarkable improvements, reflected, in particular, in the creation of 15 million new jobs in the euro area since the start of economic and monetary union ( emu ) compared to only around three million new jobs in the nine preceding years, in many countries, structural reform efforts have not sufficiently enhanced the flexibility and efficiency of product and labour markets. this is evidenced by the still unacceptably high unemployment rate in some regions or segments of the labour market, and the very low level of labour productivity growth in the euro area. 1 implementing and carrying out structural reforms is undoubtedly a challenging and arduous task. however, it is particularly important to resolutely pursue such reforms in the current environment, where the euro area economy is facing a number of important challenges, including rapid technological change, accelerating globalisation forces and ageing populations. the experience of those european countries, which have undertaken courageous and successful reforms in the past, shows that they pay off. 2 the netherlands is one such country, and is now characterised by a flexible labour market with the lowest unemployment rate in the euro area at 3. 2 % in 2007. in addition, with a total participation rate of 78. 5 % in 2007, the highest in the eu, and a female participation of 72. 2 %, two of the lisbon objectives have already been met. the annual growth rate of real gdp per hour worked in the euro area averaged only 1. 3 % over the period 1999 - 2006. see a. annett ( 2006 ) β lessons from successful labour market reformers in europe β, imf euro area policies : selected issues, august 2006. i would like to turn now to some of the reform policies pursued in the netherlands that led to the remarkable performance of the dutch labour market over the last quarter | 1 |
for release on delivery 12 : 15 p. m. est march 7, 2019 navigating cautiously remarks by lael brainard member board of governors of the federal reserve system at the julis - rabinowitz center for public policy and finance and the bendheim center for finance woodrow wilson school of public and international affairs princeton university princeton, new jersey march 7, 2019 while our economy continues to add jobs at a solid pace, demand appears to have softened against a backdrop of greater downside risks. prudence counsels a period of watchful waiting - - especially with no signs that inflation is picking up. with balance sheet normalization now well advanced, it will be appropriate to wind down asset redemptions later in the year. 1 the modal outlook let me start by discussing prospects for the u. s. economy. policymakers tend to distinguish the most likely path, which i will refer to as the β modal β outlook, from risks around that path - - events that are not the most likely to happen, but that have some probability of happening and that, if they do materialize, would have a one - sided effect. both the modal outlook and the risks around it have important implications for monetary policy, but in somewhat different ways. let me first discuss the modal outlook. while the economy performed very well last year, i have revised down my modal outlook for this year, in part reflecting some softening in the recent spending and sentiment data. this softening could be a harbinger of some slowing in the underlying momentum of domestic demand. in the initial estimate released last week, real gross domestic product ( gdp ) rose at a 2. 6 percent annual rate in the fourth quarter of 2018. however, the latest report on retail sales showed a sharp decline. analysts note that there is some reason to be skeptical of that report ; it is subject to revision, and other data sources suggest a more muted movement. although the magnitude of the drop may be revised smaller, coming in the i am grateful to john roberts of the federal reserve board for his assistance in preparing this text. these remarks represent my own views, which do not necessarily represent those of the federal reserve board or the federal open market committee. - 2last month of the quarter, that decline suggests that growth in consumer spending may be held down in the first quarter of this year. surveys of consumer sentiment, which may provide some additional insight into the strength of spending in the first quarter, fell on | oecd. org / newsroom / oecd - sees - global - growth - slowing - as - europeweakens - and - risks - persist. htm. | 1 |
per cent insurance savings products and pension fund units ; in germany and france the percentages are 13 and 9 respectively for investment fund units, and 46 and 38 for insurance savings and pension funds. the protection of savings the wide range of instruments available and the numerous financial operators allow savers to make the choices best suited to their needs, to plan for the future, and to deal with unforeseen events. this is a victory that must be defended and extended. however, it can make decisions more complex, and increase counterparty, market and liquidity risks, which are often interrelated. the main criterion to be followed for proper investment management remains that of diversification. savers should demand that this principle be followed, even when they rely on third - party advice. two broad categories of public policy contribute to safeguarding savings : that designed to guarantee the stability of the financial system and that aimed at protecting savers as consumers of financial services. this is a much more complex matter than it was in postwar italy, when it was written into our constitution ; it requires the contribution of many different actors, including savers themselves. economic policies that can foster growth are essential for the protection of savings. the value of financial assets derives from that of real assets : a company β s share and bond prices rise or fall according to its state of health. an economy that does not grow cannot generate the resources necessary to recompense the capital invested in companies, to bear the burden of public debt or to enable households to repay their debts. weak economic growth has even more serious effects on financial wealth if there is also a surfeit of debt in some sectors. the recent financial crisis provides dramatic examples of how serious these risks are. in italy it is precisely the combination of structurally low growth and high public debt that has exacerbated the problems of the banking sector. a crucial safeguard for financial wealth is price stability. several times in italy β s history, long periods of high inflation have led to unfair reallocations of wealth, above all to the detriment of small savers who are less able to guard against the erosion of the value of money. the return to monetary stability, following a loss of purchasing power of almost 90 per cent between 1973 and 1995, dates back just over twenty years. most recently, the greatest threats have come from the risk of deflation. the fall in prices increases the real value of debts, propelling the economy towards recession and eventually undermining | to improve. in the second quarter of this year the flow of new non - performing loans fell to 2 per cent of total lending, a level consistent with the average observed in the years prior to the global financial crisis. the stock of non - performing loans is also decreasing rapidly : net of write - downs, in june it had fallen to β¬150 billion, equal to 8. 4 per cent of total loans, from the peak of β¬200 billion, or around 11 per cent of total loans, reached in 2015. the ratio of bad debts to total loans has declined from 4. 8 to 3. 9 per cent. over the next few months, disposals and securitizations already under way and those recently announced by a number of banks will further drive down the stock of npls, which, net of existing write - downs, should fall below 8 per cent of total loans in the early months of 2018. banks β balance sheets need to be further bolstered to make them better able to withstand, now and going forward, the risks still weighing on the economic outlook. banks are responding to this also by referring to the ecb β s β guidance to banks on non - performing loans β issued in march 2017. the measures to reduce the burden of non - performing assets announced last july during the european council are a step in the right direction. this is also the aim of the introduction, which should be gradual and properly calibrated, of a calendar approach to write - downs for future non - performing loans. the reforms passed in italy in recent years have shortened the duration of credit recovery proceedings ; there is room for further action. the recent passage of the enabling law laying the ground for a comprehensive reform of legislation on corporate crises and insolvency proceedings will provide a major contribution to this. the principles and criteria set out in the enabling law must be implemented and translated into rules that can truly speed up credit recovery times, preserving as much as possible the value of companies that are still in sound condition. banks must make full use of the tools that have recently become available in the domain of out - of - court settlements with firms for the restructuring of debts and the transfer of assets. moreover, having suitable and timely data on npls is indispensable for more effective internal management and to facilitate their sale on the market at adequate values. despite the improvement observed following the survey we launched last year, banks still need to make progress in this area too. the | 1 |
inflation is not a sufficient condition for ensuring financial stability in the long run. past experience appeared to have confirmed the opinion that inflation is the major source of financial instability. high inflation episodes were usually accompanied by pronounced financial instability and banking sector crises or were followed by recession after the authorities took inadequate measures to curb inflation. the current global financial crisis became manifest after nearly two decades of relatively low, stable inflation. a number of factors caused low inflation to coexist with ample liquidity. the latter, along with the overly high level of savings, helped keep interest rates and volatility at bay. all this translated into a new financial texture, in which the bank intermediation model shifted away from " originate and hold " to " originate and distribute ". the new products and institutions that changed the fabric the financial system was made of until three decades ago led to the outbreak of the current financial crisis. the financial crisis was triggered by the developments in the us subprime mortgage market, as i have mentioned earlier. in turn, it broke out due to the fact that the federal reserve system, given the above - mentioned conditions, had no other option but to increase interest rates with a view to maintaining low inflation. with the new financial texture however, rate hikes brought about the emergence of the financial crisis. in view of the above, my opinion is that ample liquidity changed the financial system to the point where monetary policy found itself trapped. inaction would have resulted in higher inflation. the actions taken brought about financial instability. if regulation and supervision had prevented the excessive build - up of risks by investors, interest rate hikes could not have prompted financial instability. such developments point to the need of efficient cooperation between monetary policy, on the one hand, and regulation and supervision, on the other, a fact that failed to materialise over the past years in some of the world's leading economies. monetary policy was sometimes overly loose, also in regard to the regulatory and supervisory framework in place. 2. regulation and supervision trail behind the markets at intervals. markets always find a way to innovate because of the ongoing competition among economic agents to meet real needs. innovations enhance the efficiency whereby such needs are met and that is why the innovation process will never cease. even if confronted with administrative barriers, markets will still identify solutions to meet demand. a clear example in this respect was the nbr's attempt at slowing down the frantic pace of forex - denominated loans. we resort | mugur isarescu : nine lessons from the current financial crisis speech by dr mugur isarescu, governor of the national bank of romania and member of the romanian academy, during the session titled β what lessons can be learned from the current economic crisis? β, organised by the economics, legal and sociology department within the romanian academy, in co - operation with " costin c. kiritescu " national institute of economic research and the β esen reflection group β romanian national committee, romanian academy, bucharest, 14 april 2009. * * * your excellency, mr. president of the romanian academy, dear colleagues, ladies and gentlemen, i have recently talked about the causes of the current financial crisis and the manner in which it affects the romanian economy at babes bolyai university in cluj - napoca and transilvania university in brasov. let me just recall here that the current crisis on the us subprime mortgage market was only the trigger of the global financial crisis. its root causes were both macroeconomic and microeconomic in nature. plentiful liquidity was the catalyst for the merging of multiple microeconomic causes such as securitisation, financial deleveraging, rifts in the business model of rating agencies and excessive deregulation, which resulted in today's financial crisis. world economies are hit by this crisis to various extents, depending on the vulnerabilities of each and their exposure to toxic assets. the response to the crisis is contingent upon the fundamental principles we believe in, the available resources, the institutions and the instruments we can make use of. a short list of the lessons should reflect all these aspects : what we have learned or think we have learned about the causes of the crisis ; about the efficiency of the institutional texture and the array of instruments at hand ; and, last but not least, about the most appropriate positioning in the event of a crisis. with these criteria in mind, i will refer to nine lessons, of which seven are universally valid and two hold particularly true for emerging economies, such as romania. in order to root out any possible confusion, i would like to point out from the very beginning what these lessons do not deal with. first, they do not address the issue of shorter or longer economic cycles and do not suggest that a crisis means the end of an economic cycle. second, the lessons do not provide an answer to the question whether we could ever avoid a financial crisis. 1. low | 1 |
of 3. 6 percent over the last decade. total horticulture production also reached an all - time high of 320 million tonnes, growing at an annual average rate of 4. 4 percent over the last 10 years. india is now one of the leading producers of milk, cereals, pulses, vegetables, fruits, cotton, sugarcane, fish, poultry and livestock in the world. buffer stocks in cereals currently stand at 91. 6 million tonnes or 2. 2 times the buffer norm. these achievements represent, in my view, the most vivid silver lining in the current environment. 5. shifting the terms of trade in favour of agriculture is the key to sustaining this dynamic change and generating positive supply responses in agriculture. experience shows that in periods when terms of trade remained favourable to agriculture, the annual average growth in agricultural gross value added ( gva ) exceeds 3 per cent. hitherto, the main instrument has been minimum support prices, but the experience has been that price incentives have been costly, inefficient and even distortive. india has now reached a stage in which surplus management has become a major challenge. we need to move now to policy strategies that ensure a sustained increase in farmers β income alongside reasonable food prices for consumers. 6. an efficient domestic supply chain becomes critical here. accordingly, the focus must now turn to capitalising on the major reforms that are underway to facilitate domestic free trade in 1 / 5 bis central bankers'speeches agriculture. first, the amendment of the essential commodities act ( eca ) is expected to encourage private investment in supply chain infrastructure, including warehouses, cold storages and marketplaces. second, the farmers β produce trade and commerce ( promotion and facilitation ) ordinance, 2020 is aimed at facilitating barrier - free trade in agriculture produce. third, the farmers ( empowerment and protection ) agreement on price assurance and farm services ordinance, 2020 will empower farmers to engage with processors, aggregators, wholesalers, large retailers, and exporters in an effective and transparent manner. with this enabling legislative framework, the focus must turn to ( a ) crop diversification, deemphasising water - guzzlers ; ( b ) food processing that enhances shelf life of farm produce and minimises post - harvest wastes ; ( c ) agricultural exports which enable the indian farmer take advantage of international terms of trade and technology ; and ( d ) public and private capital formation in the farm sector. the committee on doubling farmers income | % of the investment portfolio, both in the afs and hft categories plus a 2. 5 % risk weight on the entire investment portfolio - whereas basel norms take into account only the trading portfolio. rbi β s involvement in basel ii rbi β s association with the basel committee on banking supervision dates back to 1997 as india was among the 16 non - member countries that were consulted in the drafting of the basel core principles. reserve bank of india became a member of the core principles liaison group in 1998 and subsequently became a member of the core principles working group on capital. within the cpwg, rbi has been actively participating in the deliberations on the accord and had the privilege to lead a group of 6 major non g - 10 supervisors which presented a proposal on a simplified approach for basel ii to the committee. the basel committee on banking supervision is yet to issue the final basel ii document. the reserve bank β s comments on the 3rd consultative document on the new capital accord on the basis of the quantitative impact studies ( qis 3 ) undertaken in co - ordination with select banks has brought out the need for more simplicity and greater flexibility on account of the different levels of preparedness of the banking system in india. policy approach in general, keeping in view the rbi β s goal to have consistency and harmony with international standards and our approach to adopt the pace as may be appropriate in the context of our country specific needs, the rbi had in april 2003 itself accepted in principle to adopt the new capital accord basel ii. the rbi has announced, in its annual policy statement in may 2004 that banks in india should examine in depth the options available under basel ii and draw a road - map by end december 2004 for migration to basel ii and review the progress made thereof at quarterly intervals. the reserve bank will be closely monitoring the progress made by banks in this direction. hence, at a minimum all banks in india, to begin with, will adopt standardized approach for credit risk and basic indicator approach for operational risk. after adequate skills are developed, both in banks and at supervisory levels, some banks may be allowed to migrate to irb approach. regulatory initiatives the regulatory initiatives taken by the reserve bank of india include : β’ ensuring that the banks have suitable risk management framework oriented towards their requirements dictated by the size and complexity of business, risk philosophy, market perceptions and the expected level of capital. the framework adopted by banks would need to be adaptable to changes in business size, market dynamics and introduction of innovative products by banks | 0.5 |
that electronics bring to information flows. currently, deals are struck over telephones, perhaps with the assistance of voice brokers. the data from those trades must be entered into the firms β information systems. for some firms, data may even be keyed more than once. electronic systems allow the quick, accurate capture of data. the data can then be used to update risk management information systems rapidly. other benefits may be realized in firms β ability to manage their credit limits. a feature of many electronic systems is credit limits that are programmed into the system. this feature narrows the ability of rogue traders to expose firms without the knowledge of risk managers. just as electronic systems can generate data useful in internal risk management, they can also generate data about the market for financial instruments. the rapid growth and widespread acceptance of electronic brokering reportedly has made the pricing process more transparent in the foreign exchange market. dealers no longer have to do a transaction to discover where the market is trading. similar improvements in price transparency could be expected in other products. end - users in these products may also reap benefits if competition among dealers increases and bid - offer spreads narrow. 3. settlement status quo. currently, settling derivatives transactions requires lots of paper and manual labor. counterparties must confirm the details of deals with each other. the confirmation lists the economic features of the transaction as well as many legal terms. isda has developed templates for confirmations that market participants use for many products, but tailor - made confirmations may be necessary for certain products or certain counterparties. in some instances, confirmations are generated electronically, but for a range of products, the process is manual. even electronically generated confirmations often must be manually verified by counterparties. many confirmations are faxed between counterparties. s. w. i. f. t., an interbank messaging system, is used to confirm foreign currency options, forward rate agreements, and cross - currency swaps, but its usefulness is limited because both counterparties must employ the system. electronics thus are not the rule in confirmation processing. not surprisingly, the result has been significant backlogs. active dealers report hundreds of unconfirmed trades. a small but significant share may be outstanding ninety days or more. another feature of settlements in otc derivatives in recent years has been the development of collateral programs. us dealers, in particular, have rapidly expanded their use of collateral to mitigate counterparty credit risks. in these programs, counterparties typically agree that | focus. the very large negative externalities associated with such failures could be realized through a classic domino effect or through contagion effects. as the financial crisis showed, losses in a tail event are likely to be correlated for large firms deeply engaged in trading, structured products, and other capital market instruments, and relying on similar sources of short - term funding. thus, the regulatory framework should aim to reduce the chances of distress or failure at such firms to a greater extent than traditional, microprudential regulation would. moreover, it should explicitly take into account the correlations and inter - dependencies in asset holdings and funding. finally, the regulatory system should aim to offset the perception of too - big - to - fail status, which carries with it the possibility of funding advantages in normal times, and protection of creditors and perhaps even shareholders in highly stressed times. the systemic perspective and consequent aim of protecting financial stability argue for the stronger and broader regulatory measures that have been undertaken in recent years. at the other end of the spectrum are community banks, conventionally defined as those with less than $ 10 billion in assets. the roughly 5, 700 banks in this group constitute 98 percent of insured commercial banks in the united states, but hold just under 20 percent of the aggregate assets of all commercial banks. indeed, 90 percent of community banks are what supervisors classify as β small β community banks β those with less than $ 1 billion in assets. while these banks will suffer the fallout from systemic problems, they are unlikely to cause such problems. the regulatory aim, therefore, is about as close as can be to the traditional microprudential bank regulatory aims of protecting the federal dif and limiting the use of insured deposits by restricting the scope of bank activities. it is true that the relative lack of geographic and portfolio diversification in many community banks can make them vulnerable to localized economic problems. but that is just the kind of problem that traditional microprudential regulation has been concerned with addressing. what, then, of the 80 or so u. s. banks that have assets of $ 10 billion or more, but are not among the eight large, complex institutions that have been designated of global systemic importance? obviously they vary enormously in size, from just over $ 10 billion in assets all the way up to very large regional banks with hundreds of billions in assets. they bridge the $ 50 billion threshold for enhanced prudential standards established by dodd - frank. yet, whatever their size | 0.5 |
a policy approach that consists in the early adoption of prudential and countercyclical measures to reduce the vulnerability of the economy in the face of a changing scenario. the risk management approach to monetary policy seeks to prevent disruptions in the money and financial market from spreading to the rest of the economy and affecting macroeconomic sustainability. under this scheme, we take into account scenarios that traditionally involve high likelihood of having adverse effects. this entails the development of action guidelines in case such scenarios come true. at the same time, it entails preventive action to reduce their likelihood or minimize their potential impact on the economy. in our country, the strategy jells due to the consistency and validity of its three main pillars : ( 1 ) a robust monetary policy that ensures the equilibrium between supply and demand in the money market ; ( 2 ) a countercyclical scheme to mitigate vulnerabilities and reduce macroeconomic volatility ; and ( 3 ) a managed float. the trend evidenced by the means of payment in 2008 reflects our prudence. and so do financial regulations, which aim to prevent the growth of credit from being hampered and jeopardizing the sustainability of the system. this balanced trend of the means of payment was observed against a framework of multicausal inflation that requires coordinated action by the economic policy and its different areas β fiscal policy, wages policy, income policy and monetary policy. in a context of international commodity prices falling, performance in 2008 confirms the effects of this joint action. bearing in mind the stage that argentine economy currently undergoes and the instruments available, overemphasizing only one policy would be a proof of short - sightedness. especially in a phase where we are still lacking many tools that are typical in more developed economies. for instance, monetary policy transmission channels are only just being rebuilt, since credit to the private sector accounts for only 12 percent of the economy, still far below the latin american average. there are many examples in argentine history of monetary regimes unsuccessfully shifting from one extreme to the other given it inconsistencies. the relatively stable periods were short due to contradictions in the programs that should have ensured macroeconomic solvency. suffice it to recall the end of price stability in the 1990s, after a sharp appreciation of the domestic currency resulting from an exchange rate that was inconsistent with the fiscal position and external equilibrium. among the preventive measures, the reserve accumulation and management policy acts as an insurance against temporary changes in external financial conditions | to adjust their business models to the environment. banks should not use monetary policy as an excuse not to make the necessary effort to change their business models and become more profitable. the central bank of central banks, the bank for international settlements ( bis ), also warns that central bankers are repeating the mistakes of the start of this century when loose monetary policy contributed to a credit and housing boom which then collapsed and gave rise to the financial crisis. 5 / 6 bis central bankers'speeches it β s the bis β s duty to issue warnings, and we take its advice seriously. today, we monitor risks in the financial system in much more detail than before the crisis, as shown for example by our biannual financial stability review. second, we now have new tools under european law β particularly macroprudential instruments. and third, banks are much less leveraged today, thanks to the new regulatory constraints. history teaches us that, always and everywhere, asset price bubbles were accompanied by high leverage. that is not the case now, because banks β balance sheets are smaller. that reduces the amount of risk in the financial system. where we need to be particularly vigilant is with regard to market - based finance, also known as shadow banking. we need to gather the right information and we may need new instruments to make sure that the next big crisis does not come from the shadow banking system. 6 / 6 bis central bankers'speeches | 0 |
. globalisation has many benefits for emerging - market economies. capital movements facilitate the efficient allocation of saving, channel resources into productive uses and promote the financing of international trade and investment. in this way globalisation creates opportunities to increase international trade, economic growth, employment creation and welfare. unfortunately, like all good things in life, globalisation also has certain disadvantages. in particular, the integration of south africa into the world economy has made the country more vulnerable to external shocks. these can take the form of supply, demand and financial shocks. in such an uncertain environment the pursuit of financial stability has become even more imperative. although stability does not provide unconditional protection against reversals in international capital flows, it does forestall uncertainties on the monetary front and can counter excessive volatility. the reserve bank therefore remains determined to maintain financial stability in south africa. in conclusion, i wish to thank the president and deputy president of the republic of south africa, and the reverend frank chikane, director general of the presidency, for their support for the work of the south african reserve bank. in particular, i wish to express my heartfelt gratitude for their support for the independence of the south african reserve bank. i also want to place on record my appreciation to mr trevor manuel, minister of finance, mr mandisi mphahlwa, deputy minister of finance, ms maria ramos, director general of national treasury, and the staff of the national treasury for their cooperation with the bank over the past year. a word of appreciation is also appropriate to mr alec erwin, minister of trade and industry, dr alistair ruiters, director general, and the staff of the department of trade and industry who have become important collaborators of the reserve bank. informative meetings were held with the parliamentary portfolio committee on finance, which we found very helpful. i thank my colleagues on the board, including the deputy governors, for their commitment and undivided loyalty to the bank. finally, a word of thanks is also due to the staff of the reserve bank for their work during the past year and for their loyal support. | 3 % in september 1998 to a daily average of 13. 3 % in mid - february 2000, influenced by the strength of the rand during that period, low inflation, fiscal discipline and a positive assessment by international rating agencies of south africa as an investment destination. subsequently, bond yields reacted hesitantly to perceived changes in financial markets. in march market sentiment deteriorated markedly owing to the weakness in the external value of the rand, rising official interest rates in major financial centres and higher risk premiums on south african assets. the daily average yield on long - term bonds shifted upwards to reach a peak of 15. 2 % on 10 may 2000, before the return to more stable financial conditions reduced it to 13. 7 % on 22 august 2000. the monthly average inflation - adjusted yield on long - term government bonds amounted to 5. 5 % in july 2000, compared with 10 % in september 1998. trading activity in the secondary bond market was boosted by the uncertainty in international markets. a record annual turnover of r8. 8 trillion was recorded on the bond exchange of south africa in 1999, followed by r6. 2 trillion in the first seven months of 2000, which was about one - quarter more than in the corresponding period of the preceding year. in the primary bond market more active borrowing by private - sector companies compensated for a decline in the net borrowing of the public sector. the share market entered a long and difficult recovery phase after the financial crisis in 1998. the daily average index of all classes of share prices fell by no less than 40 % from the end of april 1998 to the end of august 1998, and then rose gradually to a new all - time high on 17 january 2000 of 10 % above its previous peak in april 1998. rising interest rates, the depreciation of the rand and corrections on major international bourses resulted in a decline in the daily average index of share prices of 28 % until 17 april 2000, when it began to recover again. on 22 august 2000 the daily average index of all classes of share prices was nevertheless still 9 % below its peak on 17 january 2000. the strong recovery of share prices throughout 1999 supported trading activity on the johannesburg stock exchange. the value of shares traded in the secondary share market rose to r448 billion in 1999, which was 40 % more than in 1998. volatility in share prices fuelled trading activity further during 2000. the value of shares traded in the first seven months of this year was 25 % higher than in the corresponding period | 1 |
some time focused on the buoyancy in parts of the property market and the leverage associated with that. much of the focus has been on residential property, and i will start with that before turning to the commercial sector, where risks have also been growing. while the housing market has not been universally strong around the country, we have been seeing significant strength in the sydney and melbourne markets in recent times, with investors playing a large role. to summarise a few key facts : β’ housing prices in sydney have increased by 31 per cent over the past two years, and reached an annual rate of increase of almost 20 per cent earlier this year. β’ melbourne prices were up by 16 per cent over the year to september this year. β’ the value of loan approvals to investors in new south wales approximately doubled over the two years to mid - 2015. bis central bankers β speeches as a result of these developments, the household debt ratio has started to edge up again from a level that was already high, at around 1Β½ times annual income ( graph 3 ). graph 3 click to view larger it is against this background that the reserve bank has highlighted the need for prudence, and has supported apra and asic in the measures that they have taken to strengthen lending standards. as a general proposition, mortgage lending standards in the post - crisis period have been relatively tight, at least more so than before the crisis. low - doc loans are rare, genuine savings are required to fund at least part of the deposit, and the application of interest rate buffers in serviceability assessments has become common. nonetheless, investigations by apra and asic have shown that there was some slipping in lending standards and that they were inadequate in some important respects to the current risk environment. specifically, apra found that, in some instances, lenders β serviceability assessments were based on over - optimistic judgments about the reliability of borrowers β incomes, or inadequate estimates of borrowers β living expenses, or that they failed to take into account the possible effect of future interest rate movements on a borrower β s existing commitments. asic β s review of interest - only lending practices made similar findings, and also noted instances where the lender did not make reasonable inquiries as to whether the loan product was suitable to the borrowers β circumstances. further to those findings, as a result of the additional scrutiny over the past year and substantial data revisions made by the banks, we now know that the level of investor activity in the | the possibility of workouts explicit ) may cause lenders to focus on the possibility of loss, but wouldn β t that help the moral hazard problems? if more carefully designed and rigorously enforced prudential controls inhibit some short - term flows, would there be any great loss in that? clearly, part of the capital surge of the 1990s could, with benefit, have been done without. is the problem β like advertising β that you do not know which part to stop? no. we can see elements β short - term rootless flows β which had minimum benefits and greatest costs. a case can be made that it would have been no great loss if the asian countries had received only the foreign direct investment flow. while it is technically true that β speed doesn β t kill β it β s the stopping β, we should recall that the problems come from excessive inflows, so if the net result of more rigorous β rules of the game β is smaller inflows in the boom times, then that will be a plus. if something has to give way in the β open economy trilemma β ( obstfeld and taylor 1997 ), then some limits on the variance of capital flow seem a good place to start. the third β and most controversial β set of possibilities are those which smack of capital controls. even here, the debate has shifted. now, chilean - type controls seem to be acceptable to international opinion. what distinguishes these? they are market - based, upfront and ex ante, and are on inflows rather than outflows. this is all still a lively topic of debate. the consensus view is changing, but slowly. while now acknowledging that temporary controls may be required in certain circumstances, the international consensus has a rather disparaging tone. just as β real men don β t eat quiche β, real countries don β t resort to capital controls. if such short - term capital controls are a legitimate instrument of policy, we need to define more clearly the circumstances, and be readier to endorse their use in these conditions. the alternative to implementing these ideas is inaction β either in the hope that these problems will go away or because of some ideological position based on the preservation of market purity. this risks losing the very real benefits of capital flows, if it leads to ill - designed measures by emerging countries to isolate themselves from these problems. at the same time, the crisis tarnishes the complex international trading structure, and adds | 0.5 |
can build confidence in the euro area in the near term. but only actions by governments can secure confidence in the euro area over the longer term. in particular, governments need to work together to establish a stronger institutional structure for the euro area. bis central bankers β speeches this process began in june this year with what has been called the β four presidents β report β. that report β of which i am a co - author β identified four key pillars on which a stable and prosperous monetary union should be built. these pillars are financial union, fiscal union, economic union and political union. in the near term, the most important pillar is financial union. financial union is essential in a single currency area where cross - border capital flows can lead to credit booms and other imbalances β and where the negative effects of a bust can spread rapidly to other members. one essential part of financial union is a single banking supervisor. as you know, the european commission has recently proposed that the new supervisor should be based at the ecb. this is important to ensure consistency across the euro area and to prevent regulatory capture. day - to - day tasks, however, would remain with national supervisors who have the competence and resources to implement them. but financial union does not have to imply the pooling of deposit guarantee schemes, an issue that i know is of concern in this country. organising and funding deposit guarantee schemes can remain a national responsibility, with comparable effectiveness. in the longer term, all four pillars are equally important. they are the bedrock for the enormous potential of the single currency for europe β s citizens. completing economic and monetary union would give citizens greater security against any future crisis. it would create the foundations for sustainable growth and employment. for all citizens of the euro area, it is therefore essential that europe β s leaders stay on course. thank you for your attention. bis central bankers β speeches | relate to diverse but interrelated issues, such as trade integration, business cycle synchronisation, financial integration, structural reforms in product and labour markets, as well as inflation persistence and inflation differentials. i believe that the quality of the papers to be presented and the impressive group of discussants, chairpersons and panellists will contribute to fruitful debates. looking at the titles of the various sessions of the workshop, i would like to share some thoughts with you on three specific topics. the first relates to the consequences of market integration for trade. the second, β closer to home β for a central banker, concerns inflation and output divergences across euro area countries and their implications for policy. the third pertains to the role of the euro in fostering reforms in product, labour and financial markets. the implications of the integration of goods, services and financial markets for trade the first topic β the effects of market integration on trade β is particularly interesting, as it raises a number of issues which sometimes seem to lead to puzzling results. first, the conclusions about what we should expect as the trade effects of deeper integration are, in part, ambiguous β think, for example, of the effects of specialisation. increased competition achieved by deregulation and the completion of the single market, as well as cross - border price transparency due to the single currency, may foster higher sectoral or industry - specific specialisation. greater sectoral specialisation, as well as increased financial integration, should lead to increases in trade flows within the euro area. at the same time, however, if increased integration were to lead to more similar economic structures and business cycles, this could weaken trade flows within the euro area. but even if the expected effects of integration are not as ambiguous, appearing instead to be rather straightforward, the evidence available thus far seems not to fully conform with the expectations. take, for example, the significant progress that has been made in the 1990s regarding product market reforms, which had positive effects on the integration and the degree of competition in goods and services markets in the euro area. one could expect that easing regulations and fostering competition would lead to higher labour productivity growth in the industries concerned, as has happened, for example, in the telecommunications sector. yet, over the past decade the euro area as a whole has experienced a decline in trend labour productivity growth. a number of other effects of integration on trade should also be looked at : for instance, whether labour regulations and taxation that | 0.5 |
system. | and 2. 5 % in 2006, and between 1. 5 % and 2. 5 % in 2007. the results constitute a slight upward revision to the eurosystem staff projections of december 2005, mainly reflecting a somewhat stronger outlook for private investment over the projection horizon. most recent forecasts by international organisations and private sector institutions give a broadly similar picture. in the view of the governing council, downside risks to this outlook for growth relate mainly to oil price developments and global imbalances. turning to price developments, according to eurostat β s flash estimate, annual hicp inflation was 2. 3 % in february 2006, compared with 2. 4 % in january. in the short run, inflation rates are likely to remain at above 2 %, with the precise levels depending strongly on future energy price developments, which have recently been relatively volatile. beyond the short term, changes in administered prices and indirect taxes are expected to significantly affect inflation in 2006 and 2007, and an upward impact can also be expected from the indirect effects of past oil price increases. at the same time, wage dynamics in the euro area have remained moderate over the recent past ; our working assumption is that this will continue to be the case, due not least to strong global competitive pressures, particularly in the manufacturing sector. moderate wage trends have helped to contain domestic inflationary pressure despite strong oil price increases. therefore, looking ahead, it is crucial that the social partners continue to meet their responsibilities in this regard, also in the context of a more favourable economic environment. further input into our assessment of the outlook for price developments is again provided by the march ecb staff projections. annual hicp inflation is projected to lie between 1. 9 % and 2. 5 % in 2006, and between 1. 6 % and 2. 8 % in 2007. compared with the december 2005 eurosystem staff projections, these ranges imply a slight upward revision to the profile for hicp inflation over the coming years, reflecting mainly an increase in the assumption for future oil prices, in line with market expectations. risks to the outlook for price developments remain on the upside and include further increases in oil prices, a stronger pass - through of oil price rises into consumer prices than currently anticipated, additional increases in administered prices and indirect taxes, and β more fundamentally β stronger wage and price developments than expected due to second - round effects of past oil price increases. turning to the monetary analysis, the governing council has again discussed the assessment of monetary developments in depth. | 0.5 |
. it is worth mentioning here the approval by the council of ministers of updating the aml law to fully comply with international requirements, especially with the assessment team β s recommendations stated in the assessment report on the kingdom. this is a clear sign of the government of the custodian of the two holy mosques β attention paid to compliance with combating money laundering and terrorism financing in line with international standards in this regards. dear audience, the international, regional and national combined efforts to combat money laundering and terrorism financing are stringent evidence of combating those crimes and the consequent bis central bankers β speeches economic, social and security risks they may cause. accordingly, the kingdom has supported efforts aimed at developing international frameworks capable of monitoring the global financial system to detect such offenses. the kingdom is one of the countries that participated in and called for the creation of the middle east and north africa financial action task force. it is still supporting all the efforts of the fatf and menafatf, whether through its permanent participation in work teams and supporting activities that enhance the work of the two entities or through its commitment to raise the level of its government organs, financial and non - financial institutions and making sure that its related laws are in line with the international requirements. in addition, it supports the imf β s technical assistance fund. ladies and gentlemen, to achieve our objective, we should work together to promote awareness of the gravity of such crimes and protect all segments of the society, its government organizations, and financial and non - financial institutions. in this aspect, i would like to refer to the recent fatf β s recommendations issued to strengthen the international efforts in the fight against this global scourge and make necessary adjustments to the systems and techniques of their detection and combating. on this occasion, i would like make reference to the results achieved by fatf, after reviewing and revising the recommendations. there is no doubt that the updated recommendations will enhance the level and methods of protection of the economic system against such type of crimes threatening it. in conclusion, i would like to express my thanks and gratitude for your respected group for its achievements accomplished during its short life, wishing you continued success. i thank the organizers for their efforts. i also welcome you again in the kingdom of saudi arabia and i hope that your meetings in this session will be a success. bis central bankers β speeches | equity in australia. the majority of this decline reflects valuation effects, rather than a marked decline or compositional change in net inflows of equity capital. notably, australian non - financial firms have continued to receive equity inflows, while australian superannuation funds have continued to accumulate ( large ) holdings of foreign equities. the change in the composition of the stock of foreign liabilities has had a noticeable impact on the net income deficit, which is the part of the current account deficit that measures the net cost of servicing these liabilities. the net income deficit has recently declined to around its lowest share of gdp in a number of decades. in part, this reflects the lower yields on government debt than on debt issued by the banking sector as well as the historically low level of interest rates both locally and globally at the moment. 8 debelle g ( 2014 ), β the australian bond market β, speech to the economic society of australia, canberra, 15 april. these developments are discussed in ma s ( forthcoming ), β why has the net income deficit narrowed? β, rba bulletin, june. bis central bankers β speeches the outlook for capital flows given that changes in gross inflows to the banking, resources and government sectors have had a significant influence on changes in the composition of australian capital inflows over recent years, it is worth considering what factors might affect these flows in the future. in terms of the banking sector, it seems unlikely that the pattern of capital flows will change materially any time soon. the banks are likely to continue with little net debt issuance in the period ahead ; that is, only issuing enough debt to replace that maturing. to the extent that investment in the non - resources sector is more likely to be intermediated by the banking sector than resources sector investment, the rba β s forecast pick - up in investment in the non - resources sector might see some pick - up in business credit from its current low rate of growth. even so, this would not require much of an increase in wholesale debt issuance given that deposit growth continues to outstrip lending growth by a few percentage points. turning to the resources sector, the investment phase of the resource boom has peaked, and a number of resource projects are moving into the production phase. as foreign investors have played a large part in the financing of this investment, a move to the production phase should result in reduced capital inflows. at the same time, the increase in resource export volumes | 0 |
phase two. let me also say that i truly value our close relationship built over many years with the nbc. we continue to benefit from our mutual exchange of knowledge, ideas and experience on many areas, including though not limited to our respective instant payment systems and arrangements. one such area that we seek to learn further from nbc's experience is in leveraging on distributed ledger technology or dlt for its bakong system which will offer useful lessons for our own cbdc exploration journey. clearly, exciting times still lie ahead of us in the payment space. before i close, let me take this opportunity to acknowledge, thank and congratulate the contributions of everyone involved in this project. in particular : ( i ) to the national bank of cambodia, the operator of bakong, ( ii ) to paynet, our instant payment system operator ; and 2 / 3 bis - central bankers'speeches ( iii ) to maybank as the sponsoring bank that has helped bridge the two instant payment systems. our launch today would not have been possible without the efforts and commitment from all of you. the launch of this qr linkage is more than just a technical feat. it is a testament to our commitment to build a world where financial services transcend borders, and where innovation creates new pathways for inclusive economic development. our work does not end here, and i certainly look forward to seeing the close partnership between malaysia and cambodia in the area of payments and beyond continue to grow. thank you. 3 / 3 bis - central bankers'speeches | given the encouraging growth experienced with our bilateral payment linkages with other asean partners. the total volumes for our live qr linkages with thailand, indonesia and singapore in the first half of 2024 have already surpassed volumes recorded for the whole of last year by more than twofold. 1 / 3 bis - central bankers'speeches over two million duitnow qr merchants in malaysia, mostly small businesses, are poised to benefit from a wider user base by being able to accept qr payments from foreign tourists including cambodians. likewise, once the inbound leg into cambodia is up and running in the next phase, cambodian merchants will also be able to enjoy similar advantages when malaysians visit cambodia. we are optimistic that the positive impact that we are already seeing from malaysia's linkages with other countries will also be observed in the malaysia - cambodia qr payment linkage. our qr payment linkage will also contribute towards the fast - growing network of payment linkages within the region. this is in line with our shared vision for greater regional economic integration under the asean economic community blueprint 2025 and the regional payment connectivity initiative, while also supporting targets set at the broader g20 roadmap level for enhancing the efficiency of cross - border payments. collectively, these efforts will surely foster greater tourism and trade activities across the region, while ensuring an inclusive financial ecosystem that benefits all. as malaysia assumes the asean chairmanship in 2025, payment connectivity will continue to be a priority agenda for bnm. we look forward to seeing a further expansion the number of linkages in the region and promoting greater usage of the services by users by continuing to leverage on public - private sector collaboration as well as cross - border cooperation. additionally, to ensure the linkages can be operated safely and securely to manage risks, we will also continue to work closely in the area of cooperative oversight arrangements, in collaboration with other asean member countries. this takes into account the recent trends of fraud and scams, among others. as the first phase of the bilateral payment linkage between malaysia and cambodia goes live today, i look forward with anticipation to the second phase of the linkage which is targeted to be launched early next year. under this upcoming phase, malaysian travellers will be able to scan khqr by just using their own domestic mobile payment app at millions of merchants across cambodia to pay for their purchases. once ready, we would also be honoured to have our cambodian colleagues to visit us in malaysia for the launch of | 1 |
a collection of individual board members β views, did not represent the β price stability β that is the basis of the policy decisions of the bank as an institution. in addition, there was some difficulty with the word β understanding β, in that it failed to deliver the message that the bank was making active moves toward price stability. taking account of these problems, the policy board members have made a collective decision on how to express the price stability that the bank should aim to achieve. they have also decided to use the word β goal β, so that the bank β s policy stance can be understood clearly. i would like to point out that there is a notable feature in the introduction of the β goal β. that is, the β goal β for the time being is set differently from the β goal β from a longer - term perspective. the bank has decided to set a specific inflation rate goal for the time being β a rate that it currently aims to achieve β even though there is considerable uncertainty surrounding the prospects for japan β s economy, such as in terms of changes in economic structures. at the bis central bankers β speeches same time, from a longer - term perspective, if the efforts to strengthen growth potential successfully boost real growth rates to an adequate level in a sustainable manner, then the medium - to long - term sustainable inflation rate β and consequently, the nominal growth rate β will gradually rise. bearing in mind such a possibility from a longer - term perspective, the board has decided to express β the goal for price stability in the medium to long term β with a degree of latitude as β a positive range of 2 percent or lower in terms of the year - on - year rate of change in the cpi β and to review the β goal β once a year in principle. as long as the bank β s thinking behind the β the price stability goal in the medium to long term β is shared correctly, it is not essential to argue about what it should be called. i feel no discomfort in referring to the β goal β as a flexible inflation target. b. question : was the policy change in february based on the assessment from the β two perspectives β? next, let me take up the issue of how difficult it was to predict the february decision to enhance monetary easing. since march 2006, in deciding the conduct of monetary policy, the bank has been examining economic activity and prices from two perspectives. the first is in terms of whether the baseline scenario of the outlook for economic activity and prices follows a | have been volatile against the backdrop of the further decline in crude oil prices and uncertainty such as over future developments in emerging and commodity - exporting economies, particularly the chinese economy. for these reasons, there is an increasing risk that an improvement in the business confidence of japanese firms and conversion of the deflationary mindset might be delayed and that the underlying trend in inflation might be negatively affected. in order to preempt the manifestation of this risk and to maintain momentum toward achieving the price stability target of 2 percent, the bank introduced β quantitative and qualitative monetary easing ( qqe ) with a negative interest rate β in january 2016. the bank will lower the short end of the yield curve by slashing its deposit rate on current accounts into negative territory and will exert further downward pressure on interest rates across the entire yield curve, in combination with continued large - scale purchases of japanese government bonds ( jgbs ). the jgb yield curve has declined after the introduction of β qqe with a negative interest rate, β bis central bankers β speeches and policy effects have been seen. going forward, these effects are likely to steadily spread to both the real economy and the price front. the bank will continue with β qqe with a negative interest rate, β aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. it will examine risks to economic activity and prices, and take additional easing measures in terms of three dimensions β quantity, quality, and interest rate β if it is judged necessary for achieving the price stability target. in global financial markets, risk aversion of investors has been spreading excessively around the globe recently. the bank will carefully monitor how the developments in global financial markets influence japan β s economy and prices. thank you. bis central bankers β speeches | 0.5 |
how we are utilising the bank β s balance sheet to support financial stability. much of this will be familiar. you β ve heard a lot from me and my fpc colleagues throughout this year, but it bears repeating given what it implies for existing and new vulnerabilities and risks to continued financial stability, which the fpc and the bank are managing. lessons from 2024 β developments in market - based finance if i was going to pick out one theme to describe 2024, it β s the continued transition of activity to non - banks, particularly in some core markets. non - bank financial institutions ( nbfis ) encompass all financial institutions that are not banks, central banks or public financial entities. it means they are a heterogeneous group of financial intermediaries with widely differing business models, varying from pension funds and insurance companies to hedge funds and money market funds. as has been well documented, their role within the financial system has increased rapidly since the global financial crisis, with non - banks now accounting for around half of the total assets in both the uk and global financial systems. nearly all of the increase in net borrowing by uk business since the global financial crisis has come from market - based sources rather than direct bank lending, and market - based lending now accounts for 56 % of the Β£1. 4 trillion stock of uk corporate debt, as shown in figure 3. figure 3 : composition of stock of uk corporate debt as of 2024 q2 sources : bank of england, bayes cre lending report ( bayes business school, city university of london ), deloitte, eikon from refinitive, financing & leasing association, firm public disclosures, lcd a part of pitchbook data inc., ons, peer - topeer finance association and bank calculations. data as of 2024 q2. one square represents approximately Β£14 billion. there are 100 squares, each representing 1 % of the total current stock of uk corporate debt, rounded to the nearest 1 %. debt securities include bonds, private placements, and commercial paper. non - bank loans to large corporates includes lending by securities dealers and insurers, non - monetary financial institution syndicated loans, asset finance provided by the non - bank sector, and direct lending funds. these data are for private non - financial corporates using ons consistent national accounts definitions, and excludes public, financial, and unincorporated businesses. the bank has previously set out the reasons for, | yields have declined. significantly, the decline in yields in the underlying government bond markets has typically more than offset the widening in spreads faced by lesser credits. in the us corporate bond market, for example, bbb spreads widened over the year from around 75 basis points to around 140 basis points, but because of the underlying fall in yields, yields paid by bbb borrowers actually fell from around 6Β½ % to 6 %. similarly, in the sterling market here, lower grade spreads widened from around 80 basis points to over 150 basis points but yields paid fell from just over 7 % to around 6 %. the result has been a notably effective contribution by the bond market to meeting the financing needs of the corporate sector. the past year has, also, in a real sense been the year of europe. in any event, the prospect then advent of the euro was undoubtedly a major factor driving the increase in bond market activity. issues by european borrowers accounted for some 25 % of the total, and issues in european currencies rose to nearly 30 %. many issuers took the opportunity to issue tributary or parallel bonds which were fungible with the launch of the euro. others offered large benchmark issues with provision for redenomination into the euro. in parallel, 1998 saw a further rapid expansion in the volume of equity issuance by european names, fed partly by privatisation sales, but reflecting also increased corporate use of the equity market to finance expansion and acquisitions. even more remarkably, merger and acquisition transactions in europe rose nearly 50 % in 1998, continuing a trend which has seen this area of activity increase by around 35 % a year over the past five years. β 2 β moreover, january 1999 has by all accounts started the new year in an even more active vein, with a very high volume of bonds issued, and with the euro accounting for over a third of the total. in part, this no doubt reflects the fact that the euro is, for the moment, the new kid on the block which everyone wants to meet. but more fundamentally it is a clear vote of confidence in the new currency that such international interest should already be apparent in borrowing and investing in the euro, and in adapting and rebalancing portfolios to take account of this major change in the structure of the capital markets. a hugely important contribution to this process has, of course, been the vast exercise to prepare conventions, processes and systems for the euro, both within firms and in the shared market infrastructure | 0.5 |
, such as job creation and improvement of incomes. for this reason, the inflation targeting framework retains the fundamental monetary policy paradigm of striking the optimum balance between inflation and output. apparently, when a central bank faces a dilemma of choosing between inflation and growth, inflation remains the priority. an example of this can be seen in the problems we faced last year, when world oil prices almost doubled. this disturbing trend became highly problematic for monetary policy because not only did it boost inflationary pressure, but also inhibit economic growth. many suggested that the central bank did not need to respond to this temporary surge in inflation. however, our view at the time was that despite the temporary nature of the disturbance, the inflationary impact emanating from the higher oil prices through increased price for other goods and services, such as transport and wages, would drive up core inflation. in this situation, the tight policy was necessary to prevent sustained escalation in public inflation expectations. the third characteristic of the itf is that monetary policy is implemented on a transparent basis with measured accountability. in my view, with elements like these, inflation targeting is more than a mere framework for monetary policy. inflation targeting promotes the good governance of a central bank. by announcing the inflation target to the public, the central bank commits itself to its achievement. uncertainty over future inflation will ease because public inflation expectations have a point of reference, and thus economic costs arising from uncertainty will also be reduced. communication to the public on the future monetary policy direction is also vital so that the public can anticipate the central bank monetary policy and to avoid β surprises β that could trigger volatility in the money market. to strengthen policy effectiveness in this present age of disclosure, the central bank must also carry out a process of educating the public on what the monetary policy objectives are, the strategy for achieving these objectives, and what lies behind the decisions taken. one example involves the communication of the monetary policy response to soaring oil prices and risks from global imbalances at a time of weak conditions in the real sector and high unemployment. communications between the central bank and market players are also necessary, especially when financial markets are experiencing turbulence. in financial markets fraught with asymmetric information, the wealth of information held by the central bank is frequently of great benefit in mitigating this issue and thus preventing panic and herding by investors. in this regard, the credibility of the central bank is crucial. concluding remarks under the environment of financial integration, the task of | also declined somewhat in the recent period, albeit still remaining high. for further information about this issue, you can refer to the relevant box in our report. 6 / 12 bis - central bankers'speeches we envisage that our decisions will facilitate an improvement in inflation expectations, and the gap between market expectations and our interim targets will be closed. monetary policy distinguished participants, in this part of my speech, i would like to talk about our monetary policy strategy. as you know, we initiated a strong monetary tightening process in june 2023 to establish the disinflation course as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behavior. accordingly, we have raised the policy rate from 8. 5 percent to 50 percent. as a technical adjustment, we widened the interest rate corridor in march. in addition, against the divergence in expectations of economic units and possible volatilities, we continue to implement macroprudential policies to enhance the effectiveness of monetary transmission. accordingly, in order to support the rebalancing process in domestic demand, we lowered turkish lira commercial loan and general - purpose loan growth limits to 2 percent, we introduced reserve requirements and terminated securities maintenance practice. moreover, we raised the maximum interest rate on credit cards. in order to reinforce the monetary transmission mechanism and increase the share of turkish lira deposits, we started remunerating turkish lira required reserves according to targets and revised targets for growth of turkish lira deposit share. as of today, we completely terminated the securities maintenance practice in order to enhance the functionality of market mechanisms and strengthen macro - financial stability. thus, we were able to enhance the functionality of the bond market, normalize the yield curve and strengthen the monetary transmission mechanism. we have sterilized the excess liquidity stemming from the exchange rate difference payments of fx - protected accounts and the increase in the cbrt's swap transactions with domestic banks in the final quarter of 2023. more than 1 trillion turkish liras were sterilized from the market via the increases in required reserves. in december, we started holding turkish lira deposit buying auctions to sterilize access liquidity. we are sterilizing the temporary excess liquidity via deposit buying auctions. 7 / 12 bis - central bankers'speeches we will monitor liquidity conditions closely and we will effectively use necessary sterilization tools when necessary. our monetary tightening steps have immediate and strong effects on financial markets. in this part | 0 |
harder to do so later, when growth might be weaker, interest rates higher, and property prices lower. stringent efforts to ensure singapore β s financial centre remains clean and trusted next, let me touch on the efforts we have been making to ensure that singapore remains a clean and trusted financial centre. β’ there has a growing concern internationally on the use of financial centres to hide illicit funds or evade taxes. singapore takes seriously the integrity of its financial centre and is fully committed to international efforts to combat money laundering and tax evasion. the policy measures singapore has taken on this front well - known ; so i will not elaborate. β’ laundering proceeds of tax evasion and tax fraud is now a crime in singapore, effective 1 july. financial institutions are required to conduct customer due diligence to deter and detect proceeds from serious foreign tax offences, even if they are not offences in singapore. β’ we will automatically extend exchange of information ( eoi ) assistance in accordance with oecd standard to all existing avoidance of double tax agreement ( dta ) partners without the need for negotiation. β’ we signed the oecd multilateral convention on mutual administrative assistance in tax matters. bis central bankers β speeches what is less well - known is the rigorous supervisory regime in place to combat financial crime. mas β approach is preventive. β’ we seek to identify control weaknesses early so that financial institutions can strengthen their processes and prevent attempts to launder money or finance terrorism. β’ this is more effective than punishing financial institutions only after actual acts have been committed and detected. our coverage is comprehensive. β’ over last three years, mas conducted total of 108 anti - money laundering / countering the financing of terrorism ( aml / cft ) inspections covering banks, insurance companies, money changers, remittance agents, and licensed intermediaries. β’ financial institutions have enhanced aml / cft controls over the years, and most have in place the necessary policies, procedures and controls to combat money laundering and terrorism financing. financial institutions with control deficiencies are firmly dealt with. β’ β’ example : β a bank which facilitated ship - closing transactions, did not conduct adequate due diligence on the final identity of buyers behind these transactions. β mas ordered the bank to commission an independent audit of its aml / cft controls. β the audit uncovered serious control weaknesses and compliance failures. β mas imposed a composition sum of s $ 350, 000 on the bank. β the bank has since beefed up its control | summary of an article entitled risk disclosure by financial institutions published in the bank of japan quarterly bulletin of february 1997 bank of japan, communication, 28 / 2 / 97. introduction public disclosure by financial institutions has long provided information about business performance through the publication of financial statements. in recent years, however, a number of financial institutions have come to focus on disclosure of a wider range of information, including their management policies. this is partly attributable to the expansion of derivatives transactions, which has made risk management techniques increasingly important in the management of financial institutions, and which has thereby encouraged financial institutions to improve such techniques. accordingly, individual financial institutions have been motivated to reveal voluntarily their risk exposures and risk management methods in order to win a favorable assessment from market participants. disclosure thus brings into play a check mechanism inherent in financial markets ( hereafter referred to as the market check mechanism ) that disciplines management of financial institutions, and thereby helps to enhance the efficiency and transparency of the markets and to stabilize the financial system. this report examines the disclosure of information on risks of financial institutions, with an overview of the current practices and future issues. it is intended to serve market participants, the beneficiaries of the information disclosed. | 0 |
. put differently : keep the real economy going ; make sure economic growth does not shrink ; ensure your business maintains the same rates and that employment grows instead of reducing. this, dear participants, is may otherwise be referred to as ensuring the stability of the country β s economic growth. on behalf of the institution i represent, i would like to assure you that the bank of albania β being one of the main economic and financial decision - making authorities at home β remains entirely committed in this context. the times we are going through require all the development strategies, economic policies, measures and rules to undergo a strict cost / benefit analysis. in this context, although the crisis is not outlined yet, we have already drawn the first lessons from it. public and private authorities need to consider these lectures as future opportunities. mistakes can teach us how to better serve the future. we should have an optimistic view of the future and at the same time make sure our stance is realistic and consistent. time is ripe for albania to start producing more goods and services than before. despite the admirable progress in this context, the gap is still wide. agriculture and industry remain two important branches of the economy operating far from their potential. additionally, other sectors that have revitalized during the transition years require more orientation and tuning. these measures will enable better diversification of the albanian economy, augmenting its stability with the passing of time. other challenges i believe relate to the country β s external position, implying the reduction of current account deficit and the provision of alternative resources of foreign currency inflows. therefore, i think that the role of the state needs to be more pronounced, not only in terms of completing the legal and regulatory basis but also of concluding a number of important structural reforms, in particular those related to the land, ownership titles, pensions, to the support of the small and medium - size business, to the further improvement of business environment and the ongoing upgrade of national infrastructure. the further strengthening of safety nets, in the context of a stable fiscal and financial position, is an obligation whose accomplishment would reduce both the real and perceived risk of the albanian economy, hence creating incentives for the growth of domestic and foreign investments. time is ripe for the state budget to involve the participation of private entrepreneurs in strategic investment projects through joint financing programmes. the banking system plays a vital role. banking loan has played a key role in albania β s economic development. it has been a source of profit in your business and it has | can be observed. given that the bank continues to steadily pursue qqe and that inflation continues to be above 1 percent, medium - to long - term inflation expectations will likely follow an increasing trend, which will further reinforce inflationary pressure. upward drift of the phillips curve although somewhat technical, let me summarize this price rise mechanism by using the concept of the phillips curve ( chart 9 ). the phillips curve depicts the relationship between the output gap and inflation, and illustrates the following mechanism : if economic conditions are favorable and the labor market and the market for goods and services are tight, inflation will rise. in the chart, the vertical axis depicts the inflation rate, while the horizontal axis depicts the output gap. the phillips curve is assumed to be upward - sloping ; that is, if economic conditions improve and we move to the right along the phillips curve, the inflation rate will increase. note that the inflation rate here depicts the year - on - year rate of change in bis central bankers β speeches the cpi excluding food and energy, both of which are likely to be affected by changes in the exchange rate of the yen. let us first look back at the situation before the introduction of qqe. the green curve is based on data up to the first half of the 1990s, while the blue curve is based on data since the second half of the 1990s. comparing these two, you can see that the phillips curve shifted downward during the prolonged period of deflation. as a result, the relationship between economic activity and prices had become such that even when the output gap is zero β when the economy is in a normal state β inflation is about 0 percent. under these circumstances, the view that prices will decline or not rise had become firmly entrenched among firms and households. qqe aims at drastically changing this deflationary mindset of firms and households and at raising inflation expectations toward 2 percent. in terms of the phillips curve, this means that the bank aims at shifting the phillips curve upward, slightly above the green curve, so that the relationship between economic activity and prices is such that inflation will be 2 percent when the output gap is zero, that is, when the economy is in a normal state. developments in the past year in light of this aim, how much progress have we made? let us next look at changes since the introduction of qqe. the red circles in the chart illustrate developments over the past year and indicate the following. first, with the economy growing at | 0 |
i would stress again that the scope of business continuity plans for central banks goes beyond the avian flu. v. avian flu : the indian case if seen in the indian perspective, the first case of bird flu in maharashtra was announced on february 18, 2006 as a sample of an affected poultry farm from navapur was tested positive for highly pathogenic h5n1 viral strain. first case of h5n1 infection in birds was reported in india in february 2006. initially, the virus infected 52 poultry farms in northern part of maharashtra and such reports put authorities in other states on high alert as such a contagious disease could be source of concern for the indian economy in general and poultry industry in particular. india is the fifth largest producer of eggs and the livestock and poultry sector is one of the fastest growing sectors in india. it may be noted that outbreak of avian flu was navapur and uchhal in maharastra was a localised one, which has been contained effectively. the major poultry exporting states are located at a considerable distance from navapur. according to ministry of agriculture, the export of poultry / poultry products from these states is absolutely safe as the samples tested are negative ( government of india, 2006a ). according to the ministry of agriculture, there has been no case of avian flu reported since april 18 of this year. prudence, however, demands that we should take all possible precautions in this regard and be prepared to face any eventuality of any nature. according to minister of agriculture, consumer affairs, food and public distribution, " though the poultry industry had suffered heavily because of the outbreak of bird flu this year, india would be in a position to declare the country free from this disease very soon ( government of india, 2006b ). " to avoid any large scale avian flu pandemic, the indian authorities have already announced various protective measures. action plan has been prepared for the guidance of the animal husbandry departments of the state governments. this action plan for the state governments consists of three parts. part i gives the action plan in case of any suspicion of occurrence of avian flu at any place. part ii describes the action plan in the unlikely event of the outbreak of the disease being confirmed by laboratory tests. part iii provides advice to persons who may be required to handle highly pathogenic avian influenza ( hpai ) affected poultry. recently, the indian council of agricultural research ( icar ) has developed an indigenous | ladies and gentlemen, 2 / 3 bis - central bankers'speeches in conclusion, i would like to emphasise that this is not the time to rest in our laurels, but we need to reflect on future challenges in order to render the local capital market as vital and as functional as possible. the approval of the latest policy paper " on creating an environment which facilitates the development of capital markets in albania, 20232027 " is a qualitative step toward the identification of problems and obstacles and of relevant suggestions to improve the main components for the development of capital markets. they aim to further complete the legal and regulatory framework, the market infrastructure, financial education and the development of various capital market segments. in this framework, the bank of albania in cooperation with the afsa and the ministry of finances and economy is undertaking the necessary steps to start an important project with the ebrd, which will identify the need to amend the legal acts that regulate financial market activity, aiming to render the trading environment safer, for both international and national investors. given the characteristics of the albanian financial market, the bank of albania deems that the development of capital market must be stable and gradual. it should give priority to opportunities that attract more non - resident investors, strengthen investing capacities of non - bank financial institutions and increase liquidity in their secondary markets. furthermore, the expansion of both stock and derivative products will be driven by strengthening the harmonising capacities of supervision and reporting to lawabiding institutions. on the other hand, the policy - making should also allow fiscal facilitations, primarily in regards to investors, which would translate in low financing costs for the issuer. also, creating a special room in the administrative court to resolve financial market disputes will help improve the investing climate. in the same vein, the establishment of the financial ombudsman will ensure legal support to investors that are engaged in or benefit from financial services. last but not least, the banking system should support the capital market development through the diversification of investments toward corporate products. this market should be considered complementary rather than as a competition to the economy, where banks would profit in regards to both investment portfolio diversification, as well as better risk management. i wish the best of luck to the financial stakeholders present here! thank you for your attention. 3 / 3 bis - central bankers'speeches | 0 |
prices and the stability of the payment system, understood as financial stability. the first of these objectives has been specified under the regime of flexible inflation targeting, and has governed us for over 15 years, setting the target that annual expected cpi inflation must stand at 3 % in a two - year horizon. this regime also considers a floating exchange rate, where the bank reserves the possibility of intervening in the market, a power it has exercised barely four times since this policy came into effect in 1999. this should clarify what lies beyond the objectives of our monetary policy : on the one hand, under the foreign exchange policy i have just described, we do not have a target for the exchange rate. we allow it to settle freely in the market responding to local interest rates and its other macroeconomic determinants. this is relevant because, as the empirical evidence shows, in small, open economies the exchange rate is an important shock absorbing mechanism. second, our target is not short - term inflation, but longer - term inflation. thus, to the extent that inflation fluctuations are perceived as transient, they should not have much impact on our policy decisions. a good example of this is the steep increase in inflation we had between 2014 and 2016. this process originated largely in a shock to the exchange rate that had transitory effects on inflation. of course, the duration of the period of high inflation was long, but it responded to a succession of different shocks and not to the persistent effect of a single one. on the contrary, whenever we identify medium - term pressures on inflation, either upward or downward, we must react with vigor. the same episode which i have just referred to is illustrative in this regard. while in the short term inflation rose as a result of a shock on the exchange rate, with transitory effects, medium - term pressures diminished as a result of a deteriorating economy. had our target been short - term inflation, we should have raised the mpr. as it is not, and what we aim at is medium - term inflation, our decision was to lower the mpr to prevent inflation two years out from falling below the 3 % target. this response of monetary policy is very different from its not so distant past. in the 1990s, when our economy was not yet sufficiently prepared to deal with a currency shock, the bank had to choose between an inflation target and an exchange rate target. the result of the exercise was complex for the chilean economy. not to mention what happened in the early 1980s | to ensure the convergence of inflation to the target, it will be necessary to enhance the monetary impulse somewhat, which reflects in an mpr trajectory similar to the one implied by financial asset prices during the ten days prior to the statistical closing of this report. macroeconomic scenario in february, annual cpi inflation was 2. 7 %, while core inflation β cpiefe ; cpi excluding energy and foodstuffs β was 2. 2 %, driven mainly by its goods component, whose annual growth fell to 0. 4 % in february, in line with the nominal exchange rate, which is now below its year - ago level. the services component of the cpiefe posted an annual change of 3. 4 % in february, a quite milder fall than its goods component, reflecting its greater inertia ( figure 1 ). about this, it is worth noting that one feature of the cpi services basket is that 75 % of its prices are either managed or linked to another indicator or to past inflation, meaning that they are indexed. this fact in practice augments their inertia and causes the effect of any change in the activity gap to take longer to show up. of course, this is not the case for every service price, as non - indexed or non - managed prices tend to show a more visible effect from changes in the gap. one of the boxes in the report is devoted to this, showing how the differences in the recent evolution of services inflation appear when these recently mentioned price groups are taken separately. in this report β s baseline scenario we foresee that headline inflation will continue to decline for some months, to return to 3 % by year β s end and hover around that mark until the first quarter of 2019, when the current projection horizon ends. the cpiefe will decline steadily until the second half of 2017 and will take longer to hit 3 % ( figure 2 ). this inflation path relies on two assumptions : first, a fairly stable real exchange rate around its current levels, which are estimated to be in line with fundamentals ; second, that although the output gap will exceed the december estimate for some time, it is projected that, for the aforesaid reasons, it will begin to close towards the end of this year. activity growth ended 2016 in line with the december forecast, although characterized by a steeper slowdown during the year, which is expected to continue well into 2017. on 20 march, the bank published the first national accounts figures based on the new benchmark compilation | 1 |
issue. after all, we have witnessed rapid price increases and even faster declines in the housing market, for example for tenant - owned apartments in metropolitan areas during the crisis at the beginning of the 1990s. in principle, i would be prepared to agree, if it proved impossible to explain the price rises with fundamental factors. in order to see if there are fundamental factors that could explain the recent price increases, it makes sense to look at the driving forces that could have been important for house prices, i. e. interest rates, primarily the post - tax real interest rate, household disposable income, the supply of housing and the demand that results from people moving to metropolitan areas in particular. as regards interest rates, both real and nominal rates have fallen continuously since the mid 1990s. for households this has entailed significantly lower mortgage costs. at the end of 1992 the banks'average nominal lending rate to households was just over 15 per cent and inflation stood at just over 2 per cent. now, the average lending rate is around 6 per cent, while inflation has remained at about the same level. so households can incur more than double the amount of debt today and still have lower debt - servicing costs. the favourable economic climate from the mid 1990s also contributed to a drop in unemployment, on the one hand, and an increase in wages on the other. all in all, this led to a rise in household disposable income. moreover, disposable income has continued to increase during the period of relatively weak economic activity in recent years. this has been mainly due to unemployment remaining low, in spite of the economic slowdown. so low interest rates and high growth in household disposable income are two fundamental factors that could explain the rise in prices in the housing market. furthermore, there is no excess supply in the housing market similar to that seen at the beginning of the 1990s when housing construction was encouraged through various kinds of grants and tax subsidies. instead, there is very little construction of housing today, and discussions are concerned rather with how to step this up. in addition to the low level of housing construction, demand for housing has risen mainly in metropolitan areas due to the greater numbers moving to these regions during the latter part of the 1990s. it is not surprising that a relatively constant, low supply, as well as high demand, should have contributed to the substantial price rises. thus, low interest rates, an increase in disposable income and a low supply | lars nyberg : developments in the property market speech by mr lars nyberg, deputy governor of sveriges riksbank, at the seminar on properties, malmo, 2 september 2003. * * * i would like to begin by thanking you for the opportunity to come to malmo and speak about the riksbank's view of developments in the property market. of course, these developments are not only of interest to those of us present today. they are important to all people, as movements in property prices have significance both for the real economy and financial developments in sweden. when property prices rise, we feel more financially secure and increase our consumption, which leads to a rise in employment and growth. we might even borrow a bit more from the bank if we can. normally, there is no harm in this. but there is a limit, of course, to the burden of debt households can bear without giving rise to worrisome risks. should the debt of commercial property companies also swell, it could entail risks for the stability of the entire banking system, a point that was illustrated so well during the crisis at the beginning of the 1990s. on account of this, the riksbank monitors developments in the property market carefully. we usually divide it into two segments, which give rise to different questions and reflections. the first segment is the housing market. since 1997, housing prices have risen by just over 50 per cent, measured in current prices. the price boom has continued in spite of the generally weak economic activity of the last two years. this is a new experience which differs from previous business cycles, when prices have tended to recede during periods of economic decline. similar developments have occurred in other countries, for example in the us, england and holland. the situation could appear worrying, particularly given that the rise in housing prices has been accompanied by an increase in household indebtedness. the upsurge in prices has raised questions about the healthiness of this trend. are the price rises in the swedish housing market the result of a bubble? are the higher levels of household indebtedness sustainable? the riksbank's view is that the current price developments in the housing market do not reflect any speculative expectations of future price rises which would warrant the term β bubble β. nor is household indebtedness a bigger problem than usual for this stage of the business cycle. i will explain this in a moment. the other segment is the market for commercial property. here, | 1 |
mark carney : opening statement for appearance before the house of commons standing committee on finance opening statement by mr mark carney, governor of the bank of canada, presented to the house of commons standing committee on finance, ottawa, ontario, 1 november 2011. * * * good morning. tiff and i are pleased to be here with you today to discuss the october monetary policy report, which the bank published last week. the global economy has slowed markedly as several downside risks to the projection outlined in the bank β s july mpr have been realized. volatility has increased and there has been a generalized retrenchment from risk - taking across markets. the combination of ongoing deleveraging by banks and households, increased fiscal austerity and declining confidence is expected to restrain growth across the advanced economies. the bank now expects that the euro area β where these dynamics are most acute β will experience a brief recession. the bank β s base - case scenario nonetheless assumes that the euro - area crisis will be contained, although this assumption is clearly subject to downside risks. we welcome the agreement announced last week by euro area leaders on a comprehensive plan to address the ongoing challenges in europe. we look forward to additional details on modalities of the various measures and to their implementation in the coming weeks. in the united states, real gdp growth is expected to be weak through the first half of 2012, reflecting diminished household confidence, tighter financial conditions and increased fiscal drag. growth in china and other emerging - market economies is projected to moderate to a more sustainable pace. these developments, combined with recent declines in commodity prices, are expected to dampen global inflationary pressures. the outlook for the canadian economy has weakened since july, with the significantly less - favourable external environment affecting canada through financial, confidence and trade channels. although canadian growth rebounded in the third quarter with the unwinding of temporary factors, underlying economic momentum has slowed and is expected to remain modest through the middle of next year. household expenditures are projected to grow relatively modestly as lower commodity prices and heightened volatility in financial markets weigh on the incomes, wealth and confidence of canadian households. business fixed investment is still expected to grow solidly in response to very stimulative financial conditions and heightened competitive pressures, although it will be dampened by the weaker and more uncertain global economic environment. net exports are expected to remain a source of weakness, owing to sluggish foreign demand and ongoing competitiveness challenges, including the | - 20 reform agenda : building robust financial market infrastructure. that infrastructure includes a number of components : payment and securities settlement systems, trading venues and exchanges, information and price providers, and collateral management systems. for the most part, these key elements not only functioned well during the crisis, they were in fact a source of strength. just after the onset of the crisis, the cls bank, which settles foreign exchange transactions, successfully processed roughly three times its normal daily volume of transactions ; and cdsx, which clears and settles trades in canadian - dollar - denominated debt securities, handled double its normal volume. efficient clearing and settlement systems such as these were able to perform a stabilizing role during the crisis. that is exactly what they were intended to do. the crisis did, however, illuminate some key areas in which financial market infrastructure needed to be broadened and put to better use. here, i am talking about expanding the use of central counterparties or ccps to replace bilateral clearing and settlement for a number of core markets. in my presentation today i am going to review how bilateral clearing contributed to contagion during the financial crisis, describe why greater use of resilient bis central bankers β speeches financial infrastructure is needed and tell you how ccps will strengthen the financial system. ccps are of particular interest to us at the bank of canada because we are responsible for overseeing systemically important financial infrastructure that affects the stability of the canadian financial system and, therefore, the health of the economy. what happens when robust market infrastructure is not in place? during the crisis, we had two stark illustrations of why greater use of financial infrastructure is needed. the crisis did not start or end with the following shortcomings in bilateral clearing and settlement, but they were channels through which problems in an obscure part of the u. s. housing market cascaded into a global crisis. although these are familiar stories, they illustrate the need for change. one instance is the near - failure of bear stearns. bear stearns wasn β t one of the largest investment banks in the united states, but it was one of the most leveraged, with large broker - dealer and proprietary operations. it played a pivotal role in the global repo market, holding collateral for transactions and acting as a counterparty for repo financing. when the firm β s mounting losses, extensive leverage and reliance on potentially unstable short - term funding markets threatened to cause its failure, there was a risk that bear ste | 0.5 |
zero trend inflation, working paper 2006 - 34 ( ottawa : bank of canada, 2006 ). other with laval professor kevin moran. 6 their early results suggest that this is an avenue worth pursuing further. but while there may be benefits to be gained from a lower inflation target, there may also be costs involved in getting there. as i mentioned earlier, canadians'expectations of inflation have now become firmly anchored on 2 per cent. adjusting those expectations down to a lower level, say 1 per cent, may not be easy, although the cost of lowering inflation expectations can be expected to be lower than when inflation targeting was first adopted, given the credibility that the bank β and our inflation - targeting framework β have acquired. however, the lengthening of non - indexed wage and debt contracts would raise some transition costs. two main arguments have traditionally been advanced against the idea of targeting a lower inflation rate. the first is the concern about downward wage rigidity : that it is more difficult to adjust real wages downwards in an environment of very low inflation because this will likely involve cuts to nominal wages. the second argument is that central banks could have problems implementing a stimulative policy in a very - low - inflation environment because nominal interest rates cannot go below zero. with respect to downward wage rigidities, research described at the time of the 2001 renewal of the target, 7 as well as labour market developments generally, do not appear to provide a compelling argument against a lower inflation target. but the zero - bound constraint on interest rates remains a critical issue. the adoption of price - level targeting, however, could help central banks deal with the zero - bound constraint. so let me now turn to the topic of price - level targeting. a target for the price - level path? the essential difference between a target for the price level ( which could rise over time ) and an inflation target is that under pure inflation targeting, past deviations from the target do not have an impact on the future targeted rate of inflation. movements in the price level that are perceived to be " one - off " events are ignored. bygones are bygones. but with price - level targeting, past inflation performance does matter. if inflation had been below trend, causing the price level to fall below target, monetary policy would need to generate above - trend inflation for a while in order to return the price level to the target over time. symmetrically, if inflation had been above trend, lifting the price level above its target, | measures will expand the eurosystem β s balance sheet towards the levels prevailing in early 2012. and in this context, the addition of purchases of covered bonds to our abs purchases will allow us to conduct interventions on a scale that will achieve the intended effects in terms of portfolio rebalancing and signalling. let me underline however that contingent on outcomes, we are committed to recalibrate the size, pace and composition of our purchases as necessary to deliver our mandate. this is why the governing council has tasked ecb staff and the relevant eurosystem committees with ensuring the timely preparation of further measures to be implemented, if needed. conclusion let me conclude. for all the reasons i have mentioned, it is essential to bring back inflation to target and without delay. monetary policy can and will do its part to achieve this. but it is also clear that, as monetary policy works on the demand side of the economy, other policies can assist in this process β or at least not counteract it. this means that the aggregate fiscal stance of the euro area has to be consistent with our position in the cycle. and it means that this fiscal stance must be achieved in a confidenceenhancing way β that is, consistent with the fiscal governance framework β otherwise lack of confidence will undermine investment and offset the positive effects of fiscal policy on demand. and as investment does not only create current demand, but also future supply β by raising growth potential β appropriate structural policies are also a key part of the policy mix. we need to create a business environment where new investment is attractive. and this in turn would also help monetary policy to reap its full effects. in short, there is a combination of policies that will work to bring growth and inflation back on a sound path, and we all have to meet our responsibilities in achieving that. for our part, we will continue to meet our responsibility β we will do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us. if on its current trajectory our policy is not effective enough to achieve this, or further risks to the inflation outlook materialise, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases. bis central bankers β speeches | 0 |
states such as maharashtra, gujarat, karnataka, andhra pradesh and tamil nadu account for over 80 % of urban cooperative banks presence and 75 % of their total deposits. predominant concentration of urban cooperative banks in these 5 states is mainly on account of emergence of strong cooperative leadership. ucbs normally confine their area of operation to localised geographical regions, but over a period of time, their area of operation has crossed the frontiers of districts and in some cases the states of their registration. continuing the ideals and beliefs of cooperative pioneers, ucbs seek to bring about an alignment of human and social development with their business objectives. at present, the bigger question is can we extend or diversify the development of strong, vibrant and financially sound ucbs to the other regions of the country as well to cater to the requirements of the people at the base level and bring them under the banking fold. there is a clear indication as per the available data as mentioned earlier that a huge potential exists for the ucbs to play a more proactive role in the banking sector in the coming years. the potential exists, but how important a role the ucbs can play in our scheme for an inclusive growth? why should we have more thrust on the role played by the ucbs? in a regime of planned development, sound cooperative banking movement is an instrument, which while retaining some of the advantages of decentralisation and local initiative, will yet serve willingly and readily the overall purposes and directives of the developmental plans of the government in the identified sectors. it is an indispensable instrument of planned economic action in a democracy. the client profile of ucbs today predominantly comprise of priority sector segments viz. small business establishments, ssis, retail traders, professionals, self - employed persons and srtos, etc. who would not normally find it easy to have access to large commercial banks. in urban areas, however, there are a number of underbanked people like artisans, labourers, small business men, retailers, etc. of smaller means who find it difficult to organise themselves in keeping with the requirements of modern times. it is highly desirable on social as well as on economic grounds, that members of this class should be enabled to be brought into the banking fold and the ucbs certainly can take a lead into this. role of rbi β efforts to ensure sustainable growth and functioning of ucbs while the cooperative banking sector had shown spectacular growth during the 1990 β s exhibiting substantial potential for sustained growth, there were also concerns regarding inherent | factor which comes to fore only in times of disaster, while in organizations that manage security well, the ownership of security vests at the highest levels of governance. implementing security is often considered a one - time activity, which is effectively discharged when funding approvals are accorded for a technology stack. it is often perceived that having a set of information security tools will ensure adequate protection for a reasonable period of time. the information security landscape is dynamic in nature and techniques that worked at one point may not suffice for that year. often a regular high level review and monitoring framework is not in place, leading to a reactive rather than proactive approach to information security. is audits 21. banks may look at is audits being conducted periodically, the scope of audits may include : technology review covering all the technology components of the it projects such as : ( a ) ethical hacking : vulnerability assessment and penetration testing of the network. ( b ) application security : application security audit to identify known vulnerabilities and source code review : ( c ) design review : review the it architecture from security point of view and identify single point of failure. process review covering all the process related to security adopted by the it project. third party review : review should the security controls deployed by the third parties on the government data / information. business continuity plans 22. if a bank is to survive a disaster, it must select the β right β strategy. development of alternative business continuity plan strategies should be based upon the outcome of the business impact analysis. cyber frauds and security 23. even though the actual value of losses accruing on account of cyber crime in india might not be substantial, nearly 39 per cent of these cases are related to banks and financial institutions excluding those of the government. the cyber criminals find banks to be a bis central bankers β speeches lucrative target for their ingenuity. instances of credit - card fraud have become common given the growing popularity of credit card transactions, internet banking and atms. as of now, the cyber criminals seem to be a few clicks ahead of cyber - crime sleuths. this is where the banks may need to take preventive action. fraud management 24. frauds directly impact the bottom line, hence it would be imperative that banks combat them effectively. if the business intelligence framework unifies various data sources, it would be possible to mine the data, detect suspicious transactions on different online channels and suggest an appropriate action. therefore, banks need to put in place | 0.5 |
bowman, david, juan m. londono, and horacio sapriza ( 2014 ). β u. s. unconventional monetary policy and transmission to emerging market economies ( pdf ), β international svensson ( 1997 ) notes that the reaction function might take the form of a β targeting rule β expressing how the policymaker β s target variables are expected to move over time. bernanke ( 2010 ) discusses the practical importance of targeting forecast, as opposed to realized, variables. bis central bankers β speeches finance discussion papers 1109. washington : board of governors of the federal reserve system, june. caballero, ricardo j., and alp simsek ( 2013 ). β fire sales in a model of complexity, β journal of finance, vol. 68 ( december ), pp. 2549 β 87. cerra, valerie, and sweta chaman saxena ( 2008 ). β growth dynamics : the myth of economic recovery, β american economic review, vol. 98 ( march ), pp. 439 β 57. chor, davin, and kalina manova ( 2012 ). β off the cliff and back? credit conditions and international trade during the global financial crisis, β journal of international economics, vol. 87 ( may ), pp. 117 β 33. coulibaly, brahima, horacio sapriza, and andrei zlate ( 2011 ). β trade credit and international trade during the 2008 β 09 global financial crisis ( pdf ), β international finance discussion papers 1020. washington : board of governors of the federal reserve system, june. d β amico, stefania, and thomas b. king ( 2013 ). β flow and stock effects of large - scale treasury purchases : evidence on the importance of local supply, β journal of financial economics, vol. 108 ( may ), pp. 425 β 48. eggertsson, gauti b. ( 2006 ). β the deflation bias and committing to being irresponsible, β journal of money, credit and banking, vol. 38 ( march ), pp. 283 β 321. engen, eric, thomas laubach, and david reifschneider ( 2015 ). β the macroeconomic effects of the federal reserve β s unconventional monetary policies ( pdf ), β finance and economics discussion series 2015 β 005. washington : board of governors of the federal reserve system, january. fernald, john ( 2014 ). | organizations in the united states - those that our screening criteria determine to be core banks - should be subject to the most sophisticated version of basel ii. to be clear, we are not proposing to implement either the standardized or the foundation internal - ratings - based ( f - irb ) approaches within the united states. the twenty banks that we are assuming will be under basel ii in this country either by, or shortly after, the initial implementation date would account for about 99 percent of the foreign assets held by the top fifty domestic u. s. banking organizations. we believe that this high percentage clearly signals our intent to meet our obligation to ensure cross - border competitive equality of capital regimes. that the same twenty banks also currently account for approximately two - thirds of the domestic assets of u. s. banking organization indicates their importance to our banking and financial system. these entities must operate under the best risk - management standards with the most risk - sensitive capital treatment. we do not intend to require the thousands of other banking organizations in the united states, including u. s. subsidiaries of foreign banks that do not meet the mandatory criteria, to adopt basel ii. unless they choose to adopt basel ii, they will remain under our current regulatory capital rules, which are based on basel i. those banks remaining under basel i will not be subject to an explicit regulatory capital charge for operational risk. to be sure, any of these organizations can choose the basel ii requirements whenever they want, provided they meet the infrastructure prerequisites of the a - irb and the ama approaches to basel ii. we believe that the cost - benefit nexus will make this option infeasible for most of these banks in the years immediately ahead, but ultimately that decision resides with the banks themselves. nonetheless, as the cost of risk - management techniques decline with their wider dissemination and as counter - parties and stakeholders seek the comfort that comes with banks'application of more - sophisticated risk - management techniques, the larger regional banks may wish to migrate from rules based on basel i to those based on basel ii. even if larger regional banks do not formally choose to operate under basel ii for regulatory purposes, we expect they may wish to make use of the risk - management process that underlies basel ii. indeed, i should emphasize that the movement toward more - sophisticated risk management, the prerequisite of a - irb and ama, is occurring, and would continue to occur, independent of basel ii. this movement is clearly a market trend reflective | 0.5 |
for achieving the best possible performance of the company. this means maximizing profits, increasing growth and market share, expanding business lines, and doing all that it takes to maximize the company β s share value. on the other hand, the board of directors has to oversee the operations of management, ensuring that they operate well within the bounds of acceptable risks in order to ensure business continuity. the board of directors, thus, needs to act as a check - and - balance against the management with a view to ensuring the safety and soundness of the enterprise. meanwhile, shareholders also expect the board to perform its role as a watchdog or guarantor that the corporation would not incur losses or go into bankruptcy. they also expect the board to check management against excessive risk taking. therefore, it goes without saying that if the roles of chief of management and the chairman of the board are performed simultaneously by the same individual, then other board members cannot fully perform their duties of providing the check - and - balance required by good governance. worse yet, shrewd ceo will tempt other board members with stock options so that they would go along with his policy direction. this would especially be the case when the ceo aims for high growth or business expansion, which usually implies a quick rise in the company β s equities. though, these policies are often prone to higher risks, board members may become less inquisitive and more optimistic in their judgment as a result of the personal interests in potential profits from stock options. at the end of the day, their own personal interests would overtake their sense of conservatism and responsibilities. one can think of an even worse scenario when the ceo would like to cover up any wrongdoings or poor performances. since this ceo is also chairman of the board, he can easily influence the agenda of the meeting. thus, board members may never be aware of the company β s problems. if and when they have been informed of the problems, it may already be too late, as evidenced in the case of enron. it is for the above reasons that the authorities here in asia, are pushing for the separation of chairman and ceo positions so that they cannot be occupied by the same person in order to properly balance the powers and functions of the two roles. it is also fortunate for us that the practice of issuing stock options to directors of financial institutions is not yet widespread among banks in asia. ladies and gentlemen, what i have highlighted is only one face | tarisa watanagase : thailand's weathering the global downturn address by dr tarisa watanagase, governor of the bank of thailand, at a luncheon with eu ambassadors, bangkok, 3 february 2009. * * * your excellency ambassador hotek, excellencies, honourable guests, ladies and gentlemen, i am delighted to join this luncheon gathering of prominent ambassadors of the council of european union in thailand, under the presidency of ambassador ivan hotek of the czech republic. indeed, i would like to extend my sincere appreciation to ambassador hotek for his kind invitation for me to update excellencies from the eu countries on recent economic developments in thailand and the prospects for 2009. let me begin with the overview of thailand's economic performance. the thai economic performance was satisfactory for 2008 as a whole. gdp is estimated to grow by around 3. 6 percent, driven by the growth momentum during the first three quarters of the year. notably, from october 2008 onwards, economic developments have been deteriorating. during the fourth quarter of 2008, exports weakened considerably, falling by 9. 4 percent from the same quarter of the previous year. since october, exports showed large reduction in manufacturing products, especially high - technology products. on the domestic side, demand as well as consumers'and investors'confidence have deteriorated as evidenced by several indicators reported by the bank of thailand, including the business sentiment index, which fell to the lowest level at 34. 4 in november last year. in light of this, businessmen and the press started to become concerned about the potentially higher unemployment, which exacerbated confidence further. turning to economic stability, inflation pressure has dissipated starting august 2008. headline and core inflation rates, which were at 9. 2 and 3. 7 percent respectively at their peaks in july 2008, fell to 0. 4 and 1. 8 percent at the end of the year. as for the financial sector, our banking system is healthy in terms of profitability and capital base. i will return to touch on the financial sector later on. economic stability on the external front is also very strong. for 2008, the current account recorded a small deficit of 0. 2 billion us dollar. our international reserves amounted to 111 billion us dollar, which is 4 times of short - term external debt. the exchange rate remains competitive and stable. for 2008, the capital account recorded an overall surplus of 12. 8 billion us dollar, of which foreign direct investment or fdi was | 0.5 |
second pillar is intended to reveal this information, giving policymakers greater insight into shorter - run price dynamics and their implications for monetary policy. monetary policymaking in the euro area has to reflect the complexities and uncertainties which surround the transmission mechanism of monetary policy in a wholly new economic entity. these uncertainties imply that no single approach is likely to be entirely reliable. the inherent uncertainty faced by the central bank cannot simply be wished away. reliance on a single indicator or forecast, or a single model of the economy or view of the world, would, in these circumstances, be extremely unwise. the strategy needs to incorporate the full range of relevant indicators and assess them in the context of a variety of different models. in this respect, the two pillars complement one another. they allow for a structured cross - checking of the evidence and analysis underlying policy decisions, encompass all information and allow for various views of the structure of the economy. the academic literature and other external commentators are slowly coming to recognise the importance of β robustness β in monetary policymaking - something which i believe has been understood by central bankers for some time. a successful monetary policy is not one that performs β optimally β in the context of a specific model or given a particular view of the world. in the light of our limited understanding of how the economy works, no single model is reliable enough. rather given the great uncertainty faced by central banks - a successful monetary policy should perform well in a broad range of possible situations and across a variety of models or views of the world, each one of which may capture important aspects of actual economic behaviour or may, ex post, turn out to be close to reality. monetary policymaking is therefore complex. the two - pillar strategy chosen by the eurosystem where these pillars represent distinct, yet complementary, approaches - captures this complexity in an honest and genuinely transparent manner. this naturally brings me to transparency - a topic of considerable and ongoing debate in the euro area. in my view, the transparency of the monetary policy process is best understood as the extent to which the external, presentational role of the strategy is consistent with the internal, decision - making procedure. as a party to both the decision - making and the presentation of the single monetary policy, i can assure you that the correspondence between the internal and external aspects of the eurosystem β s strategy is extremely close. discussions in the governing council take into account, on the one hand, an analysis of monetary developments and their implications for monetary | policy offered an opportunity to design the operational framework afresh, ensuring that best practice was adopted throughout the euro area. the resulting framework provides for a broad set of instruments and procedures to implement monetary policy. thus far, this framework has worked very effectively in clearly signalling the stance of monetary policy and containing the volatility of short - term market interest rates. at the heart of the framework is the so - called β corridor β for the overnight market interest rate, which is defined by the interest rates on the deposit and marginal lending facilities. with the help of the minimum reserve system, the behaviour of the market rate within this corridor is smoothed, without recourse to fine - tuning interventions by the authorities that might be prejudicial to the market orientation of the system. with these features, the ecb has a very simple but probably also one of the most modern operational frameworks in the world. concluding remarks earlier this month i participated in a celebration of the 150th anniversary of the nationale bank van belgie / banque nationale de belgique. today we celebrate the banque de france β s bicentenary. it would have been extremely foolish if the eurosystem had not exploited the accumulated wisdom and experience gained from the long and distinguished history of these institutions and those of the other ncbs. as i have argued today, both the eurosystem β s strategy and its operational framework have exploited this wisdom to the full, while recognising the new and different challenges faced by the single monetary policy in the euro area. let me therefore finish by again congratulating the bank on its bicentenary, by expressing my gratitude to all those who have dedicated their time and effort to the achievement of monetary union and, finally, by wishing the bank another 200 successful years - and more - as an important and vital component of the eurosystem. | 1 |
an important tool. with the monetary policy rate close to zero β we cut the interest rate from 8. 25 % to 0. 5 % in less than a year β, communicating that we planned to keep a very low short - term interest rate for an extended period of time. this was essential in keeping medium and long term interest rates low. these measures β as well as some other more exogenous developments such as the rapid recovery of commodity prices β allowed the economy to rebound quite fast from a mild recession in 2009. actually, in the post - crisis years gdp growth was above 5 % in a context of low inflation. over time, these measures were eliminated, but certainly the lessons we learned from the crisis have been incorporated into our policy analysis and toolkit. among the most significant i would mention two : first, the fact that the central bank must be rapid to respond and use all the available tools if necessary. second, that a clearer signal about what we believe will be the path of interest rates in the future helps to have a more efficient transmission of the monetary policy, particularly in turbulent times. in fact, in the more recent period, marked by a higher than normal level of uncertainty associated with both a grimmer outlook for the chinese economy and the normalization of monetary policy in the united states, we have made a special effort to signal the financial market what is the likely direction of our monetary policy in our baseline scenario as well as the risks involved. we have done this by increasing the transparency of our analysis and, especially, by being more precise in our communication. of course it is too soon to make a comprehensive and definite analysis about the costs and benefits of this policy, but in my view this extra amount of forward guidance has been positive in order to achieve a smoother economic adjustment in difficult times. i thank you for being here, and without further delay, welcome to our nineteenth annual conference : β monetary policy through asset markets : lessons from unconventional measures and implications for an integrated world. β bis central bankers β speeches | also responsible for ensuring financial stability. broadly, one can say that when a country β s fiscal position is strong, its capacity to take on the risks arising from the failure of financial institutions is higher. on the other hand, with a weak fiscal situation, the capacity to take care of a financial or banking crisis is rather limited. more important, whenever pockets of vulnerability arise in the financial sector, the headroom available in the fiscal position to provide succour to financial entities needs to be assessed. in this context, one important source of strength as well as vulnerability remains the publicly owned financial institutions, which may have fiscal implications. they contribute heavily as a source of tax revenue. another source of linkage is the cross subsidies and we have to identify the areas of maximum cross subsidies in public sector entities. the sources of indirect subsidies through and by financial intermediaries are also important. a reading of the several budget speeches of the finance ministers in recent years would show the extent to which activities of public sector financial intermediaries operate as instruments of fiscal policy though these entities are competing in the market with private sector on all fronts. these public policy oriented operations of the public enterprises at the instance of fisc seriously limit the efficient price discovery, depth and vibrancy in different segments of the financial markets. thus, it is evident that while analysing the link between the fiscal and the public sector, perhaps, one should not confine to public sector borrowing requirements only. fifth, as regards further reforms in the financial markets, it is very clear that the development of insurance and pension sectors are very important especially for the government debt market and the corporate debt market. however, there are some challenges in this regard. the tax treatment of investment in debt and equity is quite asymmetrical in india with a favourable tilt towards investment in equity. there are limited incentives for encouraging contractual savings. hence, some of the areas that have to be looked at, as we move forward, relate not only to the demand side which advocates development of financial markets, but also to the supply side through policies that promote contractual savings, especially through pension and life insurance funds. now let me move to the fisc and the external sector. fisc and the external sector in the context of the external sector, there are certain issues from the perspective of fiscal policy that are of contextual relevance. the first issue pertains to the opening - up of government debt market to non - residents through, what we may call | 0 |
of a development agenda of future priorities and contextualise the future of payment system oversight. ladies and gentlemen, since the establishment of the ccbg a decade ago, methods of effecting payments and other financial transactions have quickly become sophisticated with a trend towards execution in real time electronic media. all this is taking place because consumer confidence is growing in these instruments and mechanisms, which have been supported by growing confidence in sadc member countries β economies in general and stability of the national financial systems in particular. it is therefore the expectation of the bank of zambia that this conference will discuss this trend and its implications, particularly with regard to limited accessibility to technology and technicalknow how of consumers in sadc member countries. other themes i am sure you will deliberate upon include confidentially of financial information, money laundering and terrorist financing. effective payment system oversight needs to be promoted so that public confidence in the safety and soundness of the national payment systems is maintained. understandably, this is a new area and in most member countries work is still exploratory. i therefore urge you all to double your efforts in this regard and deliver on this very important central bank responsibility. ladies and gentlemen, another new area is that of mobile phone enabled payment services. this development has a huge potential to help the sadc region leap frog a number of financial sector development challenges particularly those related to improving access and availability of financial services. this is because mobile phone based services, particularly those focused on low - value payments where swift and convenient service is the primary goal could be a practical solution for sadc member countries. the challenge therefore is how well we all respond without damaging this sprouting and potentially cost - effective delivery channel for financial services, which can be damaged with over regulation or lack of mitigation for the risks its poses. ladies and gentlemen, i wish to conclude by reminding all delegates that it is my hope that at the end of the conference all of you will have obtained a better understanding of payment systems best practice. equally important you will also have obtained a clearer view of the purpose of payment systems within a developmental context and the need for concerted efforts in balancing our responses in a manner that is supportive of the objective of attaining economic inclusion and growth, regional economic co - operation and integration. with these remarks, i declare the conference officially open and wish you successful deliberations. i thank you. | caleb m fundanga : payment system developments in the region speech by dr caleb m fundanga, governor of the bank of zambia, at the official opening of the 2007 sadc payment systems regional conference, livingstone, 2 april 2007. * * * β’ sadc payment systems project team leader ; β’ sadc payment systems project country leaders ; β’ chairperson, bankers association of zambia ; β’ delegates from all sadc countries ; β’ distinguished invited guests ; and β’ ladies and gentlemen on behalf of the bank of zambia and indeed on my own behalf, i wish to welcome you all to zambia and livingstone in particular. for those of you coming to livingstone for the first time, you will no doubt soon discover that this historical city, which incidentally was zambia β s capital city until 1935 when it was moved to lusaka, is one of the world β s pristine tourist destination and boasts of a number of magnificent sights and places of cultural interest. for those of you that have been here before, i wish you a joyous time as you renew your acquaintance with this beautiful city and enigmatic victoria falls. to all of you, i implore you to shop around and take a piece of livingstone as souvenir on your return. ladies and gentlemen, allow me to thank you all for being here for the 2007 sadc payment systems regional conference. this event has now become interwoven into the tradition and fabric of sadc. it has come to symbolize our commitment to collaboration and consultation within the sadc committee of central bank governors ( ccbg ) and annually marks our contribution to the process of regional economic co - operation and integration. it is in this light that the bank of zambia applauds the favourable response from all central banks, individuals and other institutions represented here for allowing their members of staff to attend this event. as bank of zambia, we believe this event provides an excellent opportunity for exchanging views and sharing ideas in improving our national payment arrangements to foster economic growth and integration. ladies and gentlemen, lessons from the development of payment systems in the european union and the united states of america provide a useful guide for emerging market economies such as ours. that be as it may, recent technological advancements and developments in china and india are also instructive as they glaringly indicate that it is possible to leap frog some of the historical development experiences of these major industrialized economies. however, it is without a doubt that this will require the concerted efforts and commitment of all those involved in the transformation | 1 |
common good. thanks to the work of community affairs staff at the boston and cleveland reserve banks and here at the board, we have been able to document many of these lessons in the conference publication. while i don β t want to spoil the plot, i do want to use the remainder of my time to preview some of the most important lessons about community stabilization. first, we have learned that effective interventions emerge when there is a full understanding of mortgage markets, their dynamics, and incentives. several articles describe the steep learning curve that policymakers have navigated in order to effectively implement the nsp created by congress and to utilize the $ 6 billion in funds made available through the first two rounds of the program. these funds were provided to help stabilize neighborhoods through the acquisition, rehabilitation, financing, demolition, and land banking of properties that are blighting communities. while nsp funds were intended to provide an aggressive response to the forces destabilizing communities, time limits, such as the requirement that grantees obligate funds within 18 months, often underestimated the time needed to navigate the property disposition process, especially when paired with the myriad other requirements and limitations on uses of the funds. the complexities of the secondary mortgage market have made it difficult for local governments and community organizations to ascertain who owns a particular property, much less arrange for its purchase in a timely way. the pooling of mortgages in securities further complicates the process, making it difficult for municipalities to acquire one or two properties among many. several articles in our publication discuss the challenges of using nsp funds, particularly in a competitive environment where investors have the resources to purchase properties in bulk without the constraints related to neighborhood stabilization plans. craig nickerson β s article, for example, describes the efforts of the national community stabilization trust ( ncst ), which was established to create local capacity so that communities could effectively acquire, manage, rehabilitate, and sell foreclosed properties. despite a slow start, ncst now has transactional expertise, development infrastructure, asset management skills, land banking approaches, and the comprehensive planning necessary to effectively utilize nsp funds for reo acquisition. i also commend the article by stergios ( terry ) theologides, which serves as a primer on servicing arrangements, the fiduciary relationship between servicers and investors, and the imbedded incentives that drive servicer decisionmaking. it is a cogent explanation of a complex set | in both the february 2020 and 2021 outgoing rotation groups. earnings are weekly and were compared with all members of the outgoing rotation group in february 2020. 2 see the federal reserve banks'small business credit survey : 2021 report on employer firms ( pdf ) fielded in september β october 2020. 3 see the frbs'small business credit survey in note 2 as well as small business credit survey : 2021 report on firms owned by people of color ( pdf ) released on april 15, 2021. 4 data comparisons are for the period between february 2020 and march 2021. 3 / 3 bis central bankers'speeches | 0.5 |
in a number of other advanced economies, including the united states, there is currently little net growth in the capital stock, with the investment that is taking place barely enough to offset depreciation. the fact that investment is high in australia reflects the high expected return on capital, particularly in the resources sector. given that countries with relatively high returns on capital typically have relatively high real interest rates, it should not be surprising that interest rates in australia are above those in other countries where the return on capital is currently much lower. in terms of productivity, the story is not as positive, although, as always, measurement issues cloud the picture. according to the australian bureau of statistics ( abs ) data, since the mid 2000s, almost all the increase in output in australia has been accounted for by a rise in hours worked and an increase in the capital stock. or put another way, there has been very little underlying productivity growth over this period ( graph 4 ). the reasons for this are not particularly clear. some slowing in productivity growth might have been expected in the mature stage of the business cycle, as the economy was operating against its capacity limits and skill shortages emerged. a second possibility, relating to the mining sector, is that high commodity prices allowed lower grade resources to be mined. the lag between the construction and production phases of large resource projects may also have lowered measured productivity growth, at least until these projects come on line. more generally though, it is important to remember that one of the least productive things that a society can do is to leave large numbers of people sitting at home who actually want to work. from this perspective, the productivity performance over the past decade looks to be quite a lot better. the australian economy has done well at bringing in to paid employment those who actually want to work and the unemployment rate has fallen significantly. while one side effect of this may have been to contain productivity growth as conventionally measured, from a broader perspective it represents a considerable success. as we go forward, if we are to grow strongly on a sustainable basis we will need to ensure that both our capital and our workforce are used as efficiently as possible. returning to my earlier theme, maintaining flexibility in the economy is important here. under the central scenario that i sketched earlier, the economy is likely to undergo considerable structural change, particularly as the resources sector expands. how well we deal with this change will have a significant impact on how the overall economy performs. housing now to the second issue, that of housing | policy had to respond to changes in this environment. without both of these aspects, the recent economic history of australia would have been quite different. this flexibility, though, did not just materialise out of thin air. instead, it was the result of many years of policy reform and hard work by governments and business. what we have seen recently is the dividend of that hard work, with the economic outcomes over the past year or so reflecting not just the decisions made since late 2008, but also the decisions made in the two to three decades before that. i would like to touch on a few aspects of this flexibility. the first is the flexibility of the exchange rate. this has been one of the great success stories of economic policy making in australia. without it, we would have seen bigger booms and busts and more variable and, probably, higher inflation. as ric battellino, the rba β s deputy governor, discussed in a speech a couple of weeks ago, the floating exchange rate has helped the economy adjust more smoothly to the current boom in the resources sector than was the case in previous resources booms, which always ended in high inflation. it also helped the economy in 2008 when global risk aversion was at its peak, and during both the asian financial crisis in the mid to late 1990s and the bursting of the tech bubble in the united states a decade ago. the second area is labour market flexibility. over the past year, the unemployment rate rose by considerably less than was expected. while this was partly the result of the surprising strength in the economy, it also highlighted the increased flexibility of the labour market. when demand weakened, many firms and their employees agreed to reduce working hours as a way of preserving jobs. and in other cases, wage rises were reduced or delayed as a way of avoiding lay offs. these responses helped limit the rise in the unemployment rate. in turn, this helped support incomes and the general level of confidence in the community, and ultimately the level of economic activity. the third area is the flexibility in macroeconomic policy. when the world economy took a sharp turn for the worse, fiscal policy in australia responded quickly and on a significant scale. it was able to do this without raising the fiscal sustainability concerns that have come to the fore in a number of other countries. while there will always be differences of opinion about the merits of specific measures, there is little disagreement with the idea that australia β s history of sound fiscal policy provided the government with the | 1 |
steps we've taken since last august to address the concerns covered in the cgfs report ( see summary table ). summary table other central banks have also been working towards the same goals. the cgfs report suggests that central bank actions in response to the market turbulence have been effective in that they have " reduced, though not resolved, " tensions in short - term money markets, thereby mitigating the damage to the economy. however, it has been much more difficult to address funding - market pressures in the broader sense, particularly in term, unsecured markets. the report notes that " the assessment of central banks about their ability to deal with such market pressures depends crucially on the pressures'origins : how much came from liquidity concerns, which are amenable to central bank actions, and how much from counterparty risk or other concerns, which are beyond the reach of central bank operations. overall, the judgment was that tensions would have been more acute and more damaging without the forceful interventions of central banks. " that does not mean that our work in dealing with the broad policy lessons from this period of financial turbulence is done. one important set of issues being studied is how fluctuations in the financial sector play out in the real economy, and how regulations and practices β including the regulation of financial institutions β can dampen or exacerbate these fluctuations. under the umbrella of the financial stability forum, various international committees have been looking at these important issues and are considering a variety of proposals. it is important to reduce procyclicality in the financial system β perhaps including the key aspects of leverage and liquidity β in order to reduce the magnitude of the effects of future financial disturbances. i'd like to turn now to the current state of the markets. the current state of the markets although credit conditions in canada remain challenging, they are better in many respects than those in other major markets. for example, short - term credit spreads, as measured by the spread between short - term lending rates and the expected overnight rate, have narrowed significantly in recent months ( chart 2 : spreads between 3 - month libor and ois ). in large part, the lower short - term credit spreads in canada reflect the healthier state of canadian financial institutions. this relative strength is also shown in the smaller decline in stock market valuations for canadian financial institutions relative to their foreign peers over the past 14 months ( chart 3 : performance of financial sector equities ). nevertheless, there | stephen s poloz : central bank of the year award remarks by mr stephen s poloz, governor of the bank of canada, at the central banking awards 2018, london, 1 march 2018. * * * it is an honour for me to accept the award for central bank of the year on behalf of the staff of the bank of canada. and it is a real pleasure to be here to celebrate the successes and achievements of central bankers from around the globe, such as my good friend lesetja kganyago of south africa. back in january, when central banking announced this award, you published an extensive writeup that detailed the reasons why we were judged to be worthy of it. i am very glad that you did so, because the article illustrates just how important teamwork is at the bank of canada. in that article, every employee in every department can see how their own work contributes to a central bank that is operating at the top of its game. from the model developers, to the currency designers, to the people who got us settled back in our renewed headquarters β everyone contributed to an outstanding body of work with remarkable skill and dedication. so, this award belongs to all the members of our incredible team. i would like to particularly thank central banking for recognizing the work we have done in terms of conducting monetary policy in an era of heightened uncertainty. we have been working on the theme of uncertainty since the global financial crisis revealed the limits of our models and our knowledge. and we have learned that it is far better to be open and honest about the uncertainty we face, as well as how we deal with it, rather than to just assume the uncertainty away and project a false sense of confidence. because profound uncertainties are everywhere, we began talking about monetary policy as an exercise in risk management, as opposed to the precision engineering that many believe the practice of monetary policy to be. to be truly honest about the uncertainties we face, we stopped providing routine forward guidance, which observers and market participants had come to rely on. we took some grief for this decision. but i am certain that the best and most honest approach is to communicate openly about the bank β s reaction function, and the key risks we see. this leaves market participants to interpret the data and make their own forecasts about the future path of interest rates. it has taken time, but markets and observers are increasingly adapting to our approach. this experience shows that open communications are vitally important β even more so in a world | 0.5 |
stabilizing measures are inevitable. assure that the government will not fall short on the adjustment, as it would seriously damage its credibility and, consequently, the costs would grow exponentially. third, once a country is immersed in a crisis, governments often lack the necessary credibility, thus making it imperative to β import β such credibility. at the beginning of a crisis, it would be very difficult for the government in charge to have the credibility needed to make a strong economic adjustment if it failed to prevent the crisis when it had the opportunity to do so. how can this be achieved in the short term without changing the government? the answer lies in mobilizing the external financial support and accepting that this support be subject to conditionality. credibility indeed increases directly according to the amount of financial support, which is recommended to be plentiful, and to the quality of conditionality, which normally consists of corrective measures the country must adopt in any case. credibility would continue to increase to the extent that the adjustment program is implemented in a timely fashion. it is for this that it would be useful at this time to strengthen international and multilateral cooperation bodies, such as the international monetary fund, and that currently being built by europe, for the time being represented by the european financial stability fund. the strengthening of the imf β s lending capacity will be an issue that will be discussed in tomorrow β s g20 meeting. fourth, debtor countries should engage in a constructive relationship with creditors, following the β principals for stable capital flows and fair debt restructuring β that have been developed under the auspices of the iif. fifth, it is very important to implement various programs to mitigate, to the extent possible, the social consequences of adjustment. these programs should seek to maintain a basic support network, for instance in health and education, focusing specifically on the most vulnerable and poorly equipped population to withstand shocks and adjustments. sixth, an adjustment program without subsequent economic growth is ephemeral, especially if the country is not able to do a correction in the exchange rate regime. therefore, the adjustment program should be accompanied by quick structural reforms that generate rapid advances in productivity and foster a more rapid recovery of competitiveness. certainly, these general principles are applicable to europe today. they stem from experience, which means that they work even though each crisis has its own singularities and the political and social environment is different in each country. concluding remarks by sharing these ideas born from experience, my ultimate objective is not to teach lessons | but to convey a message of optimism and hope : the problems many european countries are facing today have a solution, if they act decisively and on time. if this is done, sooner rather bis central bankers β speeches than later we will see a promising future in the global economy. no one wants the crisis from dragging on indefinitely, or that every time expectations of a solution emerge they are quickly refuted by new shocks or setbacks. in order to reach as soon as possible a definite solution, the countries must first take strong, painful but necessary actions, as indeed they have been doing in many cases, and second, the international community must join these efforts, support them, and thereby facilitate the solution. it is this spirit of collaboration and cooperation in solving global problems that mexico wants to build and consolidate during its period of leadership in g - 20. these are no times to be enclosed behind borders, waiting illusory for the end of the storm. it is a time for collaboration and cooperation, for free trade, and for enhancing globalization. an essential condition for sustainable economic growth in advanced economies, mainly in the u. s. and the euro zone, is the recovery of confidence. therefore, these economies should invest their energy and political capital in pursuing macroeconomic stabilization in the short run through well designed and decisive measures. to the extent that confidence among economic agents is reestablished the negative feedback loop between low economic growth, the deterioration of fiscal accounts, and the fragility of banking systems, finally will be broken. bis central bankers β speeches | 1 |
i would like to emphasize that this increase in labor supply has boosted employee income overall and has had a positive effect on economic growth. this " dual structure " of the labor market has important implications for predicting future wage trends. the reason is that the wage formation mechanism differs depending on the type of employment ( chart 10 ). in particular, the degree to which wages respond to labor demand differs substantially between regular and non - regular employment. labor market conditions for both regular and part - time employees have been tightening consistently over the past decade, excluding the early phase of the pandemic. over the past decade, hourly wages for part - time employees have continued to register a relatively high increase, at an average rate of about 2 percent, while wages for regular employees have only grown at a very modest rate of less than 1 percent. this difference is due to differences in job mobility in the two types of employment. in the case of non - regular employment, wages tend to reflect labor market conditions due to the high degree of job mobility. on the other hand, job mobility in regular employment is generally considered to be low due to long - term employment practices. furthermore, another aspect of regular employment is that the experience of the weak economic growth that followed the collapse of the bubble economy led both labor and management to prioritize maintaining employment, resulting in restrained wage increases. the fact that wages of regular employees, who account for the larger share of total employment, have not risen so high is also a factor that restrained overall wage growth from a macroeconomic perspective, despite a tightening of labor market conditions. differences in mobility can also be found across firm sizes, industries, and age groups ( chart 11 ). 2 for example, regular employees in small and medium - sized firms are more likely to change jobs in search of better working conditions than those in large firms. because of the higher degree of job mobility at small and medium - sized firms, wages tend to be more responsive to labor market conditions. in fact, while wage levels of regular employees at large firms have been more or less unchanged, those at small and medium - sized firms have been rising clearly. similar trends have been observed in the face - to - face services industry, where small and medium - sized firms account for the larger share of total employment, and among younger workers, for whom job mobility is high, including somewhat recent graduates who are looking for a new job. outlook for wages bearing in mind these features of japan's labor market, i | ##ly adopted by the bank of albania, allows the albanian economy to withstand these shocks at minimum cost. let us leave this mechanism operate smoothly, without excessive reactions from the market or its agents. any smooth moves towards the exchange rate equilibrium will be in the albanian economy β s own interest. any hasty short - term reactions, like the ones we have been attesting to over the course of the present year and in the early days of this week, bring about individual financial cost to those undertaking them, as well as financial cost to the economy. no economic agent is stronger than the foundations. the high volatility and uncertainty in the foreign exchange market do not have any real base. the euroisation of the economy is a visionary idea, not only for albania but for the entire region as well, since its final aspiration is the membership into the european union. it encourages the domestic and the regional market, and the european authorities, to speed up the convergence process. however, convergence in the euro area is a derivative of continuous structural reforms and strengthening of financial systems, wherein the stability of the currency is of prime importance. there can be no european integration without a longterm equilibrium of the national and european currency. in the long run, the exchange rate will inevitably reflect the sound foundations of the albanian economy, which are to remain so. the past years β equilibriums remain real indicators of the potentials of the albanian economy. in the long run, we remain deeply convinced of the benefits the free floating exchange rate regime brings about. it will be the passport to and the best support to the albanian economy in its path to european integration. i take this opportunity to invite all the economic agents to consider the benefits, that our national currency provides, impassively, as the best long - term instrument for protecting their savings and as the greatest buffer to wealth volatility. to albania, the lek has been, is and will remain a successful currency. the lek serves as an anchor for all our european initiatives. in the last 17 years, the lek has managed to withstand the inflationary pressures and the pressures deriving from the foreign markets. therefore, it should be left alone. it should move freely on its path, concurrent with the market demand and supply. the lek is the icon of the albanian economy that will guide us through the european gates. i take this opportunity to invite the media to comprehend this message and transmit it to the public at large. before giving the | 0 |
slow. don β t want to run fast ; don β t blame your neighbour if he wins the race. suffice it to say that the bank of mauritius has been the fastest institution in the last eight years. the bank, not to say i, has been the first in sub - saharan africa to have a real time gross settlement system. the bank has been the first to have a credit information bureau in sub - saharan africa. the bank has given mauritius an unprecedented level of foreign exchange reserves despite difficult economic circumstances. the bank has given mauritius the lowest average rate of inflation in the last eight years. the bank has been the first in sub - saharan africa to embark with full cooperation from all the bankers on the project for implementation of basel ii. the bank has been the first in a few other areas. the bank has successfully pushed private enterprises to go for efficient treasury management in the last eight years. all the chief executive officers in the banking industry understood in 1999 the way forward. they have been running fast. and they are winning. the banking industry is far sounder and resilient today than it was eight years back. ladies and gentlemen, may i, on behalf of my wife and my two daughters and on my own behalf, wish you and your family a merry xmas and a happy new year. thank you. | let me close with some remarks about the canadian economy. as we noted in our december policy announcement, the outlook for the world economy has deteriorated significantly since october. the global recession will be broader and deeper than previously anticipated. global financial markets remain severely strained. measures taken by major governments are beginning to encourage credit flows, although it will take more time before conditions in those markets normalize. in addition, monetary and fiscal policy actions announced late in 2008 are expected to support global economic growth. nonetheless, the canadian economy is entering a recession as a result of the weakness in global economic activity, the associated decline in our terms of trade, and the drop in household and business confidence. the depreciation of the canadian dollar is providing an important offset to the effects of weaker global demand and lower commodity prices, and the monetary policy actions taken in october and december ( a 150 - basis - point reduction in the policy interest rate ) will provide timely and significant support to the canadian economy. as we prepare for the next interest rate announcement on 20 january, and the update to the bank's monetary policy report two days later, we will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required to achieve the 2 per cent inflation target over the medium term. conclusion in conclusion, let me stress again the importance of sound risk management for financial system stability. risk cannot be avoided ; it must be anticipated and managed. the current crisis has exposed serious flaws in prevailing risk - management models and showed ways to enhance our ability to manage risk. policy - makers are also considering steps to make the financial system more resilient so that we may be better prepared for the next storm. thank you for your attention. i'd now be pleased to take your questions. | 0 |
plans are finalized and submitted to supervisors. the substantial progress these firms have made in meeting their required capital buffers, and their success in raising private capital, suggests that investors are gaining greater confidence in the banking system. fiscal policy in the current economic and financial environment let me now turn to fiscal matters. as you are well aware, in february of this year, the congress passed the american recovery and reinvestment act, or arra, a major fiscal package aimed at strengthening near - term economic activity. the package included personal tax cuts and increases in transfer payments intended to stimulate household spending, incentives for business investment, increases in federal purchases, and federal grants for state and local governments. predicting the effects of these fiscal actions on economic activity is difficult, especially in light of the unusual economic circumstances that we face. for example, households confronted with declining incomes and limited access to credit might be expected to spend most of their tax cuts ; then again, heightened economic uncertainties and the desire to increase precautionary saving or pay down debt might reduce households β propensity to spend. likewise, it is difficult to judge how quickly funds dedicated to infrastructure needs and other longer - term projects will be spent and how large any follow - on effects will be. the congressional budget office ( cbo ) has constructed a range of estimates of the effects of the stimulus package on real gdp and employment that appropriately reflects these uncertainties. according to the cbo's estimates, by the end of 2010, the stimulus package could boost the level of real gdp between about 1 percent and a little more than 3 percent and the level of employment by between roughly 1 million and 3 - 1 / 2 million jobs. the increases in spending and reductions in taxes associated with the fiscal package and the financial stabilization program, along with the losses in revenues and increases in income - support payments associated with the weak economy, will widen the federal budget deficit substantially this year. the administration recently submitted a proposed budget that projects the federal deficit to reach about $ 1. 8 trillion this fiscal year before declining to $ 1. 3 trillion in 2010 and roughly $ 900 billion in 2011. as a consequence of this elevated level of borrowing, the ratio of federal debt held by the public to nominal gdp is likely to move up from about 40 percent before the onset of the financial crisis to about 70 percent in 2011. these developments would leave the debt - to - gdp ratio at its highest level since the early 1950s, the years following the massive debt build | made significant progress, and we expect to begin publishing soon a monthly report on the fed's balance sheet and lending programs that will summarize and discuss recent developments and provide considerable new information concerning the number of borrowers at our various facilities, the concentration of borrowing, and the collateral pledged. in addition, the reports will provide quarterly updates of key elements of the federal reserve's annual financial statements, including information regarding the system open market account portfolio, our loan programs, and the special purpose vehicles that are consolidated on the balance sheet of the federal reserve bank of new york. we hope that this information will be helpful to the congress and others with an interest in the federal reserve's actions to address the financial crisis and the economic downturn. we will continue to look for opportunities to broaden the scope of the information and supporting analysis that we provide to the public. ben s. bernanke ( 2009 ), " the economic outlook, " statement before the joint economic committee, u. s. congress, may 5. | 1 |
- wide re - organisation. similar to other organisations we are experiencing higher than normal levels of staff turnover, in part promoted by the ongoing impact of covid - 19. we are however seeing strong demand in the marketplace for our roles and a high calibre of candidates coming on board. wellbeing the lingering covid - 19 health challenge created a difficult work environment for many over recent years. we run a number of initiatives and training to support staff wellbeing. we have operated and modernised our corporate policies to best support our people β with policy topics including, for example : wellbeing ; support for flexible working ; prevention and management of harassment and bullying ; whistleblowing ; and an employee assistance programme available to all staff at any time. in august 2022 we ran an employee engagement survey to check in on all aspects of work life at te ptea matua. 5 / 7 bis - central bankers'speeches 79 % of our people completed the survey and the aggregate health & wellbeing score was 7. 7 / 10 consistent with our benchmark. overall, there were many positives around health and wellbeing, but more support was requested in managing workloads. diversity and inclusion we are committed to a goal of the representation of ethnic groups : our workforce should reflect modern aotearoa, and we are focused on ensuring it does while building our capabilities. in order to achieve our goal we have : refreshed our diversity, equity and inclusion strategy ; commenced measuring critical areas of activity for gender and ethnic pay gaps ; commenced a women leaders programme ; and piloted a number of programmes in unconscious bias and cultural intelligence. te ao mori we have also continued to build out our te ao mori strategy. we recognise mori as tangata whenua, and commit to working in a manner that gives effect to te tiriti o waitangi. as a kaitiaki of the financial system, we want to both enable a thriving mori economy and support economic wellbeing for all new zealanders. our activities included : our te moni anamata work programme included partnering with mori to explore how access β or lack thereof - to physical currency impacts financial inclusion ; we completed our collaborative work identifying barriers to mori accessing capital, and are now partnering with mori, financial institutions, and government agencies to reduce these barriers ; and we are an active member of the central bank network for indigenous inclusion, which shares knowledge and practices aimed at better financial engagement with indigenous peoples. | 1984 reform. if the 1984 reform allowed spain to create millions of jobs and to increase the welfare of spaniards during upswings, the reform approved this year should put an end to a situation in which dismissal and an increase in unemployment are the only way of adjusting the economy. this reform leaves workers and employers free to agree to increase competitiveness by increasing productivity and / or adjusting wages, with the only obstacles or impediments being those laid down by law. it is sometimes said that all this has been done too late. should labour - market reform have been carried out five years ago? it certainly should have. or ten years ago in 2002, when we were enjoying the long upswing? it would certainly have been better for spain. the same can be said about financial reform. why were savings banks not reformed during the good times? why were bank resolution schemes, such as the frob, not drawn up ready to resolve the banking problems created by the upswing? these questions merely lead to gloominess and, moreover, ignore the fact that, not only in spain, but almost worldwide, key reforms are introduced at the worst times. more encouraging is the principle of better late than never, and the important thing is that spain initiated the process of bank restructuring, now nearing completion, in 2009, that significant measures to reduce the budget deficit began to be adopted in may 2010 and that an ambitious labour - market reform was introduced in february this year. spain has proven itself capable of making adjustments and reforms and this is essential to restore long - lasting upswings and sustainable growth. but this reassurance must not lead to complacency. what we have done so far, despite its huge importance, is not sufficient. and some of us have the thankless task of pointing this out. for example, when each financial reform has been approved it has always been argued that the result will be more credit, but although bank restructuring is certainly an absolutely necessary condition, we have always seen that it is not sufficient by itself to make credit flow again. we have to restructure the financial system so that, as in any process of industrial adjustment, the resulting banks can generate a healthy profit and be sufficiently solid to meet demand when the adjustment process is complete. however, credit will not improve until solvent demand increases. hence the importance of other economic reforms to boost consumer and investor confidence, such as reducing the budget deficit and reforms, such as the labour - market one, to increase the | 0 |
felipe m medalla : central bank independence and fiscal prudence hallmarks of philippine economic development speech by mr felipe m medalla, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the fitch ratings annual sovereign review joint economic team meeting, manila, 7 march 2023. * * * let me start by saying that the philippine central bank is an independent central bank. and this is actually embedded in our constitution. of course, our independence has to do with our tools. the government sets the preference between growth and inflation. the government actually sets the inflation target, but it does not tell us [ at the central bank ] how to do [ achieve ] it. our two other mandates are financial stability and the payments system. on the second one, it is a very simple approach : the greater risk a bank takes, the more capital it has to put up. if they [ the bank ] are in trouble, the [ bank ] owners lose their money - not the public [ depositors'money ] - and it has worked very well so far. i will talk very little about the third one, but the importance of that is digitalization. first pillar in focus : preserving price stability in a challenging environment now, my most important topic for you is inflation. we are an inflation - targeting central bank. our inflation target is 2. 0 to 4. 0 percent. we missed the target last year, and we will miss it again this year. but we can easily explain to the public that that [ elevated inflation ] is largely due to supply shocks. incidentally, when you look at the [ inflation figures in the ] past 12 months or so [ since january 2022 ], there were only three months ( february 2022, december 2022, and february 2023 ) when the month - on - month ( m - o - m ) change [ in inflation ] was lower than 0. 4 percent. of course, 0. 4 percent [ m - o - m inflation ] is about 5. 0 percent [ once ] annualized. so, you can see that the supply shocks this year were quite unusual. indeed, there is only one month ( february 2023 ) when the m - o - m change [ in inflation ] was lower than 0. 3 percent, which is the high end of our target [ range ]. by the way, that month is this month ( february 2023 ) - zero. of | the history of the country [ shows that ], somehow, after all the debates, we will reach an agreement that we cannot afford to spend money that is not there, that it is not good to be irresponsible fiscally. it clearly becomes a choice between what is necessary : cutting spending or raising taxes. there were times when it was clear that increasing taxes was better because that meant more for infrastructure spending. i think, politically, that that is the under - driver because we are all aware that we are way behind in infrastructure. we will seek other ways to finance infrastructure if necessary. when the two of us [ referring to finance secretary benjamin diokno ] were first in government, the spread [ between the philippine and united states rates on 10 - year dollar government bonds ] was 600 basis points. there are enough adults in this room, in this country, to know how bad that situation is. so, we [ in the government ] will eventually get consensus [ on how to balance trade - offs between cutting spending or raising taxes in response to lower - than - expected growth ]. i think, over time, even as we debate among ourselves, we will gravitate toward common sense. 4 / 4 bis - central bankers'speeches | 1 |
behavioural patterns, saving patterns in particular, should not pose any particular constraints on the substitution of the euro for the drachma - at least no more than elsewhere in the euro area. on the other hand, the geography of the greek territory does make the frontloading of euro cash to banks and the public more difficult. the bank of greece now has the required stock of euro banknotes and coins and is presently frontloading to banks according to schedule. sufficient amounts of euro cash have already been delivered to the 27 branches of the bank of greece across the country. another part of the euro stocks will be supplied to commercial banks through 96 branches of the national bank of greece, with which the bank of greece holds cash surpluses from funds under its management. frontloading is at present free of charge. the counterpart of frontloaded euro banknotes and coins will be debited to banks gradually in the course of january 2002, so as to help them deal with the costs of frontloading and supplying. let me add that the bank of greece is in a position to meet part of the demand for euro banknotes in neighbouring balkan countries and, in cooperation with the respective central banks, is planning the frontloading of euro banknotes in the region. it is estimated that the public in these countries are currently holding significant amounts of legacy currencies, predominantly german marks worth at least 6 billion marks, which will have to be exchanged for euro. until the end of the year and while the central bank will be frontloading euro banknotes and coins to banks, the latter will assume the task of supplying the economy with the new currency : they will be sub - frontloading euro coins ( as from 1 november 2001 ) and euro banknotes of lower denominations ( 5 and 10 euro ) to retailers ( as from 1 december ). starting from 17 december 2001, the public at large will be supplied with 13 million starter kits, containing euro coins of all denominations. meanwhile, banks are completing the adjustment of their information systems and the technical preparations that will enable atms to dispense euro cash as from 1 january 2002. from mid - january 2002 onwards all atms of banks will operate in euro only. what we have heard so far during the first two sessions of this conference confirms that the greek banking system is in an advanced state of preparedness for the changeover. i believe that, with close cooperation between the bank of greece, commercial banks and the hellenic bank association, the necessary preparations will have been accomplished | venture, but it was also a significant step towards the creation of the european monetary union and the implementation of the single monetary policy. the venture was difficult as it required many and complex institutional, technical and operational adjustments of central banks, credit institutions and financial markets. it was, however, a significant step, as in this way the money market was integrated and the monetary regime in 11 eu countries was radically and irrevocably changed. equally difficult from a technical point of view and important for the economy and the conduct of monetary policy was the adoption of the euro as greece β s currency in january 2001. consequently, the euro is already with us and is actually the single currency adopted by 12 eu countries. this reality, however, is not sufficiently visible to the general public, which uses national banknotes and coins in its day - to - day transactions. that is why many people consider the euro a β virtual β currency. moreover, since the euro does not exist in physical form, many firms and organisations have not fully adjusted their accounting and it systems to the single currency. with the circulation of euro banknotes and coins on 1 january 2002, the changeover to the single currency will be completed and it will become a visible, tangible and irreversible reality. the last stage of the transition will produce further specific benefits for consumers and firms. it will also favourably affect the international acceptance and external value of the euro. at the same time, i believe that it will enhance and speed up the overall process of european cooperation and unification. ii completion of the changeover to the euro with the entry into circulation of euro banknotes and coins and the withdrawal of national currencies is also a complex undertaking, possibly more difficult than the introduction of the euro in scriptural form. it requires a wide range of preparatory work by the monetary and economic authorities and credit institutions in general. this work involves not only the production and distribution of euro banknotes and coins but also institutional and operational adjustments in the public sector. at the same time, however, this venture calls for the preparation and adjustment of those who will actually use the single currency : citizens, firms, organisations and other economic agents. the successful completion of the changeover to the euro thus calls for concerted efforts, preparations and cooperation between all parties involved, at both the european and the national level. i would first like to briefly reflect on the role of the bank of greece in this process. i will then focus on some of the | 1 |
it could do so based on a high degree of analytical depth and information sharing at a global level that the central banks β global cooperation has been able to develop over time. these analytical contributions assisted in driving the strong and coordinated policy response when the crisis erupted. we have now scaled back our cross - border operations as markets have recovered, but the spirit of cooperation and the readiness to work together is stronger than ever. regulatory arbitrage but as much as some aspects of global governance appear to have passed the severe test of the global crisis, we should remember the significant shortcomings that may have contributed to creating the conditions for the crisis to happen in the first place. one is the lack of coordination in financial regulation that was pervasive before the crisis and which encouraged financial institutions to engage in a large degree of regulatory arbitrage. this was the unavoidable result of the fact that while financial players were becoming increasingly global, and despite the remarkable efforts of the basel committee in respect of the banking sector, financial regulation remained largely national, with only relatively weak coordination at the international level. the dramatic under - supply of the global public good of international financial stability is an area where reform is essential. global imbalances another shortcoming that needs to be addressed for the future was the insufficient orientation of macroeconomic policies towards medium - term stability and sustainability. this led to the build - up of unsustainable external imbalances between deficit and surplus economies prior to the crisis. although warnings had been voiced, including by the imf, about the risks of a disorderly adjustment, there was no effective mechanism to influence macroeconomic and structural policies in key countries where those policies appeared unsustainable from the standpoint of global economic and financial stability. this must change β and it requires both the work of international institutions and the cooperation of national authorities. 3. the evolution of global governance let me turn to the question of how global governance is evolving after the crisis. the scope of international cooperation has been significantly broadened. after an initially hesitant response, governments implemented broadly coordinated policies, both within the eu as well as at the global level under the aegis of the g20. and central banks were able to take quick, decisive and coordinated action at short notice. but the crisis also showed that gaps in the system of global governance β in terms of both efficiency and legitimacy β have to be filled. this can be done β indeed, it is being done β by strengthening the mandate of | their adf system. as is well known, xbrl system adopted by the reserve bank in 2008 is already benefitting the banks as well as the reserve bank as an online single point data submission / dissemination platform following the international standards. so far 97 out of total 267 returns have been taken up in xbrl system. banks have to gear up to meet the requirements in this regard as fast as possible. d. recently released guidelines of basel committee on banking supervision ( bcbs ) on corporate governance principles for banks highlights the board members having knowledge, inter alia, relating to role of information technology in risk governance. the guidelines also prescribe that the degree of sophistication of a bank β s risk management infrastructure β including, in particular, a sufficiently robust data infrastructure, data architecture and information technology infrastructure β should keep pace with developments such as balance sheet and revenue growth. realising that banks β information technology and data architectures were inadequate to support the broad management of financial risks during the global financial crisis that began in 2007, bcbs released the β principles for effective risk data aggregation and risk reporting β in 2013. the principles, inter alia, highlight that improving banks β risk data aggregation capabilities would lead to improvements in terms of strengthening the capability and the status of the risk function to make judgments and in turn to gain in efficiency, reduced probability of losses and enhanced strategic decision - making, and ultimately increased profitability. banks in india, therefore, have to strengthen the it systems for creating a robust compliance infrastructure to meet the international and national regulatory best practices. boards of banks, especially of the public sector banks, will have a critical role to play in this regard. 12. banks should also enable an adequately skilled people in the audit committee to manage the complexity of the is audit oversight. a designated member of the audit committee needs to possess the relevant knowledge of information systems, is controls and audit issues. the designated member should also have relevant competencies to understand the ultimate impact of deficiencies identified in it internal control framework by the is audit function. the board or its audit committee members could seek training to fill any gaps in the knowledge related to it risks and controls. where needed in the interregnum period services of an outside expert may be taken as a special invitee. bis central bankers β speeches information security and cyber threats 13. banks face a difficult challenge in the area of security management. with a growing population of internal and external users accessing an increasing number of applications | 0 |
stimulate the economy and mitigate the effects from economic shocks during times of difficulties that may arise in the future. the researches will assess whether we are experiencing a new equilibrium or other problems exist in the transmission of accommodative policies, and whether the resilience and reactions against these shocks remain similar to the pre - crisis periods. in the meantime, regulatory and adjustment processes that accompany monetary policy decision - making ( especially those that will follow the return of the past to normality ) may trigger temporary shocks with effects on both the european economy and the small economies related to it. again, it is the duty of research to investigate potential shocks and model them in the framework of models corroborating central banks decision - making. this situation is not unique to albania, but is a global - wide problem. therefore, we are happy to see here participation from all the regions, whose research will introduce new experiences, of benefit to us not only from their conclusions but also from the methodologies they have applied. fortunately, the topics that will be discussed address the whole spectrum of central banks β interest and will enrich our experience with the opinion and focus of your scientific research. i hope you will find bank of albania β s experience interesting, informative and valuable for your current and future scientific research. i take this opportunity to thank the regional and european central banks for their high consideration and valuable contribution to the reputation of our research workshop. finally, i wish you a successful and fruitful workshop and hope to meet you again in future activities of the bank of albania. thank you! 2 / 2 bis central bankers'speeches | instance, in that decisions on the repo rate would be taken by an executive board consisting of six members. interest rate decisions were previously made by the governing board, whose successor, the general council, now has the main task of appointing the members of the executive board. the six members of the executive board are also forbidden by law to seek or take instructions when making monetary policy decisions. the legislation is largely in line with the applicable legislation in other parts of the eu. these changes have contributed to further strengthening our credibility. the fact that the political system in a democracy chooses to delegate such an important task as monetary policy to an authority with such a high degree of independence as the riksbank is not in principle completely uncontroversial. but as i implied earlier, there are good reasons why one, with a clear majority has chosen to do so. i will like to take the opportunity to develop this point. why has monetary policy been delegated? one could say that the riksbank is at the end of a delegation chain. the swedish people have elected a parliament which has in turn legislated on the riksbank β s objective and appointed the general council of the riksbank. the general council in turn appoints the six members of the executive board, who take the monetary policy decisions. the fact that some tasks in society, such as monetary policy, are delegated in this way may be appropriate for several reasons. this applies perhaps mainly when there is a risk that political decisions might be taken with too short a time horizon. this problem is dealt with in monetary policy by the riksbank having a high degree of independence and a clear statutory task. our independent position is thus an important β perhaps even an essential β condition for being able to maintain low and stable inflation in the long term. it is a necessary condition for credible monetary policy. a further example connected with the same argument concerns the delegation of the management of the state finances to the swedish national debt office β the state β s own internal bank. that " allocation of responsibility β is also important for monetary policy. i spoke earlier about occasions long ago when the central bank was forced to use its banknote printing presses to finance government deficits that for various reasons had got out of hand. this type of behaviour is of course incompatible with price stability. it is therefore important for the credibility of monetary policy that there are rules for how state borrowing should be handled and that monetary financing is forbidden. according to the law | 0 |
be managed to avoid interference with the appropriate monetary policy stance. in terms of interest rate policy, the governing council expects to keep policy rates at their current or lower levels until we have seen the inflation outlook robustly converge to our inflation aim within our projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics. the concept of robust convergence signals that we require a high degree of confidence that the inflation outlook has durably approached the inflation aim, while the condition that convergence should also be evident in realised underlying inflation means that future rate tightening will not run ahead of the hard data in terms of the out - turns for underlying inflation. given this β double hurdle β set of conditions, our forward guidance represents a strong commitment to keep financial conditions at highly accommodative levels for as long as necessary to lift inflation to our inflation aim in a sustainable fashion. in line with our forward guidance, market - based expectations of future policy rates and the future path of the app have adjusted in response to changes to the inflation outlook. compared to september 2019, chart 5 shows that the date of the policy rate lift - off implicit in the eonia forward curve β the term structure of expectations for the overnight rate ( and associated risk premia ) β has shifted from december 2022 to august 2024. similarly, market surveys have shown a similar outward shift for the expected end date of net purchases under the app. through these endogenous market responses, our forward guidance acts as an automatic stabiliser through the adjustment of monetary policy expectations β and hence the entire spectrum of monetary conditions β to changes in the inflation outlook. chart 5 eonia forward curve and lift - off dates ( percentages per annum ) https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201006 ~ e1d38a1ccc. en. html 6 / 12 07 / 10 / 2020 the ecb β s monetary policy in the pandemic : meeting the challenge sources : bloomberg and ecb calculations. notes : dotted lines indicated lift - off dates based on the trough of the curve plus 10 basis points. the latest observations are for 2 october 2020. the combination of our pre - pandemic and pandemic - specific monetary policy measures has successfully contributed to the stabilisation of markets and has thereby helped to ensure the smooth transmission of our monetary policy. [ 7 ] as shown in chart 6, the pepp | european central bank : press conference β introductory statement introductory statement by mr jean - claude trichet, president of the european central bank, and mr vitor constancio, vice - president of the european central bank, frankfurt am main, 3 march 2011. * * * 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, which was also attended by commissioner rehn. based on its regular economic and monetary analyses, the governing council decided to leave the key ecb interest rates unchanged. the information which has become available since our meeting on 3 february 2011 indicates a rise in inflation, largely reflecting higher commodity prices. the economic analysis indicates that risks to the outlook for price developments are on the upside, while the underlying pace of monetary expansion remains moderate. recent economic data confirm that the underlying momentum of economic activity in the euro area remains positive ; however, uncertainty remains elevated. the current very accommodative stance of monetary policy lends considerable support to economic activity. it is essential that the recent rise in inflation does not give rise to broad - based inflationary pressures over the medium term. strong vigilance is warranted with a view to containing upside risks to price stability. overall, the governing council remains prepared to act in a firm and timely manner to ensure that upside risks to price stability over the medium term do not materialise. the continued firm anchoring of inflation expectations is of the essence. the governing council today also decided to continue conducting its main refinancing operations ( mros ) and the special - term refinancing operations with a maturity of one maintenance period as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of the sixth maintenance period of 2011 on 12 july 2011. furthermore, the governing council decided to conduct the three - month longer - term refinancing operations ( ltros ) to be allotted on 27 april, 25 may and 29 june 2011 as fixed rate tender procedures with full allotment. the rates in these three - month operations will be fixed at the average rate of the mros over the life of the respective ltro. as we have stated before, the provision of liquidity and the allotment modes will be adjusted as appropriate, taking into account the fact that all the non - standard measures taken during the period of acute financial market tensions are, by construction, | 0.5 |
credit portfolio by acquiring credit exposure to borrowers with which they do not have a lending relationship. for example, european insurance companies reportedly have used credit derivatives to acquire exposure to european corporations that, because they rely primarily on bank lending, have little publicly traded debt outstanding. the improvements in technology, the quick pace of financial innovation, and the evolving risk - management techniques almost ensure that businesses will increasingly use almost limitless configurations of products and services and sophisticated financial structures. accordingly, outsiders will have ever more difficulty understanding the risk positions of many large, complex organizations. these developments represent significant challenges to standard setters and to firms. for market discipline to be effective, accounting standards must evolve to accurately capture these developments. company managers must also do their part, by ensuring that public disclosures clearly identify all significant risk exposures - whether on or off the balance sheet - and their effects on the firm's financial condition and performance, cash flow, and earnings potential. with regard to securitizations, derivatives, and other innovative risk - transfer instruments, accounting measurement of a company's balance sheet at a point in time is insufficient to convey the full effect of a company's financial risk profile. organizations should continue to improve their enterprise - wide risk - management and reporting functions. the fei's leadership in the proposed coso enterprise risk management framework demonstrates this organization's recognition of the importance of this new discipline. i would like to challenge companies to use their new risk - management discipline as a framework also to begin disclosing this information to the market, perhaps in summary form, paying due attention to the need for keeping proprietary business data confidential. disclosures would not only provide more qualitative and quantitative information about the firm's current risk exposure to the market but also help the market assess the quality of the risk oversight and risk appetite of the organization. my last comment on disclosures is that less than fully transparent disclosures are not limited to β complex β off - balance - sheet transactions. one glaring example is the treatment of expenses associated with defined - benefit pension plans. in recent years we have seen how the accounting rules for these plans can produce, quite frankly, some very misleading measures of corporate earnings and balance sheets. in effect, firms use expectations of the long - term return on assets in defined - benefit plans to calculate current - period pension costs ( income ). at the same time, they use a spot rate to discount the future liabilities. this accounting is reconciled with | professionals from multiple disciplines within the financial institution and may involve significant fees or high returns in relation to the market and credit risks associated with the transaction. third, they may be associated with the creation or use of one or more special - purpose entities designed to address the economic, legal, tax, or accounting objectives of the customer or the use of a combination of cash and derivatives products. fourth, and perhaps most important, they may expose the financial institution to elevated levels of market, credit, operations, legal, or reputational risks. as we are all too aware, in the most extreme cases, complex structured finance transactions appear to have been used in fraudulent schemes to misrepresent the financial condition of public companies or evade taxes. as a result, the corporations that engaged in these improper transactions and the financial institutions that structured and advised on these transactions have been subject to civil and administrative enforcement actions. the existence of these schemes has also sparked an investigation by the permanent subcommittee on investigations of the senate committee on governmental affairs, as well as numerous lawsuits by private investors. although these events have raised serious concerns, it is important to recognize that structured finance transactions and other market innovations, when used and designed appropriately, play an important role in financing corporate america. structured finance transactions, as well as financial derivatives for market and credit risk, asset - backed securities with customized cash flow features, and specialized financial conduits that manage pools of purchased assets, have served the legitimate business purposes of bank customers and are an essential part of u. s. and international capital markets. however, financial institutions may assume substantial risks when they engage in these transactions without a full understanding of their economic substance and business purpose. these risks often are difficult to quantify but the result can be severe damage to the reputations of the companies engaging in the transactions and their financial advisers, and in turn, impaired public confidence in those institutions. these potential risks and the resulting damage are particularly severe when markets react through adverse changes in pricing for similarly structured transactions that are designed appropriately. assessments of the appropriateness of a transaction for a client traditionally have required financial firms and advisers to determine if the transaction is consistent with the market sophistication, financial condition, and investment policies of the customer. given recent events, it is appropriate to raise the bar on appropriateness assessments by taking into account the business purpose and economic substance of the transaction. for those of you who are cfos or other senior officials of corporations seeking to engage in complex structured finance transactions | 1 |
in 1961 to 0. 36 in 2008 in the uk, and from 0. 39 to 0. 46 over the same period in the us, according to data collected by atkinson and morelli ( 2014 ). those data show this to be a common pattern across many advanced economies. in emerging markets, gini coefficients remain high relative to the average for oecd countries, and rose between the 1990s and 2000s for india, china and the russian federation, though falling for brazil ( oecd, 2011a ). the share of income received by the top 1 per cent of the population has also risen since the 1980s across many industrialised countries, including australia, canada, the united kingdom and the united states ( atkinson and morelli, 2014 ). see autor, katz and krueger ( 1998 ) and autor, katz and kearney ( 2008 ). for example the last 60 years have seen us returns to education rise despite a large increase in the supply of more educated workers. and there is evidence that increases in the employment of more skilled workers between the 1970s and the 1990s were greater in more computer intensive industries. bis central bankers β speeches now is the time to be famous or fortunate. there is also disturbing evidence that equality of opportunity has fallen, with the potential to reinforce cultural and economic divides. for example, social mobility has declined in the us undercutting the sense of fairness at the heart of american society. 7 intergenerational equity is similarly strained across the advanced world. social welfare systems designed and enjoyed by previous generations may prove, absent reform, unaffordable for future ones. 8 and environmental degradation remains unaddressed, a tragic embarrassment now seldom mentioned in either polite society or at the g20. to maintain the balance of an inclusive social contract, it is necessary to recognise the importance of values and beliefs in economic life. economic and political philosophers from adam smith ( 1759 ) to hayek ( 1960 ) have long recognised that beliefs are part of inherited social capital, which provides the social framework for the free market. social capital refers to the links, shared values and beliefs in a society which encourage individuals not only to take responsibility for themselves and their families but also to trust each other and work collaboratively to support each other. 9 so what values and beliefs are the foundations of inclusive capitalism? 10 clearly to succeed in the global economy, dynamism is essential. to align incentives across generations, a long - term perspective is required. for markets to | available at http : / / www. oecd. org / governance / budgeting / 47558957. pdf bis central bankers β speeches oecd ( 2013 ), β crisis squeezes income and puts pressure on inequality and poverty β. available at http : / / www. oecd. org / els / soc / oecd2013 - inequality - and - poverty - 8p. pdf oreopoulos, p, von wachter, t and heisz, a ( 2012 ), β the short - and long - term career effects of graduating in a recession β, american economic journal : applied economics, 4 ( 1 ), pages 1 β 29. ostry, j, berg, a and tsangarides, c ( 2014 ), β redistribution, inequality, and growth β, imf staff discussion note 14 / 02. padoa - schioppa, t ( 2010 ), β markets and government before, during and after the 2007 β 20xx crisis β, the per jacobsson lecture, june. pew research center ( 2013 ), β economies of emerging markets better rated during difficult times ; global downturn takes heavy toll ; inequality seen as rising β, may. available at http : / / www. pewglobal. org / files / 2013 / 05 / pew - global - attitudes - economic - report - final - may23 β 20131. pdf putnam, r ( 2001 ), β social capital : measurement and consequences β, mimeo. sandel, m ( 2012 ), what money can β t buy : the moral limits of markets, macmillan shanmugaratnam, t ( 2013 ) β the invisible hand of social culture β, 6th s rajaratnam lecture, december. smith, a ( 1759 ), the theory of moral sentiments. wilkinson, r and pickett, k ( 2009 ), the spirit level : why more equal societies almost always do better, penguin. yellen, j ( 2012 ), β the economic outlook for monetary policy β, speech to the money marketeers of new york university, april. available at http : / / www. federalreserve. gov / newsevents / speech / yellen20120411a. htm bis central bankers β speeches | 1 |
inclusion. to truly unlock the potential of digital innovations for inclusive finance, we need to build pillars that enable and promote the use of digital finance. the first pillar is the digital infrastructure. indeed, digital connectivity is a pre - requisite for digital finance. yet, speed, affordability, and availability of internet connectivity are important factors that determine adoption of digital finance, particularly in the rural areas. overcoming the barriers to digital connectivity will not only promote accessibility to digital financial products, but will allow innovators to improve the design, enhance security features, and drive down the cost of financial services. another important infrastructure is the digital id system which is why the bsp is looking forward to the implementation of the philippine id system or the philsys. beyond its ability to address the lack of identity documents commonly cited as a barrier by the unbanked, the philsys through its electronic kyc feature can significantly reduce the cost of onboarding new clients by as much as 80 % based on a study commissioned by the asian development bank. such a digital id system can also enable the delivery of innovative end - toend financial services. the second pillar would be the digital payments use cases. it is not enough that people are able to easily open a transaction account. people should see the necessity of an account and be able to use that account for various payment transactions on a regular basis. what can compel people to open a transaction account? for the wage earners and informal workers, receiving wages and social benefits is one. being able to use a mobile phone to pay market vendors, jeepney drivers, utilities and online purchases is another. 3 / 5 bis central bankers'speeches the regular use of transaction accounts will not only catalyze digital payments but also enable the account holder to build a richer digital footprint for his credit profile. this is the focus of our intensified coordination efforts with the department of social welfare and development, the department of labor and employment, and the department of transportation. to provide the public with digital payment options for transactions with government, we are working closely with the payments industry and the department of finance and the department of budget management on the development of a bills payment platform and on possible policies to address implementation barriers. the third pillar is user trust and readiness. if people do not trust, understand or know how to use digital financial services, people will not use these products even if they are affordable and convenient. to this end, we are committed to our partnership with various public and | private entities to promote financial and digital literacy in the country. we also continue to engage the fintech industry, the department of information and communication technology and the national privacy commission to promote cyber - resilience and data privacy in digital finance. it is also necessary to provide an accessible venue for consumers to engage the regulators for concerns regarding their use of financial services as a way to build confidence in these products. and this is why we have undertaken a chatbot project for consumer complaints and issues handling. i am happy to share that this project, and our regtech project on prudential reporting, have earned the bsp two innovation awards from the central banking publications in singapore last september 4. indeed, the imperatives of financial inclusion go beyond enabling regulations and require coordinated programs across the government and private sector. i hope that by explaining these pillars, i was able to give you a sense of the breadth of the work that we need to do and support. i hope that in understanding why financial inclusion matters, you will leave this conference with a genuine interest to find ways on how you and your companies can contribute to financial inclusion. allow me therefore, before i close, to throw in some ideas. consider this my call to action for this body. as businesses, you may be operating in a value or supply chain over which you can exert influence. examine the actors in these chains ; you may have as suppliers or buyers the small businesses, microentrepreneurs and farmer groups. think of how you can leverage your role in the chain so they can access better credit terms from the banks and other lenders. for companies that collect customer data, you can explore ways on how you can empower these customers to use their data for their credit profile so they can access better financing. empower your customers to use their data for welfare - enhancing pursuits. if there are workers in your supply chain who are paid cash, perhaps you can ensure that they be given a transaction account where they can receive their wages. another way that your company or even this body as a collective can support financial inclusion is to advocate with legislators for policies and infrastructure that can help promote access to finance of the smes and farmers. for instance, the warehouse receipts system bill can support farmers by providing them the tools to manage commodity price risks and to access financing using warehouse receipts as collateral. 4 / 5 bis central bankers'speeches there β s also the financial consumer protection bill that provide all financial sector regulators with the necessary powers | 1 |
bank of japan β s november report of recent economic and financial developments1 bank of japan, 19 november 2001 * the bank β s view * * adjustments in economic activity are becoming more severe, as the substantial decline in production is beginning to have an adverse effect on private consumption through decreases in employment and income. with regard to final demand, net exports ( real exports minus real imports ) continue to decline, reflecting not only a slowdown in overseas economies but also sluggish demand for it - related goods. business fixed investment also continues to decrease while the deterioration in exporting conditions persists. housing investment remains sluggish and public investment is on a downward trend. moreover, private consumption seems to be weakening gradually. industrial production continues to decline considerably, reflecting these developments in final demand and also strong excessiveness in inventories of electronic parts and materials. corporate profits are deteriorating, particularly in manufacturing, and the weakness in household income is becoming evident amid the decrease in the hours worked and the rise in unemployment. turning to the outlook, as for exporting conditions, the prevailing view is that inventory adjustments in it - related goods worldwide are expected to be mostly completed by around next spring. however, while the world economy has decelerated further since the terrorist attacks in the u. s., final demand of it - related goods is likely to be stagnant for the time being. moreover, if the downturn in u. s. private consumption persists, it may induce another round of adjustments in the japanese economy, starting from the decline in exports such as of consumer goods. meanwhile, with respect to domestic demand, business fixed investment is expected to follow a downward trend, particularly in the it - related sector, amid the decline in corporate profits. private consumption will also continue to be weak along with deteriorating employment and income conditions and the more cautious consumer sentiment. government spending is projected to follow a downtrend at the time when the substantial decline in exports and production is negatively affecting private consumption through the decrease in household income. consequently, it may take quite a while for overall production activity to stop declining, although the decrease in the production of it - related goods may eventually come to an end. overall, adjustments in economic activity, starting from the decline in exports since the beginning of this year, will surely dampen domestic demand further. at the same time, concern that another substantial decline in exports will exert downward pressure on the economy is growing. moreover, while the economy continues to be in | we were in agreement that the swedish business cycle is fairly close to the point at which it is reasonable to give monetary policy a less expansionary stance. although we all endorsed the outlook for inflation and the economy in the inflation report a number of us were of the opinion that it provided scope for somewhat different interpretations of exactly when the interest rate needs to be raised. i myself and two other members for a more detailed overview of the debate ; see bean, c. ( 2003 ), " asset prices, financial imbalances and monetary policy : are inflation targets enough? ", speech at a bis conference on " monetary stability, financial stability and the business cycle ", 28 - 29 march 2003, basel, switzerland. ( http : / / www. bankofengland. co. uk / publications / speeches / 2003 / speech200. pdf ) interpreted the analysis in such a way that we deemed an increase of 0. 25 percentage points to be warranted already at the time of the monetary policy meeting. allow me to say something about the reasons that, in my opinion, suggest that it would have been appropriate to take a first step towards less expansionary monetary policy at the beginning of december. one is that there hardly can be any doubt now that we are in the midst of a strong, stable cyclical upswing. the economic climate has improved in the us and asia and the swedish labour market is showing clear signs of a recovery β not least statistics from staffing companies are pointing to a pick - up in demand for labour. another reason is that an interest rate rise would reduce the risk of the krona weakening further as monetary policy in other countries gradually becomes less and less expansionary. the interest rate differential in relation to the euro area and the us seems recently to have had great significance for developments in the krona exchange rate. a third reason β perhaps the most important β has to do with what i have spoken about here today. my assessment is that house prices and household debt may very well have reached levels at which there is a risk of there arising a self - reinforcing negative spiral with falling house prices and weak demand growth when the business cycle eventually turns down. even if it were not β as i already pointed out β a case of a correction of an overvalued market, such an adjustment could be comparatively abrupt. in my opinion, an earlier initiated and more gradual raising of interest rates would increase the chances of a more orderly slowdown in the rate of price | 0 |
true health of the chinese economy, this sentiment of china not being in crisis was also borne out in discussions at the recent the imf / world bank annual meetings in lima, peru. the asian development bank also noted a number of reasons to remain optimistic despite the slowing growth outlook, notably a growing services sector and resilient consumption amongst others. deutsche bank, in a recent article 3 notes that a β hard landing β scenario in china is not on the cards and interpret recent evidence as pointing to, at worst, a gradual decline in growth such as has been evident over the past couple of years. deutsche bank argues that while china β s credit / gdp ratio is rising, the inherent advantages of a current account surplus, high net foreign assets ( 13 per cent of gdp ) and low external debt burden ( about 10 per cent of gdp ) offer a significant counterweight to the risks of a crisis posed by a high credit / gdp ratio. therefore, it is unlikely that there would be a β sudden stop [UNK] of international capital, such as the kind that in the past has triggered crises. in addition, it is argued that china doesn β t need to import capital to sustain credit growth, neither are banks in china likely to voluntarily suspend financing to borrowers. what does this all mean for africa? the current low level of commodity prices has had a significant impact on some commodity exporters. if we take oil as an example, nigeria as an oil exporter has seen a dramatic slowing in growth to 2. 4 per cent in the second quarter of 2015 from 6. 5 per cent a year earlier. the oil market accounts for more than 90 per cent of foreign exchange earnings and about 70 per cent of government revenues in nigeria. the central bank has spent reserves and more recently implemented capital controls to defend the currency. it is also worth noting that the imf has significantly revised downwards the sub - saharan africa growth outlook for 2016, from 5. 1 per cent in july, to 4. 3 per cent in the october 2015 world economic outlook. http : / / www. brookings. edu / blogs / order - from - chaos / posts / 2015 / 09 / 21 - chinese - currency - devaluation - dollar global economic perspectives, a hard landing in china? deutsche bank, 5 october 2015. bis central bankers β speeches while china is africa β s largest trading partner, it does not follow that because china slows, that it is all doom and gloom for africa. we should | at the same time, the average coupon on outstanding corporate bonds remains considerably above rates on new debt issues, suggesting that firms are well positioned to cut their debt service burdens still further as outstanding bonds mature or are called. the net effect of these trends to date has been a decline in the ratio of business interest payments to net cash flow, a significant increase in the average maturity of liabilities, and a rise in the ratio of current assets to current liabilities. with business balance sheets having been strengthened and with investors notably more receptive to risk, the overall climate in credit markets has become more hospitable in recent months. specifically, improvements in forward - looking measures of default risk, a decline in actual defaults, and a moderation in the pace of debt - rating downgrades have prompted a marked narrowing of credit spreads and credit default swap premiums. that change in sentiment has extended even to the speculative - grade bond market, where issuance has revived considerably, even by lower - tier issuers that would have been hard - pressed to tap the capital markets over much of the last few years. banks, for their part, remain well - capitalized and willing lenders. in the past, such reductions in private yields and in the cost of capital faced by firms have been associated with rising capital spending. but as yet there is little evidence that the more accommodative financial environment has materially improved the willingness of top executives to increase capital investment. corporate executives and boards of directors are seemingly unclear, in the wake of the recent intense focus on corporate behavior, about how an increase in risk - taking on their part would be viewed by shareholders and regulators. as a result, business leaders have been quite circumspect about embarking on major new investment projects. moreover, still - ample capacity in some sectors and lingering uncertainty about the strength of prospective final sales have added to the reluctance to expand capital outlays. but should firms begin to perceive that the pickup in demand is durable, they doubtless would be more inclined to increase hiring and production, replenish depleted inventories, and bring new capital on line. these actions in turn would tend to further boost incomes and output. tentative signs suggest that this favorable dynamic may be beginning to take hold. industrial production, as i indicated earlier, seems to have stabilized, and various regional and national business surveys point to a recent firming in new orders. indeed, the backlog of unfilled | 0 |
bank watch discusses monetary policy trade - offs in an environment of high inflation, and whether the costs of high inflation after a cost - push shock are exaggerated in our modelling system. they point out that an optimal monetary policy response depends on the nature of the economic shock and the transmission of monetary policy. at the same time, the cost of high inflation must be measured correctly. let me first say that these are the very questions that have featured in the discussions of our monetary policy and financial stability committee over the past year. among other things, we have devoted considerable time to assessing the effect of higher interest rates on household disposable income and the relative importance of the nominal and real interest rate. the results were also presented in a box in the june 2022 monetary policy report. 2 / 3 bis - central bankers'speeches at the same time, the conduct of monetary policy is not mechanistic. models are useful, but they are simplifications and must be supplemented by other information. for example, loss functions in such models cannot be directly interpreted as the committee's view of inflation costs. as the deviation from the target increases, we need to assess the risk of high inflation becoming entrenched in the expectations of households, firms and fx market agents. if this were to happen, we may find ourselves in uncharted territory, where the costs are far higher than when inflation expectations are anchored to target. as last year, norges bank watch notes that norges bank's fx transactions related to tax payments to the government result in volatility in the money market premium. as long as the short - term money market functions well, norges bank will not seek to steer such risk premiums. but we do not want to contribute to needless volatility, which is why we seek to make fx transactions as smoothed and predictable as possible. the ministry of finance is now appointing a working group, in which norges bank will participate, tasked with examining various aspects of the government's liquidity management. the practical implementation of the petroleum fund mechanism is one of the topics for discussion. among the matters the working group will consider is whether the number of due dates for petroleum tax should be increased. let me conclude by again thanking norges bank watch for an excellent report. as i stated in my introduction, such an assessment is very useful for us, and we will take the committee's recommendations on board in our work going forward. thank you for your attention | play a greater role in the years ahead. the overall risk in the financial system is greater than the sum of the risk represented by each individual bank. which macroprudential instruments would be the most suitable is currently being discussed in detail in various international fora and central banks. one instrument that will be introduced is the countercyclical capital buffer for banks. the purpose of this buffer is to reduce the procyclicality of bank lending. when banks are required to hold more capital in a period of high credit growth, they will be more robust to large loan losses. in addition, increased capital requirements could restrain credit growth. the ministry of finance has the overriding responsibility for regulating the financial industry, but norges bank will be given the primary responsibility for elaborating the basis for the establishment of the countercyclical capital buffer. with a buffer ceiling of 2. 5 percent of banks β risk - weighted assets, the buffer will probably have a limited downward impact on banks β lending enthusiasm in good times. but banks that have solid capital reserves can take larger losses before having to limit lending to creditworthy customers. the countercyclical buffer comes on top of a new, comprehensive regulatory framework. equity capital requirements will be tightened. banks will face stricter maturity requirements for funding, limiting their share of short - term funding. they will be required to hold more liquid assets. all in all, the new regulatory regime will contribute to a more robust financial system and reduce fluctuations in credit growth. bis central bankers β speeches the turbulence in europe, which started with the problems in greece, has now prevailed for close to two and a half years. financial market sentiment and banks β access to funding have varied widely during the period. the nascent market optimism may continue, but it is fragile. should the economic situation abroad worsen again, and credit markets dry up, other tools can be put to use in norway. during the financial crisis in 2008, several measures were deployed, such as the so - called swap arrangement, which provided banks with access to liquid government securities in exchange for covered bonds. smaller banks were given loans with longer maturities. the measures aimed at improving banks β access to long - term funding. the measures enabled banks to maintain virtually normal lending standards for norwegian households and businesses. norway β s swap arrangement and quantitative easing have some common features : bonds shift from private to public hands, and banks β funding costs become lower than would otherwise have been the case. | 0.5 |
aina bilit y sust bond issuance increases 2025, it increases from 6. 5 % to 7. 7 % of gdp tariffs ( [UNK] in semester ii - 25 ) immigration euro area / united kingdom, china geopolitical trade fragmentation : supply disruption : trade war, sanctions energy dominance : oil supply demand ffr for asset the usa, china, mexico, canada, euro area / the united kingdom trade diversion : asean, latin amerika reducing immigration, tightening customs deportation of illegal immigrants ust yield rises commodity market : 25 % : steel, aluminium, motor vehicles from the euro area / uk, followed by retaliation 25 % : machinery / electronics and chemicals from china. china retaliates with 10 % increasing penalties for illegal entry and overstaying inflation rises risk export commodity prices oil prices ( 2025 - 26 ) global inflation ( 2025 - 2026 ) global gdp growth ensuring nato members meet the requirements for ο¬scal spending of 2 % of gdp on defense cut aid to ukraine. ending the conο¬ict in ukraine through negotiations with russia settling the conο¬ict in the middle east smaller cuts in the ffr, ust yields rising ust yield rises notes : flows into u. s. - trade [UNK] ( supply shock ) have a negative impact on gdp usd strengthens financial assets and a positive impact on inο¬ation. - tax cuts ( demand shock ) have a positive impact on both gdp and inο¬ation exchange rate depreciation and foreign portfolio investment outflows from emes source : bank indonesia, adapted from various sources smaller cuts in global interest rates geopolitical conflict main policies : [UNK] increase import prices 2. impact on the global economy the direction of trump's policy table 1. global economic growth performance and outlook ( % ) 2024 * 2025 * 2026 * world 3. 5 3. 3 3. 2 3. 1 3. 0 advanced economies 2. 6 1. 7 1. 8 1. 7 1. 8 united states 1. 9 2. 9 2. 7 2. 1 2. 3 euro area 3. 4 0. 4 0. 8 1. 2 1. 3 japan 1. 0 1. 9 0. 0 1. 2 0. 6 4. 1 4. 4 4. 2 4. 1 4. 0 china 3. 0 5. 2 4. 8 4. 5 3. 9 india 6. 8 7. 7 7. 0 6. 7 6. 7 | cross - border economic and financial transactions, maintain stability and build sustainable economies, while prioritizing national interests. this initiative will be realized through figure 22. direction of innovation and digital payment system acceptance in bspi 2030 digital innovation and acceptance fostering innovation of payment services c litera strengthening digital literacy and acceptance y services services data public economic transaction data risk consumer protection data industry bank - nonbank payment services innovation market intelligence design thinking snap instrument channel data center sandbox payment services qris bank indonesia data as a service kyc aml - cft cyber fraud unfair competition bi - digital innovation center industry & bi collaboration payment info bi led payment clear supervisory technology - regulatory technology reporting - regulation - supervision source : bank indonesia two programs, namely : ( i ) expanding the scope of cross - border qris cooperation ; and ( ii ) preparing national payment system infrastructure that is ready to connect internationally ( figure 23. ). existing qris cooperation between indonesia and malaysia, thailand, and singapore will be expanded to japan, south korea, india, united arab emirates ( uae ) and saudi arabia. cross - border payment connectivity will also be driven through interconnected payment system infrastructure channels, both bilaterally and multilaterally. on the retail side, bank indonesia is pursuing bi - fast interconnection multilaterally through project nexus with malaysia, thailand, singapore, the philippines, and india with the involvement of the bank for international settlements ( bis ). bank indonesia is actively involved in the stage iii development of project nexus by preparing a roadmap for multilateral interconnection between five asean member states and india for the use case of remittances. in terms of wholesale payment system infrastructure connectivity, the bi - rtgs modernization, as previously mentioned, is being prepared from the outset to anticipate and meet future cross - border interconnection demand. rtgs interconnection has also become a g20 agenda promoted through the initiative of enhancing cross - border payments, which needs to be anticipated early, considering indonesia β s position as a g20 member. fifth, bank indonesia will continue digital rupiah development in the advanced experimentation stage with a focus on replicating the function of the wholesale market and financial market deepening. this will be achieved through three main programs as follows : ( i ) experimentation in terms of issuance, transference, and redemption of the securities ledger ; ( ii ) experimentation in terms of using digital securities for the use cases of monetary operations and other | 1 |
the market. third, the end - of - day lending rate on the standing facility was reduced from repo plus 100 basis points to the repo rate. at the same time, the borrowing rate on the standing facility, which is the rate at which the sarb absorbs liquidity, was also adjusted lower. commercial banks β deposits at the sarb now earn interest based on the repo rate less 200 basis points, compared to the repo rate less 100 basis points previously. this measure is meant to discourage banks from depositing money at the sarb, and to encourage money market liquidity. lastly, as an extra measure to add liquidity and promote the functioning of the bond market, the sarb commenced with a programme of purchasing government securities in the secondary market. more than r30 billion worth of government bonds has been bought since the commencement of the programme in march this year. regulatory and supervisory relief measures since the 2008 / 2009 global financial crisis, south africa has implemented reforms to strengthen its regulatory framework for financial institutions and improve the resilience of the financial system. this has enabled the prudential authority ( pa ) to deliver temporary regulatory relief for banks in a manner that is consistent with internationally agreed regulatory standards. the pa has provided guidance covering accounting matters and imposed a limit to the payment of dividends and bonuses by banks and insurers to ensure the conservation of capital and retained capacity in an environment of heightened uncertainty caused by covid - 19. page - 5 - of 9 expected impact of the south african reserve bank β s response the sarb β s policy responses are an important element of providing support to the economy. interest rate decisions are expected to play an important role in replacing displaced income. the relaxation of certain regulatory measures has enabled banks to provide support to households and businesses through continued lending activities, alongside the government loan guarantee scheme. in addition, the liquidity operations have supported market functioning, which is important for financial stability. while there is limited information to assess the impact of interest rate adjustments and other regulatory measures, the decline in indicators of bond market frictions and the improvements in money market liquidity conditions testify to the positive impact of the sarb β s liquidity management measures. financial stability the sarb has a statutory mandate to protect and enhance financial stability in south africa by monitoring global and domestic conditions, using various indicators to identify the risks and vulnerabilities which may impact on the financial system. during the past year, the main risks to financial | for crisis prevention while economic and financial conditions are still fragile. as a typical and familiar example of such difficulties, i would like to raise a couple of points concerning the volcker rule stipulated in the dodd - frank act. first of all, i should make it clear that i fully agree with the fundamental reasoning behind the volcker rule. indeed, speculative activities by some financial institutions under the β originate - to - distribute β type business model were the main driver of the recent crisis, as explained before. based on such appropriate recognition, the dodd - frank act asks financial industries to make a thorough assessment of their business models, and to modify them if necessary. at the same time, in view of the on - going eurozone crisis, i would like to emphasize that policymakers should be extremely careful to avoid any unintended consequences when introducing new rules, especially in terms of possible negative impacts on overseas sovereign debt markets at this juncture. moreover, central banks are required to be attentive to the liquidity of sovereign debt markets, which are the core of the monetary policy transmission mechanism. the volcker rule is intended to restrict proprietary trading by banking entities for the purpose of short - term gain. however, the rule could have significant implications for important market - making activities as well as for market liquidity, depending on how related regulations are written and how they are actually implemented. according to the proposed regulations, u. s. government bonds and most other u. s. agency obligations are exempt from the rule. obviously, the u. s. authorities are keen to ensure smooth transactions for these securities, and are well aware of the importance of market - making activities for that purpose. market liquidity is no less important for the securities of non - u. s. governments. however, the proposed regulations do not exempt government obligations of other countries, including bis central bankers β speeches japan, canada and european countries. thus, if the volcker rule were to be strictly implemented as proposed, it could adversely affect the liquidity of overseas sovereign debt markets. another issue is that short - term foreign exchange swaps could also be subject to the volcker rule under the proposed regulations. this means, dollar liquidity that has been provided through foreign exchange swaps could be curtailed, causing difficulties for the dollar funding of financial institutions. this could also be a concern for many financial institutions, especially when the global condition of foreign - currency funding is tightened. i understand that the proposed regulations take into | 0 |
additional slack. the committee said that it will want to be reasonably confident that inflation will move back to 2 percent over the medium term. on a 12 - month basis, headline inflation in february, as measured by the personal consumption expenditures price index, stood at 0. 3 percent ; meanwhile, core inflation, which excludes volatile energy and food components, was 1. 4 percent. these low current readings are partly a consequence of two transient shocks β the dramatic decline in oil prices and the effect of the appreciation of the dollar on import prices. before those shocks, both headline inflation and core inflation were running at about 1. 5 percent. when the effects of these shocks pass, i expect that inflation will return roughly to those earlier levels and then rise gradually to our 2 percent objective over the medium term as labor and product markets tighten further. despite the current low inflation readings, survey - based measures of inflation expectations in the united states have been stable. however, market - based readings on inflation compensation have declined significantly since mid - 2014. i view this decline as more likely reflecting movements in risk premiums and other transitory factors, rather than shifts in longer - term inflation expectations. still, it will be important to keep an eye on the performance of inflation breakevens. i expect that economic conditions will support the first rate increase later this year. i do not expect that such an increase or the associated market reaction will materially restrain the bis central bankers β speeches progress of the economy. from a macroeconomic perspective, the precise timing of liftoff is less important than the path of subsequent additional rate increases. my view is that, if the economy continues on its expected path, it will be appropriate for a time to increase rates fairly gradually. of course, if the economy improves faster or inflation increases more than expected, it will be appropriate to raise rates faster. and if economic performance disappoints or inflation remains lower than expected, it will be appropriate to delay liftoff or raise rates more slowly thereafter. there are several reasons why it may be appropriate to raise rates somewhat gradually, including the proximity of the zero lower bound for interest rates and continuing economic headwinds in the wake of the crisis. 1 i would like to explore a rationale that has received somewhat less attention, which is the unusually high level of uncertainty today about capacity measures such as the natural rate of unemployment. 2 uncertainty about the precise level of these indicators becomes more important for policy as the expansion continues and the economy approaches | curbing inflation expectations and not allowing inflationary spiral to exacerbate. according to our estimates, annual inflation is expected to be higher than we forecast in april but lower than its current level. due to the high base effect in the first half of this year annual inflation will return to the target only in the second half next year. third. monetary conditions remain accommodative. interest rates on loans and deposits are low as compared to current and expected inflation. our decisions to raise the key rate in march and april have not yet been fully reflected in banks β interest rates. banks β lending and deposit rates are closely connected with yields on government bonds, ofzs. ofzs are risk - free ruble assets for banks and the pricing of all other ruble products of banks is pegged to them. ofz yields with various maturities change together with the key rate, though to a different extent. the key rate impacts to the most extent the yields on short - term ofzs, with maturities of up to two - three years. these yields have increased significantly over the past two months. they will impact the cost of short - term loans and also deposit rates, which have already started rising. meanwhile, yields on long - term ofzs are largely determined by long - term inflation expectations, the assessment of the macroeconomic policy stability, and external environment. the cost of long - term financing of investment projects as well as mortgage loan rates depend precisely on the yields on long - term ofzs. pursuing monetary policy to stabilise inflation and raising the key rate to achieve this, the bank of russia curbs growth in long - term interest rates in the economy. this quarter experience is a good illustration of the above. despite the increase in the key rate on three occasions since last march for a total of 125 basis points, the yields of long - term ofzs are currently on the same level as in late march. as far as the pace of lending growth is concerned, it remains high both in corporate and particularly retail segments. thus, mortgages are rising by more than 25 % year - on - year. in addition, retail loans are heating consumer demand. we are also concerned by the fact that lending is growing due to loans to borrowers with a high debt burden. therefore, we resume prepandemic macroprudential add - ons on unsecured loans from 1 july and on mortgage loans with a low down payment | 0 |
benjamin e diokno : old partnerships and renewed beginnings message by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the trust officers association of the philippines general membership meeting, manila, 25 march 2021. * * * to the directors, officers, and members of the trust officers association of the philippines ( toap ), guests, ladies and gentlemen, good evening! it is a pleasure to address the toap once again, this time, at your general membership meeting. it was in november 2020 when i joined your summit. i recall that i challenged your organization to be adaptable, to take advantage of opportunities, so your institution will reach its goals. with the accomplishments of the association, i commend the incumbent officers of toap under the leadership of atty. bobbie conception for ably steering the industry in 2020. 2020 was an extremely difficult year. but don β t despair. we are on the way to recovery. we can look to 2021 with guarded optimism. performance of the trust industry nevertheless, the performance of the trust industry in 2020 was impressive. while the level of assets under management ( aum ) for trust and investment management activities did not show significant growth, it is encouraging to note that the aum of unit investment trust funds ( uitfs ) rose by a hefty 22 percent year - on - year by the end of the third quarter of 2020. this development must have been made possible by the online accessibility of uitfs as the number of uitf participants also surged by around 32 percent year - on - year. uitf clients seem to prefer funds that are more liquid and whose products they are more familiar with. as we move forward, we hope that the uitf participants can progress, particularly with respect to the choice of underlying investments, and that in due time uitfs can be an effective vehicle for retail investors to actively participate in the philippine capital markets. apart from uitfs, the bsp expects growth of trust assets to continue this year. following the industry β s proposal, the bsp issued circular no. 1109 on february 4, 2021, which lowered to the minimum amount required to maintain an investment management account ( ima ) and to participate in commingled funds to p100 thousand. the circular also expanded the financial assets that a commingled fund can invest in. this is expected to fuel an increase in the | industry β s investment management activities as new clients with lower amounts of investible funds can now be tapped. financial inclusion was a major consideration in crafting this policy amendment. we want to make investing more accessible, while providing retail investors with a greater degree of protection. we are confident that these investors will benefit from the expertise of trust entities and that trust entities would continue to exercise prudence in the way they offer their services. economic update to provide a big picture on what lies ahead, let me proceed with an update on the economy and the banking system. 1 / 4 bis central bankers'speeches the economic, social and health effects of covid - 19 are unprecedented. they disrupted economic activity globally. the philippines was not spared : its economy contracted by 9. 5 percent in 2020, its first fall since the 1998 asian financial crisis. but one can argue that the contraction could have been worse had the philippine economy not entered the crisis in a strong position. the uninterrupted economic growth for over two decades prior to the covid - 19 pandemic, the timely structural reforms, the generally manageable inflation, and the hefty gross international reserves β all these have helped cushion the adverse effects of the health cum economic crisis on the domestic economy. our key economic indicators remain encouraging. inflation inflation is manageable and inflation expectation remains anchored. while inflation rates have risen in recent months, they were driven mainly by faster price increases of key food items and higher domestic oil prices. but the upticks in inflation are consistent with bsp β s assessment that inflation will remain elevated in the coming months before decelerating in the fourth quarter of the year. inflation is projected to return within the government β s target range of 3. 0 percent Β± 1. 0 percentage point over the policy horizon. monetary policy will continue to support the various interventions of the national government to alleviate the impact of supply - side factors on consumer prices. balance of payments ( bop ) the country β s external position has caught up well despite the weak global demand in 2020 amid the synchronized recession of our major trade and investment partners. for full - year 2020, the overall balance of payments ( bop ) position was at an all - time high of us $ 16. 02 billion. for 2021, we project the balance of payments to be us $ 6. 2 billion or 1. 6 percent of gdp. gross international reserves ( gir ) meanwhile, the country β s gross international reserves ( gir ) level remains | 1 |
glenn stevens : australia β s economy against the background of recent international developments opening statement by mr glenn stevens, governor of the reserve bank of australia, to the house of representatives standing committee on economics, sydney, 7 march 2014. * * * madam chair members of the committee thank you for the opportunity to meet with you today. when we met with the committee just prior to christmas, i suggested that, taking an international view, 2013 could be described as a year that turned out not to be quite as good as hoped for, but not as bad as feared. nothing that has occurred in the period since then would change that assessment. one prominent international event was that, within hours of that hearing, the us federal reserve commenced the β tapering β of its monthly asset purchases. this was a possibility we talked about at the time and, although the timing of it wasn β t known, it was considered likely that it would begin before long. a further reduction in asset purchases was decided at the fed β s january meeting. after all the anticipation of this change, the actual announcement of the fed β s decision caused little disruption in markets in december. during january there was more volatility in markets, and a few emerging economies came under pressure, with bond yields spiking and exchange rates declining. it is important to keep this in perspective. periods surrounding changes of course by the fed have often been times when market participants re - assess their positions and their appetite for risk, and this occasion has been no exception. it isn β t necessarily the fed action per se that is most important, but rather what it conveys about the overall economic and financial environment. at such times investors sometimes start to focus on risks to which they had hitherto been attaching little significance. investors have not, however, fled from risk indiscriminately on this occasion, at least to date. they have drawn distinctions between alternative classes of investment and different countries. long - term sovereign yields of the core advanced countries have increased a little, but they remain low. with compressed risk spreads, this means that borrowing costs for many private - sector borrowers remain very low. the spreads over german yields for european sovereigns have continued to fall. this suggests that actions by european policymakers have had more influence on european markets than actions by the us authorities. this is as one would expect, but it hasn β t always been the case in the past. moreover, not all emerging markets are experiencing the same pressure | avoid further emergency procedures. these changes involve : removing the scope for taking on excessive leverage via regulatory arbitrage ; making sure that adequate capital is held against risk that is being incurred ; ensuring better management of funding liquidity ; countering, to the extent possible, the inherent tendencies in both human nature and regulation to form assessments of risk in a pro - cyclical way ; and improving resolution processes to ensure orderly and rapid crisis management and to help manage the issue of β too - big - to - fail β institutions. these are all very important goals. the australian authorities support them. but as we have said before, the really serious problems were generated in a relatively small number of very large, internationally active banks. they did not stem from the thousands of other banks around the world which have not needed to be β bailed out β and whose capital resources have, in most cases, proved adequate to cover normal losses in a cyclical downswing. hence it is important not to shackle unnecessarily the latter group in our efforts to constrain the relatively small number which caused much of the problem. challenges from sovereign debt turning from banks to markets more generally, a recent development has been the increasing focus on sovereign debt and creditworthiness. the initial manifestation of this was late last year when dubai world requested a six - month standstill agreement on its debt repayments. more recently, the focus has been on greece, after it was revealed that the greek government β s current borrowing requirement was much larger than had been previously disclosed. greece is a small country β accounting for only half of one per cent of the world β s gdp. the significance of greece is that it is a euro area country, which means two things. first, its adjustment to its predicament cannot involve currency depreciation ( unless it were to leave the single currency ). the only way it can grow out of the problem is by gaining competitiveness against other european economies via domestic deflation, which will be a difficult and lengthy process. a very large fiscal consolidation is an unavoidable part of this path. second, the euro area has an interest in this effort succeeding, which is why there has been intense discussion about whether, and in what form, european assistance might be forthcoming. any assistance would of course have to pass the test of credibility more generally in europe, and would need to be applicable under similar terms to other euro area countries if needed. this is obviously a difficult problem, | 0.5 |
to the concerns of the public and to carefully evaluate whether and how they may be able, within their mandate, to respond to these concerns. accountability is the quid pro quo of independence. the ecb is doing this diligently as part of its ongoing monetary policy strategy review. we are analysing the effects and side effects of our unconventional monetary policy instruments in depth. and we are exploring if and how, within our mandate, we can contribute to the broader objectives of the union, including by taking measures that will help accelerate the transition towards a more sustainable economy, while firmly adhering to our primary objective of price stability. thank you for your attention. 1. see, for example, the deloitte global millennial survey 2020. 2. various listening events, both with experts and with the general public, were held by the ecb and the eurosystem β s national central banks between october 2020 and february 2021. an overview of the ncb β s listening events is provided on the ecb website. 3. see, for example, calomiris et al. ( 2016 ), " political foundations of the lender of last resort : a global historical narrative, " journal of financial intermediation, vol. 28 ( c ), pp. 48 - 65. 4. see also goodfriend, m. ( 2007 ), β how the world achieved consensus on monetary policy β, journal of economic perspectives, 21 ( 4 ) : pp. 47 - 68 5. treaster, j. ( 2005 ), β paul volcker : the making of a financial legend β, john wiley & sons. 6. see haldane, a. ( 2018 ), β climbing the public engagement ladder β, speech at the royal society for the encouragement of arts, manufactures and commerce ( rsa ), 6 march. 7. see also schnabel, i. ( 2020 ), β narratives about the ecb β s monetary policy β reality or fiction? β, speech at the juristische studiengesellschaft, karlsruhe, 11 february. 8. see, for example, christelis, d., georgarakos, d., jappelli, t. and van rooij, m. ( 2020 ), β trust in the central bank and inflation expectation β, working paper series, no 2375, european central bank ; mellina, s. and schmidt, t. ( 2018 ), β the role of | risk boards are close to them on both sides of the atlantic. in other words, you trust ben bernanke will not risk a heavy depreciation of the dollar? on exchange rates i will say that excess volatility and disorderly movements in exchange rates always have adverse implications for economic and financial stability. and i consider it very important that the us authorities also recently confirmed their long - standing position that a strong dollar vis - a - vis the other major floating currencies is in the interests of the united states. but cooperation in the g20 is at a very low point. the united states will perhaps create even more liquidity ; china refuses a substantial appreciation of the yuan. between the selfish policies of the two great powers of today, europe risks the euro becoming too strong. i responded already on the united states. on the emerging economy currencies, i would say that at the toronto summit emerging economies agreed to undertake reforms to enhance exchange rate flexibility. it is the case for all of them, including for china, which has confirmed the will to engage in such reforms, as it signalled last june. | 0.5 |
loi m bakani : recent financial sector and economic developments in papua new guinea address by mr loi m bakani, deputy governor of the bank of papua new guinea, at the opening of the kimbe branch of anz bank ( png ) limited, kimbe, new west britain province, 23 november 2006. * * * acknowledgement honourable sinai brown, mp, minister for public services mr. garry r. tunstall, managing director of anz bank ( png ) limited mr. peter madden, ceo, post png bishop alphonse chaupa, kimbe diocese representing churches in wnb business and community leaders distinguished guests, ladies and gentlemen. i would like to thank the anz bank for inviting the governor of the bank of png mr. wilson kamit cbe to the official opening of its kimbe branch. however, he is unable to attend, as he is on his way overseas for an official engagement. he has asked me to represent the central bank. 1. introduction the bank of png is proud to see continued positive developments in the financial system and encourages the expansion of banking network throughout the country. today, the people of west new britain province have every reason to be joyful as they celebrate this important occasion β the opening of the kimbe branch of the anz bank. anz bank joins westpac and bsp to bring the number of commercial bank branches in the province to three, thus, providing an additional option of banking services for the general public. the opening of this anz kimbe branch highlights another milestone in the development of our banking and financial system. the central bank is glad to be invited because such events gives us an opportunity to talk about the developments that are occurring in our financial sector and the economy at large. 2. financial sector reform and role of the central bank i will talk on the developments in the financial sector and the current economic conditions later. let me first mention the underlying framework, which gave rise to the current positive developments we are now seeing in png. a major government initiative was the reforms to the financial sector, which began in 2000. a new central banking act and banks and financial institutions act were enacted. these gave the central bank a focused set of objectives, increase its independence and improved regulation and supervision of the financial system. the central banking act also limited the government β s access to central bank financing and introduced a new board with wider community representation. more recently, two other legislation | β capital needs. as is known, this assessment was conducted by the consultancy firm oliver wyman, and its outcome was that banco popular evidenced capital needs in excess of β¬3. 2 billion. but in october 2012 it was concluded that both banco popular, and the other institution for which capital needs have been identified, namely ibercaja, could cover these needs by their own means, without resort to public funds and, therefore, also without transferring assets to sareb. i believe the resolution of banco popular, undertaken early in june in accordance with the provisions of the 2014 european directive, is set in a different context to that of the analysis of the crisis from 2008 to 2014, even if it is considered that the still - distant source of the problems of banco popular can be found in the period covered by the report. but here i shall naturally defer to what this commission should decide. regarding public aid, the report details in its various chapters the aid injected into the financial system during the crisis. this is summarised in tables 5. 5 and 5. 6 ( pp. 246 - 247 ). at the close of 2015, recorded total net funds assigned to supporting the spanish financial system were β¬60, 613 million, β¬39, 542 million of which relate to public funds provided by the frob and β¬21, 071 million to private funds provided by the dgs. naturally, these figures will vary depending on the recoverable value of the assets currently owned by the frob and the dgs. in terms of the comparison with other developed countries, there are various metrics to evaluate the fiscal cost of public aid. the most general one is the outstanding balance of accumulated public debt. in gross terms, spain β s public debt as a consequence of assistance to the financial sector was 4. 7 % of gdp in 2015 and 4. 6 % in 2016, in line with the average for the euro area. however, in terms of net debt assumed by the public sector ( accumulated liabilities minus the value of publicly owned assets ), the euro area average stood at end - 2015 at 1. 8 % of gdp and at 1. 9 % in 2016. greece and ireland are the countries that have assumed most net public debt ( around 20 % of gdp ), followed by slovenia and portugal ( 7 - 8 % of gdp ). in spain β s case, this figure in 2015 was 3. 7 % of gdp, and it had risen to 3. 8 | 0 |
christopher j waller : welcoming remarks - 2023 international journal of central banking conference welcoming remarks by mr christopher j waller, member of the board of governors of the federal reserve system, at the 2023 international journal of central banking conference, dublin, ireland, 22 june 2023. * * * thank you, gabriel, and thank you to the central bank of ireland ( cbi ) for hosting this year's conference. from the outside, central banking can look like the work of individual policymakers, parsing the data and making the hard decisions. in truth, it is a team effort of many people, and that has also been true for editing the international journal of central banking ( ijcb ) and putting together this conference. i have a long list of people to thank who did the lion's share of that work during the year that i have served as managing editor. but first, for those who may not know it, let me review the history of the journal and touch on what this conference will address. in the summer of 2004, the bank for international settlements ( bis ), the european central bank, and the group of ten central banks agreed to support the development of a new publication focused on the theory and practice of central banking. there was no shortage of research on central banking, and, indeed, central bankers themselves did and continue to publish peer - reviewed research in leading journals, not to mention many working papers published by central banks and other outlets. this work was prevalent, but there was a sense that there lacked a place for scholarly research that focused exclusively on central banking and could serve as a forum for the community of central bankers around the world. the creation of the international journal of central banking filled this deficit. the primary objectives of the ijcb are to widely disseminate the best policy - relevant and applied research on central banking and to promote communication among researchers inside and outside central banks. we do this with publication of the journal, which will now be coming out six times a year, and with the added attention of this conference, which presents research on timely policy topics. with the possible exception of myself, the journal has attracted distinguished managing editors, including my colleagues from the federal reserve and my immediate predecessor, luc laeven from the european central bank. we have the strong support now of 55 sponsoring institutions, including the cbi and the bank of canada, which hosted last year's conference. in 2022, we chose the theme for this year ' | ' speeches | 1 |
lucas papademos : globalisation, inflation, imbalances and monetary policy speech by mr lucas papademos, vice - president of the european central bank, at a conference on β the euro and the dollar in a globalized economy β jointly organised by the department of economics, washington university, the weidenbaum center on the economy, government, and public policy, and the federal reserve bank of st. louis, and sponsored by the european union delegation to the usa, st. louis, 25 may 2006. the references and charts for this speech can be found on the ecb website at www. ecb. int. * * * introduction reflecting on the venue and the theme of this conference on my way to st. louis, it struck me that the combination is very fitting indeed. it was from here that lewis and clark set off to explore the unknown american west, reaching the columbia river on the pacific coast more than 200 years ago. today, our exploration is more of the intellectual type, and what we are investigating and seeking to understand better encompasses the whole world, or rather β a globalised economy β, as the title of the conference says. it is a great pleasure for me to be here and share with you and the distinguished members of this panel some thoughts on the implications of globalisation for monetary policy. the themes of this conference, the challenges of globalisation for the advanced economies, the severity and correction of global imbalances, and the evolving roles of the dollar and the euro in the international financial system, have been the subject of enriching and stimulating discussions during the previous sessions today. in my remarks, i will try to bring together these three themes from the perspectives of the euro area and of the central banker. what are the challenges of globalisation for the euro area economies and for the conduct of the ecb β s monetary policy? in answering this question, i will address the following specific issues : β’ the consequences of globalisation for inflation and its dynamics ; β’ the implications of globalisation for the size and sustainability of global imbalances ; β’ the appropriate policies, globally and in the euro area, in order to effectively contribute to the orderly correction of global imbalances ; and β’ the role and conduct of the ecb β s monetary policy in a globalised economy. globalisation : definition and measurement let me start by defining the term globalisation. various definitions have been proposed which overlap and differ somewhat in terms of scope and emphasis. i | of the intensified and prolonged financial market turmoil, the most recent data clearly confirm that economic activity in the euro area is weakening, with contracting domestic demand and tighter financing conditions. the fall in oil prices from their peak in july and ongoing growth in emerging market economies might support a gradual recovery in the course of 2009. in the view of the governing council, the economic outlook is subject to increased downside risks, mainly stemming from a scenario of ongoing financial market tensions affecting the real economy more adversely than currently foreseen. other downside risks relate to the possibility of renewed increases in highly volatile energy and food prices, disorderly developments owing to global imbalances and rising protectionist pressures. with regard to price developments, annual hicp inflation has remained considerably above the level consistent with price stability since last autumn, standing at 3. 6 % in september according to eurostat β s flash estimate, after 3. 8 % in august. this still worrying level of inflation is largely the consequence of both the direct and indirect effects of past surges in energy and food prices at the global level. moreover, wage growth has been picking up rather strongly in recent quarters, in spite of a weaker growth momentum and at a time when labour productivity growth has decelerated. this resulted in a sharp increase in the year - onyear unit labour cost β to 3. 4 % β in the second quarter of this year, after several years of more moderate increases in the order of 1 - 1Β½ %. looking ahead, on the basis of current commodity futures prices, annual hicp inflation rates are likely to remain well above levels consistent with price stability for some time, moderating gradually during the course of 2009. at the policy - relevant medium - term horizon, taking into account the weakening in demand, upside risks to price stability have diminished somewhat, but they have not disappeared. they include the possibility of previous commodity price rises having further and stronger indirect effects on consumer prices, as well as a renewed increase in commodity prices. in particular, there is a very strong concern that the emergence of broad - based second - round effects in price and wage - setting behaviour could add significantly to inflationary pressures. moreover, unexpected rises in indirect taxes and administered prices could occur. against this background, it is imperative to ensure that medium to longer - term inflation expectations remain firmly anchored at levels in line with price stability. this is all the more the case in an environment of very high uncertainty. broad - based second - round effects | 0.5 |
monetary policy statement press conference christine lagarde, president of the ecb, luis de guindos, vice - president of the ecb frankfurt am main, 8 september 2022 good afternoon, the vice - president and i welcome you to our press conference. the governing council today decided to raise the three key ecb interest rates by 75 basis points. this major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to our two per cent medium - term target. based on our current assessment, over the next several meetings we expect to raise interest rates further to dampen demand and guard against the risk of a persistent upward shift in inflation expectations. we will regularly re - evaluate our policy path in light of incoming information and the evolving inflation outlook. our future policy rate decisions will continue to be data - dependent and follow a meeting - by - meeting approach. we took today β s decision, and expect to raise interest rates further, because inflation remains far too high and is likely to stay above our target for an extended period. according to eurostat β s flash estimate, inflation reached 9. 1 per cent in august. soaring energy and food prices, demand pressures in some sectors owing to the reopening of the economy, and supply bottlenecks are still driving up inflation. price pressures have continued to strengthen and broaden across the economy and inflation may rise further in the near term. as the current drivers of inflation fade over time and the normalisation of our monetary policy works its way through to the economy and price - setting, inflation will come down. looking ahead, ecb staff have significantly revised up their inflation projections and inflation is now expected to average 8. 1 per cent in 2022, 5. 5 per cent in 2023 and 2. 3 per cent in 2024. after a rebound in the first half of 2022, recent data point to a substantial slowdown in euro area economic growth, with the economy expected to stagnate later in the year and in the first quarter of 2023. very high energy prices are reducing the purchasing power of people β s incomes and, although supply bottlenecks are easing, they are still constraining economic activity. in addition, the adverse geopolitical situation, especially russia β s unjustified aggression towards ukraine, is weighing on the confidence of businesses and consumers. this outlook is reflected in the latest staff projections for economic | different response of income and wealth inequality highlights the fact that we need to be more precise when defining exactly the " inequality of what " we are analysing. the recent pandemic emergency has shown the importance of another channel through which monetary policy may affect inequality, albeit largely indirectly. focusing on the first wave of infections, simulation results show that the public policies implemented in italy to support workers and households during the first half of 2020 were successful. the post - transfer gini index of the labour income distribution remained, in fact, almost constant compared to pre - crisis levels, instead of rising by several percentage points, as would have occurred in the absence of any intervention. actual data on household incomes have later confirmed these early assessments. monetary policy seemingly plays no part in this story. however, we should remember the severe tensions that arose in financial markets in march 2020. it is therefore reasonable to argue that introducing those public measures would have been much more difficult, even impossible, without the extraordinarily expansive monetary policy that was put in place, including the introduction of the ecb's pandemic emergency purchase programme and the strengthening of the asset purchase programme. although the " fiscal dominance " alarm bell may now be ringing for some of you, these considerations do not suggest that central banks have become dependent on national governments, but rather highlight the importance of the complementarities between fiscal and monetary policies. these complementarities not only concern the response to the deflationary pressures that we observed before and during the pandemic, but also affect, as we speak, the fight against inflation. the experience of italy, in this respect, is particularly insightful. in this country, the " conquest of inflation " took a long time, as we lived through the two dismal decades of the 1970s and 1980s. it has to be acknowledged that the economy was then subject to very severe shocks ( and if there is one thing that i have learned during my long experience in central banking, it is that we may only dream of steady states and the like! ). following the conflicts of the " hot autumn " of the late 1960s, a weak italian economy, and society, had to face the collapse of the bretton woods fixed exchange rates system and the two major oil shocks that followed the yom kippur war and the iran revolution. disinflation took place via a long process that only began in the early 1980s, with the strengthening of the central bank's autonomy and | 0 |
and medium - sized enterprises have seen borrowing costs from banks somewhat reduced. all of this should support investment. target balances, which provide a powerful summary indicator of fragmentation, have declined by almost 300 billion euros or 25 % from their peak. the costs of protection against see, for example, cukierman, a., 2013, monetary policy and institutions before, during, and after the global financial crisis, journal of financial stability, in press, and curdia, v. and woodford, m., 2011, the centralbank balance sheet as an instrument of monetary policy, journal of monetary economics, 58 ( 1 ), 54 β 79. bis central bankers β speeches risks of deflation have fallen from peaks twice their long - term average last summer to slightly below average now2. overall, monetary policy has regained steering capacity, which had become lost for large parts of the euro area in mid - 2012. this is an important positive development. let me turn now to the limitations of monetary policy. here i see two possible dimensions. the first is positive and refers to the effectiveness of central bank actions at the margin β for example, when interest rates are close to zero. the second is normative and refers to the constraints imposed on us by our mandate and to the fears that boundaries between central bank policies and other policies might become blurred. i will not dwell on the first dimension because i do not think that we are materially challenged in our ability to deliver our objective of price stability by the low level of interest rates. looking back, despite extraordinarily testing economic circumstances, inflation in the euro area has remained on the whole consistent with the ecb β s objective of below but close to 2 %. looking forward, eurosystem staff project annual hicp inflation at 1. 4 % in 2013 and 1. 3 % in 2014, but medium - term inflation expectations remain anchored in line with our definition of price stability. one reason why inflation expectations have remained broadly stable is that we β and other major central banks around the world β have prevented the materialisation of deflation risk by adopting both standard and non - standard measures as and when necessary. in the euro area, one such non - standard measure was the introduction of the outright monetary transactions ( omt ) programme last year, the stabilising effects of which are widely recognised. there are numerous other measures β standard interest rate policy and non - standard measures β that we can deploy and that we will deploy if circumstances | a non - issue in the united states. however, such observers vastly underestimate the political capital invested in the euro by our leaders, as well as the political significance that such an investment has for the future of europe. of course, much work remains to be done for economic policy - makers across europe. but i am confident that together we can build a stronger economic and monetary union that ultimately delivers jobs, growth and a return to prosperity for the citizens of the euro area. thank you for your attention. bis central bankers β speeches | 1 |
jean - claude trichet : the entry of estonia into the euro area speech by mr jean - claude trichet, president of the european central bank, at the euro conference at the bank of estonia, tallinn, 20 september 2010. * * * distinguished guests, ladies and gentlemen, it is a great pleasure for me to be here today, in tallinn, to participate in the euro conference. on 1 january 2011 the euro will become legal tender in estonia, and estonia will become the 17th country to join the euro area. let me first congratulate all parties involved in this outstanding achievement on their efforts and determination to prepare estonia for the adoption of the euro. the creation of the single currency has been a very important step forward in the achievement of the historical endeavour of creating a single market for the europeans, which was what the founding fathers had in mind more than fifty years ago. its inception has been, at the same time, a powerful symbol of the will of the european countries to pursue actively their strategic road towards unification. we were eleven countries when we started the euro on 1 january 1999. we will be seventeen on 1 january 2011. there is no better way to demonstrate that the euro area is not a β closed shop β but is open to those countries and economies that are fully compliant with the entry criteria in a convincing and sustainable manner. 1 january 2011 will become a landmark in the history of estonia, reflecting the long and challenging process of economic and monetary integration that has enabled estonia to join the euro area. after regaining independence in 1991, estonia embarked on a rapid and farreaching programme of social and economic reform. in addition to being a determined reformer, it became a model for stable multi - party democracy. estonia transformed itself into a dynamic economy, gaining recognition for its sound fiscal record, economic freedom and capacity to develop new technologies. for several years, estonia was also one the world β s fastest growing economies, but its growth was far from balanced. notwithstanding some very difficult years following its regaining of independence, estonia β s real gdp grew at an average rate of 7. 2 % per annum over the period from 1995 to 2007. however, this growth rate came to a halt in 2008. real output declined sharply in 2008 and 2009, and, after latvia, estonia became the second most severely affected eu member state in terms of output decline. the severity of the adjustment revealed that the period of rapid output growth was, to some extent, also a period of imbalanced growth and economic | , this should help stabilise euro area economic activity and lead to a gradual recovery in the second part of the year. at the same time, necessary balance sheet adjustments in the public and private sectors, and the associated tight credit conditions, will continue to weigh on economic activity. this economic outlook for the euro area remains subject to downside risks. the risks include the possibility of even weaker than expected domestic demand and slow or insufficient implementation of structural reforms in the euro area. these factors have the potential to dampen the improvement in confidence and thereby delay the recovery. according to eurostat β s flash estimate, euro area annual hicp inflation was 1. 7 % in march 2013, down from 1. 8 % in february. the ongoing decline in annual inflation rates mainly reflects the energy component of the price index. looking ahead, price developments over the medium term should remain contained in an environment of weak economic activity in the euro area. inflation expectations are firmly anchored and in line with price stability over the medium to long term. risks to the outlook for price developments continue to be broadly balanced over the medium term, with upside risks relating to stronger than expected increases in administered bis central bankers β speeches prices and indirect taxes, as well as higher oil prices, and downside risks stemming from weaker economic activity. turning to the monetary analysis, the underlying pace of monetary expansion continues to be subdued. the annual growth rate of m3 moderated to 3. 1 % in february, down from 3. 5 % in january. the annual growth rate of the narrow monetary aggregate, m1, increased to 7. 0 % in february, from 6. 6 % in january. at the same time, mfi deposits in a number of stressed countries strengthened further in february. the annual growth rate of loans ( adjusted for loan sales and securitisation ) to non - financial corporations and households remained broadly unchanged in february, at β 1. 4 % and 0. 4 % respectively. to a large extent, subdued loan dynamics reflect the current stage of the business cycle, heightened credit risk and the ongoing adjustment of financial and non - financial sector balance sheets. at the same time, available information on non - financial corporates β access to financing indicates tight credit conditions, particularly for small and medium - sized enterprises in several euro area countries. in order to ensure adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential that the fragmentation of euro area credit markets is reduced further and the resilience | 0.5 |
hit, helping cushion the initial financial turbulence. and as the crisis unfolded in successive β waves β and materially altered our market environment, we adopted further measures to meet the new challenges we faced. we are thus now presented with an important question β should we treat these changes as temporary imperatives that should be withdrawn as soon as conditions permit, or should they form a permanent part of our operational framework? to answer this, we need to ask : of all the challenges we have faced during the crisis, which ones are likely to persist? and which measures should we retain to deal with them? in my view, there are two challenges that stand out. the first is how monetary policy should adapt to structural shifts in financial intermediation. the second is how to cope with the constraints imposed on central banks by the effective lower bound of interest rates. shifts in financial intermediation financial intermediation in recent years has been characterised by two structural shifts, one of which was specific to the euro area and one of which is global. bis central bankers β speeches in the euro area, financial markets underwent severe spatial fragmentation in the early phase of the crisis, with intermediation retreating behind national borders and impairing the bank lending channel of monetary policy. many of the changes to our operational framework during the crisis were a reaction to this. for example, the move towards fixed - rate full allotment liquidity provision, the widening of our collateral framework and the extension of the maturity of our lending operations acted as crucial stabilisers and averted sudden stops in market funding for national banking systems. while this problem has now largely disappeared, it would be complacent to see it as completely resolved. some key components of our banking union ( such as the build - up of the single resolution fund and the removal of national options and discretions in bank supervision ) are still being phased in, and some key drivers of fragmentation, such as the bank - sovereign nexus, remain unsolved β not to mention a lingering risk of political fragmentation. the second structural shift in patterns of intermediation, a global one, is linked to financial regulation. tighter financial regulation is both increasingly affecting the behaviour of supervised entities, and encouraging a parallel shift towards unregulated forms of finance. this dual process has repercussions for monetary policy implementation. it increases demand for safe short - term instruments to meet new regulatory requirements, such as the liquidity coverage ratio and margin requirements for derivatives. and it | the second challenge β the effective lower bound β recent evidence suggests that real neutral rates have fallen to very low levels, driven by both cyclical and structural forces. 1 this challenge is common to advanced economies but it is more pronounced in the euro area than in the us, given its markedly lower rate of potential output growth. in this context, all major central banks reduced interest rates to very low levels, thereby approaching the effective lower bound on interest rates. they responded to this via different measures : providing forward guidance, launching large - scale purchases of public and private sector assets, and β in our case β by implementing a negative interest rate policy, which has in fact uncovered that the effective lower bound is lower than was previously thought. these measures have been very effective in supporting output and inflation and anchoring medium - term price stability. however, they were taken on the implicit assumption that they would be transient, both because monetary stimulus would help counter the cyclical forces depressing the real equilibrium rate and because other economic policies would provide cyclical support and tackle the more structural drivers of low real rates. but if other economic policies do not in fact play this role, then we cannot exclude that the real equilibrium rate remains low. as such, we may see short - term rates being pushed to the effective lower bound more frequently in the event of macroeconomic shocks ; and the stimulus provided by lowering interest rates to that level would be of course be much weaker. for central banks to retain a handle on output and inflation, then, unconventional policies may have to be deployed more frequently. but this would come with at least three complications. first is the question of the operational target. a target focused on short - term interest rates makes sense when this is the main policy variable, but if short - term rates are persistently pushed towards the lower bound, monetary policy has to focus on a wider constellation of rates across different maturities and asset classes. what then is its target? central bankers currently offer quantity targets in these cases β a volume of assets to be bought per month β but price targets are only given in general terms, for instance β flattening the yield curve β. this is appropriate so long as balance sheet policies are temporary. it may not be in the long term, but moving to price targets may come at the expense of price discovery. this links to the second complication : balance sheet policies can mitigate certain facets of the safe asset shortage, but they might exacerbate others. in | 1 |
, but they actually have something very strong in common : ensuring the european banking and payment sector is fit for purpose in a rapidly changing technological landscape. looking ahead, as abraham lincoln once put it, β the best way to predict the future is to create it β. let us do it together, as talented and committed europeans. i thank you for your attention. villeroy de galhau, f., anchors and catalysts : central banks β dual role in innovation, speech, 27 september ii three progress reports are publicly available on the ecb website, the third and latest of which was released on 24 april 2023 iii european central bank, digital euro β prototype summary and lessons learned, 26 may 2023 iv the eurosystem will not know any details of any transaction v the european commission β s legislative proposal on retail cbdc is expected on 28 june 2023 vi be it for account holding, payments or access to a mobile app vii villeroy de galhau, f., big techs in finance : a bildungsroman that is far from over, speech, 9 february 2023 viii panetta, f., a digital euro : widely available and easy to use, speech, 24 april 2023 i | first concerns the resolution of large or even systemically important banks. the provision of potentially significant amounts of liquidity in times of crisis is a prerequisite for successful resolution. the framework for the ecb to provide " eurosystem resolution liquidity " has yet to be built. the other priority, at the other end of the spectrum, is to shift from resolution " for a minority " - a far too small minority of cases : two in the last nine years - to resolution " for the majority " of cases, including small and medium - sized banks. the european commission's proposal for a revised crisis management and deposit insurance ( cmdi ) framework is a step in the right direction. yet, level - playing field must be ensured not to give unfair advantage to smaller banks ; and greater pooling between the resolution fund and deposit guarantee schemes should not lead to large companies potentially benefiting from the same protection as the smaller deposits of individuals or smes. ii. the digital currency for a changing world let me now turn to my second topic : the technological evolutions underway in the fields of finance and payments, which has led us, the eurosystem, to have launched an investigation phase on a retail central bank digital currency ( cbdc ) under the sponsorship of president christine lagarde and my friend and colleague fabio panetta. pending an approval by the governing council, a preparation phase will then start at the end of this year, before a potential and gradual launch from 2027 or 2028 onwards. i am aware i am entering here a less consensual ground, listening to banks β doubts along two arguments ( i ) the cbdc would be a β solution in search of a problem β, the β why? β question ( ii ) and the cbdc would be a competitor to commercial bank money. the purpose : a digital banknote about the β why? β, i can imagine that two centuries ago, there were many voices questioning the need for a paper banknote β at that time a huge technical innovation β to be issued along the good old gold and silver coins. today, it all page 4 of 6 boils down to one simple question : as everything is becoming digital, why should central bank money be the only thing to remain in paper? as many of you know, central banks have also β and fortunately so β innovation in their dna i, keeping pace with technological disruptions. the eurosystem has made headway on the design of the digital | 1 |
summer and fall, despite further tightening of the labor market. even though the labor market heated up and labor compensation rose, measured inflation fell, owing to the appreciation of the dollar, weakness in international commodity prices, and faster productivity growth. those restraining forces were more evident in goods - price inflation, which in the cpi slowed substantially to only about Β½ percent in 1997, than on service - price inflation, which moderated much less - - to around 3 percent. providers of services appeared to be more pressed by mounting strains in labor markets. hourly wages and salaries in service - producing sectors rose 4Β½ percent last year, up considerably from the prior year and almost 1Β½ percentage points faster than in goods - producing sectors. however, a significant portion of that differential, but by no means all, traced to commissions in the financial and real estate services sector related to one - off increases in transactions prices and in volumes of activity, rather than to increases in the underlying wage structure. although the nominal federal funds rate was maintained after march, the apparent drop in inflation expectations over the balance of 1997 induced some firming in the stance of monetary policy by one important measure - - the real federal funds rate, or the nominal federal funds rate less a proxy for inflation expectations. some analysts have dubbed the contribution of the reduction in inflation expectations to raising the real federal funds rate a β passive β tightening, in that it increased the amount of monetary policy restraint in place without an explicit vote by the fomc. while the tightening may have been passive in that sense, it was by no means inadvertent. members of the fomc took some comfort in the upward trend of the real federal funds rate over the year and the rise in the foreign exchange value of the dollar because such additional restraint was viewed as appropriate given the strength of spending and building strains on labor resources. they also recognized that in virtually all other respects financial markets remained quite accommodative and, indeed, judging by the rise in equity prices, were providing additional impetus to domestic spending. the outlook for 1998 there can be no doubt that domestic demand retained considerable momentum at the outset of this year. production and employment have been on a strong uptrend in recent months. confident households, enjoying gains in income and wealth and benefitting from the reductions in intermediate - and longer - term interest rates to date, should continue to increase their spending. firms should find financing available on relatively attractive terms to fund profitable opportunities to enhance efficiency by investing in | recourse to costly informal finance, often in conjunction with loans from banks. while the β arithmetics β of extending credit are often diligently followed by lenders, in the absence of consistent credit histories, banks are often at a loss in case of non - repayment by borrowers. given the growing indebtedness, there is an increasing need to develop follow - up services to enable distressed borrowers overcome credit delinquencies. credit counsellor thus offers a viable task - specific, advisory ad hoc intermediary between the borrower and the bank concerned. counselling on the above lines generally serve three purposes. first, it examines ways to solve current financial problems. second, by creating awareness about the costs of misusing a credit, it improves financial management and develops realistic spending plans. third, it advises the distressed people to gain access to the structured financial system, including banking. however, such counselling will be appropriate only if it addresses unique situations of households in different parts of india. processes, costs and benefits it is technically possible for credit counselling to be ex ante or ex post. ex ante counselling helps borrowers to decide upon the quantum of loans they can avail, based on their income profile and stream of cash flows. more importantly, ex ante counselling attempts to influence the stability of the borrowers β flow of income and expenses, thereby lowering the probability of default. ex post counselling typically occurs after a crisis event, when the borrower has already missed one or several payments. the purpose of such counselling is to prevent default and foreclosure. it is, therefore, curative in nature. credit counselling in practice generally tends to be ex post in nature. such counselling involves oneon - one meetings, allowing the counsellor to observe the level of maintenance of the debt and other issues relevant to the stability of the borrower's situation. it includes advice on not only crisis management, and budgeting but also exploring avenues and networks that can provide succour in the interim. owing to these reasons, such counselling can be expensive, owing to the not - so - insignificant administrative costs involved. a credit counselling agency often receives most of its compensation from the creditors to whom the debt payments are distributed. this funding relationship could lead to the impression that credit counselling agencies are merely collections wings of the creditors. it is therefore essential to guard against these undesirable possibilities. in many instances | 0 |
per cent. at the most recent monetary policy meeting on 3 may we decided to keep the repo rate unchanged. at the same time, our assessment was that the repo rate will need to be raised gradually, which we had also assumed earlier. now we believe that it will need to be raised more than was anticipated in february. this is necessary so that inflation will develop in line with the target. the main reason why we need to revise our forecast upwards is the outcome of this year β s wage bargaining rounds. the central wage agreements have been slightly higher than we had earlier had reason to believe, given that unemployment is still quite high in sweden. some forecasters have believed in a higher interest rate path than we have predicted. however, this does not appear to be because their forecasts for wages or fiscal policy have differed substantially from those made by the riksbank. i would also like to point out that so far there are no dramatic differences in our picture of current economic developments today compared with february. we will return to this in the monetary policy report to be presented in june with a more detailed account of how we view the situation. own interest rate forecasts when we expressed our views in february regarding the future development of the interest rate, it was the first time we presented our own assessment of the future repo rate path. by this we mean that we try to calculate what we believe will be a well balanced monetary policy over the coming years. previously we presented forecasts for the economy on the basis of what the financial market participants believed about the repo rate. now that we are presenting our own interest rate path it will be clearer both what we believe about the interest rate and what we believe about the economy in general. we consider this to be a major step forward in the riksbank β s way of explaining how monetary policy functions. for most people i believe it is more important to have an idea of the development of the interest rate over time, rather than to know what an individual interest rate decision will entail. in this context i always try to be as clear as possible. the interest rate path is merely a forecast, not a promise. the economic conditions on which we base our forecasts are constantly changing. changes are constantly taking place in the economy, which means that we have to reconsider our opinions of future developments. the interest rate path represents nothing more nor less than the best assessment we were able to make at the time it was published. | vocational training must be developed to cover working careers characterized by mobility and change, with workers safeguarded by reinforced safety nets and insurance systems, both public and private, during periods of inactivity. schools and universities must support this process by ensuring education of adequate quality and quantity, acting with determination to raise levels of academic achievement and develop new skills. italy needs conditions that are conducive to enterprise and to the reallocation of productive factors. the lag we have accumulated is accentuated by a redundant regulatory framework, by complex and costly administrative obligations that must be drastically reduced, law that must be rendered more certain, widespread corruption that must be stamped out, and insufficient protection from crime. immediate, visible progress in removing these serious obstacles can stimulate productive investment, including from abroad, in all the country β s regions, especially in the south, where what is most critical is the environment for business activity, on which the balanced development of our economy ultimately depends. the programme of reforms launched in the last two years stems from these considerations. but in many instances, after the enactment of reform laws, the implementing measures have been slow to follow ; in some cases they are still lacking and administrative practices remain unchanged. this is a recurrent feature of our country β s history : the chief difficulties reside not so much in the substance of the laws as in their effective application. the pace of reform has slackened in the past year, owing in part to the progressive deterioration of the political climate. in resuming the path of reform with determination β as the european commission too urges in the recommendations accompanying the closure of the excessive deficit procedure β it is vital to adopt a comprehensive approach that fixes medium - term objectives from the outset. structural reforms take time ; they can be implemented in succession, provided that they are designed as part of a bigger picture that immediately clarifies their goals, implications and benefits. a credible programme can have an impact on expectations at once, dispelling uncertainties, fostering investor confidence and favouring the prospects of employment and income, above all for the young, who today find it difficult to imagine any future in our country. the consolidation of the public finances was also postponed for too long ; in the face of demographic pressure on important expenditure items, the priorities for the allocation of resources were not clearly set. in 2007 public expenditure excluding interest payments was 43 per cent of gdp, two percentage points more than in 1997 ; the primary surplus had contracted by more than three points. | 0 |
, there are also risks involved in continued low interest rates. if the continuation of low interest rates leads to a substantial rise in long - term interest rates by raising inflation expectations or by generating expectations for a weak dollar, this may give rise to another problem, namely that the fiscal burden increases and in turn the need for adjustments in the government's balance - sheet arises. effects resulting from different sectors making balance - sheet adjustments the difference between the united states and japan in terms of what sectors have to or had to make balance - sheet adjustments can result in considerable differences not only in income transfer effects, but also in the adjustment process. in the case of japan, since it was mainly the corporate sector that had to make balance - sheet adjustments, progress in the adjustment process for the economy overall was achieved through an increase in exports owing to high global economic growth. however, at present, it is difficult for the united states to expect similar help from a substantial rise in its exports, because other advanced economies are also, to a greater or lesser extent, undergoing balance - sheet adjustments. an additional problem is that employees'income has declined more substantially than in previous recessions in the united states. while this may help the recovery in corporate profits, it at the same time entails the risk of a delay in balance - sheet adjustments by households. having said that, i must hastily add that there are elements in the structure of the u. s. economy that will encourage rapid progress in balance - sheet adjustments. the size of necessary balance - sheet adjustments depends on the size of the excess in supply capacity in the overall economy relative to the long - term equilibrium growth rate β that is, the potential growth rate. if expectations for economic growth are high, pressures for balance - sheet adjustments will be small. in this context, the united states has the significant advantage of having a flexible economic structure. if labor and capital shift swiftly from low - productivity sectors to high - productivity sectors, this should sustain high productivity growth in the economy overall. in contrast, reflecting population aging and a falling birth rate, the growth rate of japan's working - age population first declined and then turned negative during the 1990s. moreover, labor and capital mobility was relatively low, which was partly responsible for the gradual decline in productivity growth in the economy overall. as a result, japan's potential growth rate after the bubble burst declined, which protracted the duration of balance sheet adjustments. iii. balance - sheet adjustments and the global economy lastly | toshihiko fukui : the outlook for japan's economy and the conduct of monetary policy summary of a speech by mr toshihiko fukui, governor of the bank of japan, at the kisaragi - kai meeting, tokyo, 7 november 2006. * * * introduction at the monetary policy meetings at the end of april and october, the policy board of the bank of japan approves the text of the outlook for economic activity and prices, or the outlook report as we call it for short, and makes it public. today, i would like to discuss the bank's view on the current state of and outlook for the domestic economy and overseas economies as well as the bank's thinking behind its conduct of monetary policy, with reference to the october 2006 outlook report, which was released last week. i. developments in overseas economies let me first touch upon recent developments in the global economy. in the united states, deceleration in the pace of economic expansion is becoming clearer, as seen, for example, in the decrease in housing investment. however, business fixed investment and production continue to increase, and the pace of deceleration in private consumption has been moderate so far. meanwhile, in the euro area, the momentum of economic recovery is becoming more evident. the increases in production and the recovery in corporate profits observed so far have contributed to an improvement in the employment situation and increases in business fixed investment. in china, strong expansion in both domestic and external demand is continuing. the rate of growth in fixed asset investment remains high, although the pace of growth has been slowing slightly as a result of measures taken by the chinese government and the people's bank of china to contain the overheating of the economy. oil - producing countries, such as those of the middle east, continue to experience an economic boom supported partly by the significant improvement in the external balance resulting from the rises in crude oil prices. other emerging economies also continue to expand. thus, the global economy as a whole continues to expand strongly, with the slowing growth in the u. s. economy being offset by high growth in other economies. the global economy is expected to continue expanding steadily across a broader range of regions. according to the international monetary fund ( imf ), the global economy has registered high growth rates of around 5 percent for two consecutive years : 5. 3 percent in 2004 and 4. 9 percent in 2005. the global economy is expected to continue expanding at around the same pace, | 0.5 |
bank that meets the qualifying internal infrastructure standards for risk measurement and management could choose to apply these versions of basel ii. we anticipate another ten or so large banks may opt to do so voluntarily because of the greater risk sensitivity it affords. these banks may also make this choice for prestige or competitive reasons, as counterparties look for indications of technical risk measurement skills at the large banking entities with which they deal. u. s. authorities have agreed to implement only the most advanced basel ii options and to limit the number of required participants. first and foremost, the decision reflects a balancing of costs and benefits. any change is expensive, and the advanced approaches are very costly to implement. the overwhelming majority of banks in this country are well capitalized and well managed under the current modified basel i, and smaller banks are forced by markets to hold capital considerably above the well - capitalized level, so the cost - benefit ratio of requiring more of our banks to adopt some version of basel ii is tilted, for most banks, very strongly against the desirability of change. when we then add to the equation the fact that it is primarily the megabanks whose operations seem inconsistent with the current capital regime, the decision to limit the scope of application appeared even more clear - cut. moreover, with our concern about shortfalls of the current regime focused on the complex, large, internationally active banks - - and the desirability, on grounds of safety and soundness and macroeconomic stability, to see the best practice risk - management techniques applied to these entities - - the decision to deploy only the most sophisticated version of basel ii also seemed obvious to us. you may also recall that an important objective of both basel i and basel ii is to create cross - border competitive equality, reducing in our minds the necessity of requiring basel rules to be applied to smaller banks that do not compete in international markets. although u. s. regulators have for some time signaled that basel ii would apply only to the largest banks, questions have been raised about the implication for those banks that are not a - irb candidates. let me share with you our evaluation of what the implications may be for banks that will not be required to adopt basel ii and that opt to remain under basel i. no bright line marks the separation between the groups of institutions that we refer to as large, complex, internationally active banks ( those that would be required to follow the advanced basel ii ), other large, complex banks ( some of which we | obviously, falling into financial distress is not solely the result of lack of knowledge about finance. but in many cases such knowledge could avoid or ameliorate the negative consequences of uninformed decisions. thus, in considering means by which to improve the financial status of families, education can play an important role. while data to measure the efficacy of financial education are not plentiful, the limited research available is encouraging. for example, a recent study by one of the nation's largest purchasers of home mortgages finds that homebuyers who obtain structured homeownership education have reduced rates of loan delinquency. similarly, an evaluation conducted by the national endowment for financial education on its high - school - based programs found that participation in financial - planning programs improved students'knowledge, behavior, and confidence with respect to personal finance, with nearly half of participants beginning to save more as a result of the program. another study of the relationship between financial behavior and financial outcomes revealed that comprehension of the general principles of sound financial behavior, such as budgeting and saving, is actually more beneficial in producing successful financial results over time than specific and detailed information on financial transactions. these findings underscore the importance of beginning the learning process as early as possible. indeed, in many respects, improving basic financial education at the elementary and secondary school level can provide a foundation for financial literacy, helping younger people avoid poor financial decisions that can take years to overcome. in particular, competency in mathematics - both in numerical manipulation and in understanding its conceptual foundations - enhances a person's ability to handle the more ambiguous and qualitative relationships that dominate our day - to - day decisionmaking. for example, through an understanding of compounding interest, one can appreciate the cumulative benefit of routine saving. similarly, learning how to conduct research in a library or on the internet can be instructive in where and how to look for information to evaluate decisions. educational efforts to improve fundamental mathematic and problem - solving skills can foster knowledgeable consumers who can take full advantage of the sophisticated financial services offered in an ever - changing marketplace. many of you are involved in institutions that are working hard to enhance basic education about economics and finance, and it is a challenge the federal reserve takes seriously as well. gary stern, president of the minneapolis federal reserve bank, has been an inspiration in the fed as well as within national council on economic education. the economic educators of the federal reserve system have recently launched | 0.5 |
of debt? as mentioned at the beginning, the term β debt β emphasises the borrower β s obligation to repay the loan in future. each credit / debt relationship is therefore fraught with the risk that the borrower might incur financial difficulties and be unable to repay the loan. the cartoon here makes a tongue - in - cheek reference to this credit risk ( cf. slide 8 ). naturally, credit risk is also inherent in the case of our university graduate β s start - up. there is a rule of thumb in the start - up scene that says only one in ten start - ups succeeds. if her product idea fails, our university of berne graduate will lack the funds to repay her loan and interest. and the miller family β s mortgage loan is not exempt from credit risk, either. payment difficulties could arise if, for example, a divorce or rising interest rates lead to an unexpected hike in current expenses, or if the family β s future income is reduced by unemployment or illness. in such cases, borrowers will of course do all they can to avoid a default and first of all try to lower other expenses. this may mean cutting back on non - essential consumer spending or postponing maintenance work or investments. a default, after all, has far - reaching in this simplified example, no mention is made of the risk / return considerations that naturally need to be made in such a case. this is also what the empirical literature suggests. an advanced financial system and access to efficient credit provision are closely linked to growth and a high level of prosperity ( cf. beck ( 2011 ) and levine ( 2005 ) ). it should be kept in mind that a modern financial system comprises further key elements besides the credit mechanism, in particular payment systems, market places for trading shares and bonds, and insurance business. page 5 / 16 consequences. in the case of the start - up, it could possibly lead to insolvency. the miller family for their part might be forced to sell the house in an emergency sale. when borrowers face payment difficulties or default on their loan, this also causes problems for creditors. they will have to write off anticipated interest income and may even lose the money lent if the loan isn β t secured by collateral. and even if the loan is secured β for instance by real estate β getting a good price for the collateral could prove difficult, depending on the circumstances. credit as a burden for an entire economy the examples show that an actual or impending | vehicles has expanded. while there are several reasons for this abundance of global credit, global integration is almost certainly an important part of the story. saving rates in asia are relatively high and exceed the region's investment needs. in addition, with the sharp rise in the price of oil in recent years, a number of the major oil - exporting countries have seen a large increase in their saving that has outstripped the growth of their investment demand. with the integration of these economies into world markets, and with investors seeking international diversification, new pools of capital have been injected into the global financial system. how is canada faring? how have these developments been affecting the canadian economy? i'll discuss them in reverse order. the implications of abundant global credit are readily apparent. long - term interest rates in canada have been low. even with some back - up in yields in recent weeks, yields on 30 - year government of canada bonds remain well below 5 per cent. the canadian stock market has been buoyant, and risk spreads on corporate debt are near historical lows. household credit and money growth have been strong, and cross - border investment flows have accelerated. the rise in the prices of commodities relative to manufactured goods has reinforced many of these same effects. since canada is a net exporter of commodities and a net importer of manufactured goods, the rise in commodity prices has made canada wealthier as a nation. the increased value of canada's natural resource endowments is showing up in higher domestic stock market prices and increased cross - border investment flows. it has also been a major factor supporting robust consumption and investment growth in canada. and of course it's showing up in a higher canadian dollar. in the past five years, the canadian dollar has gained about 45 per cent against the u. s. dollar. this appreciation since 2002 reflects a combination of factors, the most important of which is the significant increase in commodity prices. the other implication of the rise in the relative price of commodities is economic adjustment, by which i mean the reallocation of labour and capital from weaker sectors to stronger sectors. the manufacturing sector, faced with higher costs for energy and other inputs, new sources of competition from asia, and a stronger canadian dollar, is going through a difficult adjustment. our own surveys suggest that most manufacturers are responding to these challenges by making changes in the way they do business. part of this adjustment has involved reducing employment. in the past three years, employment in manufacturing has | 0 |
interest rate paths can be used to illustrate the choices facing monetary policy. let me use the riksbank β s interest rate decision in december 2004 as an example. on that occasion we left the rate unchanged despite the fact that inflation was forecast to be below our target of 2 per cent during the greater part of the next two years. with inflation forecast to be so low during such a large part of the forecast period it would have been possible to justify a further rate cut. but there were also arguments in the opposite direction. the most important was that demand was already growing markedly faster than the economy was deemed capable of sustaining in the long run. the vigorous growth was anticipated to continue and so it wasn β t weak demand that was causing the low inflation. instead, the low inflation was being caused by unexpectedly high productivity and unexpectedly low price increases for imported goods, something that in itself could be expected to further stimulate growth in the period ahead. an additional factor was that the repo rate was already at an unusually low level, which could partly explain the increase in households β debt burden and the continued rise in housing prices. even though debt levels were not deemed to be a threat to financial stability, another rate cut could have further fuelled house price inflation and indebtedness. that in turn could have given rise to future problems when monetary policy eventually would most likely have to be tightened. none of these arguments in themselves were the key factor in deciding to leave the repo rate unchanged, but taken together they indicated nevertheless the need for a certain measure of caution. in this kind of situation it can be interesting to consider how different future paths for the interest rate can be expected to affect both the real economy and inflation. figure 6 shows resource utilisation in two different cases : one based on an unchanged repo rate and another on the implied forward rates that applied during the autumn. at that time the implied forward rates were indicating that the repo rate would be raised very shortly and that it would then rise to levels around 4. 5 per cent in the longer term. resource utilisation picks up in both cases, turning positive after about a year. but if the repo rate is raised according to the implied forward rate at the time, resource utilisation drops, turning negative again during 2007, whereas it remains positive throughout the whole period covered by the example if the rate is held constant. the situation also differs somewhat between the two alternatives when it comes to inflation ( see figure 7 ) | number of people in employment is the highest on record. and unemployment has fallen from its most recent peak of 10Β½ % on a claimant count basis at the turn of 1992 / 93 to the present rate of 3. 7 %. that is the lowest for 25 years in the uk as a whole, and just about the lowest in nearly every region. this is not just past history. having come through the global economic slowdown a year or two ago, the economy as a whole is now again growing at well above trend, with inflation a bit below target ; and the broad prospect for the next couple of years - on most forecasts, is for continuing relatively strong growth with relatively high employment and relatively low inflation. our economic progress - and the common approach to economic management that underlies it and which we share with our european partners - provides, in my view, a firm foundation for a continuing positive and constructive relationship between the uk and other members of the european union, whether or not they are members of the eurozone. that of course is in the economic interest of all sides. just as we benefit from a stable and prosperous europe, so too the continental european interest lies in a stable and prosperous uk. and that mutual self - interest above all is the thing we all need to hold on to. | 0 |
) geopolitical risks. in particular, uncertainties regarding the effects of protectionist moves have been heightening. as it can be said that the situation surrounding overseas economies is uncertain, it is necessary to stay vigilant regarding these risk factors, including their impact on the sentiment of firms and households in japan. b. japan's economy and prices 1. economic activity i will now discuss the economic situation in japan. the economy has been on a moderate expanding trend, with a virtuous cycle from income to spending operating, although exports, production, and business sentiment have been affected by the slowdown in overseas economies. this is evidenced by the real gdp growth rate having registered 1. 3 percent for the april - june quarter of 2019 on an annualized quarter - on - quarter basis, representing positive growth for three consecutive quarters. while the contribution of net exports on real gdp growth 1 / 5 bis central bankers'speeches has turned negative, that of domestic demand has remained positive. according to the bank of japan's september 2019 tankan ( short - term economic survey of enterprises in japan ) released at the beginning of october, the diffusion index ( di ) for business conditions for all industries and enterprises has remained positive, although the effects of such factors as the slowdown in overseas economies have continued to be observed. with regard to the outlook, japan's economy is likely to continue on a moderate expanding trend on average, although it is projected to be affected by the slowdown in overseas economies for the time being and due attention needs to be paid to the effects of the october 2019 consumption tax hike on private consumption. in terms of specific figures for the economic growth rate, as provided in the july 2019 outlook for economic activity and prices ( outlook report ) released by the bank, the medians of the policy board members'forecasts are 0. 7 percent for fiscal 2019, 0. 9 percent for fiscal 2020, and 1. 1 percent for fiscal 2021. the bank estimates that the economic growth rate that can be achieved in the long term, or the so - called potential growth rate, is in the range of 0. 5 - 1. 0 percent. thus, japan's economy is expected to continue growing at a pace consistent with its potential. to elaborate on japan's economy by demand component, exports are projected to continue showing some weakness for the time being, but thereafter are expected to return to their moderate increasing trend as the growth rates of overseas economies rise. domestic demand | lenders, counselors, community development specialists, and policymakers. we are also concerned about the challenges of neighborhoods that have seen large increases in foreclosures and vacant properties and have begun to work with policymakers, lenders ( including community banks ) and community groups to address these problems. in particular, we have undertaken a joint effort with neighborworks america to help communities develop strategies for neighborhood stabilization. conclusion reducing the rate of preventable foreclosures would promote economic stability for households, neighborhoods, and the nation as a whole. although lenders and servicers have scaled up their efforts and adopted a wider variety of loss - mitigation techniques, more can, and should, be done. the fact that many troubled borrowers have little or no equity suggests that greater use of principal writedowns or short payoffs, perhaps with shared appreciation features, would be in the best interest of both borrowers and lenders. this approach would be facilitated by allowing the fha the flexibility to offer refinancing products to more borrowers. ultimately, though, real relief for the mortgage market requires stabilization, and then recovery, in the nation's housing sector. modernization of the fha would be of help on this front as well. i am sure that the fha and the department of housing and urban development, given the appropriate powers by the congress, will make every effort to expand their operations and to help improve the functioning of the market for home - purchase mortgages. for community bankers, fha modernization and expansion would provide an important opportunity β of which i urge you to take advantage β to better serve your customers and community. the government - sponsored enterprises ( gses ), fannie mae and freddie mac, likewise could do a great deal to address the current problems in housing and the mortgage market. new capital - raising by the gses, together with congressional action to strengthen the supervision of these companies, would allow fannie and freddie to expand significantly the number of new mortgages that they securitize. with few alternative mortgage channels available today, such action would be highly beneficial to the economy. i urge the congress and the gses to take the steps necessary to allow more potential homebuyers access to mortgage credit at reasonable terms. | 0 |
to a revival of interest in the topic of monetary policy coordination. 9 but formal monetary policy coordination is complex, for well - known reasons. 10 central banks have national mandates, not global ones, and are accountable to their domestic parliament. this does not mean, however, that we cannot achieve a better global solution than we have today. we have seen, for instance, how divergent monetary policies among major central banks can create uncertainty about future policy intentions, which in turn leads to higher exchange rate volatility and risk premia. that then has to be countered with more expansionary monetary policy, increasing spillover effects for others. we also know that competitive devaluations are lose - lose for the global economy, since they lead only to greater market volatility, to which other central banks are then forced to react to defend their domestic mandates. so we would all clearly benefit from enhanced understanding among central banks on the relative paths of monetary policy. that comes down, above all, to improving communication over our reaction functions and policy frameworks. the global economy could also benefit from cooperation among spillover - initiating and spillover - receiving economies on how to mitigate unwanted side effects. one aspect that we need to understand better is how domestic monetary regimes affect the transmission of foreign monetary policy shocks. there has been a debate in recent years as to whether the famous β trilemma β of international macro has collapsed into a β dilemma β, whereby floating exchange rates no longer guarantee autonomy for domestic monetary policy, and policy independence is only possible if capital flows are in fact managed. 11 but see ammer et al. ( 2016 ), β international spillovers of monetary policy β ifdp notes. see georgiadis ( in press ), β determinants of global spillovers from us monetary policy β, journal of international money and finance ; feldkircher and huber ( 2015 ), β the international transmission of u. s. structural shocks β evidence from global vector autoregressions β, european economic review, vol. 81 ( c ), pages 167 β 188 ; kim ( 2001 ), β international transmission of u. s. monetary policy shocks : evidence from vars β, journal of monetary economics, vol. 48 ( 2 ), pp. 339 β 372. see ammer et al. ( 2016, op cit. ). see rajan ( 2016 ), β towards rules of the monetary game β, speech at at the imf / | the revision of the inflation forecast is a clear sign that deflation risks have increased once more. global economic outlook the snb β s inflation forecast is embedded in a global economic scenario. let me now discuss our assessment of the global economy. global economic developments continue to be mixed. the us, uk and china all saw robust growth in the third quarter. in the euro area and japan, by contrast, it was weaker than expected. in addition, inflation in the advanced economies was below central bank targets β in some cases by a considerable margin. in the euro area, it is only just in positive territory. the decline in commodity prices, above all crude oil, will curb inflation further over the short term. we continue to assume that global economic growth will gradually firm over the course of next year. the considerable fall in oil prices should be a contributory factor. however, the bis central bankers β speeches prospects for individual countries vary widely. for the us, we are expecting that growth will remain robust over the next few quarters, leading to better utilisation of economic capacity. for the euro area, by contrast, we have revised the growth forecast downwards once more, and the outlook for this region remains very subdued. the picture for the emerging economies is mixed. china will continue to be a driver of the global economy, although it is likely to see a gradual weakening of growth. for india, growth prospects are picking up again. the outlook for brazil and russia, by contrast, remains muted. overall, the global economic outlook is still very uncertain and dominated by downside risks β the most important of which are the continuing difficult conditions in the euro area and a possible escalation in geopolitical tensions. swiss economic outlook i will now look at economic developments in switzerland. following a weak second quarter, real gdp growth was unexpectedly favourable in the third. on the demand side, the increase was supported predominantly by goods exports, with manufacturing the main beneficiary of the strong export demand. however, private and public consumption also picked up, after having registered only lacklustre growth in the first half of the year. momentum in equipment investment, by contrast, remained weak. in part, growth was also boosted by special factors, including an unusually large increase in value added in the healthcare industry. despite the positive developments of the third quarter, utilisation of economic capacity remains unsatisfactory. we are assuming that growth will be markedly lower in the fourth quarter. in particular, export | 0 |
at the local economy, which became the destination of increased capital inflows β the flood i mentioned previously. granted, part of them were volatile in nature or directed towards the non - tradable 2 / 4 bis central bankers'speeches sector. still, some of these inflows were aimed to create or enhance production capacities or to set up businesses in tradable services, which were essential to securing welfare through job creation and increased income, the type of welfare that is more resilient when faced with worldwide volatility such as that seen during the crisis. these positive developments continued to produce effects in the aftermath of the crisis as well, when romania experienced an export - driven recovery, to which sectors on the receiving end of fdi inflows made a significant contribution, and which enabled progress in terms of income per capita. the indicator, expressed as a ratio to the eu28 average ( the uk still included ), currently stands at close to 57 percent ( after around 41 percent in 2007 and just over 25 percent in 2000 ). there is still very much room for progress. i say this having in mind the gdp per capita gap that is still substantial ( and larger than those of most regional peers ). in a scenario where romania experiences constant 5 percent growth each year, while the eu grows on average only by 2 percent, it will take us 20 years to achieve full convergence. under more pessimistic scenarios, i guess you don β t want to hear how long it would take to catch up. at this point, some of you may wonder why would anyone be pessimistic if local output currently grows at over 5 percent, at 6 percent in fact, in the second quarter of 2016, the highest rate in the eu? well, as the effects of the recent fiscal stimulus wear off, gdp dynamics will come down, while additional stimulus, if implemented, will put even more at risk the already weaker fiscal position. above all, growth needs to be achieved in a sustainable fashion, backed by productivity and while keeping fiscal and external deficits in check. the lessons taught by the most severe teacher of all, the economic crisis, should not be wasted β¦ when i am talking about much room for progress, i am also referring to developments sometimes overlooked, especially if one has in mind only the aggregate figures. more specifically, i am referring to the fact that eu accession benefits were not evenly distributed across the economy, as reflected for instance by rising regional divergence. | we believe that financial digitalization accelerates income growth and democratizes access to more affordable financial products and services. we have also embraced digital transformation in our internal strategy, highlighting our commitment to being an agile, resilient, and proactive organization. we envision to be a digitally transformed organization driven by a strong digital leadership, an innovative and collaborative culture, a secure and resilient technology infrastructure, and optimized work processes that support data - driven decisions. while we recognize the promising benefits of digitalization, we are also cognizant of its attendant risks. thus, we also highlight that these efforts are underpinned by sound digital governance, adequate risk management practices, and robust internal controls. 1 / 2 bis central bankers'speeches given these developments, it is important for the internal audit function to reposition itself as a strategic partner in driving digital value. the independent view of internal audit continues to be crucial, as it plays a valuable role in complementing the first - and second - line functions by providing assurance and advice on governance, risk management, and controls. digital transformations are journeys without borders and the possibilities for digital innovation are endless. as central banks embrace change through digitalization, internal audit teams must forge the same trail ; reassess perspectives ; reimagine audit approaches and methodologies ; and tap on reliable technologies to add more value and provide assurance to the organization. i hope that this meeting will provide a meaningful platform for discussing internal audit β s rapidly evolving role in these areas. the shared views, practices and experiences during the sessions will certainly enrich our knowledge and inform our individual and collective digital transformation journey. thank you and i wish you all a meaningful discussion ahead. 2 / 2 bis central bankers'speeches | 0 |
, stability of the lev, and stability of our monetary regime. i will say once again what i have stated repeatedly : the only exit from our currency board monetary arrangement is our entry into the euro area and the adoption of the euro. that will happen when all necessary conditions for this are fulfilled. we are not at this stage yet ; however we are working hard in this direction. i should now like to say a few words about our immediate priority tasks. first, we are making sure the measures resulting from the asset quality review are strictly applied with a focus on the capital buffer replenishment plans as prescribed for some of the banks. second, we are finalising the plan to further enhance the work of the banking supervision. that is a continuation of the plan we have been implementing for the last almost two years now and whose fulfilment has produced good results. the new accents are : internal regulations, 1 / 2 bis central bankers'speeches information systems, and increase of resources, including appointment of the additional number of people as provided for in the original plan, which, unfortunately, takes more time than we expected. third, we adopted a combination of measures to make the already developed system for recovery and resolution of banks fully functioning. in this area we have prioritised two sets of measures : the approval of resolution plans for the systemically important domestic banks ( something that we have already done for the subsidiaries of eu banks ) ; and the joint work with the ministry of finance of possibilities for the bnb to provide liquidity support. fourth, we have thoroughly analysed the issue of nonperforming loans ( npl ), both at banking system level and at an individual bank level, and we are developing comprehensive measures which would create conditions for reduction of these loans, including strengthened loan - loss provisions, higher npl write - offs, improved collateral valuations, enhanced disclosure practices, and strengthened data collection. fifth, we are continuing the efforts to bring the regulatory framework fully in line with the eu law. for example, we are drawing up a completely new law on payment services and payment systems which, inter alia, would strengthen the requirements for security of payments made electronically and via internet. i mention all these priority tasks of the bnb because for their performance we would largely rely on our constructive partnership with you, as we have done so far. of course, we are well aware of the specific challenges that you too are facing. the strong pressure on profitability with a | must ensure we achieve the same level of risk mitigation β in other words, the β same regulatory outcome β. and, if and when for certain crypto related activities this proves not to be possible, where we can find no way to mitigate and manage the risk to the extent necessary, that is to say to the extent such risk is managed in other parts of the financial system, we should not let activities proceed. let me give an example of how this approach works in the development of the regulatory standards for stablecoins should they be used as part of systemic payment systems. this is an area in which i have been deeply involved as the chair of the international committee on payments and market infrastructure ( cpmi ) at the bank for international settlement. together with the international organization of securities commissions ( iosco ), the cpmi is responsible for the international standards for financial market infrastructures, including systemic payment systems. the standards, the principles for financial market infrastructures ( pfmi ), were established a decade ago and are intended to be technology neutral. cpmi - iosco has, over the past two years, worked through the details and the risks of stablecoin arrangements used to make payments to determine where the existing standards, the pfmi, can simply be applied to stablecoin arrangements and where, given the novel features of stablecoins, further guidance is needed, for example where technology has made possible structures that were not envisaged when the pfmi were agreed. the objective of such further guidance is to ensure we achieve for stablecoins the level of risk mitigation we expect of payment systems that are, or are likely quickly to become, of systemic scale. so, for example, if a stabecoin is being used as a β settlement asset β, in transactions β in other words, as the means of settlement or the β money β β it must be as safe as the other forms of money β central bank money or commercial bank deposits β that is currently used as the settlement asset in payments systems. so the guidance makes clear that if used for this purpose, the holders of such stablecoins must have a clear legal claim that enables them to redeem the coin within the day and at par in central or commercial bank money. to meet the international standard, stablecoin issuers will have to demonstrate they can meet this requirement β in much the same way that commercial banks that issue deposit based money have to be able to repay | 0 |
be compared to a walking man, who has to stand firm on both legs. should one of the legs fail to respond in a timely and coordinated way for whatever reason, many adverse consequences would inevitably follow. although fiscal policy is of course extremely useful in many respects, i am quite skeptical as regards this specific feature that is so important for the elaboration of an appropriate policy mix, namely the stabilisation properties of an active fiscal policy geared towards macroeconomic fine - tuning. this β leg β seems quite unreliable to me, for several reasons. first of all, experience shows that fiscal impulses are frequently implemented too late, after the occurrence of the shock. these delays simply reflect a time - consuming decision - making process. let me draw your attention on the various steps involved : the identification of the problem, the elaboration of the required measures, the discussion of these measures and their political adoption, their implementation and the time it takes before they exert an impact on aggregate demand. there are many examples of allegedly contra - cyclical policies that turn out to exert a procyclical impact on the economy because of the time lags involved. in these circumstances, fiscal impulses could contribute to magnify economic cycles. in addition, long and variable delays increase the uncertainty about the impact of discretionary measures on the economy. this β impact uncertainty β will increase the uncertainty for economic agents and monetary policy - makers. furthermore, any stabilisation policy has to be conducted in a symmetrical way in order to avoid a systematic drift in the level of public expenditure. this condition is unfortunately difficult to fulfill, because many expenditure items are not flexible downwards. they could be increased in an easy way when the policy mix requires an expansionary fiscal policy, but a decline of the same magnitude will in all probability not be implemented when a restrictive stance becomes more appropriate. let me give the example of luxembourg to illustrate the validity of this point. the compensation of employees and social transfers - two expenditure categories characterised by a weak downward flexibility for evident reasons - jointly account for about 70 % of total general government expenditure. on a priori grounds, only the intermediate consumption of general government could be used in a symmetric way and in a timely manner, but this expenditure item does not account for more than 3 % of gdp. in addition, it is split between the central government and local governments, which would also require a close co - ordination between these two entities. the weak magnitude of fiscal multipliers | has cost the people of sweden thousands of kronor more per year. the real effects have a high social and economic price one of the more tangible effects of the crisis of the 1990s was its impact on the labour market. having gotten used to a level of unemployment of a few per cent, we then saw unemployment increase to double figures over only a couple of years. overheating at the end of the 1980s and the resulting financial crisis almost doubled long - term unemployment. and, of course, shocks to the national economy of this kind do not spare us citizens in our role as taxpayers either. problems in the banking sector impact the country β s citizens in several ways a banking crisis thus impacts individual citizens in several ways. lower or even negative growth leads us, as employees, to run an increased risk of unemployment and to earn lower wages than would otherwise have been the case. when the growth path falls over the longer term, we also have to count on lower pensions. bank crises also risk being costly to us in our role as taxpayers. if the government is forced to compensate those who have put money into a bank, or even take over and capitalise a bank on the ropes, there will be less funding left for other purposes. taxes will be higher or public welfare lower β or both. as almost all citizens are also bank customers, they are also impacted more directly. a crisis in the swedish banking system would lead to higher funding costs for the banks and thus higher lending rates. customers in a bank needing to be restructured may also need to change bank and negotiate conditions under circumstances that would probably not be particularly favourable. all of this risks leading to major difficulties for households. and this is something that we saw all too many examples of at the start of the 1990s. financial crises ultimately threaten fundamentally important social functions an even more serious financial crisis could even threaten fundamentally more important social functions. households are dependent on the banks β ability to manage payments so that they can receive wages, purchase food and so on. in turn, our banks are dependent on the financial market as a whole. if a serious crisis should break out β if the payment systems should stop working, if the banks should stop trusting each other or if the banks should cancel payments β there would be problems for a great many of us. as a conjectural experiment, we could ask ourselves how many swedish households would be able to cope with a week or two in which neither charge cards nor atms functioned. thankfully, we haven | 0 |
excluding food and energy componentes β inflation, in turn, will approach 3 % in the first half of 2019, to later stay in the neighborhood until the end of the projection horizon ( figure 8 ). monetary policy about monetary policy, the same as in september, the board considers that the evolution of macroeconomic conditions makes it necessary to gradually withdraw the current monetary stimulus. key in this judgment is our assessment of the size of the capacity gaps compared with the magnitude of the monetary stimulus : while the former has decreased, monetary policy is still very expansionary. the baseline scenario uses as a working assumption that the monetary policy rate will continue to rise in the coming months to approach its neutral level of 4 % to 4. 5 % in the first half of 2020. the board has stated that it expects to adjust the mpr in a gradual and prudent manner. in particular, the implementation of monetary policy will be conditional on the effects of incoming information on the projected inflation dynamics, making the necessary adjustments to policy measures if faced with significant deviations in either direction. risk scenarios as usual, there are internal and external elements that may alter the projections i just presented you. like in the past several quarters, the risk balance of the external scenario relevant to chile remains biased downward. the main risk continues to be a drastic deterioration of financial conditions facing emerging economies, which could result from some of many elements. on one hand, whatever happens in the us is important to us, because of its effects on inflation as well as its monetary policy and economic outlook. on the other hand, major geopolitical risks persist. the trade conflict has tended to refocus on the us versus china, in a context where the chinese economies have activated several stimulus measures, but financial risks remain while the economy rebalances. in any case, the meetings held by the two nations during the g - 20 convention seems to indicate that this conflict will not escalate any further, at least for some time. in europe, the uncertainty surrounding brexit and the complex situation in italy has taken on greater force. finally, although we believe that the drop in the oil price responds primarily to supply - side factors β which reduces short - term inflationary pressures β it remains to be established to what extent this could be reflecting more permanent demand - side factors. recent months have seen a substantial adjustment in financial asset prices in the developed world that could be signaling a change in risk premiums, consistent with a scenario of uncertainty that | continue to recede to 4. 6 % of gdp. the international economy is undergoing a normalization process that influences the chilean economy. this means a lower external impulse, with more balanced world growth between developed and emerging economies, terms of trade approaching their long - term level and global financial conditions more in line with historic patterns. a smaller boost from foreign investment is also to be expected β especially in mining β, which will take pressure off the current - account deficit and the use of internal resources. monetary policy is well equipped, if so required, to back this adjustment process. the board follows closely the evolution of the external and domestic macroeconomic scenario and its implications on inflation, and reaffirms its commitment to conduct monetary policy so that projected inflation stands at 3 % over the policy horizon. i would like to end by sharing with you some final thoughts. final thoughts we have been 19 months with the same monetary policy interest rate. and as with the exchange rate, during this time we have received the most diverse recommendations and suggestions from the market. from taking prompt action to prevent the economy from overheating to acting just as promptly to avoid deterioration. in this dilemma, we have always opted for a medium - to long - run look over the short - term ups and downs, and therefore considered all the risks involved. so far this has allowed us to properly anticipate events and stick to what we believe has been the right monetary policy. the international conjuncture puts us to the test ; we have identified many risks in this area. over the months they have increased in both variety and origins. we know that we are prepared to face them in the best way possible. it is impossible to be immune. in fact, a small open economy like chile is always subject to the vagaries of the international economy : it could not be otherwise. however, policy makers should be able to overcome them without major setbacks. there are also challenges within our borders, especially doubts about the evolution of a number of variables, such as employment and consumption, among others. it is precisely this medium - to long - term vision what helps us not to make hasty decisions. we have said that we are ready to take action if necessary, but overreacting to one particular event would be tantamount to throwing away the well - earned credibility of the central bank, which is a fundamental anchor to achieve our goal of safeguarding the stability of the price level and the financial system. bis central bankers | 0.5 |
tight monetary policy as well as the benign global price environment for ukrainian exports in the first half of the year, and the record harvest of grain crops in the second half of 2018, the hryvnia strengthened by 1. 4 % over the year. this is the sign of stabilization in the foreign exchange market of ukraine. at the same time, ukrainians now trust the nbu β s ability to smooth out excessive market fluctuations. this is proven by the fact that even russian aggression in the kerch strait and the imposition of the 1 / 3 bis central bankers'speeches martial law have not caused any major panic on the foreign exchange market. we highlighted developments on the foreing exchange market and continued to be active in the market, thus preventing panic among market participants and households. the stronger hryvnia allowed the nbu to increase international reserves throughout the year by purchasing foreign currency on the interbank market. external financing became another source : ukraine received a new program of cooperation with the imf, which lays the groundwork for further strengthening of macrofinancial stability. as a result, usd 2. 4 billion was added to the reserves by international partners ( the imf, the eu and the world bank ). the resulting amount of international reserves is the highest in five years, at usd 20. 8 billion. the last time we saw such figures was in the fall of 2013. the financial sector is showing good performance as well. the banking system is not only resilient, capitalized, and transparent, but also profitable β for the first time in five years. consumer confidence in the banking system is on the rise. hryvnia household deposits increased 15 % last year. banks are finally doing more lending, with hryvnia household loans up 31 % last year. in addition, we can currently talk about a certain recovery in corporate lending. our priorities in achieving these results were identified by the nbu β s medium - term strategy. approved and unveiled in the spring of 2018, the strategy identifies seven key goals of the nbu : 1. low and stable inflation. 2. stable, transparent, and effective banking system. 3. resumption of lending. 4. effective regulation of the financial sector. 5. free flow of capital. 6. financial inclusion. 7. modern, open, independent, and effective central bank. the nbu β s activities aimed at achieving these goals were what made possible the comforting highs and record - high figures of | the banking panics of an earlier era. although the vulnerabilities associated with short - term wholesale funding and excessive leverage can be seen as structural weaknesses of the global financial system, they can also be viewed as a consequence of poor risk management by financial institutions and investors, which i would count as another major vulnerability of the system before the crisis. unfortunately, the crisis revealed a number of significant defects in private - sector risk management and risk controls, importantly including insufficient capacity by many large firms to track firmwide risk exposures, such as off - balance - sheet exposures. this lack of capacity by major financial institutions to track firmwide risk exposures led in turn to inadequate risk diversification, so that losses β rather than being dispersed broadly β proved in some cases to be heavily concentrated among relatively few, highly leveraged companies. here, i think, is the principal explanation of why the busts in dot - com stock prices and in the housing and mortgage markets had such markedly different effects. in the case of dot - com stocks, losses were spread relatively widely across many types of investors. in contrast, following the housing and mortgage bust, losses were felt disproportionately at key nodes of the financial system, notably highly leveraged banks, broker - dealers, and securitization vehicles. some of these entities were forced to engage in rapid asset sales at fire - sale prices, which undermined confidence in counterparties exposed to these assets, led to sharp withdrawals of funding, and disrupted financial intermediation, with severe consequences for the economy. private - sector risk management also failed to keep up with financial innovation in many cases. an important example is the extension of the traditional originate - to - distribute business model to encompass increasingly complex securitized credit products, with wholesale market funding playing a key role. in general, the originate - to - distribute model breaks down the process of credit extension into components or stages β from origination to financing and to the postfinancing monitoring of the borrower β s ability to repay β in a manner reminiscent of how manufacturers distribute the stages of production across firms and locations. this general approach has been used in various forms for many years and can produce significant benefits, including lower credit costs and increased access of consumers and small and medium - sized businesses to capital markets. however, the expanded use of this model to finance subprime mortgages through securitization was mismanaged at several points, including the initial under | 0 |
ranked number 59 in the world in terms of human development by the united nations development programme's human development report. our continuing prosperity depends on our ability to import the things we need to enable our lifestyles. if workers are to improve their lot, each one of us must contribute more to the production of goods and services, so that our gain is not at the expense of others. increasing labour productivity is therefore at the heart of barbados'development strategy. it will enable us to become even more successful in an increasingly competitive international market, it will also allow workers to share in the fruits of that increased competitiveness. this increase in labour productivity will be difficult to achieve, because it is about quality, engagement and commitment. some time ago a nise survey told us that only 30 percent of the barbadian workforce feels fully committed to their jobs. there is no evidence to suggest that the situation has improved since that survey was done. the problem is especially acute in the public service. in the global competitiveness report previously alluded to, the inefficiency of our government bureaucracy is identified as the most damaging factor for doing business in barbados. each and every public servant should resolve to play their part in improving that statistic. bis central bankers β speeches ultimately, we are in a good place. the future of our economy looks promising, and that future is firmly in the hands of all barbadians. what is required is that we each commit to doing the very best of which we are capable, each and every day. national productivity week is an occasion for us to remind ourselves of this responsibility to our country, our community, our families and ourselves. let us go forward with confidence, to seize the time, and the opportunity. bis central bankers β speeches | delisle worrell : increasing labour productivity in barbados welcome remarks by dr delisle worrell, governor of the central bank of barbados, at the national productivity council β s annual week of excellence, bridgetown, 23 february 2015. * * * it is because barbados is a relatively prosperous and competitive economy, by international comparison, that the focus of national economic policy must be squarely on increasing labour productivity. barbados'prosperity has been achieved by selling tourist services, international business services, and other exports of goods and services in a competitive international market. with the foreign exchange we have earned, we have imported the products and services that support our modern lifestyles. going forward, that is what we must continue to do. barbados has established a reputation for the quality of its tourism and other export products and services, and we have enhanced their quality and appeal, with the addition of yacht marinas, first class golf and polo facilities, the new kensington oval, the olympic swimming facility, bushy park, st nicholas abbey, the atlantis submarine, harrison cave, lime grove, our acclaimed rums, oistins, our various culinary offerings, our festivals, and in many other ways. what makes our business and financial services special is our legal and regulatory framework, and the growing levels of knowledge and expertise that we offer to the international investor. if you are successful in any business you will attract competitors, and as we all know, barbados has always had competition from within the caribbean and beyond. it's a dynamic world, and to stay ahead of the competition, you need to keep getting better. barbados has been getting better, in terms of the quality and variety of its products and services. the most comprehensive report on global competitiveness is the global competitive report, published by the world economic forum. in its 2014 - 15 report barbados ranks number 55 in the world, and highest in the english speaking caribbean. however, barbados has not made commensurate progress in terms of labour productivity. we have seen increases in output for each unit of labour, in the past decade. but they have only been sufficient to enable us to maintain our standing in the late forties to early fifties in the competitive ranking. in today's world you cannot prosper by standing still. faster growth in the productivity of our labour force is necessary, if we are to further improve our relative competitiveness. increasing labour productivity is also essential to improving the living standards of our workforce. barbados is a prosperous economy, | 1 |
against this background, let me now turn to the financial inclusion strategy of the reserve bank and what are the specific steps taken for uttarakhand? it is important to bring the poor and under - privileged sections of the society within the banking fold for inclusive growth. in this context, our recent financial inclusion drive has four key elements. first, provision of a set of basic financial products and services for the vulnerable and financially excluded sections. this includes a savings cum overdraft product in the form of bis central bankers β speeches no - frills account, and entrepreneurial credit in the form of kisan credit card ( kcc ) / general credit card ( gcc ) ( table 4 ). second, spread of financial literacy across all sections of the society by creating awareness about financial products and services among the population. third, greater regulatory incentives through liberalisation of interest rates and branch licensing. banks have been given complete freedom to price their advances so that lending in the rural areas could be a commercial proposition. given the lower penetration of formal credit and recourse to money lenders what matters is the availability of credit rather than the cost. banks have also been given the freedom to open branches in centres with population of less than 1, 00, 000. fourth, use of technology and innovative delivery models so that the cost for providing large quantum of small - ticket transactions could be brought down. this initiative included putting in place a system of business correspondent ( bc ) model to provide door - step delivery of financial products and services by authorized agents of banks ; and electronic benefit transfer ( ebt ) for routing of payments of the central and state government welfare schemes like social security pensions, mahatma gandhi national rural employment guarantee scheme ( mnregs ), national old age pension scheme ( noaps ) directly to the bank accounts of the beneficiaries. in this direction, the effort so far has been to make basic banking facility available to all villages with a population of over 2, 000 by end - march 2012. the progress in banking coverage over the last two years has indeed been substantial. the next step is to provide banking facilities with population below 2000. state level bankers committees ( slbcs ) are preparing roadmaps for banking facilities in these villages in a time bound manner. for meaningful financial inclusion, it is envisaged that banks would set up brick and mortar branches in a cluster of 8 β 10 bc units in a reasonable distance of 3 β 4 kilometers. bis central bankers | chart 3 ). reflecting the divergence in sectoral growth trends, the contribution of agriculture to the gross state domestic product ( gsdp ) declined while that of industry and services sectors rose ( chart 4 ). it is noteworthy that the growth of industrial sector in the state has been significant despite the constraints of the terrain and topography. an analysis of the trends at a more disaggregate level suggests that growth was led by manufacturing, construction and trade & hotels ( chart 5 ). the composition of the labour force mirrored the composition of gsdp. the share of employment in agriculture at 33 per cent remained significantly lower than the national average of around 52 per cent. the share of construction, trade and manufacturing in the labour force remained higher compared to the national average ( table 1 ). however, labour force participation rate at around 47 per cent in 2010 β 11 was lower than the labour participation rate of 53 per cent at the national level indicating higher level of unemployment in the state. bis central bankers β speeches socio - economic indicators the state has the potential to achieve faster growth by harnessing the large proportion of working age population by encouraging quality vocational and professional education ( chart 6 ). the share of informal sector in employment generation in the state is very minimal as compared with other states ( chart 7 ). hence, the development of the informal sector is important as it could help harness the demographic dividend bestowed on the state. the informal sector can also play a significant role in improving credit absorption. the standards of life indicators for the state compare favourably with the national average. the share of households having access to basic civic amenities such as safe drinking water and electricity was relatively high compared to the national average. similarly ownership of household assets such as television, telephone and mechanised personal transport was higher than the national average. the population of households having banking facility was also higher than the national average ( table 2 ). bis central bankers β speeches notwithstanding the economic growth and better access to amenities, the state lags behind in certain human development aspects. despite high literacy and high per capita income, there is high incidence of poverty and life expectancy rate is lower as compared with the national average. the state ranked 14 among the 23 states 1 in terms of human development index 2007 β 08 ( chart 8 ). fiscal trends the state has initiated various fiscal reforms which include implementation of vat, enactment of fiscal responsibility legislation, introduction of a new pension scheme, imposition of ceiling on guarantees and constitution of consolidated | 1 |
be supported in the short term by a number of temporary factors but is likely to be affected over the medium term by the process of ongoing balance sheet correction in the financial and the non - financial sector of the economy, both inside and outside the euro area. in the view of the governing council, the risks to this outlook remain broadly balanced. on the upside, there may be stronger than anticipated effects stemming from the extensive macroeconomic stimulus being provided and from other policy measures taken. confidence may also improve more quickly, the labour market deterioration may be less marked than previously expected and foreign demand may prove to be stronger than projected. on the downside, concerns remain relating to a stronger or more protracted negative feedback loop between the real economy and the financial sector, renewed increases in oil and other commodity prices, the intensification of protectionist pressures and the possibility of a disorderly correction of global imbalances. with regard to price developments, annual hicp inflation stood at - 0. 3 % in september, according to eurostat β s flash estimate, compared with - 0. 2 % in august. the current negative inflation rates are in line with previous expectations and reflect largely base effects resulting from the movements in global commodity prices a year ago. also owing to base effects, annual inflation rates are projected to turn positive again in the coming months. thereafter, over the policy - relevant horizon, inflation is expected to remain in positive territory, with overall price and cost developments staying subdued reflecting ongoing sluggish demand in the euro area and elsewhere. in this context, it is important to re - emphasise that inflation expectations over the medium to longer term remain firmly anchored in line with the governing council β s aim of keeping inflation rates below, but close to, 2 % over the medium term. risks to this outlook remain broadly balanced. they relate, in particular, to the outlook for economic activity and to the evolution of commodity prices. furthermore, increases in indirect taxation and administered prices may be stronger than currently expected owing to the need for fiscal consolidation in the coming years. turning to the monetary analysis, the latest data confirm that developments in broad money and credit growth remain subdued. in august, the annual growth of m3 and loans to the private sector declined further to historically low rates of 2. 5 % and 0. 1 % respectively. this parallel deceleration in money and credit growth confirms our previous assessment of a moderate underlying pace of monetary expansion and low inflationary pressures over the medium term. the ongoing | given the disagreements we have seen within the governing council. everyone has their own style. in any case, in terms of decision - making, while the president is important, the ecb is itself a machine made up of the staff, the committees, the executive board, the governing council... generally, decisions are taken in a collegial way and then the president announces them. that work is very important, but when institutions are sound not everything depends on one person. 7 / 7 bis central bankers'speeches | 0.5 |
0 - 25. 0 per cent in 2007 - 08 from the average of 29. 8 per cent over 2004 - 07. the fiscal position of the government, both central and states, is undergoing consolidation in terms of targeted reduction in fiscal deficit indicators. the improvement in the fiscal position of several states is particularly impressive, which augurs well for the sustained growth of the economy and lower inflation. the union budget for 2007 - 08 has placed the fiscal deficit at 3. 3 per cent of gdp for the year 200708, as against 3. 7 per cent in the previous year, in keeping with the spirit of the frbm act, 2003. way forward β challenges and strengths there are, undoubtedly, many challenges for the indian economy, but it is useful to focus on more urgent of these. first, the poor state of the physical infrastructure, both in terms of quantity and quality is considered by many to be the most critical hindrance for india β s progress. the most important issues here are regulatory framework and overall investment climate, which are being addressed by the government. second, the most complex and challenging issue relates to development of agriculture. while over 60 per cent of the workforce is dependent on agriculture, the sector accounts for barely 20 per cent of the gdp. further, the gdp growth generated from agriculture is only marginally above the rate of growth of the population, which is not adequate to ensure rapid poverty reduction. the results of recent surveys on poverty in india, however, provide grounds for some optimism in regard to accelerated reduction in absolute poverty since the reform period. third, delivery of essential public services such as education and health to large parts of our population is a major institutional challenge. it is strongly felt that education will empower the poor to participate in the growth process and the large gaps in availability of health care, in terms of minimum access to the poor, need to be filled. there are reasons to believe that these challenges will be met, with some assurance of success, on account of many inherent strengths in the indian society. i will narrate a few of these, relevant to this gathering. first, india is a country of great diversities but with incredibly harmonious co - existence of various religions, languages and a unified culture. the familiarity with multiple languages in india prepares the people to adapt better to multi - lingual environment, making it easier for them to fit into international systems very smoothly. also, a vast and growing pool of science and technology graduates and the millions | . a lot of works are still waiting ahead, though after many years β efforts great progress has been achieved in raising accounting standards and amending accounting rules since the asian financial turmoil. in the end of 1980 β s and early 1990 β s, serious distortions in enterprises β costs and profits propelled the launching of financial accounting reform in 1993 and adoption of new accounting standards and general financial rules. comparing the profit margin of chinese enterprises with their international counterparts, we would notice that, profit margin of chinese enterprises was much higher than the average 5 percent of the top 500 enterprises in the world. you can check the detailed data of chinese enterprises at that time for yourself. such comparison doesn β t mean higher profitability of chinese enterprises, as a large amount of costs was not reflected in cost, but in profit. for instance, bonus, employees β pensions, health, r & d and advertisement expenditures should have been cost items, but they were covered by profits. if such artificially high profits of enterprises were paid out as dividends, enterprises could not survive and develop. therefore, resolving distortions in cost and profit should be the first task in a series of supporting reforms. this involves upgrading accounting standards. in recent years, continued progress has been made in this regard, for instance, adoption of many practices. further international comparison may help us detect the remaining problems. financial treatments of complicated operations are also involved in the fundamental issue of cost and profit classification, such as risk provisioning, loss write - off and accounting rules on derivatives. without a clear classification, there will be serious disputes and complaints from enterprises when distorted profits are used as a basis to pay dividends. some entrepreneurs think it is a difficult problem. we can look at it from the perspective of distorted relationship between profit and cost. second, there are deficiencies in the tax system. our tax system should be rational and with few distortions. yet, this is not easily achievable for countries in transition and emerging markets and usually takes a long time. the first is tax category. improper tax categories affect the amount of profits before anything else, thus causing problems. the second is tax base. right now, reform of tax base is underway in china. the value - added tax ( vat ) will be shifted from production - based to consumption - based. one of the issues involved is how to apportion equipment investment and whether such input should be taken as costs. some large state - owned enterprises also face problems in taxa | 0 |
ardian fullani : recent economic and monetary developments in albania speech by mr ardian fullani, governor of the bank of albania, at the joint press conference with the albanian minister of finance and the imf mission chief for albania, tirana, 22 june 2011. * * * dear media representatives, in the last two weeks, a team of the international monetary fund ( imf ) led by mr gerwin bell, mission chief, visited albania. during this visit, we had intensive discussions on the current economic developments, the economy β s expected performance and appropriate orientation of macroeconomic policies. this visit in the framework of article 4 consultation focused also on structural issues of the albanian economy, highlighting the steps to be made for ensuring sustainable long - term growth. brief overview of key issues discussed first, the 2010 and early 2011 economic and financial developments showed that, overall, the albanian economy overcame the global crisis effects with success and has the prerequisites to generate economic growth in the period ahead. foreign demand was the main contributor to the 2010 economic growth, while the current year is expected to be characterised by a resurgence of domestic demand and slower growth rates of albanian exports. overall, the macroeconomic situation is balanced, characterised by low and controlled inflation ; safe, liquid and well - capitalised financial system ; improving financial markets ; and improved current account position. these developments reflect, inter alia, the relevant policies, which have proven effective in buffering large shocks from the global crisis. i take this opportunity to point out that the bank of albania β s efforts to keep inflation in check and anchor inflationary expectations, as well as its regulatory and supervisory measures to guarantee financial system stability managed to reduce shock - buffering costs and prevented undesirable consequences. second, as regards the economy β s expected performance in the medium and long run, the conclusion reached after the two - week long consultations was that the albanian economy is expected to remain in positive territory of economic growth. however, growth rates will clearly depend on the resurgence of the domestic demand, which is suffering from insecurity related to national and international developments. consumption and investments continue to suffer from added prudence by economic agents, while financial conditions and banking system capacity to credit the economy are improved. furthermore, higher inflation rates, noted during the first months of 2011, are expected to drop in the upcoming period. this reveals the foreign origin of shocks that have led to increased prices and reflects internal economic and financial conditions as well as our | the albanian authorities have engaged in comprehensive reforms of the property rights, of the tax regime, of the electricity sector, of the general infrastructure, and remain engaged in the fight against informality. the most recent measure in this regard is a banking sector regulation that aims to put an end to the practice of lending through uncertified company balance sheets. further, to enhance efficiency and tackle corruption and informality, a determined drive to improve the functioning of the public administration, which broadly speaking encompasses also the judicial system reform, has been undertaken. in order to increase economic stability and to improve financial resilience, we have initiated a wide ranging set of reforms. to that end, the government has improved its public finance management procedures, has adopted a fiscal responsibility framework, and has undertaken measures to reduce debt. the bank of albania has strived to model itself after the ecb. its professionalism has increased while its independence, transparency and credibility have all improved. through a joint effort of institutional stakeholders, we have 2 / 3 bis central bankers'speeches managed to reform the financial supervisory authority and enhance the role of the deposit insurance authority. together with the albanian government, we have implemented a comprehensive npl resolution strategy, which has already brought encouraging results, we have approved a bank resolution law and we have jointly designed a de - euroization strategy, aimed at tackling financial vulnerabilities, improving the transmission mechanism and intensifying the use of the domestic currency. we have also established a new interinstitutional financial stability advisory group, vested with coordination powers on systemically - important stability β related issues. in order to further develop financial markets, the albanian authorities have accelerated the development of capital markets, through the establishment of the albanian stock exchange, the licensing and functioning of several investment and asset management funds, the encouragement of the on - going consolidation in the bank and non - bank financial institutions, the tax encouragement of private pension schemes, the on - going efforts to improve the functioning of secondary markets for government papers, etc. however, i am convinced the sharing regional experience would result in an additional impetus to the process. furthermore, regional solutions can be sought to common problems. this brings me to my last point. improving regional cooperation coordination and cooperation cannot run standalone in an ever integrated and intertwined world. the same concept applies to our region, where policy initiatives, aimed at achieving a common objective, should be implemented jointly. let me highlight a few potential cooperation areas : first, | 0.5 |
stability concerns. similarly, in times of crisis when risks materialise, capital buffers that can be released by authorities can support monetary policy via their impact on the supply of credit from banks. while the system had ample structural buffers at the start of the coronavirus ( covid - 19 ) crisis, buffers that could be released β like the countercyclical capital buffer β accounted for only 0. 2 % of risk - weighted assets at the end of 2019. this imbalance between structural and releasable buffers has gained more attention in the macroprudential debate since the beginning of the pandemic. there is growing consensus on the need to reassess the current balance between structural and releasable buffers and to create what i would call macroprudential space that could be used in a system - wide crisis. i would like to suggest three guiding principles. first, the creation of macroprudential space should be capital - neutral. in other words, we should amend or rebalance certain existing buffer requirements rather than creating additional buffer requirements. second, we need strong governance to ensure that capital buffers are released ( and subsequently replenished ) in a consistent and predictable way across countries in the face of severe, system - wide economic stress. centralising macroprudential action at the euro area - level, based on a clear objective framework, could foster a timely policy response and reduce fragmentation across national borders. and third, the creation of macroprudential space should not modify national authorities β existing macroprudential responsibilities and competences as allocated within the current regulatory framework. let me conclude. we have come a long way on the path to completing the banking union. but we are not there yet. what remains to be done is ambitious. but it is ambitious and achievable. when the pandemic crisis struck this time last year, the joint european response revealed the strength of a united europe that can react and move forwards swiftly. let us seize this moment and this opportunity to improve. 1 the target size of the single resolution fund ( srf ) is set at 1 % of covered deposits by the end of 2023. the srf will eventually amount to almost β¬70 billion. on 14 july 2020 the total amount was approximately β¬42 billion. see single resolution board ( 2020 ), β srf grows to β¬42 billion after latest round of transfers β, 14 july. 2 / 2 bis central bankers'speeches | s home member state. credit risks and potential losses are thus borne mainly by financial institutions in other eu or non - eu countries, and β once bank shareholders and creditors have been bailed in β taxpayers in those countries may ultimately have to foot the remaining bill. for this reason, market authorities, prudential supervisors and central banks have a keen interest in other countries complying with the highest financial and operational ccp risk management standards. they rely on home authorities to carry out prudent due diligence. such cooperation with other authorities has been enshrined by the cpmi and the international organisation of securities commissions ( iosco ) as responsibility e of the principles for financial markets infrastructures ( pfmi ). given the stakes involved, blind trust is not enough. i would argue that we must strike a balance 1 / 5 bis central bankers'speeches between facilitating market integration through cross - border access and safeguarding the ability of authorities to fulfil their statutory tasks and objectives. finding this equilibrium is, of course, a challenge and i welcome the work carried out by the financial stability board, at the behest of the japanese g20 presidency, to address potential regulatory causes of market fragmentation. 3 as i see it, fragmentation is not always caused by overlapping regulations, but often by a failure to cooperate. mutually acceptable solutions can and should be found to meet the legitimate expectations of all the authorities involved. the scope of these solutions may differ depending on the degree of interconnectedness. at the european level, for example, where financial markets are highly interdependent and integrated, it is clear that the cross - border stability implications are significant and in many ways exceed those of our banking sector. supervisory coordination at the eu level should reflect this close nexus. unfortunately, however, the competence for ccp supervision remains almost exclusively national. in this respect, despite significant legislative efforts, the lack of ambition of the current revision of the european market infrastructure regulation ( emir ) is regrettable. 4 given that the brunt of default risk in eu ccps is borne by their clearing members, most of whom are directly supervised at the european level, the principle of aligning liability and responsibility clearly implies european supervision of eu ccps. the current text can at best be seen as a modest step in that direction. at the global level, we should strive for an international framework based on two pillars : proportionality and cooperation. proportionality means that where financial stability implications are limited, outcomes | 0.5 |
bilateral meetings remarks on the chilean economy since september monetary policy report rosanna costa, governor of the central bank of chile 2022 imf / wb annual meetings thursday 13 to saturday 15, october 2022 recent inflation developments currently, inflation is a major concern for most economies and chile is no exception. in chile, although with a slight moderation in the last figure β september 2022 β, total inflation reached 13. 7 % yoy, while core inflation β measured by the cpi excluding volatiles β continued to rise to 11. 1 % yoy. the sum of the august and september data β both figures known after the release of the last monetary policy report ( ipom ) β reveals somewhat higher inflation than expected with the surprise coming from food prices, both volatile and non - volatile. β’ inflationary factors behind the evolution of inflation there are some common elements to the rest of the world and some others more idiosyncratic. among the former, there is the increase in external costs since the end of 2021, explained by the increase in the price of raw materials and food due to russia's invasion of ukraine, and the disruption of supply chains. among the internal factors, one of the main elements identified is the domestic spending imbalances accumulated during 2021 β as a result of fiscal aid and pension fund withdrawals, that reached almost 33 % of gdp β, and which is especially evident in the still high level of private consumption. added to this is the increase in wage costs associated with the tight of labor market. however, this has diminished during 2022 with the recovery of labor supply and lower demand. the peso's depreciation has also played a relevant role in the rise in inflation. the increase in the exchange rate has been caused by a combination of internal and external factors, where the former have a greater weight. in recent years, the chilean currency has lost value vis - a - vis other comparable currencies, mainly because of greater local uncertainty and some political - legislative decisions taken in previous quarters. more recently, the peso's evolution has been more linked to the dollar's global appreciation. data for the quarter ending in august shows that job creation is stagnant, the unemployment rate remains at 7. 9 % and labor participation has stabilized. on the other hand, the internet job postings index shows a decreasing trend during the year. nominal salaries present annual increases of around 11 %, and real salaries remain at negative values close to 3 % | ##less have reflected the paring of so called " fat " in corporate operations - - fat that accumulated during the long expansion of the 1990s when management attention was focused primarily on the perceived profitability of expansion and less on the increments to profitability that derive from cost savings. managers, now refocused, are pressing hard to identify and eliminate those redundant or non - essential activities that accumulated in the boom years. now, with margins under pressure, businesses effectively have been reorganizing work processes and re - allocating resources so as to use them more productively. moreover, for capital with active secondary markets, such as computers and networking equipment, productivity may also have been boosted by a reallocation to firms that could use the equipment more efficiently. for example, healthy firms reportedly have been buying equipment from failed dot - coms. businesses also may have managed to eke out increases in output per hour by employing their existing workforce more intensively. unlike cutting fat, which permanently elevates the levels of productivity, these gains in output per hour are often temporary, as more demanding workloads eventually begin to tax workers and impede efficiency. there are those who point out, quite correctly, that a significant part of the output of the late 1990s was wasted in a misallocation of capital to pie - in - the - sky ventures. but that output was misused does not subtract from the evident capacity to produce that output, and it is this that our measures of structural productivity attempt to capture. perhaps the return to a low - inflation environment in recent years in itself explains the intensification of competitive pressures, which has been a spur to the growth of productivity. indeed, the data do suggest a relationship between inflation and productivity growth over the long run. but that statistical relationship is modest at best and inferring causality is complicated by a circularity that arises because increased growth in output per hour depresses unit labor costs and, hence, prices. taken at face value, historical relationships suggest low inflation would explain very little of the most recent surge in output per hour. to be sure, while lack of pricing power and associated competitive pressures may have initiated much of the cost cutting and organizational changes that have occurred, it will ultimately be the quantity of fat in the system and the opportunities for productive reorganization that will determine the potential gains in productivity. only in retrospect, if then, will we be able to ascertain how much of the past | 0 |
case that staff from non - member countries get opportunities from time to time. we would like to see this practice continue, and ideally expand. i acknowledge that there are a great many non - member countries for the basel committee to potentially engage with, but on the other hand, engaging a single high quality person from such countries can have a disproportionately positive effect in transferring best practices. i note again the icbs, and the regional consultation groups, as indications of good practice. 3. 4 getting a fair chance to demonstrate compliance finally, what about a fair chance to demonstrate compliance? in the bcbs case, rcaps are only relevant to member countries, and small countries generally deal with basel rules text compliance through the imf / world bank and fsap processes. our experience has been that we do get a fair chance to demonstrate compliance on the core principles, and aspects of the rules texts as they come up. on the other hand, i must observe that small countries are often subject to regulatory and supervisory fads that emanate from the large countries that constitute the bulk of your membership. current examples include stress testing and resolvability of domestic systemically important banks ( dsibs ). on the stress testing front, north american and european banks are spending billions of dollars a year on financial stress testing. that is their business. it should not be our business. to again refer to the bahamian example, our banking system has a common equity tier 1 ( cet1 ) ratio exceeding 30 per cent. recession - type stresses generate reductions in that ratio, but nothing remotely large enough to approach international minimum capital levels. but what about our obvious stress, which in common with many small countries revolves around a natural disaster? most hurricanes which hit the bahamas have not presented a financial system threat. but a category 4 or 5 hurricane passing to the close north of this island could hurt us very badly. how badly? we don β t know. why don β t we know? in part because it β s a very complex question requiring coordination across a great many agencies plus the private sector. but also because the relevant staff are working on financial stress tests that in all honesty are more for fsap consumption than our own use. plus, there is a huge amount of work for a great many international agencies on a great many topics, not all of which are locally helpful. on the dsib resolution front : we have a minimal equity and nearly no debt capital market | we will also provide education on how to conduct transactions in safer and more secure fashions, especially given the increasing importance of electronic commerce, online banking and electronic money. this pushes along the desired path of being less dependent on physical cash in our daily transactions. we are pleased to be partnering with the clearing banks β association with this campaign. we will also be working with several industry stakeholders throughout the year to ensure that the campaign is well - rounded, relevant, and can reach as many people as possible. we encourage the public to visit the campaign website www. getmoneysmartbahamas. com /, for 1 / 2 bis central bankers'speeches information that will be updated at regular intervals throughout the year. we also encourage the public to follow get money smart bahamas on facebook and twitter and to join the conversation online using the hashtag # getmoneysmartbahamas. 2 / 2 bis central bankers'speeches | 0.5 |
ignazio visco : welcome address β β financial stability and regulation β conference welcome address by mr ignazio visco, governor of the bank of italy, at the 3rd bank of italy and bocconi university conference β financial stability and regulation β, online event, 17 march 2022. * * * ladies and gentlemen, friends and colleagues, i am delighted to welcome you to the third biennial conference on β financial stability and regulation β organised by the bank of italy and bocconi university. the conference takes place at a particularly difficult time : while we are still facing the complexities of the gradual phasing out of the policies implemented during the pandemic, new risks have dramatically taken centre stage. the russian invasion of ukraine has changed the macroeconomic scenario almost overnight. in the current situation, even financial stability faces significant risk from potential energy supply disruptions and their consequences for the real economy and intermediaries, as well as from dislocations in financial markets. amidst such profound uncertainty, amplification mechanisms may arise from multiple channels, due to the close interconnections within the global financial system. looking forward, beyond the dramatic events we are currently witnessing, technology as well as the transition to an economy with net - zero carbon emissions will continue to shape the evolution of markets and of both traditional and new financial service providers. while this evolution has the potential to make the financial industry more effective in supplying the services required by households and firms, intermediaries and investors need to learn how to manage the risks arising from digitalisation and climate change. on the regulatory and supervisory front, national and international authorities responsible for financial stability are themselves β proactively adapting β, by developing new approaches and instruments to identify, monitor and manage new risks. these issues will be discussed in depth during this conference, and i am sure it will provide an excellent opportunity to gain new insights from academic research. at the same time, the experience of policymakers and the challenges they face may help guide researchers towards the specific questions that it is of the utmost importance they address. in these brief opening remarks, i would like to mention some research questions raised by the interaction between monetary policy, financial stability and macroprudential policies, which i think should be explored over the coming years. in its recent strategy welcome address ignazio visco governor of the bank of italy 3rd banca d β italia and bocconi university conference, β financial stability and regulation β online event, 17 | march 2022 2 review, the ecb has highlighted that β the preparation of monetary policy deliberations will be enhanced with additional information on financial stability considerations. β while macroprudential policies are and will remain the first line of defence against financial stability risks, we aim at basing our monetary policy decisions on a more systematic assessment of the risks to output and inflation created by the accumulation of financial vulnerabilities, of the extent to which macroprudential measures can mitigate these risks, and of the design features of monetary policy tools that minimise side effects on the financial sector. taking proper account of these financial stability considerations will require the contribution of research along two main dimensions. first, further progress is necessary on the development of macro - financial models capable of underpinning the joint analysis of monetary and macroprudential policies. the global financial crisis of 2007 β 08 spurred a vast research agenda on macro - financial linkages, providing us with new analytical tools to calibrate macroprudential measures and to evaluate their impact. work in this direction should be expanded to build integrated frameworks for the assessment of the 1 / 2 bis central bankers'speeches trade - offs and complementarities between price stability and financial stability over different time horizons, and of the interactions between monetary policy and macroprudential policy. we need to better understand, in particular, the nonlinearities associated with episodes of financial instability, the potential lack of synchronicity between the real business cycle and the typically longer financial cycle, and the extent to which each policy influences the effectiveness of the other. second, we have to expand our knowledge of the impact of monetary policy on the non - bank financial intermediation sector. the share of financial intermediation performed by non - banks has risen sharply over the last few decades at a global level. on one hand, these institutions are increasingly becoming an important channel for the transmission of monetary policy during normal times. on the other hand, they could also seriously threaten its functioning in situations of stress, requiring central banks to turn to extraordinary ( direct or indirect ) interventions, such as those that were implemented in march 2020. non - bank financial intermediaries are not currently subject to a macroprudential framework, nor have explicit access to central bank facilities. understanding how monetary policy measures may affect their behaviour is therefore particularly relevant from a financial stability perspective. several other important issues should also be better investigated. as the balance sheets of banks and non - | 1 |
benoit cΕure : low interest rates are not inevitable opinion piece by mr benoit cΕure, member of the executive board of the european central bank, in les echos, 9 november 2016. * * * after nearly a decade of crisis, the euro area is once again experiencing growth. in volume terms, gdp now exceeds its 2008 level and the unemployment rate has posted a steady decline. monetary policy has been instrumental in supporting this welcome recovery. but the improvement is too feeble to be a cause for true rejoicing. and some observers are concerned about the consequences of low interest rates on financial stability and profitability in the financial sector. is monetary policy facing an efficiency problem? or is it actually dangerous? the answer is clearly no. let β s remember where we β re coming from. the euro area experienced a sovereign debt crisis coupled with a banking crisis, which shattered confidence and precipitated a double - dip recession in our continent at a time when other major economies were already recording positive growth. today, high debt levels are still holding back the recovery and non - performing loans weigh heavily on the balance sheets of many of our banks. headwinds have also emerged β this time from the external side β as a result of weakening global economic activity. since 2014, net exports have made practically no contribution to euro area growth. that means that we have only our own strengths to rely on to sustain growth. finally, and most importantly, our economies are suffering the effects of an erosion of long - term growth prospects and a relative increase in the global supply of savings. long - term growth in the euro area has halved since the crisis, to less than 1 % a year. these factors β the origins of which are in part technological and demographic β have played a part in reducing the β natural β level of interest rates that is consistent with balanced growth and price stability over a longerterm perspective. this is crucial : to support a given growth trajectory, monetary policy must be more accommodative than before. without our exceptional measures, growth would be weaker, the unemployment rate higher and inflation would be zero or even negative. the ecb will continue to support the recovery of the euro area in an uncertain international climate. a highly accommodative monetary policy remains appropriate, and will continue to be appropriate until inflation is firmly back on track and heading towards 2 %. the side effects of our measures are at present limited and give us no reason to question their | relevance. yes, low interest rates are holding back banks β profitability, but our monetary policy is stimulating the volume and strengthening the quality of bank lending so well that its overall impact on banks is, for the time being, positive. if growth is to rise significantly and interest rates return progressively to levels more favourable to savings, economic policies must make a more active contribution. what does that mean in practice? budgetary margins for manoeuvre can be used, where they exist. but in most countries of the euro area they are limited or non - existent. in france, for example, where public debt is verging on 100 % of gdp, another delay in reducing deficits would mean taking an unconsidered risk with business and household confidence. in all of our countries, however, the mix of revenues and expenditure could be made friendlier to investment. and a comparison of current growth rates in the euro area shows a clear advantage for countries that have implemented the most ambitious structural reforms, most notably in their labour markets. 1 / 2 bis central bankers'speeches weak growth, high unemployment and low rates are not inevitable. they reflect the legacy of the crisis but are also a consequence of economic policies that are lacking in ambition. the ecb will continue to protect the euro area from financial shocks, but the monetary climate will not always be so favourable. and the global economy could present new risks. it β s time to draw β and act on β the appropriate conclusions. 2 / 2 bis central bankers'speeches | 1 |
can grow into medium and big businesses. many of our large companies like tappoos and motibhais started from very humble beginnings. this brings hope to everyone. the key is hard work, perseverance and prudence. when these small businesses grow they can look at the export market and also add to investment. small businesses can directly help in import substitution. we can use more of our natural resources to fulfil our basic needs. they are not only cheap they are healthy. constraints let me pose this question : what are the constraints to starting and operating small businesses? some of the more common answers are difficult access to finance, lack of skills and lack of access to markets. on finance, i am glad that the fiji development bank is putting its money where its mouth is. the national centre for small and micro enterprise development is also a financing option. the reserve bank is currently examining ways that can facilitate access to financing for small businesses. still on this issue of finance, we have been amazed at the increase in personal remittances from abroad which have provided us with much needed foreign exchange. one of the issues that we are encouraging is for us to spend these remittances in a more useful manner. one of the best ways of doing this is to use these remittances to start small businesses. the benefits will last for a long time. the reserve bank is also looking at ways in which we can help facilitate this. we are also talking with commercial banks on how we can work together to help small businesses. one of the issues that i am hopeful that we can collaborate on is the provision of training on how to plan and successfully run small businesses. debt the national budget was voted on in the house yesterday. let me say a few things on this topical issue. another of our major challenges is to reduce our rising debt level. i am encouraged that the government has addressed this challenge in the 2007 budget. it has made the commitment to lower the fiscal deficit to 2 percent of gdp in 2007 and to maintain this level over the next five years. this is expected to bring government debt back down to 45 percent of gdp by 2011. the other aspect of the budget that was encouraging is the implementation of the government β s policy support program. it will be important that this program is heavy on reforms in the key areas of the civil service, public enterprise and public financial management. budget strategy supports monetary policy it was also important to see that fiscal policy is complementing | issues they raise and other possible approaches to achieve our objective. federal reserve consumer help www. federalreserveconsumerhelp. gov / index _ sp. cfm. under the proposal, a " higher - priced mortgage loan " would have an apr that exceeds the yield on comparable treasury securities by three or more percentage points for first - lien loans, or five or more percentage points for subordinate - lien loans. can be accessed online at our public hearings and our analysis identified problems not just in higher - priced loans, but also in the broader mortgage market. thus, our proposal addresses unfair or deceptive practices for the vast majority of mortgage loans secured by a consumer's primary home. areas targeted this broadly include broker steering, appraisal coercion, unwarranted servicing fees, and deceptive advertising. i'll touch on broker steering toward the end of my remarks. robust approach to affordability extending credit that borrowers can afford to repay is a fundamental pillar of responsible lending. across the whole range of higher - priced mortgage loans, our proposal offers three rules that, working in combination, would help ensure that borrowers can afford their payments. first, is a requirement that a lender maintain responsible underwriting practices that genuinely assess borrowers'ability to repay. this general requirement would be complemented by a specific requirement to verify the income and assets of the borrower that are relied upon in making the loan. a third rule would require lenders to escrow property taxes and homeowners insurance to help borrowers meet these obligations. this robust approach to affordability would help ensure that the subprime market promotes sustainable homeownership. just as important, it would also help protect consumers from abusive refinancings that strip equity. clear lending standards have the further advantages of increasing investor confidence in the mortgage market and helping to revive the flow of credit to consumers with shorter or weaker credit records. assessment of repayment ability now i want to discuss the major elements of our proposed regulations for higher - priced loans in a little more depth, starting with the requirement to assess repayment ability. the regulations would prohibit a lender from engaging in a pattern or practice of making higherpriced loans based on the value of the borrower's house rather than on the borrower's ability to repay from income, or from assets other than the house. this prohibition is intentionally broad to capture all risks to loan performance and the different ways that | 0 |
selling financial instruments for customers ; and other business lines that generate revenue by charging customers transaction and account processing fees. these activities generate little balance - sheet exposure, but they present the potential for large losses if the complex systems and financial deals associated with them are not managed in a sound manner. operational risks are also becoming more important in the large, complex financial institution as more technology and automated processes are used in all areas of operations. when banks used manual processes, errors were confined to the limited area where the employee worked. but in a modern technology setting, factors such as breakdowns in controls, errors in software code, and processing stream interruptions can have enterprisewide effects on the performance of the organization. recent history provides us with ample evidence that operational risk can be significant. large financial institutions have reported operational losses from breakdowns in operating controls that, in some cases, have exceeded their credit - or market - related losses. in the area of legal risk, for example, many institutions have learned that failing to identify and promptly correct problems can result in losses that significantly exceed management's initial expectations. over the past decade, large financial institutions have experienced more than 100 operational loss events in excess of $ 100 million each ; some of these individual operational losses, resulting from fraud, rogue trading, and settlements stemming from questionable business practices, have exceeded $ 1 billion. an effective operational - risk management framework, therefore, is essential for identifying and managing operational risks. as you know, analysts at the main rating agencies are placing increasing importance on operational risk when they assess a bank's credit ratings. we believe effective operational - risk management has both quantitative and qualitative components and that reliance on solely quantitative or solely qualitative approaches is no longer appropriate. what remains critically important is how these approaches are combined in the implementation of an effective process for identifying, measuring, managing, and controlling operational risk throughout an organization. effective operational - risk measurement tools enable the executive management at the largest banking organizations to make better risk - and - return decisions, thereby enhancing the return on their institution's capital investments. by considering operational risk as part of their assessment of capital requirements and true profitability, corporate decisionmakers can better decide which business lines to invest in or shut down. the organization further benefits when operational - risk measurement is integrated with the management processes of individual business units, because this helps communicate risk - management issues to the business lines. the allocation of operational - risk capital to these units provides them with a financial incentive | some truly innovative thinking about ways to integrate operational - risk measurement into the broader framework of operational - risk management. i would like to offer some specific observations on a couple of key challenges relating to operationalrisk quantification. first, with respect to operational - loss data, basel ii banks face the challenge of establishing credible operational - loss databases that they can use in determining their regulatory capital requirement for operational risk. the advanced approaches under basel ii create a link between regulatory capital and risk management. banks using an ama for operational risk will be required to adopt more - formal, quantitative risk - measurement and risk - management procedures and processes. for example, basel ii establishes standards for data collection and the systematic use of the information collected. these standards are consistent with broader supervisory expectations that high - quality risk management at large complex organizations depends on credible data - - and not just for basel ii. data are needed for all models and risk measures used in financial services, including credit - scoring models, market - based measures such as kmv, and value - at - risk and other economic capital models. the emphasis in basel ii on improved data standards, therefore, should not be interpreted solely as a requirement to determine regulatory capital standards but rather as a foundation for risk - management practices that will strengthen the value of the banking franchise. as i mentioned earlier, regulators view capital from the perspective of ensuring safety and soundness in the financial system. but individual financial institutions generally focus on capital, in particular economic capital, as a means for evaluating the profitability of their activities, defining their risk appetite, and setting risk limits. although the goals differ, there are important linkages between firms'efforts to quantify operational - risk capital for regulatory capital purposes and for strategic decisionmaking. to the extent the operational - loss data considered in banks'internal economic capital models appropriately reflect the banks'risk exposures, banks should be able to leverage their economic capital data collection efforts to measure their operational - risk exposure under an ama. this leverage is also consistent with the basel ii objective of better aligning regulatory capital with banks'internal economic capital. the second challenge i wanted to touch on is banks'integration of insurance in their processes for quantifying operational risk. as many of you are aware, basel ii contains a provision whereby banks using an advanced measurement approach for operational risk could adjust their calculated operational - risk exposure to reflect reductions due to operational - risk mitigants, such as insurance, subject to certain limitations. according to the | 1 |
evaluated. these proposed metrics would also use thresholds that are tailored to local market conditions, while also retaining a focus on targeted performance context factors. lastly, we hope the anpr will provide a foundation for the agencies to converge on a consistent approach that has broad support among stakeholders. stakeholders, including the nhc, have expressed strong support for the agencies to work together to modernize cra. by reflecting stakeholder views and providing a long public comment period, we believe that the anpr provides the basis for the agencies to establish a consistent approach that has broad support. before concluding, i want to highlight a few proposals in the anpr that have particular relevance to affordable housing. first, the anpr proposes two separate tests for evaluating the cra performance of large retail banks β a retail test and a community development test β in response to the overwhelming stakeholder feedback we heard about the vital importance of both retail and community development activities. in the anpr, each of these tests would have a subtest that focuses on financing and a subtest that focuses on services, resulting in four overall subtests for large retail banks. - 7second, the anpr proposes evaluating a bank β s retail lending in its major product lines using metrics that measure the number of loans a bank makes, not the dollar - value of these loans. as a result, a larger mortgage loan would count the same as a smaller - dollar mortgage under the proposed metrics. we think this is important to avoid providing incentives to serve borrowers seeking to finance higher - priced homes at the expense of lower - income borrowers seeking finance for lower - priced homes. third, the anpr proposes combining consideration of community development loans and qualified investments, including originations and purchases, into one metricsbased community development financing subtest. we believe this could encourage the provision of patient capital because both new originations and those already on the balance sheet would be included in the evaluation metric. fourth, stakeholders have emphasized the critical importance of cra - motivated capital as a source of funding for affordable rental and single - family housing for lmi populations. given the significant unmet need for affordable housing, the anpr provides an opportunity to carefully reconsider how we define affordable housing in the cra regulations and how we can strengthen existing provisions for the creation and preservation of affordable housing, both rental and owner - occupied. the anpr proposes new regulatory language that would specify that a housing unit would be considered affordable | implications for monetary policy of a step - up in trend productivity growth and, hence, trend real gdp growth? first, such a development would ultimately call for an upward revision to the targets for money growth, so that the money growth targets would remain consistent with an unchanged target for the inflation rate. as a practical matter, however, this is not a serious policy issue because the monetary aggregate targets play only a minor role in the conduct of monetary policy today. at any rate, such an adjustment might be premature today, given the uncertainty about the underlying trend. however, if the apparent higher trend productivity and gdp growth persists, at some point the money growth ranges should be appropriately adjusted. under the prevailing operational regime of setting a target for the federal funds rate, money growth would automatically adjust to accommodate the higher rate of trend growth, at an unchanged nominal federal funds rate target. over the longer run, the challenge under an interest - rate regime is to align the real federal funds rate with its new equilibrium value, which is likely to increase with a higher trend rate of productivity growth ( due to a higher return on capital that underlies the new equilibrium real interest rate in the economy ). the principal challenge to a monetary policy focused on utilization rates is that an unexpected shift in productivity growth, in effect lowers the unemployment rate consistent with stable inflation ( the nairu ) for a while. this allows the economy to operate at a higher utilization rate without inflationary consequences, at least until the higher productivity is fully anticipated in wage bargaining or until productivity growth stops accelerating. let me explain the source of the decline in the effective nairu. assume that the increase in productivity is not anticipated and therefore does not immediately raise workers β real wage demands. with unchanged nominal wage demands and higher productivity, firms will experience a decline in unit labor costs. this will initially boost profits. but competition will quickly force the lower costs to be passed through to consumers in lower prices, lowering price inflation relative to nominal wage change. this decline in inflation, in turn, will put some downward pressure on nominal wage gains. the net result is that an unanticipated increase in the rate of growth of productivity is another example of a favorable supply shock, temporarily lowering inflation. it is useful, nevertheless, to distinguish price shocks β such as declines in energy or non - oil import prices β from productivity growth shocks that have their initial effects on costs rather than on prices. during a transitional period following an unexpected increase in the productivity trend, | 0.5 |
sustainability of the monetary policy. after the hard work in spring, we have welcomed a harvest β the long awaited launch of the gem β in the golden autumn. we sincerely hope that the newly - launched gem will grow in an orderly and healthy manner! thank you. | that will each develop with its own characteristics. hong kong in international monetary relations apart from these seven principles, it is also important for hong kong as an international financial centre to continue to develop its international monetary relations and participate in the activities of international and regional financial institutions, central bank forums etc. there are therefore provisions in the joint declaration and the basic law that hong kong may, on its own, maintain and develop financial relations and conclude and implement agreements with other countries, regions and relevant international organisations, using the name of β hong kong, china β. some international financial organisations restrict their membership to sovereign states. in those cases, where negotiations are held on matters involving hong kong, the chinese government would normally consult hong kong and include its representatives in the chinese delegation. when entering into international financial agreements which may involve hong kong, the chinese government will first seek the views of hong kong before deciding whether such agreements will apply to it. taken together, these provisions will enable hong kong to continue and also develop its current international monetary relationship. prospects for hong kong after 1997 i believe hong kong will remain prosperous and stable after 1997. why? this is because : first, the strong economic fundamentals of hong kong and the entrepreneurial and management skills of the people of hong kong are the basis for its continued prosperity and stability. secondly, the basic law has provided a legal safeguard for the maintenance of the prosperity and stability of hong kong. thirdly, the economic development of the mainland has created excellent conditions for hong kong β s continued prosperity and stability. as pointed out by china β s vicepremier zhu rongji at his meeting on 29 may this year with senior officials of four main financial regulators and institutions from hong kong including the hong kong monetary authority - china is confident in hong kong β s maintaining prosperity and stability and its status as an international financial centre after 1997 because we have full confidence in the economic development of china. as hong kong will continue its role as an international financial centre, it will become the most important funding centre for china and very likely for the asian region as a whole. with the ongoing reform and open - door policy, the mainland of china has achieved sustained and strong economic growth. our target for economic growth in 1996 is 8 % but it could exceed 9 %. inflation should be within the range of 7 to 8 % for 1996. the mainland of china β s growth will obviously benefit hong kong β s economy tremendously as we are its largest trading partner. the mainland of china | 0.5 |
intended to produce graduates that can be entrusted with positions of responsibility in the industry over the long term. this was the idea behind the formation of fstep and we need to bear this in mind when devising the syllabus and enhancement in the future. the quality assurance committee was created based on the thinking that a dynamic and relevant programmes requires continuous and timely revision. the qac that had developed the new syllabus incorporated valuable inputs from the industry. the new syllabus was approved, by the fstep steering committee on june 28, 2010. under the revised syllabus, the programme design and delivery will be more balanced between classroom - lectures and experiential learning in the form of case studies, role plays and simulations. this methodology is better suited for adult learning and shift somewhat the responsibility of learning to the trainees. with this in mind, the content and details of the programme will be regularly updated and align with the progressive development of the financial industry. it will keep participants abreast with market needs in this age of advance technology and knowledge. as the financial services industry matures and the lines between businesses become even more blur, the skills and talents needed to navigate the industry becomes even more diverse and demanding. the change in syllabus and other enhancements will differentiate fstep from other training programmes offered by the financial institutions and training institutes. so i don β t expect fstep syllabus to converge with the training programmes offered by individual financial institution. in order to ensure fstep secures a constant flow of quality graduates from both local and foreign institutes of higher learning to its training programme, initiatives have been mooted by fstep to sign a memorandum of understanding ( mou ) with all public universities and a few reputable private universities in malaysia to instill the way for greater cooperation and collaboration in matters of mutual interest and benefit. in particular, fstep will offer scholarships to eligible top graduates from various universities to participate in its one - year fast - track training programme. i wish to congratulate fstep for the successful effort in designing a new syllabus and it continuous effort to improve the fstep programmes remain contemporary and relevant agreed to by all parties within the financial services industry. more importantly, it is my hope that fstep will continue to produce the quality of graduates that will meet the needs of the industry. i hope that all of you will have a fruitful discussion and dialogue. on | this note, i declare open the event β fstep : syllabus enhancement β. | 1 |
##tingency planning the federal reserve has been involved with contingency planning and dealing with various types of emergencies for many years. today is no different in many respects, but the need for year 2000 readiness raises new concerns that are applicable to all banks, foreign or domestic. one is the risk of contagion. operating problems at individual banks must not be allowed to spread and become systemic. many experts have pointed out that counterparties to automated transactions ordinarily do not transmit material whose logic statements can act as a virus and destroy software in a receiving host. on the contrary, most exchanges are simply transmitting data that is ordinarily subject to edits intended to identify any miscalculated date sensitive information. if indeed, the sender has unintentionally transmitted erroneous, miscalculated information and it is identified as such, the recipient rejects the misinformation and is free from the problem which can then be corrected by the sender. so this very important issue should be readily manageable, but managed it must be. on the subject of operating outages, if an automated information system crashes because of a year 2000 readiness problem, the crash must be prevented from spreading. we know that when electric utilities experience a local problem with the power grid, it has on occasion in the past taken down a wider, regional network. could this happen with interconnected computer systems? most professionals argue that the operational outage of one data center need not spread and disable others. nevertheless, as a bank supervisor concerned about systemic issues, even the remote possibility for operational outages and disruptions to service require all of us to do significant contingency planning. early in our efforts to address year 2000 automation issues, we realized contingency planning in the year 2000 context is made more difficult because operating centers can not fall back to an earlier version of a software package because the earlier version itself may not have been readied for year 2000. similarly, a us office of a foreign bank experiencing local problems may not be able to rely on its parent because it is likely that the parent depends on the same software that caused the local problem. so, in order to plan for continuation of services, it may be necessary to provide a complete, alternative service, or a service that can be repaired as a year 2000 problem is identified. a major interagency contingency planning effort underway addresses a possible federally assisted resolution scenario that might be necessary should a bank experience extensive computer problems | welcoming remarks remarks by jerome h. powell chair board of governors of the federal reserve system at the reservation economic summit 2022 national center for american indian enterprise development las vegas, nevada may 24, 2022 good morning, and welcome. it is a great pleasure to welcome all the attendees to res 2022. the national center for american indian enterprise development has been a strong and consistent partner to the federal reserve, collaborating with us on small business covid surveys, serving on the leadership council for the minneapolis fed β s center for indian country development, and moderating our policy webinar series on tribal enterprise diversification, just to name a few. trust is earned and developed through relationships. this is particularly important in indian country. the federal reserve has built an enduring and sturdy bond with the national center, and we value that partnership. we are excited to be participating in this year β s conference, learning alongside you. there is undoubtedly more research and engagement to be done on the specific and unique economic needs of tribal nations and indigenous communities. res 2022 is a great meeting ground for such collaboration. the best insight and analysis come from people who live and work in communities and have an inside view of the struggles and opportunities within. the federal reserve system has made a priority of engaging with leaders and stakeholders on opportunities most relevant to tribal economic prosperity. for example, input from tribal stakeholders has been invaluable to informing the important work of modernizing the community reinvestment act, which was incorporated into the recently published proposal that we are looking forward to getting comments on. we also value the growing representation of tribal voices on our boards of directors and advisory councils at reserve banks, helping us to better understand economic conditions in indian country. - 2many of you are aware of the center for indian country development ( cicd ), our national institute dedicated to helping tribes reach their full economic potential. we are excited to be expanding its capacity to conduct economic research and data analysis to support the long - term economic prosperity of indian country, in partnership with indian country. we look forward to cicd β s ongoing collaboration with tribal communities on research and data. additionally, an initial st. louis fed partnership with the osage nation, to provide youth financial education, has led to partnerships with tribal governments across the country that provide personal finance education, often in their native languages. tribal leaders nationwide have also joined recent listening sessions to discuss the impacts of inflation. similar sessions were held on our pandemic response facilities | 0.5 |
. why did central banks not see the crisis coming? in 2006 and 2007 i said β on behalf of the governors of central banks meeting in basel β that the quantity of risk and the price of risks were underestimated in global finance. spreads were very low, risk premia were abnormally meagre and volatility was very modest. this called for a market correction and we asked market participants to prepare for that market correction. you forecast the crisis? not the extent and the depth of this global crisis. but if anyone saw warning signs and voiced them, it was the central banks. how can the central banks now help to find a way out of the crisis? with rates near to zero, can you do any more than print money? the present circumstances are extraordinary. central banks and governments must therefore resort to extraordinary measures. to prevent the collapse of the financial system, we have provided the banks with an exceptional framework of liquidity providing. but citizens can have full confidence that we will guarantee stable prices over the medium and long term. the 329 million citizens of the euro area are very clever. they would not improve their level of confidence and help restarting the economy if they had the sentiment that we were forgetting our primary medium term goal. do you think that governments will be able to quickly pay off the debts they are now accumulating? we call upon the governments to do that. we support strongly the european commission in its task of ensuring the respect of the stability and growth pact in such exceptional circumstances. many people expect either a massive reduction in the value of money or tax increases β or both? are the fears justified? we are here to preserve the value of the money of our fellow citizens. they can count on us. as regards governments β fiscal policies they must be designed to incorporate the exit strategies to reassure people that these policies are on a medium term sustainable path. many experts, however, are worried about deflation, i. e. a lasting fall in prices. are there grounds for such fears? we should not confuse disinflation and deflation. at the moment i am speaking, we are experiencing very low inflation and in the months to come negative inflation due to the decrease of the prices of oil, energy and commodities, before it increases again at the end of the year. this is good for the purchasing power of households and is a correction of the high prices of the past. deflation means steady decrease of all prices and negative inflation expectations. this | oversight, were a significant contributor to the crisis. the federal reserve has been working with the other member agencies of the financial stability oversight council ( fsoc ), established by the dodd - frank act, to close these regulatory gaps. on april 3 the fsoc issued a final rule and interpretive guidance implementing the criteria and process it will use to designate nonbank financial firms as systemically important. 2 once designated, these firms would be subject to consolidated supervision by the federal reserve and would be required to satisfy enhanced prudential standards established by the federal reserve under title i of dodd - frank. the fsoc β s rule provides detail on the framework the fsoc intends to use to assess the potential for a particular firm to threaten u. s. financial stability. the analysis would take into account the firm β s size, interconnectedness, leverage, provision of critical products or services, and reliance on short - term funding, as well as its existing regulatory arrangements. the fsoc β s issuance of this rule is an important step forward in ensuring that systemically critical nonbank financial firms will be subject to strong consolidated supervision and regulation. more work remains to be done, however. in particular, although the basic process for designation has now been laid out, further refinement of the criteria for designation will be needed ; and, for those firms that are ultimately designated, it will fall to the federal reserve to develop supervisory frameworks appropriate to each firm β s business model and risk profile. as the fsoc gains experience with this process, it will make adjustments to its rule and its procedures as appropriate. regulation of shadow banking i have been discussing the oversight of systemically important financial institutions in a macroprudential context. however, an important lesson learned from the financial crisis is that the growth of what has been termed β shadow banking β creates additional potential channels for the propagation of shocks through the financial system and the economy. shadow banking refers to the intermediation of credit through a collection of institutions, instruments, and markets that lie at least partly outside of the traditional banking system. as an illustration of shadow banking at work, consider how an automobile loan can be made and funded outside of the banking system. the loan could be originated by a finance company that pools it with other loans in a securitization vehicle. an investment bank might sell tranches of the securitization to investors. the lower - risk tranches could be purchased by an | 0 |
continue monetary tightening, inflationary pressure has not been reduced as they maintain strong growth. therefore, there is a high degree of uncertainty about whether these economies will be able to make a soft landing by achieving price stability and economic growth at the same time. regarding risks to the price outlook, inflation could rise more than expected if international commodity prices increase further. there is also a possibility that the rate of inflation will deviate downward from the bank β s baseline scenario due, for example, to a decline in medium - to long - term inflation expectations. ii. conduct of monetary policy lastly, let me explain the bank β s conduct of monetary policy. in order for japan β s economy to overcome deflation and return to a sustainable growth path with price stability, the bank has continued to consistently make contributions as the central bank through the three - pronged approach of pursuing powerful monetary easing consisting of comprehensive monetary easing, ensuring financial market stability, and providing support to strengthen the foundations for economic growth. with regard to pursuing powerful monetary easing, the bank has encouraged the overnight call rate to remain at virtually zero, namely, around 0 to 0. 1 percent. moreover, the bank has committed itself to continue the virtually zero interest rate policy until it judges that price stability is in sight. in order to further enhance monetary easing despite the limited room left for a further decline in short - term interest rates, the bank has implemented measures to encourage a decline in longer - term market interest rates and a reduction in various risk premiums. specifically, the bank has established a new framework called the asset purchase program through which it conducts the fixed - rate funds - supplying operation against pooled collateral and purchases various financial assets. the assets to be purchased range from long - term government bonds and treasury discount bills to risk assets such as cp, corporate bonds, exchange - traded funds ( etfs ), and japan real estate investment trusts ( j - reits ). immediately after the earthquake, the bank increased the amount of its asset purchases, mainly of risk assets, with a view to preventing any deterioration in bis central bankers β speeches business sentiment or excessive increase in risk aversion from adversely affecting economic activity. as a result, the size of the asset purchase program increased to about 40 trillion yen from the initial size of about 35 trillion yen. in addition to such pursuit of powerful monetary easing, the bank has been implementing the fund - provisioning measure to support strengthening the foundations for economic growth. even before the earthquake, japan β | masaaki shirakawa : semiannual report on currency and monetary control statement by mr masaaki shirakawa, governor of the bank of japan, concerning the bank β s semiannual report on currency and monetary control, before the committee on financial affairs, house of representatives, tokyo, 13 july 2011. * * * introduction the bank of japan submits to the diet its semiannual report on currency and monetary control in june and december. most recently, the bank submitted the report for the second half of fiscal 2010 on june 10, 2011. i am pleased to have this opportunity to talk about recent developments in japan β s economy and present an overall review of the bank β s conduct of monetary policy. i. economic and financial developments in japan i will first explain economic and financial developments in japan. japan β s economy faced strong downward pressure, mainly on the production side, due to the effects of the great east japan earthquake that occurred on march 11. the earthquake disaster caused damage to production facilities in a wide range of areas and consequent constraints on the supply of parts and materials led to supply - chain disruptions. moreover, serious damage to power generating facilities resulted in constraints on electric power supply. production declined sharply mainly due to these supply - side constraints and consequently exports fell. domestic private demand also suffered to a considerable degree, affected in part by a deterioration in business and household sentiment. four months after the earthquake, japan β s economic activity is picking up with a gradual easing of the supply - side constraints caused by the earthquake disaster. production has recently shown clear signs of picking up as the restoration of supply - chain disruptions has progressed steadily at a faster - than - expected pace. at least for this summer, the electric power shortages are apparently not constraining economic activity as significantly as initially concerned, due to a strengthening of supply capacity by electric power companies and firms and households β efforts to conserve electricity and level out demand. in response to the pick - up in production, exports have started to increase. domestic private demand has also begun to pick up, with some improvement in household and business sentiment. meanwhile, the june tankan ( short - term economic survey of enterprises in japan ), released by the bank at the beginning of this month, showed that business sentiment deteriorated compared with the march tankan, which appeared to have hardly reflected the effects of the disaster. as for the outlook, however, many firms, especially in the manufacturing sector, expected improvements. | 1 |
and standardisation quite early in the development of that system. but despite the benefits that brought, co operation, standardisation and innovation in australia β s eftpos system have not progressed as far as is desirable. the eftpos system has essentially remained unchanged since its establishment in the 1980s. the fact that the system is built on bilateral links between all the major participants means that there is no one standardised communications protocol between the participants. furthermore, co operative efforts to innovate or upgrade the system are complicated because they require all bilateral relationships to be renegotiated. this is, in fact, a difficulty with many of australia β s payment systems β they are based on bilateral links, with no established mechanism to foster improvements and expansion in the network. so left to their own devices, networks may stop short of an efficient level of co - operation. incomplete standardisation may result, and innovation or movement from one standard to a superior one may be difficult because of co - ordination problems, even where the benefits to society outweigh the costs. the literature points to several reasons for this potential outcome, some of which are evident from the example i have already given. the first is the classic economic externality. firms within the network may be concerned that if they agree a common standard with a competitor, that competitor may be able to capture some of the benefits of moving to that standard. why would i pay all the cost of converting my railway line to a gauge that can connect with another railway, when my competitor will gain as much of my rail traffic as i will of his? the implication is that competitors in a network might not individually make decisions that are optimal for the network as a whole. the second is the ineffectiveness of voluntary strategies for achieving co - operation in a network industry owned by competing firms. establishment of industry bodies to agree standards is a common approach, but the success of these bodies has been mixed. agreement tends to be delayed where there are vested interests and, in some cases, non standardisation is used as a barrier to entry by competitors. 3 third, there is often a tendency towards β excess inertia β in standards. 4 problems with coordinating the movement from an old standard to a superior standard ( such as the movement to new system architecture in a payment system ) may mean that the movement does not occur, or occurs very slowly, even where the benefits to society outweigh the costs of switching. these co ordination problems may be caused by | in the australian figures on foreign investment and it is also showing up elsewhere, including in the us figures on capital movements, where net capital movements have returned to outflows after a few years of heavy inflows. this is the note on which i think i should finish. we cannot predict the future : all we can do as a country is to try and make sure that we have an economy that is resilient enough to handle the shocks that it will inevitably face. we have done so successfully twice in recent years when we faced the asian crisis of 1997 / 98 and the world recession of 2001. this should give us some confidence that we can handle the next one - whatever it is - as successfully. | 0.5 |
been propelled by strong domestic demand, while the contribution from net exports was either small or negative. in fact, the aggregate trade balance of the region has been gradually declining since 2007, and if intra - regional trade is excluded, it has declined notably from about 4 % of the regional gdp in mid - 2007 to less than 2 % at end - 2010, the lowest in more than a decade. this gradual change in trade pattern, with regional economies shifting their export markets from deficit countries like the us to surplus countries in the region, has also been contributing to global rebalancing. 8. we also should not overlook the positive attributes of capital flows. while challenging to manage, capital inflows present important opportunities for boosting broaderbased growth. the key is to channel the capital flows into good uses, and particularly towards productive investments. in this regard, promoting capital market development is important to open up additional channels of funding for long - term investments such as infrastructure. the good news is that the region is already taking steps in the right direction by improving the financial infrastructure of bond markets and expanding the investor base. meanwhile, many economies are also making greater use of public - private partnerships to promote critical infrastructure investment projects. 9. in the face of these significant uncertainties and challenges ahead of us, imf β s assessment of the prospects and risks, as well as advice on policy response for the region is particularly important at this juncture. we look forward to the presentation by imf and the dialogue during the panel discussions. 10. thank you. bis central bankers β speeches | 4. all these complications are making life difficult for policy makers in the region. while asia, having learned well the lessons from the asian financial crisis, has managed to get through the recent global crisis relatively unscathed, we are now entering uncharted waters, and there are both imminent and longer - term policy challenges. 5. first and foremost, it is challenging to manage the large capital flows. the divergence in the growth rates of advanced and emerging economies have been driving fund flows to asia, resulting in signs of overheating in certain pockets of the region. the increasingly negative real interest rates as a result of rising inflation in many regional economies will add fuel to the already high credit growth and heated asset markets. that said, we must also be wary of the risk of reversal of the fund flow. the recent surge in headline inflation and the more favourable near - term cyclical conditions in advanced economies have already brought forward expectations of the start of rising interest rate cycles. with the normalisation of monetary policy stances in the advanced economies becoming more imminent, the risk of an abrupt reversal of international capital flows is increasing. this calls for pre - emptive policy actions to contain the build - up of overheating pressure and another boom - bust cycle in the region before such abrupt reversals of capital flows occur. bis central bankers β speeches 6. secondly, some of the conventional wisdoms in monetary policy may be challenged by paradigm shifts in the next phase of growth. conventionally it has been suggested that central bank normally may not need to react proactively to commodity price inflation because of their transitory nature and limited pass - through to core inflation. however, the recent increase of commodities prices such as food and oil could be more sustainable because of structural change in demand and supply. for instance, structural factors such as slowing of crop yield growth, fast population growth and higher income elasticity for food in developing countries would continue to support higher food prices. policy markers would therefore need to pay attention to these developments in calibrating the appropriate degree of monetary tightening. 7. thirdly, there is also a need to diversify the sources of growth for the region, in order to generate sustainable growth and redress global imbalance. in this regard, it is worthnoting some encouraging developments that are underway in the region. the first one is the deepening intraregional trade and increasing orientation towards domestic consumption. the robust economic growth of the regional economies over the past year has mainly | 1 |
to flood into the south seeking refuge. this could lead to a national disaster. in this respect, strengthening south - north economic cooperation is obviously a much more desirable option. secondly, we need to rectify the high costs and low efficiency that now characterizes korean society. it is vital to reach a social consensus on improving the climate of labor - management relations and removing the rigidities of the labor market. on the basis of this consensus, we should then work for wage stability. we also have to start to reduce the burden of other social costs. this involves bringing down housing purchase and rental costs through stabilizing house prices. it means educational reforms to cut the exorbitant level of spending on private tutoring. it also implies lowering the costs of the political system by allowing a more productive style of politics to take hold. we should also seek ways to reduce the loss of efficiency caused by the tendency to collective egotism, often found in large - scale national investment projects. thirdly, we will push forward still more passionately in upgrading the industrial structure and improving corporate competitiveness. we have to revitalize the manufacturing sector with a new focus on advanced technology areas generating high value - added, such as the it industry. at the same time, we must also promote deindustrialization or service - oriented industrialization, while giving every encouragement to our financial, logistical, cultural and knowledge - based industries. the share of manufacturing drops in any economy as it moves into a more mature stage of development, while that of the service sector rises. in terms of its weight in their economy, the manufacturing sector peaked in the u. s. in 1953, in japan in 1970 and in korea in 1988. it then showed a steady decline in each case. by upgrading its industrial structure in this way, korea can avoid competing head - on with china, which has huge reserves of low - cost labor, and can instead build up a complementary relationship with it. some form of support will of course be necessary for the sunset industries that are no longer competitive, in order to assist their friction - free market exit through mergers and acquisitions, change of business lines within the country, or relocation overseas. last, but by no means least, we need to promote even more strongly the liberalization and openness of the korean economy. earlier this year, korea concluded, not without difficulty, a free trade agreement with chile. but it is absolutely essential for us to ensure a degree of openness that | well capitalised and well positioned to cope with losses and market stress. households and firms appear to have ample access to credit. we are closely monitoring developments and we are always prepared to take the measures required to safeguard financial stability if needed. let me say a little more about the economic outlook and our assessments. chart 4 persistently high inflation among trading partners inflation is also high among our trading partners, although it has recently moderated a bit. labour markets are tight. with the lifting of pandemic - related restrictions in china and lower energy prices, activity among trading partners will likely be higher than we had anticipated earlier. high inflation has prompted central banks in many countries to raise policy rates to the highest levels since the 2008 financial crisis. over the past year, foreign interest rates have risen more than norwegian rates. combined with the turbulence in financial markets, this has probably contributed to the depreciation of the krone. the krone is now considerably weaker than we envisaged in december. a weaker krone means an increase in prices for imported goods and services in krone terms. this will contribute to sustaining inflation in norway. figure 5. high employment activity in the norwegian economy has been higher than expected. employment is high and unemployment is low. at the same time, we have seen an increase in labour force participation, which is a welcome development. growth in the economy will likely be weaker ahead, but the slowdown appears to be less pronounced than projected in december. the enterprises in our regional network report slightly better prospects than before christmas, but there are wide variations across industries. in the secondary housing market, prices have risen somewhat in recent months, but the number of homes for sale is quite high. new home sales are very low. we expect a modest decline in house prices ahead as a result of higher interest rates. chart 6 wage growth on the rise wage growth is rising and reached the highest level seen in over a decade last year, turning out higher than we had expected. this can be ascribed in large part to a tight labour market and improved profitability in some business sectors. the social partners expect wage growth to rise further this year, and expectations have increased in recent months. wage growth is projected to be around 5 percent this year, 2 / 3 bis - central bankers'speeches which is higher than we projected in december. while wage growth did not keep pace with price growth last year, we expect wage inflation to be slightly higher than price inflation this year. higher wage growth | 0 |
paul tucker : a few remarks on current monetary policy in a rebalancing economy speech by mr paul tucker, deputy governor for financial stability at the bank of england, at the joint 1900 / city club lunch, london, 22 november 2011. * * * the outlook for economic activity has deteriorated over the past few months. the mpc has responded with a further round of quantitative easing to underpin demand, and so reduce the chance of inflation undershooting our target in the medium term. monetary credibility : accommodating the price level shocks our ability to provide and sustain that stimulus depends absolutely on the credibility of our commitment to the 2 % inflation target. if our credibility were to slip and medium - term inflation expectations were to rise, we would have to run with a tighter monetary stance than otherwise in order to put the genie back into the bottle. the committee β s most important judgment over the past year or so has, accordingly, been that the elevated rate of inflation, now about 5 %, is temporary. we have had conviction in that judgment because of the observable upward impulses to the price level from sterling β s depreciation, the vat increase, and the rise in commodity prices. there is occasionally a rather odd debate about whether the mpc could have avoided the consequent increase in inflation. big picture, the answer is that we could have done, but we chose not to. we have, in effect, accommodated something like half of the cumulative impulse to the price level. we could have chosen instead to offset the price level shocks by running a much tighter monetary policy. had we done so, spending in the economy, activity and employment would all have been squeezed. conditions have anyway been difficult for many households due to the squeeze on real incomes, but i think it would have been worse if we had tightened policy. our ability to sustain exceptional monetary stimulus has, i should reiterate, depended on the credibility of our commitment to low inflation over the medium term being preserved. i worried that chatter in the markets in late 2010 / early 2011 marked incipient signs of fragility in that credibility. that was one of the reasons why, at the beginning of this year, i had expected to vote for an increase in bank rate at our february meeting. the weak output data for q4 2010 published shortly before that meeting changed my mind, and the committee β s course, as they revealed that the economy was softer than i had thought. escape | importance of the eurozone as far and away our major trading partner, the weakness of the euro, in this case more specifically its weakness against sterling, also, of course, complicates our own monetary policy task in the uk. looking at the aggregate economic data the uk has had a rather good run now for the past seven or eight years. we have grown fairly steadily quarter by quarter at an average annual rate over that period of some 2ΒΎ %, which is well above our longer term trend rate - usually estimated at around 2ΒΌ %. employment has risen steadily so that the number of people employed is the highest on record. and the rate of unemployment is as low as it has been for about twenty years. meanwhile inflation on our inflation target measure has also averaged some 2ΒΎ % over the past seven or eight years. helped by the dampening effect on uk inflation of the weakness of the euro against sterling, we have been below the 2Β½ % target now for the past year and a half, and currently - on the standard hicp measure - we have the lowest rate of inflation in europe at around 1 %. our problem in the uk is the imbalance within the overall economy between those sectors that are competing with producers in the eurozone, who are under considerable pressure, and the rest of the economy, which is doing relatively well. believe me, we are very conscious of the desirability of exchange rate stability with our partners in the single market - even though we recognise that membership of the euro provides only nominal, rather than real, exchange rate certainty, and is, of course, limited to the eurozone. why then do we hesitate? the answer - in terms of the economics of the euro - it seems to me - and here i differ from jean - claude - is quite straightforward - not a bit paradoxical or bizarre! it is because to join the euro we would have to live with the single monetary policy. it may be that in time we could expect to do so relatively comfortably. but had we joined at the outset the presumption must be that over the past two years we would have lived with both a lower exchange rate and lower interest rates during a period when we have in any case been operating close to productive capacity and growing at above trend. the likelihood therefore is that we would then have experienced something of an inflationary boom - as they have, for example, in ireland though i am not sure one can generalise from the irish experience. | 0.5 |
. 8 we are seeing the effects already. june trade data showed steel exports fell the most since 2008, with little movement in july. moreover, the value of consumer goods subject to a 10 - per cent import tariff fell almost 23 per cent in july, following a run - up in the previous months. regarding inflation, we estimated that canada β s countermeasures would temporarily boost inflation by about 0. 1 percentage point until the third quarter of 2019. the most recent inflation report from statistics canada showed no impact from the tariffs on prices to date. still, some beer and pop manufacturers have announced plans to raise prices in response to the rising cost of aluminum cans. the outlook for growth and inflation in canada is also affected by tariff disputes between big players such as the united states and china. these disputes can cause shifts in global markets that affect the prices of many of the commodities we produce. reflecting this, the prices of base metals and some agricultural products have softened. saskatchewan was among the provinces to experience this effect earlier in the summer. it is important to recognize that the challenges facing canadian exporters are not only about nafta and tariffs. concerns about weak business investment, firms see k. charbonneau and a. landry, β estimating the impacts of tariff changes : two illustrative scenarios, β bank of canada staff analytical note no. 2018 - 29 ( september 2018 ). this estimate includes the impact of tariffs previously imposed by the united states on canadian softwood lumber and newsprint as well as the new tariffs on steel and aluminum. table 4 of the july mpr provides details on these tariffs. although the us international trade commission recently overturned the newsprint tariffs, this is not expected to meaningfully change the estimate from the july mpr. - 6building new capacity outside our borders, and declining market shares existed long before the current trade tensions emerged. competitiveness issues have been hampering canadian businesses for some time, even while foreign demand has been growing. market share in the united states for canada β s non - energy goods has, in fact, been declining over the past 15 years. 9 the effect has been particularly acute in the manufacturing sector. this trend has meant a much lower share of employment for most manufacturing industries, including automotive and parts and clothing. regardless of what transpires on the trade policy front, the bank will still need to better understand the competitiveness issues to assess the extent to which canada has permanently lost market share and export capacity | . 10 yesterday β s decision let me now turn to governing council β s policy deliberations that led to yesterday β s decision. it will not surprise you to hear that the implications of the current trade environment were front and centre. as i just outlined, we have already incorporated into our forecast the expected negative effects of uncertainty on business investment and exports, as well as the effects of us tariffs and canadian countermeasures imposed so far. these estimates are highly uncertain and may need to be adjusted as we get more information about the nafta negotiations and how businesses are adjusting their plans. our practice is to not incorporate scenarios that have yet to occur, even though they may be the subject of ongoing discussions. that said, the risks to growth related to trade policies are not just on the downside, particularly in light of the ongoing negotiations. there is some significant upside as well. nonetheless, it is important to understand that certain trade developments can result in complex trade - offs for monetary policy. on the one hand, protectionist measures can be costly in terms of growth and incomes, particularly as businesses and people adjust. a recent study by the bank for international settlements ( bis ) shows how virtually all regions in canada, mexico and the united states could expect lower real wages if these countries reverted from nafta to world trade organization tariff rates. 11 on the other hand, protectionist measures create risks to the upside for inflation, especially when the economy is operating near full capacity. in weighing these for more details, see n. labelle st - pierre, β decomposing canada β s market shares : an update, β bank of canada staff analytical note no. 2018 - 26 ( august 2018 ) ; and d. brouillette, j. dorich, c. d β souza, a. gagnon and c. godbout, β what is restraining non - energy export growth? β bank of canada staff analytical note no. 2018 - 25 ( august 2018 ). see t. webley, β characterizing canada β s export sector by industry : a supply - side perspective, β bank of canada staff analytical note no. 2018 - 27 ( august 2018 ). see r. auer, b. bonadio and a. levchenko. β the economics of revoking nafta, β bis working papers no. 739 ( august 2018 ). - 7trade - offs, you can be sure that governing council will not lose sight of our | 1 |
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