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radovan jelasic : serbia ’ s individuals and institutions – adapting to become transition winners speech by mr radovan jelasic, governor of the national bank of serbia, on the occasion of the 50th anniversary of cacanska banka, cacat, 23 september 2006. * * * today, cacanska banka celebrates its 50th anniversary. it does so in the ever - changing climate of transition, in which each citizen of serbia is faced with a range of vital questions – transition to where, in what manner and at what pace? and whereas all of us understand transition in our own way, i for one believe that transition means entering a new system of economic, social and moral values, and that only those who understand what the new times bring, and who manage to adapt quickly, will at least avoid being transition losers, if they do not become transition winners – and this holds true for both individuals and institutions. it is enough to look into the share of state, social and private capital in the portfolio of your bank to understand how far - reaching and inevitable these changes have been. another significant change is that membership in the board of directors of this bank is no longer motivated by the wish to obtain credit under preferential terms, but by a wish to see the institution ’ s profits and value of its shares go up. not to mention risk management, credit approval procedures, internal controls, etc. although this was scarcely noticed, let alone appreciated, by most of the public, the restructuring of the banking system brought about a change in many aspects of our relationship with banks : for instance, instead of having to telephone the bank several times a day in order to check our account balance, we now get an account statement via our cell phones ; instead of complaining of short supply of credits, we now complain that “ credits are too expensive ”. we also have a stable currency, and although foreigners still place more trust in it than some of our own citizens, i am certain that this too will change in due course. of course, in order for any change to happen, there must be people who know what they can and cannot do alone, and who ask for help in order to be able to tackle the challenges ahead. this is how the european bank for reconstruction and development acquired a stake in cacanska banka. if there is one thing i appreciate in serbia, it is when people ask for help, when they admit they cannot carry on on their own. this is | the first, if not the most important, step towards success. at times i even ask myself : how is it possible that serbia has not outstripped switzerland long ago, when it has so many professing “ experts ” and “ know - alls “ who can tell you all about future developments in exchange rate and policy and economy long before they have even happened?! as regards the speed of transition, each citizen should decide on their own whether they are happy with its present pace or not. one thing, however, is sure : being in transition is like being on a plane – if engines stop, even for a minute, the plane will crash, whatever its speed! and an absurd thing about transition is that, while it lasts, problems need to be addressed by stepping things up, and not by slowing down. i have just returned from singapore, where i attended the annual meetings of the imf and the world bank group, and i would like to share with you the positive impressions from my stay in a city strewn with a multitude of billboards assuring visitors that they will be greeted by “ 4 million smiling faces of singaporeans. “ and it really was so. the difference between singapore and serbia lies not only in the fact that their per capita gdp is usd 30, 000 and ours only usd 3, 500, but also in the fact that the 7. 5 million of our citizens do not only show very little optimism, if any, but some of them still live in the past. the difference, as i said, is not only in the smile, or absence of it, but in an unlimited optimism, social energy and self - confidence that singaporeans display! i believe that we already have sufficient reasons to be satisfied more often, not only on important occasions, such as this, the 50th anniversary of cacanska banka, but also each time we succeed, in either private or business life. but in order for serbia to change, we must, each of us, change first. and this is the most difficult part of transition, which i myself, at the age of 38, still find hard to do! | 1 |
to stay open to contacts and interactions with countries across the world, even if we do not share their views, values and partner countries. an example includes the course participants provided by the joint vienna institute – the jvi – which is managed by the imf with financial and other support provided by the austrian ministry of finance and the oenb. the jvi offers policy classes to civil servants of member states in central, eastern and southeastern europe ( cesee ) and in central asia. should it remain open to all member states without limitations or can, and should, some limitations be imposed that make a moral point but also signal support for multilateralism? besides these down - to - earth considerations, i consider a discussion on international policy coordination eminently important at the current juncture. two weeks ago, i returned from the imf spring meetings in washington, d. c., where stress factors like fiscal legacies of the pandemic, growing geoeconomic fragmentation, military conflicts and climate change were on everybody's mind. all these things are happening at the same time and are partially reinforcing one other. this creates a situation that has been referred to as a " polycrisis. " no nation can solve a problem like climate change or 2 / 4 bis - central bankers'speeches geoeconomic fragmentation on its own. therefore, the polycrisis would warrant a coordinated policy response from all nations affected. if we coordinate our political efforts, we are likely to produce positive spillovers from one country to another. but how likely is it that we will see such a coordinated response? to coordinate economic policies among sovereign nation states, we would need a reliable international policy framework, a rules - based order if you will. but in the recent past we have witnessed a decline in the general willingness to accept the rules of a multilateral order. several nation states took unilateral decisions which served their national interest, and a more power - based system has been emerging. this reflects a certain short termism. while it may be in the national self - interest to diverge from established rules at any particular moment, doing so undermines the very existence of the multilateral order that benefits us all in the long run. this is a classic example of dynamic inconsistency which has also affected monetary policy and which was the motivation for central bank independence. in the field of international policy coordination, we are also faced with a prisoner's dilemma : there may be political incentives | robert holzmann : stress in public finances - the need for international policy coordination welcome remarks by dr robert holzmann, governor of the oesterreichische nationalbank, the austrian central bank, at the 2024 annual meeting of the standing field committee " international economics " of the verein fur socialpolitik, vienna, 3 may 2024. * * * ladies and gentlemen, esteemed colleagues, it is my pleasure to welcome you in the newly renovated kassensaal of the oesterreichische nationalbank to the discussion event on the occasion of the 2024 annual meeting of the standing field committee " international economics " of the verein fur socialpolitik. today's economic policy forum will discuss the topic of " stress in public finances : the need for international policy coordination. " since stress in public finances has a tendency to exert stress on financial stability and on interest rates, you can imagine that the topic of the panel discussion is of great interest to me as a central banker. i am very much looking forward to listening to our excellent panel of highly experienced experts. following many decades of rising globalization, including a " hyper - globalization period " between the 1990s and 2008, the 2008 global financial crisis led to a slowdown of this trend, sometimes called " slowbalization. " in recent years and fueled by the covid - 19 pandemic, the war in ukraine and growing ideological differences with respect to tackling the green transition, a trend toward de - globalization has emerged. so, based on forward - looking ideas and my personal experience – let me share a few remarks on how international policy coordination and cooperation can still work in a deglobalizing world : first, a lot of ink ( or time ) has been spent over many years on identifying the cooperation space for critical areas of economic policy - setting that promise welfare improvements of some size. a critical starting point for measuring welfare improvements is the nash equilibrium – as non - cooperative game theoretical outcome. this equilibrium assumes full information about the states of the world ( and mutual interests and differences ) and is quite likely quite some distance from the origin and state of ignorance. it thus reflects a relatively advanced welfare state to which cooperation can contribute a variable extend. hence, analytical policy events organized by international organizations primarily aimed at identifying country - specific positions may achieve such a valuable non - cooperative equilibrium. for me, a historic and still relevant example – the oecd working party no 1 | 1 |
hu xiaolian : a managed floating exchange rate regime is an established policy article by ms hu xiaolian, deputy governor of the people ’ s bank of china, 15 july 2010. * * * china ’ s has moved into a managed floating exchange rate regime based on market demand and supply with reference to a basket of currencies. as an important component of the socialist market system, this is a right choice based on china ’ s specific circumstances and development strategy and is also an established policy. i. a managed floating exchange rate regime has been in place since 1994 1. the unification of dual exchange rates in 1994 marked the official beginning of the managed floating exchange rate regime. establishing a managed floating exchange rate regime based on market supply and demand and a unified and well - functioning foreign exchange market is stipulated in the decision of the cpc central committee on several matters concerning the establishment of a socialist market economic system adopted at the 3rd plenary session of 14th cpc central committee in november 1993. on the first day of 1994, with the unification of rmb ’ s official exchange rate and swap market exchange rate, the single, managed floating exchange rate based on market supply and demand was officially adopted. the unification of dual exchange rates into a single exchange rate regime is worth mentioning because it put an end to the coexistence of official exchange rate and the swap market exchange rate which traded foreign exchange in the retention system. in 1994, the exchange rate reform marked the launch of the foreign exchange surrender system where enterprises are required to sell to the banks their foreign exchange receipts and buy foreign exchange from the banks when necessary, ended the practice of foreign exchange retention and submission, and simplified the procedures for banks and enterprises to use foreign exchange, thus giving exporting enterprises a lot of incentives to export and earn foreign exchange. meanwhile, with a unified inter - bank foreign exchange market being established, china began a new stage where the rmb exchange rate was based on market supply and demand. the rmb, as an important price tool, started to play a fundamental role in the allocation of foreign exchange resources. in 1994, when the dual exchange rates were unified, the rmb to dollar exchange rate adopted the swap market exchange rate of 8. 7 yuan to one dollar. this reflected market fundamentals and the need of supporting exports to mitigate the shortage of foreign exchange reserve. the nominal rmb to dollar exchange rate appreciated to 8. 3 yuan per dollar, or by about 5 percent between the beginning of 1994 and 1997 | stability and realize quality and rapid growth of the economy. | 1 |
establish increasingly stringent targets and performance standards for otc market participants. in addition, we are working with market participants to enhance the resilience of the triparty repurchase agreement ( repo ) market. through this market, primary dealers and other major banks and broker - dealers obtain very large amounts of secured financing from money market mutual funds and other short - term, risk - averse investors. 3 we are exploring, for example, whether a central clearing system or other improvements might be beneficial for this market, given the magnitude of exposures generated and the vital importance of the market to both dealers and investors. even as we pursue these and similar initiatives, however, the board believes additional statutory authority is needed to address the potential for systemic risk in payment and settlement systems. currently, the federal reserve relies on a patchwork of authorities, largely derived from our role as a banking supervisor, as well as on moral suasion to help ensure that critical payment and settlement systems have the necessary procedures and controls in place to manage their risks. by contrast, many major central banks around the world have an explicit statutory basis for their oversight of these systems. given how important robust payment and settlement systems are to financial stability, and the functional primary dealers are broker - dealers that trade in u. s. government securities with the federal reserve bank of new york. the new york reserve bank's open market desk engages in trades on behalf of the federal reserve system to implement monetary policy. similarities between many payment and settlement systems, a good case can be made for granting the federal reserve explicit oversight authority for systemically important payment and settlement systems. the federal reserve has significant expertise regarding the risks and appropriate riskmanagement practices at payment and settlement systems, substantial direct experience with the measures necessary for the safe and sound operation of such systems, and established working relationships with other central banks and regulators that we have used to promote the development of strong and internationally - accepted risk management standards for the full range of these systems. providing such authority would help ensure that these critical systems are held to consistent and high prudential standards aimed at mitigating systemic risk. consumer protection another lesson of this crisis is that pervasive consumer protection problems can signal, and even lead to, trouble for the safety and soundness of financial institutions and for the stability of the financial system as a whole. consumer protection in the area of financial services is not, and should not be, limited to practices with potentially systemic consequences. however, as | 49. 7 billion ( 43. 8 billion euros ). 7 digital currency payments projects from big technology firms that have network advantages have the potential to scale even more rapidly. because the utility of any medium of exchange increases with the size of the network using it, the power of a stablecoin payment system depends on the breadth of its adoption. with nearly one - third of the global population as active users on facebook, the libra stablecoin project stands out for the speed with which its network could reach global scale in payments. stablecoin networks at global scale are leading us to revisit questions over what form money can take, who or what can issue it, and how payments can be recorded and settled. while central bank money and commercial bank money are the foundations of the modern financial system, nonbank private “ money ” or assets also facilitate transactions among a network of users. in some cases, such nonbank private assets may have value only within the network, while in other cases, the issuer may promise convertibility to a sovereign currency, such that this becomes a liability of the issuing entity. stablecoins aspire to achieve the functions of traditional money without relying on confidence in an issuer — such as a central bank — to stand behind the “ money. ” for some potential stablecoins, a close assessment suggests users may have no rights with respect to the underlying assets or any issuer. we have already seen the growth of massive payments networks on existing digital platforms, such as alibaba and wechat. so far, these networks operate within a jurisdiction based on the sovereign currency as the unit of account, and balances are see https : / / www. npci. org. in / product - statistics / upi - product - statistics. - 4transferable in and out of bank or credit card accounts. we have also seen the issuance of stablecoins on a smaller scale, such as gemini or paxos. what would set facebook ’ s libra apart, if it were to proceed, is the combination of an active - user network representing more than a third of the global population with the issuance of a private digital currency opaquely tied to a basket of sovereign currencies. 8 libra, like any stablecoin project with global scale and scope, must address a core set of legal and regulatory challenges. a significant concern regarding facebook ’ s libra project is the potential for a payment system to | 0.5 |
earlier : the diffusion of new technologies and emerging skills shortages. one explanation for the widening gap between leading and laggard firms is the difficulty of employing new technologies. successfully using these technologies requires both the right management capability and technical skills. both of these can be difficult to acquire. it seems reasonable, then, to suggest that investment in human capital can both lift the rate of technical progress and accelerate its diffusion. it is therefore an important part of addressing the slow wages growth in many advanced economies, including australia. another way of encouraging the more rapid diffusion of technology is ensuring that there is strong competition in our economy. there are many other elements of the productivity debate that are also important. i don't plan to expand on them today, but the list of areas is well known. it includes : the design of the tax system ; http : / / www. rba. gov. au / speeches / 2018 / sp - gov - 2018 - 06 - 13. html 13 / 15 13 / 06 / 2018 productivity, wages and prosperity | speeches | rba the provision and pricing of infrastructure ; the way we finance innovation and new businesses ; and our business culture around innovation, risk and entrepreneurship. we need to keep all these areas on the radars of both government and business if we are to build on the prosperity that we currently enjoy. monetary policy i would like to close with a few words on monetary policy. at its meeting last week, the reserve bank board again held the cash rate steady at 1½ per cent, where it has been since august 2016. subsequent to the board meeting, the national accounts provided confirmation that the australian economy is moving in the right direction. if this continues to be the case, it is likely that the next move in interest rates will be up, not down. it is, however, important to remember that the environment in which interest rates are increasing is also likely to be one in which people's incomes are growing more quickly than they are now. this will help. any increase in interest rates, however, still looks to be some time away. the board will want to have reasonable confidence that inflation is picking up to be consistent with the medium - term target and that slack in the labour market is lessening. at this stage, a sustained pick - up in inflation to around the midpoint of the target range is likely to require faster wages growth than we are currently experiencing. there are reasonable grounds to expect that this increase in wages growth will occur. | government bond yields % % target introduced on 19 march 2020 0. 75 0. 75 0. 50 0. 50 april 2024 0. 25 0. 25 april 2023 0. 00 j f m a m j j a s 0. 00 source : yieldbroker it is worth reiterating that there are two related but separate motivations for the bank's government bond purchases since march. the first is to achieve the board's target for the three - year australian government bond yield. the second objective is to address dysfunction in the australian and state government bond markets. the three - year yield declined reasonably quickly to the target so it didn't require large purchases to achieve the target. rather, the bulk of the purchases in march and april was to address dysfunction in government bond markets. [ 8 ] the bank purchased both australian government securities ( ags ) and semi - government securities ( semis ) out to a maturity of 10 years to help restore market function. since the bond market has returned to functioning normally, purchases have been directed to maintaining the three - year target. the bank continues to stand ready to purchase both ags and semis to help support market functioning. i said earlier that the three - year yield target is closely aligned with the board's guidance about the future direction of the cash rate target. the board has consistently stated that it will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2 – 3 per cent target band. in the august, the forecast was for the unemployment rate to rise to 10 per cent at the end of the monetary policy https : / / www. rba. gov. au / speeches / 2020 / sp - dg - 2020 - 09 - 22. html statement on 9 / 13 22 / 09 / 2020 the australian economy and monetary policy | speeches | rba year and ( in the central scenario ) to decline gradually to be 7 per cent by the end of 2022. while the recent labour market release indicates outcomes could be better than this, there would still need to be a significant further decline in the unemployment rate before the australian labour market would be nearing full employment. prior to the pandemic, the unemployment rate was around 5 per cent. that was not low enough to generate sufficient wage growth consistent with achieving the inflation target. under the central scenario, it would be more than three years before sufficient progress was being made towards full employment | 0.5 |
bloomberg. iii. the bank's conduct of monetary policy chart 12 continuation of powerful monetary easing ( april 2019 ) high uncertainties regarding economic activity and prices including developments in overseas economies still taking time to achieve the price stability target making clearer the bank's policy stance to persistently continue with powerful monetary easing clarification of forward guidance for policy rates july april " the bank intends to maintain the current extremely low levels of short - and long - term interest rates for an extended period of time, taking into account uncertainties regarding economic activity and prices including the effects of the consumption tax hike scheduled to take place in october 2019. " " the bank intends to maintain the current extremely low levels of short - and long - term interest rates for an extended period of time, at least through around spring 2020, taking into account uncertainties regarding economic activity and prices including developments in overseas economies and the effects of the scheduled consumption tax hike. " implementation of measures contributing to the continuation of powerful monetary easing smooth implementation of fund - provisioning and asset purchases ( 1 ) expanding eligible collateral for the bank's provision of credit ( 2 ) improving the fund - provisioning measure to support strengthening the foundations for economic growth securing market functioning ( 3 ) relaxation of the terms and conditions for the securities lending facility ( slf ) ( 4 ) introduction of exchange - traded fund ( etf ) lending facility | powerful monetary easing centered on yield curve control. meanwhile, at the mpm held at the end of last month, policy board members shared the recognition that there are high uncertainties regarding the outlook for economic activity and prices in japan, including developments in overseas economies, and that it is likely to still take time to achieve the price stability target. based on this recognition, the bank judged it important to make it clearer that its policy stance to persistently continue with the current powerful monetary easing toward achieving the price stability target has not changed ( chart 12 ). thus, it decided at the april mpm to clarify forward guidance for policy rates introduced in july 2018. forward guidance is a measure that makes clear the stance on future policy rates in advance in order to strengthen market confidence and expectations regarding monetary policy. specifically, a part of the existing guidance was revised, thereby making clear that the bank would " maintain the current extremely low levels of short - and long - term interest rates for an extended period of time, at least through around spring 2020, taking into account uncertainties regarding economic activity and prices including developments in overseas economies and the effects of the scheduled consumption tax hike. " the point of this revision is that a specific period of " at least through around spring 2020 " was added to clarify the meaning of " for an extended period of time, " during which the bank intends to maintain the current interest rate levels. this takes into consideration that ( 1 ) pick - ups in overseas economies and the global cycle for it - related goods are expected to be seen in the second half of this year or onward and ( 2 ) it is projected to take some time to examine the effects of the scheduled consumption tax hike after its implementation. on this basis, i would like to reemphasize that the current forward guidance is a framework in which the bank makes judgments depending on economic and price developments by using data and information available at the time, as it says that the bank will make judgments, taking into account uncertainties regarding economic activity and prices. while economic activity and prices are likely to remain in a state where the current extremely low levels of short - and long - term interest rates would be appropriate, at least through around spring 2020, the bank considers that there is a fair possibility that the current low interest rates will be maintained beyond this period depending on future developments. in addition, the bank also decided at the mpm held at the end of last month to implement various measures contributing to the continuation of the current | 1 |
in only the already effective budget support measures. an upturn in the economy and domestic demand will also be driven by the easing of monetary conditions resulting from the monetary policy pursued. this will support lending, and its growth rate will rise from 3 – 8 % this year to 6 – 11 % in 2021 – 2022. the lending potential will also be maintained owing to the regulatory easing and the expansion of the bank of russia ’ s specialised refinancing instruments. according to our estimates, the easing of monetary policy is needed to maintain annual inflation close to 4 % over the forecast horizon. the slump in domestic and external demand this year will be considerably containing inflation, which induces the risk of its substantial deviation downwards from the target in 2021 and over a medium - term horizon if no additional monetary policy measures are introduced. the disinflationary pressure of weak demand will offset the effect of temporary proinflationary factors, that is, the ruble weakening and the observed elevated demand for individual products, already this year. we believe that a rise in inflation expectations caused by the above factors will also be temporary. we expect that the impact of limited demand on inflation will be stable and long - lasting. given the transmission lag of monetary policy, we should take actions already now. based on our forecast, annual inflation will reach 3. 8 – 4. 8 % by the end of the year amid the easing of monetary policy, and will further on stabilise close to 4 %. moreover, we expect a reversal of inflation trends in the middle of the year. monthly inflation in annualised terms will begin to go down, while annual inflation will still continue to rise. as to the balance of payments, we expect that the current account balance will decline to negative values in 2020 and 2021 ( to usd 35 and 18 billion respectively ). this will mainly result from the slump in exports caused by the reduction in external demand and in export revenues, primarily from oil sales. i would like to point that the temporary switch to a current account deficit is an expected effect produced by the considerable oil price downturn under the influence of the fiscal rule. receipts from fiscal rule - based foreign currency sales make it possible to support the economy and domestic consumption. in this situation, imports are contracting to a lower degree compared 2 / 3 bis central bankers'speeches to exports driven by the decline in oil prices. as a result, the current account balance will drop to negative values. in 2022, when | dollars. • fourth, the ecb extended the eligibility of collateral that could be used for central bank financing, facilitating banks ’ refinancing liquidity shortages caused by halts in interbank lending. • fifth, the ecb introduced in may 2010 the securities markets programme. by intervening in the secondary markets of public and private debt securities, the ecb could ensure depth and liquidity in dysfunctional market segments and restore the proper functioning of the monetary policy transmission mechanism. • finally, in september 2012, the ecb announced the outright monetary transactions ( omt ) initiative, essentially the intention to purchase, if necessary, securities of euro area member - states in economic adjustment programmes from the secondary market. although not activated, the announcement of the initiative has contributed significantly to the improvement in financial market conditions, the decline in sovereign bond spreads and the gradual reversal of financial fragmentation. changes in the eu architecture • with the outbreak of the euro area crisis, it was made clear that both imbalances in the real economy and in the financial sector are sources of financial instability. • a more comprehensive policy framework was therefore necessary. • in this context, improvements in the policy framework aimed at completing the emu architecture with more coordination of economic policies, sufficient backstops to address liquidity shortfalls and, last but not least, common supervision of the financial sector. • the stability and growth pact was strengthened through a series of eu regulations in 2011 and 2013. the new legislation clearly defined debt reduction rules, sanctions in case of non - compliance and a new surveillance procedure monitoring the emergence of macroeconomic imbalances. in addition, fiscal coordination and surveillance was further strengthened through the ex - ante co - ordination of fiscal and structural policies of member states of the euro area. • moreover, the “ fiscal compact ”, agreed by the euro area and some eu member states, in march 2012 further strengthened fiscal governance. the treaty, which entered into force at the beginning of 2013, requires structural deficits limited to 0. 5 % of gdp and the introduction of fiscal rules in each country ’ s national legislation. • furthermore, the euro area, as well as some eu member states agreed in march 2011 on the “ euro plus pact ”, a commitment to undertake additional reforms, on top of the eu - wide “ europe 2020 ” obligations, to promote competitiveness, employment and productivity. • in the meanwhile, the european financial stability facility ( efsf ) provided financial assistance to sovereigns which faced temporary liquid | 0 |
in interest rates, it may be possible to move rates very quickly in response to an important piece of information. but when you are highly uncertain about how to interpret events, it pays to be more cautious and gradual in your approach. to use an analogy with driving — you should slow down in a fog. it follows from this that the " right " amount of movement in interest rates depends very much on the circumstances. sometimes rates will be highly variable, as they were in the 1980s, and sometimes they will be quite stable, as they have been in the most recent decade. in all of this, interest rate stability should be seen not as a goal in itself, but as a by - product of a stable macro - economic environment. let me turn now to the second of my three questions. question 2 : why not leave interest rates to the market? this question, again, is based on a plausible - sounding premise, but the proponents of this view are often rather unclear about what " leaving it to the market " would really mean in an operational sense. it might mean several things. one possible meaning, that will not be discussed here, is that open market operations should be directed actively to controlling growth of the money base and thereby letting interest rates be determined as a residual. since this suggestion involves active intervention by the central bank, it is hardly in keeping with a " leave it to the market " approach. for those in its simplest form, leaving interest rates to the market would mean simply telling the reserve bank to cease all open market operations. it is worth exploring what would be the consequences of such a policy. in a world where the reserve bank was undertaking no open market operations, the amount of cash that underpins the money market ( exchange settlement funds, or what the academics call " highpowered money " ) would depend on the government ’ s fiscal balance, and it is not hard to see that this would be likely to result in monetary instability. any government deficits not financed by an exactly coincident issue of debt to the public, for example, would mean a rise in cash and a fall in interest rates. similarly, a surplus not exactly matched by debt retirement would lead to a shrinkage of the amount of cash and an escalation of interest rates. in both cases, there would be much more short - run volatility in interest rates than exists at present. this is because the day - to - day fluctuations in the government ’ s position, which can be quite | ##p ’ s cornerstones in stakeholder engagement for financial inclusion. the citi microentrepreneurship awards ( cma ), as the fruit of such remarkable partnership, serves as an important platform to convey the message that collaboration with a strong shared vision, coupled with responsive policies and platforms, can bring the best out of the filipino people. it is thus with great interest that i participate in this year ’ s cma. i look forward to the opportunity to discover promising micro - entrepreneurs whose experiences, achievements, and community contributions would serve as an inspiration to everyone. to my fellow nsc members, we indeed have some exciting work ahead of us. may the cma continue to nurture and empower filipino micro - entrepreneurs in the years to come. again, good afternoon and thank you all for coming. 2 / 2 bis central bankers'speeches | 0 |
is because the euro offers the prospect of being anchored in the relative safety of the world's largest economy. this would not only mean reduced exchange rate risks and less uncertainty for maltese economic agents and their foreign business partners but it would also eliminate the need to maintain higher interest rates to compensate for the element of risk associated with the small size of the maltese economy. the latter, moreover, would be of direct benefit in terms of price competitiveness, as would be the reduction in currency conversion costs and the increased price transparency. our assessment also shows that malta is well suited to participate in the euro area. its economic structure bears a fair degree of similarity with the euro area and both trade and financial linkages are substantial. furthermore, the lira is already closely linked with the euro so that joining the euro area does not entail a radical change in the parameters applicable to macroeconomic policy setting in malta. at the same time, most of the formal requirements for entry, with the exception of the criteria on public finances, have been, or stand a good chance of being met on a sustainable basis. as far as public finances are concerned, moreover, the fiscal consolidation process is on schedule, as the eu council has acknowledged, with the target deficit / gdp ratio for 2004 achieved. a positive track record of exchange rate stability has meanwhile cultivated expectations abroad that malta will not remain outside the euro area more than is necessary. a delay would thus send the wrong signals to international investors and could well reverse the upgrade in malta's credit rating as this was partly a response to expectations that malta would proceed with economic reform at a steady pace to adopt the euro as soon as conditions allowed. delaying euro adoption would thus not only postpone the benefits of the single currency but could also place malta further behind the other new member states, many of whom are expected to have adopted the single currency by 2008. three of them, in fact, have already joined erm ii and could be candidates for euro adoption as early as 2007. what is erm ii and what is the rationale behind it? erm ii is an arrangement in which a formal rate of exchange is established between the euro and the national currency of each participant in the mechanism. this rate is called the central parity rate. the rules require that at the time of entry, the lira is fully pegged to the euro. this means that the current peg to a three - currency basket, in which the euro carries a 70 per cent weight, will | way. increased competition does not result from just adding more firms with the same business model, but also, indeed perhaps more, by adding firms with different business models. where there is more diversity, and where there are more alternatives to choose from, competition is enhanced and its benefits increased. perhaps i should point out that several decades ago there were many people, including many of the local business community, who were afraid to approach a bank for a loan. they were prepared to give and receive credit directly to and from each other, believing they were neither charging nor being charged interest, but not to borrow from a bank that explicitly charged interest and made a profit “ at their expense ”. never mind that the implicit rate of interest in the credit being given and received in this way was probably higher than that being charged by the banks. i should not be at all surprised if there were still people around, potential entrepreneurs, who still reasoned that way, and who therefore may be “ financially bis central bankers ’ speeches excluded ” from the economy. might this perhaps be a niche which a cooperative bank, setting up shop here, might be able to exploit? furthermore, i think that perhaps i should modify an observation i made earlier : namely, that the need to set up a cooperative bank in malta has never so far been felt. on second thoughts, perhaps, this is not entirely true. for one of our smaller banks, one that, not surprisingly, was founded by a jesuit priest in 1910, actually did begin life as a cooperative society. it was originally called the lega dell ’ apostolato della preghiera, and its main aims were the setting up of a number of initiatives, all with an underlying social purpose. these included : a savings bank, intended to instil habits of thrift among the working classes ; a mutual benefit society ; a printing press ; the publication of a maltese language periodical ; an evening school for the teaching of languages, music and crafts ; an emigration bureau to help maltese citizens wishing to settle in other countries ; schemes for the free provision of food, medicines and medical care to the needy ; a public lotto office ; and a recreational club for members. it – or at least the savings bank part of its operations – only became a private limited company as recently as 1970, just before malta ’ s first banking act was enacted. and this, perhaps, should give us a clue as to why we do not have a maltese cooperative bank today. perhaps it is | 0.5 |
but only briefly the underlying growth potential, i. e. the speed at which output can rise, should not be confused with short - term cyclical movements driven by fluctuations in demand. over the last 20 years, average growth in denmark has been approximately 1. 5 per cent, cf. chart 1. this period comprises both overheating and a deep recession, so it is difficult to say anything about the structural growth rate. indications are that it has been lower than in the preceding decades. this does not mean that there cannot have been one year or several consecutive years in which annual growth exceeded its structural level, e. g. in an upswing. over longer periods, actual and structural growth are linked, however. this is because excessive growth in the short term, i. e. the build - up of imbalances in the economy, involves the risk of subsequent prolonged downturns with low or negative growth. in three of the last four decades, the danish economy has seen overheating followed by lengthy downturns lasting up to seven years. historical gdp growth rates in denmark chart 1 per cent gdp growth per capita gdp growth 1816 - 1836 - 1856 - 1876 - 1896 - 1916 - 1936 - 1956 - 1976 - 1996 - 20161826 1846 1866 1886 1906 1926 1946 1966 1986 2006 2050 source : ministry of finance, may 2017, and kim abildgren, a chart & data book on the monetary and financial history of denmark, ssrn working papers, no. 2977516, may 2017. the risk of imbalances often arises if domestic capacity is overestimated and excessive demand unleashed, e. g. via expansionary fiscal policy or easing of financial regulation. it is not sound economic policy to do so in an upswing when actual growth exceeds structural growth. the situation today ( autumn 2017 ) traditionally, the most important areas in relation to economic imbalances are the housing market, the labour market and growth in lending by financial institutions. the housing market has now been picking up for some years, but except for the market for owner - occupied flats it has not overheated – yet. the labour market has also been recovering markedly and there are increasing pressures and signs of labour shortage. but at present the labour market overall cannot be said to be overheated either – yet. so far, lending growth has been limited in the current upswing. there are indications that demand has been driven mainly by earnings and savings. finally, the large | balance of payments surplus and improved financial regulation make it possible to test the capacity limit a little more than previously. this time around, economic growth has been more balanced than in many previous periods. that is how it should continue to be. there is no need to jam on the fiscal or financial brakes in order to dampen demand yet. but nor is there any need for more accommodative economic policy. can overheating be countered by structural reforms? overheating occurs when society's demand for consumption and investment and demand from abroad substantially exceed the capacity of the economy. so it is relevant to ask whether overheating can be avoided – by curbing a rise in demand, and by introducing extraordinary expansions of the economic capacity – including whether the latter might even replace the former. basically, the answer to the last questions is no, or rather : this is very unlikely. it requires the implementation of supply reforms where the capacity increase materialises as rapidly, as strongly and with as much certainty as measures to curb demand do. there is one historical example to show that this is to some extent possible. the second half of the 1990s saw a protracted upswing in which the threat of economic overheating was countered several years in a row by introducing fast - acting measures to increase the supply of labour and lower structural unemployment. but the situation has changed since then and the instruments applied cannot be re - used. at that time, structural unemployment was 8 - 10 per cent. today it is 3 - 4 per cent and mainly comprises short unemployment spells between jobs. at that time, schemes such as leave of absence and transitional allowance, which had been introduced a few years earlier, could be abolished at short notice. they cannot be abolished once more. and even in the 1990s, capacity expansion was not a standalone solution. in 1998 a tax reform was introduced that not only brought long - term structural improvements, but also dampened demand in the short term ( the " whitsun package " ). this was one of the reasons why the subsequent cyclical downturn was mild and brief. in theory, a similar measure is available today, i. e. immediately to increase the early retirement and retirement ages. but they are already being increased gradually, and there seems to be broad political consensus that retirement ages should be increased at longer notice. that is a political priority. suggestions for other potential measures are more speculative, but they have one thing in common : it is far more uncertain | 1 |
philipp m hildebrand : inside europe, outside emu - lessons and outlook speech by dr philipp m hildebrand, member of the governing board of the swiss national bank, at the british swiss chamber of commerce, geneva, 23 april 2004. * * * my long - standing personal attachments to the united kingdom make it a special privilege to be here this morning to speak about europe and its significance to our two countries. geneva is one of europe ’ s truly international cities and provides a fitting platform for a discussion on some of the salient characteristics about the relations of the united kingdom and switzerland toward europe. the united kingdom and switzerland are both undeniably european nations. nonetheless, they both firmly remain outside of the european monetary union ( emu ). institutionally, the links of the two countries with europe differ, of course. the united kingdom is in eu europe while switzerland is only in europe, despite the fact that until the eu welcomes ten new member states next week, we swiss can be forgiven to think of ourselves as representing the “ heart ” of europe. culturally, our two countries are rooted in different european traditions : anglo - saxon on the one hand and continental european on the other hand, notwithstanding the fact the historical roots of the saxons are, of course, on the continent. during the remainder of my time with you today, i will sketch more fully a number of salient common features and differences between the united kingdom and switzerland. based on these commonalities and differences, i will then draw some tentative economic, financial and political conclusions about the respective experiences and relations of our two countries with europe and more specifically with emu. uk and switzerland : common features and differences : it seems to me that even a perfunctory comparison of our two countries ’ relations to europe and emu needs to touch upon law, politics and recent economic history. law and politics there is a fundamental judicial divide between the common law tradition of anglo - saxon countries and the civil law tradition of continental europe. over the centuries, this divide has undoubtedly spread into culture and minds. the custom and case - based common law was institutionalized in 1154 by henry ii through elevating local custom to a unified system of law “ common ” to the country. it may be unwritten, as it was at the outset, or captured in statutes and codes. this judicial history is reflected by the absence of a written constitution in the united kingdom. civil law in continental europe, on the | no means the only relevant one. switzerland and the united kingdom are both nations with long - standing traditions of global integration and free trade. both nations rely fundamentally on multilateral contractual frameworks such as the one offered by the world trade organization ( wto ). our nations and our peoples live in and benefit from a global and open world. europe is and must remain part of that world. surely an open multilateral global economy must be our primary long - term commitment. the decision to join a regional agreement such as the european monetary union must be evaluated against this global backdrop. i have tried to provide you with a brief sketch of some of the salient macro - economic issues related to such an evaluation. beyond economics, both of our nations have a proud political history. ultimately, the decision to surrender national sovereignty - be it monetary or otherwise - will always be a political one. central bankers may have views as private citizens which they would presumably express at the ballot box. in the public domain, however, their responsibility should be to illustrate potential economic consequences of the ultimately political decision to join or not to join the european monetary union. conclusion ladies and gentlemen, the decision formally to join emu does not appear to be a policy issue of imminent concern in either of our two countries. in the united kingdom, the issue was indefinitely pushed back in time in june of last year. here in switzerland, it is the ratification of the second package of bilateral treaties with the european union that dominates our current external political agenda. since this contractual arrangement with our european partners was designed from the outset as a multi - issue legal document with costs and benefits spread over multiple issues, the swiss government is to be commended for insisting on negotiating the agreement as a comprehensive package and not break it down into multiple single issues. meanwhile, globalization is set to proceed. with the rapid integration of china and india into the global economy and the subsequent reorganization of production processes, global competition is rapidly increasing with changes in relative prices that become increasingly a function of global demand and supply. needless to say, the globalization path will neither be linear nor smooth. there are risks, perhaps none less so than the temptation of governments to resort to protectionism in a misguided effort to respond to the costs associated with global economic integration. in europe, integration is also proceeding. in less than a week, ten countries will join the european union. they will add twenty - five percent to europe ’ s population, twenty - three percent to europe ’ s | 1 |
1 percent in the twelve months to september 2018, compared to lower growth of 2. 4 percent in the year to september 2017. this expansion was mainly driven by sustained improvement in nonmining gdp growth and the recovery in mining output. inflation was low and stable, and fluctuated around the lower end of the objective range of 3 - 6 percent for most of 2018 ; and the outcome was broadly consistent with projections for the year. the low rate of annual price increase was mostly due to the decrease in food inflation. food price inflation decreased from 1. 1 percent in 2017 to a negative 0. 2 percent in 2018. however, fuel prices increased significantly by 16. 1 percent during 2018, due to upward adjustments in may, october and november. this compares to a relatively smaller increase of 9. 5 percent in 2017. overall, the increase in administered prices ( including fuel prices, public transport fares, as well as electricity tariffs ) added 1. 86 percentage points to inflation in 2018. distinguished ladies and gentlemen, the overall modest increase in prices in botswana was in the context of subdued domestic demand pressures, as a result of the restrained growth in personal incomes and largely stable foreign inflation. monetary policy was, therefore, conducted against the background of below - trend economic activity and a positive medium - term outlook for inflation and moderate fiscal expansion. government expenditure grew by 6. 6 percent in 2018 compared to a contraction of 6. 3 percent in the prior year. it should be recognised, in this respect, that beyond the increase in wages, the short - term impact of government spending on domestic demand is moderated to the extent that a significant component involves infrastructure and capacity development. in the context of botswana, this type of spending tends to be import intensive and the economic benefits of such public investments are derived in the medium to long term. regarding wage developments, it is notable that government recurrent expenditure included a 3 percent salary increase with effect from april 1, 2018. however, nominal national wages increased by 2. 3 percent, on average, which was below the average inflation rate for the period. these developments suggest a modest impact on domestic demand and inflation. on credit developments, growth in commercial bank credit accelerated from 5. 6 percent in 2017 to 7. 7 percent in 2018 and included a faster increase in lending to businesses, from 3. 2 percent in 2017 to 10 percent in 2018. for households, annual credit expansion fell from 7. 2 percent in 2017 to 6. 2 percent in 2018, in the | stability to prices through our monetary policies and in keeping our banking sector sound, stable and liquid. all these give us cause to be optimistic about sustaining inclusive growth in 2016 and beyond,... particularly if adherence to good governance becomes the norm from the national agencies as well as to the local government units. members of the lmp, good governance is also the rationale that underpins the requirement by government to get prior opinion of the bsp ’ s monetary board ( mb ) on all government loans, including those from lgus to ensure that borrowings are consistent with overall state financial goals. this requirement is essentially based on the 1987 constitution ( article 12 ) that mandates the bsp to provide policy direction in the areas of money, banking and credit. furthermore, republic act no. 7653 or the bsp charter ( section 123 ) provides that the bsp functions as financial advisor on official credit operations of the government, its political subdivisions and instrumentalities. bis central bankers ’ speeches the objective is to enable the bsp to monitor public sector borrowings and to assess their impact on monetary aggregates, the price level and the balance of payments in fulfillment of its role and mandate to promote and maintain monetary and financial stability. as you may know, requests for mb opinion on planned borrowings may be submitted directly to the bsp by the lgus or through the lending banks. the bsp recognizes the importance of credit to lgus, particularly municipalities. thus, the bsp has issued circulars to streamline the documentary requirements and facilitate the review process on how lgus can secure mb opinions on lgu loans. we have since registered a significant increase in lgu ’ s engagement with the bsp. in 2015, the bsp received a total of 347 requests for mb opinion, an increase of 35 percent from the 257 requests in 2014. the cooperation of the lgus and lending banks enabled the bsp to render mb opinion on 334 or 96 percent of these requests. about 76 percent of the requests we received in 2015 came from municipalities, involving a total of p12. 2 billion. it is notable that the majority of the loans for which bsp rendered an opinion in 2015 were used for infrastructure projects such as farm - to - market roads, public markets and multi - purpose halls. these purposeful spending by local governments provide a boost not only to community development but also to broader national growth. indeed, in the context of governance, local government units play a significant role in ensuring | 0 |
the activities of unrelated entities to be totally separated. the proposal currently under discussion in europe would permit the creation of financially independent subsidiaries to accommodate the activity of investment within a group also authorised to engage in traditional commercial banking. we are therefore confronted with the need to achieve closer international coordination to ensure the consistency of the reforms under way in the various jurisdictions. otherwise the cross - jurisdictional inconsistencies may encourage regulatory arbitrage which would reduce the effectiveness of the reforms adopted and put at risk the sought - after simplification of banking. in any event, the implementation of measures of this type affecting the specialisation of banking activity should be accompanied by an appropriate cost - benefit analysis. in this respect, it should be kept in mind that the crisis has not demonstrated the superiority of any specific model and that, by contrast, it has witnessed the collapse of all manner of institutions, whether they be specialised in traditional business, in investment banking or in a combination of the two. moreover, given that the introduction of restrictions on banking activity means forgoing the potential benefits of diversification, it is essential to ensure that these are smaller than the risk of combining traditional banking and own - account investment activities, even after the entry into force of solvency regulations which strengthen and step up prudential controls. finally, it is necessary to assess as precisely as possible the impact structural measures may have on the location of risk outside the regulated sector and on the liquidity and efficiency of securities markets. more generally, we still lack an overall analysis of the diverse regulatory changes envisaged in the three areas in question, of their internal consistency and of their combined impact on the financial system and on the economy in general. for example, at the limit it could be argued that structural measures ( perhaps those having the greatest impact on the business strategy of the main banks ) are the least necessary if we are confident that the combination of the new solvency requirements and the reform of resolution regimes will really minimise the government support required to protect deposits. furthermore, although the soundness and solvency of banks tend to strengthen their capacity to grant credit, it is true that the combined effect of all the measures will ( by their very nature ) tend to reduce the profitability of banking and banks ’ ability to channel savings to business activities involving risk. further evidence on the quantitative importance of this effect would be useful for assessing the key parameters of each measure. effects in spain against this background, how do the regulatory changes affect the spanish banking | luis m linde : the regulatory responses to the crisis speech by mr luis m linde, governor of the bank of spain, at the fundacion de estudios financieros, madrid, 22 may 2014. * * * good morning and many thanks to the fundacion de estudios financieros for your kind invitation. let me start by recalling that just three years ago i contributed to another book of the fundacion, on the international financial crisis, as we then saw it. as governor of the banco de espana and erstwhile collaborator of the fundacion, it is a pleasure for me to participate in this presentation. knowing the authors ’ profile, i have no doubt the book will make us reflect on how to enhance our financial culture and also on the much - needed recovery, following the crisis of confidence in the financial sector. * * * * * * * my intention today is not to talk once more about the crisis and its causes. i would rather focus on the regulatory consequences of the crisis which, as we all know, have been farreaching and which we cannot consider as complete. that crises should have regulatory consequences has been a fairly frequent occurrence in financial history. you may recall, for instance, that the basel committee on banking supervision was created in 1974, in the wake of the mistrust triggered by the bankruptcy of the german bank hersttat ; that the financial stability forum was set up in 1999, following the bankruptcy some months earlier of the hedge fund “ long term capital management ” ; and that the successor to this forum, the financial stability board ( fsb ), came into being in 2009, after the lehman brothers debacle some months earlier. it is this latter institution, the fsb, which is pushing through a thoroughgoing amendment of the international regulatory framework, seeking to reduce the likelihood of further crises in the future. in this connection, the fsb has benefited from decisive contributions by, among others, the basel committee on banking supervision. identification of initiatives on the international regulatory agenda initially, the fsb identified a series of issues with a view to organising a coordinated agenda of regulatory initiatives at the international level. some aspects of the initial analysis, such as the design of structural measures in the banking sector ( which were, in principle, highly oriented towards setting limits on the size of banks ), were initially rejected by the fsb. however, as we now know, there have been several initiatives along these lines. cases | 0.5 |
dynamics so that inflation expectations remain firmly anchored and no second - round effects emerge. this implies that the objective of monetary policy must be defined in terms of an aggregate and not in terms of a partial or so - called “ core ” price index which excludes, for example, food or energy prices, in order to allow the central bank to identify in a timely manner long - lasting trend dynamics. in their assessment of the monetary policy stance, central banks realise that the ultimate impact of increases in the prices of oil and commodities – including food – on inflation and output dynamics will depend crucially on the reaction of economic agents, particularly participants in labour and product markets. their reaction will be influenced by their expectations regarding the response of monetary policy to such developments. an absence of second - round effects following food and commodity price pressures depends crucially on inflation expectations being firmly anchored at levels in line with the central bank ’ s objective. in the presence of food and commodity - driven pressures on headline inflation, there is always a risk of inflation expectations becoming unanchored and a damaging wage - price spiral being established. given the costs of curbing such unpleasant inflation dynamics once they have started, a price stability - oriented central bank should react in a timely and preemptive manner on the basis of a comprehensive analysis of the shocks to headline inflation. pain and sollie ( 2006 ). pain and sollie ( 2006 ) argue that in the united states the impact is evenly distributed over the ten - year period considered, whereas in the euro area the disinflationary effect is concentrated mainly in the period 2001 - 05. 3. the impact of globalisation on the structure of the domestic economy over the past 20 years we have experienced a significant decline in the level and volatility of inflation in both developed and emerging economies. this has often been associated with the growing empirical evidence of a flattening of the phillips curve. can globalisation alone account for changes in the way that the domestic economy – and inflation in particular – reacts to economic shocks? globalisation may have played a role in this process through two distinct channels. first, the short - run phillips curve, which typically relates inflation to excess domestic demand, may have flattened owing to the increase observed in trade and production specialisation across countries, with domestic inflation increasingly being affected by cost pressures arising in trade partners. 5 second, globalisation may have played a role in reducing the inflationary effect of excess demand is linked to the reduced ability of firms to | lift the growth momentum and boost potential through higher productivity growth. this would, in turn, support the effectiveness of our measures and also help interest rates to rise again in due time. effective central bank communication means more effective policies let me now turn to the topic of central bank communication. central banks have come a long way in how they communicate. public institutions, including the ecb, have moved in the direction of disclosing more information and better explaining policy, also in response to parliamentary and public demands. this parliament has encouraged the ecb to follow this path from the very beginning : one of the topics chosen for the first econ hearing in 1999 was the ecb ’ s communication and transparency policy. good communication forms the bedrock of the ecb ’ s credibility and underpins our legitimacy in the eyes of the people we serve. but as central bankers it ’ s also in our interest to communicate effectively : being open and clear is essential to make our policy more effective. carefully calibrated communication – think of forward guidance – has itself become a tool of central bank policy. 2 / 4 bis central bankers'speeches traditionally, as central bankers we have been more comfortable speaking to experts and markets than to the general public. markets closely follow what we do and what we say, and surveys and studies find that we are well understood by them. we are very attentive to how markets interpret – or misinterpret – our actions. but we have to remain vigilant that we do not focus too narrowly on communicating to markets and create our own echo chamber. this is why, in my confirmatory hearing, i announced that one of the priorities of my presidency is to reinforce our bridge with the public. our own research finds that even though many europeans have heard of the ecb, very few have a deeper understanding of what we do, and certainly not of why we do it or how our work serves the common good. 1 we need to improve this. we have just started to develop a new survey in which we ask consumers about their expectations on inflation, housing, consumption, saving and the labour market. we need to understand them better, not least because they can vary significantly across different regions or groups in society. after all, it is the everyday economic decisions of people and companies that we seek to influence with our policy and communication. if our language is not accessible, our policy will be less effective. we also know that people will only come to trust us more, and | 0.5 |
a digital euro, many respondents felt that a digital euro should be part of a digitalised society. the more sceptical attitude towards a digital euro was particularly pronounced among frequent cash users. 4 conclusion going forward, researchers and especially policymakers need to continue trying to reach out to various groups, including the general public, to communicate the features of the various forms of digital and physical central bank money, and how they differ from highly volatile assets that tend to give rise to far greater turmoil due to their large price fluctuations. cash has always conveyed a sense of being stable and trustworthy. i am therefore convinced that cash can and will have its place in the future, too. in fact, the long - term eurosystem strategy on cash is clear in that regard : if a digital euro were to be issued in the future, it would co - exist alongside cash. i now look forward to having fruitful discussions with all of you. i hope you have an enjoyable time at the conference and are able to exchange many valuable insights and ideas. thank you. 3 / 3 bis central bankers'speeches | would like to elaborate on what a central bank digital currency might mean for cash. 2 cash in times of crisis when economists talk about turmoil in markets, they are typically referring to unusually strong swings in asset prices. turbulence of that kind could arise, say, due to a sharp reassessment of perceived risks. in such a scenario, asset holders might be inclined to sell off large amounts of a particular asset as quickly as possible. by definition, the nominal return on cash is zero, but cash means liquidity and as central bank 1 / 3 bis central bankers'speeches money it offers that extra feeling of safety, particularly in times of crisis. demand for cash thus rises sharply during periods of elevated uncertainty. the covid - 19 crisis is no exception. in march 2020, when the german federal government was implementing the first nationwide lockdown, cash in circulation in germany increased by almost 21 billion euro. that represents a year - on - year increase of around 12 %. cash demand accelerated during the crisis, not just in germany but further afield, too. the increase was also not confined to isolated spikes during periods of lockdown, but occurred on a broader scale across countries. at the end of 2020, the overall value of euro banknotes in circulation was up by 11 % in the eurosystem. this annual growth rate is high by historical standards, considering a 5 % average increase over the past ten years. however, there is evidence to suggest that the use of cash as a means of payment has declined during the pandemic. we see that from the reduced numbers of smaller denominations that are flowing through the cash cycle in germany and beyond. at least with the recent easing of covid - 19 containment measures in germany, we have started to observe an uptick in cash lodgements at our regional branches again. there are also several surveys on payment behaviour that point to declining cash usage relative to digital means of payment. what does that imply for the role of cash going forward? in the middle of a crisis, that is hard to say definitively. many places where cash tends to be used frequently, such as cafes, outdoor events or street markets, have not been open as much during the crisis as they usually are. this has naturally placed a limit on the transactional role of cash during the pandemic. even so, the decline in cash usage during the pandemic has been more than offset by its important function as a store of value. cash offers a safe haven | 1 |
’ speeches in short, the country is prepared to face a somewhat less favorable external scenario next year, which undoubtedly will have effects on the domestic economy. for years we have built solid macroeconomic balances, which yield their fruit when adverse situations hit. we are confident that, in such a scenario, this will be no exception. our institutions, solid but flexible at the same time, distinguish us in the world. this allows us to look at the country ’ s future with calm and optimism. we as central bank will continue to contribute our own efforts to the stability of the currency and the normal functioning of the internal and external payment system, the development and welfare of the chilean population. thank you. bis central bankers ’ speeches figure 1 nominal exchange rate variation in 2013 ( * ) ( percent ) south africa india indonesia australia brazil turkey peru colombia malaysia philippines russia emerging asia chile new zealand latin america thailand other south korea poland emerging europe mexico hungary czech rep. bulgaria slovakia china - 5 ( * ) an increase denotes a depreciation. sources : central bank of chile and bloomberg. figure 2 gdp and final demand ( annual change, percent ) - 5 - 5 - 10 - 10 - 15 - 15 gdp domestic demand final demand source : central bank of chile. bis central bankers ’ speeches figure 3 inflation indicators ( annual change, percent ) - 2 - 2 - 4 - 4 - 6 - 6 cpi cpiefe source : national statistics institute ( ine ). figure 4 real exchange rate ( * ) ( index, 1986 = 100 ) ( ) g 90y rer 1998 - 2012 average 1993 - 2012 average ( * ) includes information up to 27 august. source : central bank of chile. bis central bankers ’ speeches figure 5 mpr and expectations ( percent ) fbs, second half august 2013 ees, august 2013 forward, september report mpr source : central bank of chile. table 1 international baseline scenario assumptions 2013 ( f ) mar. 13 jun. 13 report report gdp growth sep. 13 report 2014 ( f ) mar. 13 jun. 13 report report sep. 13 report 2015 ( f ) sep. 13 report ( annual change, percent ) trading partners'gdp 3. 4 3. 6 3. 4 3. 3 4. 2 3. 7 3. 6 4. 0 world gdp at ppp 3. 1 3. 3 3. 1 3. 0 3. 9 3. 6 3. 5 3. 9 united states eurozone japan china india rest of asia ( ex | 21 / 02 / 2018 household indebtedness and mortgage stress | speeches | rba speech household indebtedness and mortgage stress michele bullock [ * ] assistant governor ( financial system ) address to the responsible lending and borrowing summit sydney – 20 february 2018 thank you for the opportunity to be here today. the title of the summit, ‘ responsible lending and borrowing – risk, responsibility and reputation ’, really struck a chord with me because there has been much discussion over the past few years about housing prices and the increasing debt being taken on by the household sector. the reserve bank's interest in this area springs from both its responsibility for monetary policy and its mandate for financial stability. from the perspective of monetary policy, high debt levels will influence the calibration of interest rate changes. the more debt households have, the more sensitive their cash flow, and hence consumption, is likely to be to a rise in interest rates. households with higher debt levels may also sharply curtail their consumption in response to an adverse shock such as rising unemployment or large falls in house prices, amplifying any economic downturn. my focus today, however, is on the potential risks to financial stability from this build up in debt. one of the key issues we have been focusing on is the extent to which rising household debt might presage stress in household budgets, with flow on effects to financial stability and ultimately to the economy. there has been a lot said and written about this issue in recent times, using a multitude of data sources and anecdotes. what i hope to do today is to put this information into some context to provide a balanced view on the current and prospective levels of household financial stress, and hence the implications for financial stability. i want to make a couple of points at the outset. the first is that there are clearly households in australia at the moment that are experiencing financial stress. by focusing on whether financial stress has implications for financial stability, i am not in any way playing down the difficulties some households are experiencing. there is a very real human cost of financial stress. second, some of the most financially stressed households are those with lower incomes which typically rent rather than borrow to buy a home. access to suitable affordable housing for this group is clearly an important social issue. but given the topic of this summit and the potential link to http : / / www. rba. gov. au / speeches / 2018 / sp - ag - 2018 - 02 - 20. html 1 / 14 | 0 |
of defence is required. the recent crisis has shown that a systemic crisis may quickly pose a threat to institutions that are actually sound. systemic risk, however, cannot be dealt with by microprudential supervision alone. regarding the establishment of an effective macroprudential toolset, important measures are still due. our major concern in this respect is the too - big - to - fail issue. efforts are being made by the fsb to present an approvable base solution to the g20 summit. essential details, however, will have to be finalised afterwards, in particular the formal definition of “ systemically important financial institutions ” ( sifi ’ s ). in order to find a credible solution to the too - big - to - fail problem strong political commitment would act as a helpful support. taking the time constraints into account, i want to conclude my remarks. nevertheless, i do not want to fail to mention that macroprudential surveillance has to go beyond the focus on individual national institutions. close cooperation at the european and international levels is indispensable in order to supplement microprudential supervision with a systemic view. the establishment of the esrb is an important step in the right direction. now the challenge for its members is to make it a success. thank you very much. | or starting with ifis, which would improve the range of high - rated instruments in local currency. from the viewpoint of ifis achieving this objective would be helped by adopting standardised bond documentation and international accounting rules, by lowering transaction costs ( not least through interlinked clearing and settlement systems ) and by developing domestic derivatives markets. 2. promoting domestic derivatives markets developing domestic derivatives markets is a crucial measure to promote liquidity both directly and indirectly through helping to diversify the investor base. derivative markets provide cost - effective ways for institutional investors to structure their portfolios more efficiently and improve their risk management. despite their dynamic growth over recent years, the emes ’ derivatives markets account for no more than 10 % of the total outstanding notional values in global derivatives markets. furthermore, the development of derivatives markets differs remarkably across regions. the trading volumes of exchange - traded and over - the - counter contracts are largest for foreign exchange forwards and swaps and for equity options and futures. trading of these instruments is particularly important in emerging asia, while exchange - based trading of interest derivatives on the whole is lagging somewhat behind and is more important in latin america. to promote the development of derivatives markets, the emes should examine the extent to which regulatory deficits and shortcomings in the market infrastructure may be impeding the evolution of such markets. the g7 countries could assist this process by providing their expertise and supporting technical assistance in this area in close cooperation with the ifis. 3. strengthening the market infrastructure and the legal framework a strong legal and regulatory framework, international competitive clearing and settlement systems, effective credit ratings, and good corporate governance are also key ingredients for the development and efficient functioning of capital markets. despite the remarkable progress that emes have made so far, further reform steps are needed in these areas. let me address these aspects in more detail. first, clearing and settlement systems : capital movements are global but the clearing and settlement of securities is very often country - based. the current setup in many emes in terms of mitigating risks in the settlement process and cost effectiveness is often less than optimal. in addition, clearing and settlement systems are still highly fragmented. however, best practices in this area are well developed in the form of recommendations by the committee on payment and settlement systems ( cpss ), the international organisation of securities commission ( iosco ) and the g 30 action plan towards enhancing the interoperability of settlement systems. thus, the challenge does not lie in determining what goals | 0.5 |
85 ( november ), pp. 1063 - 70. lewis, kurt f., and francisco vazquez - grande ( 2017 ). “ measuring the natural rate of interest : alternative specifications, ” finance and economics discussion series 2017 - 059. washington : board of governors of the federal reserve system, february ( revised may 2017 ), https : / / dx. doi. org / 10. 17016 / feds. 2017. 059. lubik, thomas a., and christian matthes ( 2015 ). “ time - varying parameter vector autoregressions : specification, estimation, and an application, ” federal reserve bank of richmond, economic quarterly, vol. 101 ( fourth quarter ), pp. 323 – 52, https : / / dx. doi. org / 10. 21144 / eq1010403. - 16 mankiw, n. gregory, and ricardo reis ( 2018 ). “ friedman ’ s presidential address in the evolution of macroeconomic thought, ” journal of economic perspectives, vol. 32 ( winter ), pp. 81 – 96, https : / / dx. doi. org / 10. 1257 / jep. 32. 1. 81. nelson, edward ( 2018 ). “ seven fallacies concerning milton friedman ’ s ‘ the role of monetary policy, ’ ” finance and economics discussion series 2018 - 013. washington : board of governors of the federal reserve system, february, https : / / dx. doi. org / 10. 17016 / feds. 2018. 013. phelps, edmund s. ( 1967 ). “ phillips curves, expectations of inflation and optimal unemployment over time, ” economica, vol. 34 ( august ), pp. 254 – 81. poole, william ( 1970 ). “ optimal choice of monetary policy in a simple stochastic macro model, ” quarterly journal of economics, vol. 84 ( may ), pp. 197 – 216. priebsch, marcel a. ( 2017 ). “ a shadow rate model of intermediate - term policy rate expectations, ” feds notes. washington : board of governors of the federal reserve system, october 4, https : / / dx. doi. org / 10. 17016 / 2380 - 7172. 2056. svensson, lars e. o. ( 1997 ). “ inflation forecast targeting : implementing and monitoring inflation targets, ” european economic review, | ##co report leaves a wide range of options for ccps to meet the requirements put forward. we need to make sure that their implementation does not give rise to regulatory arbitrage and competitive distortions. in this regard, i mentioned earlier that cpmi and iosco are currently carrying out an implementation monitoring exercise for the pfmi : monitoring the implementation of the guidance on recovery and resolution will also be a priority. we also need to better understand the systemic implications of pushing risk back to participants through allocation of uncovered losses and liquidity shortfalls. how will stress be transmitted through the system once a ccp ’ s pre - funded resources have been exhausted? an understanding of interdependencies, such as common participation, is particularly important. we also need to make sure we consider scenarios in which multiple ccps enter recovery simultaneously. for instance, some clearing participants may be unable to fulfil all their obligations if multiple ccps simultaneously ask for emergency cash calls and replenishments. in this context, more thinking on ccp crisis scenarios could give us a somewhat clearer idea of the specific problems ccps might have to face in a recovery situation, including the potential size of losses and liquidity shortfalls. to that end, deeper analysis of reverse stress testing to cover hypothetical portfolios and market conditions which go beyond ‘ extreme but plausible ’ would also be helpful. this is why cpmi - iosco have identified stress testing as a policy priority, and will soon launch a work stream to develop potential guidance regarding best practices and methodologies. the objective would be to ensure that all ccps apply reliable and comparably robust stress testing frameworks. conclusion despite the work that still needs to be done to ensure the full effectiveness of ccp recovery and resolution, it is important to understand that ccps are truly beneficial for the preservation of financial stability. since the financial crisis, the systemic importance of ccps has greatly increased, and there may be concerns within the market about their safety and soundness. some of these concerns are legitimate, and regulators are taking them serious and aim at addressing them. however, it should be recalled that the alternative to central clearing is far more risky : the non - cleared world, which existed before the crisis, was dangerously opaque, did not allow for pooling of risks, and was inefficient in terms of collateral mobilisation. risk management frameworks of ccps shall be designed to provide the right incentives to all stakeholders to manage theirs risks | 0 |
, london, 1873 ; humphrey, t. “ the classical concept of the lender of last resort ”, economic review, 61, 2 – 9, 1975 ; and freixas, x., parigi b., and j. - c. rochet “ the lender of last resort : a 21st century approach ”, journal of the european economic association, 2 : 1085 – 1115, 2004. bis central bankers ’ speeches fixed - rate, full allotment regime in its refinancing operations, offering unlimited liquidity to banks at a predictable cost against an expanded set of eligible collateral. the widening of collateral might be seen as a way to mitigate the adverse and destabilizing effects of shortterm funding “ runs ” relating to a deterioration of asset liquidity, but it can also be seen as a way to prevent large recourse to central bank liquidity by banks, who would otherwise be subject to funding outflows at a later stage of the crisis. such a widening has to be accompanied by proper risk management measures, such as haircuts, to mitigate the increase of the risk profile of the central bank. the challenge for the central bank is to “ buildin ” the possibility to expand the set of eligible collateral while mitigating the incentives for banks to abuse it. 20 similarly, the lolr ’ s function of providing emergency liquidity assistance has been criticised for provoking moral hazard by banks. indeed, support that is considered as appropriate during the crisis might have perverse effects on the incentives of banks at a later stage. banks may ex ante decide to take an excessive exposure to risk, knowing that the central bank will intervene if that risk materialises. moreover, there is a fine line between liquidity and solvency needs, which in a crisis is often blurred. central banks should therefore be particularly wary not to substitute for capital support that should be provided by shareholders, investors, or in last resort by governments. when such moral hazard problems are severe, the central bank might consider mitigating but not eliminating the externalities of a liquidity crisis – that is, not helping barely solvent banks and thus providing incentives for banks to conduct business in safe and sound manner. 21 the challenge for the central bank is to find the appropriate balance between preserving financial stability and imposing discipline for the future. while the new set of liquidity standards requires banks to hold sufficient liquid assets in good times to meet their out | bank of japan ’ s september report of recent economic and financial developments bank of japan communication, 11 / 9 / 98. the bank ’ s view japan ’ s economic conditions continue to deteriorate. with respect to final demand, public investment seems to have bottomed out. net exports ( exports minus imports ) are increasing mainly due to a decline in imports. however, business fixed investment has been decreasing significantly, and housing investment has declined further. private consumption has not yet shown a recovery despite the special income tax reduction. against this background of weak final demand, production has been reduced substantially. as a result, some industries have shown improvements in inventory adjustments, but the level of inventories is still high as a whole. with the decline in expenditure and production, corporate profits continue to decrease, and the decline of employee income is accelerating somewhat. in addition, the ratio of job offers to applications records a historically low level, and the unemployment rate remains at a high level. as a whole, the employment and income conditions have deteriorated further. as the above indicates, there are continued negative interactions of production, income, and expenditure. given the current considerably low level of economic activities, the economy is unlikely to transit immediately to a self - sustained recovery led by private demand, although a further deterioration in the economy is expected to cease gradually from the effects of the comprehensive economic stimulus package. additionally, attention should be paid to possible negative effects on the real economy from financial developments including the recent fall in stock prices. in these circumstances, the cabinet approved a guideline on budget requests by ministries for fiscal 1999. this guideline intends to stimulate the economy by allocating ¥4 trillion to the special budgetary provision on the condition that the fiscal structural reform act is suspended. in addition, the bills to rebuild the stability of the financial system are being deliberated at the diet, and the reduction exceeding ¥6 trillion in personal income taxes and corporate taxes is expected to be discussed in detail. the materialization of these policies along with their effects on corporate and household sentiment should be carefully monitored. with regard to prices, wholesale prices are on a downtrend, and consumer prices are lowering below the previous year ’ s level. with respect to the outlook, the downward pressure from domestic factors is unlikely to weaken considerably reflecting the already large output gap, despite the expected effects of the comprehensive economic stimulus package. hence, prices are likely to be weak for some time. in the financial markets, stock prices dropped considerably in late august | 0 |
recent months but remain weaker than before russia's unjustified war against ukraine and its people. we see a divergence across sectors of the economy. the manufacturing sector is working 1 / 4 bis - central bankers'speeches through a backlog of orders, but its prospects are worsening. the services sector is growing more strongly, especially owing to the reopening of the economy. household incomes are benefiting from the strength of the labour market, with the unemployment rate falling to a new historical low of 6. 5 per cent in march. employment has continued to grow and total hours worked exceed pre - pandemic levels. at the same time, the average number of hours worked remains somewhat below its pre - pandemic level and its recovery has stalled since mid - 2022. as the energy crisis fades, governments should roll back the related support measures promptly and in a concerted manner to avoid driving up medium - term inflationary pressures, which would call for a stronger monetary policy response. fiscal policies should be oriented towards making our economy more productive and gradually bringing down high public debt. policies to enhance the euro area's supply capacity, especially in the energy sector, can also help reduce price pressures in the medium term. in this regard, we welcome the publication of the european commission's legislative proposals for the reform of the eu's economic governance framework, which should be concluded soon. inflation according to eurostat's flash estimate, inflation was 7. 0 per cent in april, after having dropped from 8. 5 per cent in february to 6. 9 per cent in march. while base effects led to some increase in energy price inflation, from - 0. 9 per cent in march to 2. 5 per cent in april, the rate stands far below those recorded after the start of russia's war against ukraine. food price inflation remains elevated, however, standing at 13. 6 per cent in april, after 15. 5 per cent in march. price pressures remain strong. inflation excluding energy and food was 5. 6 per cent in april, having edged down slightly compared with march to return to its february level. non - energy industrial goods inflation fell to 6. 2 per cent in april, from 6. 6 per cent in march, when it declined for the first time in several months. but services inflation increased to 5. 2 per cent in april, from 5. 1 per cent in march. inflation is still being pushed up by the gradual pass - through | and credit growth in this environment continues to point to upside risks to price stability over the medium to longer term. monetary developments, therefore, require careful monitoring, especially in the light of the strengthening of economic activity and, in particular, of strong asset price dynamics, especially in housing markets. to sum up, annual inflation rates are projected to remain elevated in 2006 and 2007 and the economic analysis confirms that the risks to price stability continue to lie on the upside. some of these risks appear to have increased in view of the renewed strength of oil prices. given strong money and credit growth in a context of already ample liquidity, a cross - check of the outcome of the economic analysis with that of the monetary analysis supports the assessment that upside risks to price stability prevail over the medium to longer term. it therefore remains crucial to ensure that medium to long - term inflation expectations in the euro area are kept solidly anchored at levels consistent with price stability – a prerequisite for monetary policy to make an ongoing contribution to sustainable economic growth and job creation. accordingly, particular vigilance is of the essence in order to ensure that risks to price stability do not materialise. with respect to fiscal policies, there are some signs that the implementation of the stability and growth pact and commitment to the rules have improved since last year ’ s revision. however, fiscal targets in a number of cases are rather lenient and their attainment is still subject to considerable risks. the governing council therefore supports any further reinforcement of fiscal consolidation efforts that also takes full advantage of a more favourable economic environment. appropriately ambitious fiscal targets as part of a comprehensive structural reform programme would bring deficit and debt ratios down more rapidly. this is decisive in order to secure the sustainability of public finances. such strategies would also boost confidence in the economic prospects of the euro area. as regards structural reforms, the governing council again stresses the importance of undertaking comprehensive reforms to ensure open, competitive and well - functioning labour and product markets, including the promotion of wage and price flexibility and the fostering of an attractive environment for investment and innovation. the need for such reforms has again been highlighted by recent oil price developments, as they would enhance the resilience of the euro area economy to external shocks. there is a broad and firm consensus that openness and flexibility are beneficial in promoting growth and employment and it is now essential to turn the agreed reform plans into actions and to strengthen them where necessary. by pushing forward with ambitious structural reforms, euro area countries will also | 0.5 |
the concrete steps that move in this direction. i would like to separate these into two categories : those that relate to the regulatory framework and those that pertain to the supervisory framework. the regulatory framework let me begin with some reflections on the regulatory framework. going back to the principles i highlighted earlier, i believe we should build upon the regulatory framework that already exists in the eu. any improvement to the eu framework for financial supervision should first seek to fully exploit the potential of the existing framework. in this respect, the concepts and responsibilities of home and host supervisors and the framework for consolidated supervision are well - embedded in the existing banking directives, and it makes a lot of sense for them to form the basis of the future approaches. indeed, the directive to implement basel ii in the eu – the so - called capital requirements directive – contains key provisions which will reinforce the role of the consolidated supervisor in relation to applications to use the advanced approaches of the new capital framework. as i am sure you are all aware, these provisions will allow banking groups to make one application for approval in relation to the group as a whole, and will require the relevant supervisors to co - operate in trying to reach a common agreement on the application. should it prove not possible to reach agreement within six months, the consolidated supervisor will have the power and responsibility to take the decision. this is a significant development in the regulatory framework, giving the consolidated supervisor the possibility to take decisions with an impact that reaches outside the national jurisdiction. i am aware that the european banking federation believes that full consolidated supervision should be determined now as the ultimate objective for the eu regulatory and supervisory framework, but i believe that we have to approach this carefully, and see how the new provisions work in practice in this more restricted area. i also think that it is important to recognise and respect the legitimate concerns of host supervisors. as i have already mentioned, the banking systems of some of the new eu member states are predominantly made up of incoming institutions. we should ensure that host supervisors are able to access sufficient information on the institutions operating locally and, where necessary, in relation to the wider group. the capital requirements directive also includes provisions in this respect and notes the need to take account of the significance of the institution in local markets. looking at the wider prudential framework let me mention two specific areas where the european commission is currently reviewing the existing eu regulation. the first area relates to deposit guarantee schemes. although the deposit guarantee directive of 1994 was useful in setting common minimum | government can use the new payments platform to make, and receive, some of its payments. so it is a busy time at the reserve bank. further details on these and other projects that we are working on will be available in the bank ’ s annual report, which will be tabled in parliament and released mid next month. thank you. my colleagues and i are here to answer your questions. 5 / 5 bis central banker's speeches | 0 |
medium term, given the broad - based weakness in the economy and subdued monetary dynamics. in the period ahead, the ecb will monitor all incoming information on economic and monetary developments and assess any impact on the medium - term outlook for price stability. with regard to money market conditions, the ecb will remain particularly attentive to developments which may have implications for the stance of monetary policy and is ready to consider all available instruments. further reducing fragmentation of euro area credit markets and improving confidence in the euro area banking sector are essential to ensure an adequate transmission of monetary policy to the financing conditions in the euro area countries and to further repair the credit channel. financial stability risks have diminished in the euro area. measures taken by european and national authorities have helped to ease the severe market stress that earlier weighed on sovereigns and banks. the euro area banking sector has made progress in balance sheet repair by improving its regulatory capital ratios, by reducing its leverage since bis central bankers ’ speeches the outbreak of the financial crisis and by shifting its funding structure towards more stable funding sources. net inflows of capital from abroad as well as a reduction in excess liquidity conditions continue to be observed, reflecting an improvement in financial market confidence. repayments of funds taken up in the context of the ecb ’ s three - year longerterm refinancing operations conducted in december 2011 and february 2012 have resulted in a decline in the size of the eurosystem ’ s balance sheet since end - august 2012. we will remain attentive to all developments that influence an adequate transmission of monetary policy to the financing conditions in euro area countries. further decisive steps towards establishing a genuine banking union are needed so as to further reduce financial fragmentation, enhance the resilience of the banking sector and strengthen the institutional framework of the euro area. the ecb welcomes the approval of the legal framework of the single supervisory mechanism ( ssm ) by the european parliament on 12 september and we look forward to its urgent adoption by the eu council in the course of october. the entry into force of the ssm legal framework will allow us to further speed up the preparation process, which is well under way. we are committed to delivering on our new supervisory responsibilities by november 2014. we also strongly support the envisaged timeline for the establishment by the end of 2014 of the single resolution mechanism ( srm ), which is a necessary complement to the ssm. the commission ’ s proposal for the srm contains three essential elements for the | effective resolution of banks, namely : a single system, a single authority and a single fund. the ecb ’ s forthcoming comprehensive assessment of banks ’ balance sheets, which will take place before the ecb assumes its supervisory responsibilities, will be an important confidence - building tool, and we are committed to ensuring its consistency and transparency. the effectiveness of this exercise will also depend on the availability of necessary arrangements for recapitalising banks, if and when needed, including through the provision of a public backstop, if private funds cannot be acquired. these arrangements must be in place before we conclude our assessment, in line with the declaration of the european council of june 2013. it is also noteworthy that strong efforts to repair bank balance sheets and enhance transparency have already been undertaken in all euro area countries, especially in those that have experienced severe stress. as regards fiscal policies, substantial fiscal adjustment has been undertaken by the euro area countries over the last few years. the average fiscal position of the euro area countries is much stronger than that of global peers. the authorities should not unravel their multi - year efforts to cut deficits but should reduce the debt ratios without delay, in line with the eu ’ s fiscal framework, which has been considerably reinforced over the past few years. as part of this enhanced framework, the draft budgetary plans that countries will now deliver for the first time under the “ two - pack ” regulations need to provide for sufficiently far - reaching measures to achieve the fiscal targets in 2014. euro area governments must also decisively strengthen their efforts to implement the needed structural reforms in product and labour markets. these reforms are required not only to help the respective countries to regain competitiveness and to rebalance within the euro area, but also to create more flexible and dynamic economies that will generate sustainable growth and employment. as regards intra - euro area imbalances, there has been a major external adjustment in euro area countries with previously high current account deficits. improved competitiveness indicators, in particular declining unit labour costs and the relatively robust export performance, point to a more lasting effect of the structural reforms undertaken so far. the framework of the european semester and the macroeconomic imbalance procedure have provided additional tools to secure further progress in terms of structural adjustments in the euro area that will put the euro area in a position to make a positive contribution to global growth and employment creation. bis central bankers ’ speeches | 1 |
shown that sustained see, for example, the discussions in lars e. o. svensson ( 1999 ), “ inflation targeting as a monetary policy rule, ” journal of monetary economics, vol. 43 ( june ), pp. 607 – 54 ; and in jon faust and dale w. henderson ( 2004 ), “ is inflation targeting best - practice monetary policy? ” federal reserve bank of st. louis review, vol. 86 ( july / august ), pp 117 – 44. see board of governors, “ fomc statement of longer - run goals and policy strategy, ” in note 3. due to well - known upward biases in the pce and other indexes of consumer prices as measures of the cost of living, zero inflation, properly measured, corresponds to a positive measured level of pce inflation, most likely on the order of 1 / 2 percent. bis central bankers ’ speeches periods of even mild deflation can impose immense costs in terms of slow growth and high unemployment. 14 thus, balancing the goal of maximum employment against the costs of modest inflation, the committee chose 2 percent measured inflation as the value it judged likely to provide an adequate buffer against costly deflations while keeping the costs of inflation quite small. given that the rate of inflation over the longer run is determined solely by monetary policy, central banks can, and indeed must, determine the long - run level of inflation. in contrast, they cannot do much to affect the maximum sustainable level of employment. that level is determined by factors affecting the structure and dynamics of the labor market that are almost completely outside the control of the central bank. nonetheless, the committee felt strongly that it should provide some quantitative interpretation of economic conditions consistent with the maximum employment portion of the fed ’ s mandate. failure to do so might be seen as elevating the inflation side of the dual mandate above the employment side. the committee chose to couch the longer - run employment objective in terms of the rate of unemployment while indicating that other indicators may also be relevant in assessing the maximum level of employment. unfortunately, there is a considerable range of disagreement in the economics profession and on the fomc itself about what this longer - run normal rate of unemployment is. moreover, there is widespread recognition that whatever the normal rate might be today, it can change over time. so the consensus statement notes that, as of january 2012, fomc participants ’ estimates of this rate had a central tendency of 5. 2 percent to 6. 0 | arrangement counterparts, to help them to cope with financial crises. second, the financial inclusion policy implemented around the world since the global financial crisis, and the support program for credit loan and support program for smallscale business owners, being carried out as parts of our bank intermediated lending support facilities, share the same goal, while the support program for trade financing and support program for high tech start - ups, for smes, are being used as credit policy tools. since the financial crisis there may be a risk of deterioration of the income distribution structure, which will ultimately affect economic stability, and it is therefore time for central banks to play a certain role in this regard. third, while carrying out its responsibility of promoting financial stability, the bank of korea has been strengthening its role of representing the national interest in the formulation of international norms. particularly, as long - and short - term liquidity regulations must be established during the course of finalizing basel iii over the next five years, which will greatly affect korea ’ s financial industry, we plan to participate more actively in this process. fourth, at the initiative of our regional branches, regular publication of the 「 golden book 」 has been launched, drawing much attention. the golden book project was carried out in the hope that the bok ’ s policy experiences will serve as triggers for regional economic development. while on the one hand striving to convey information on regional economic activities promptly, we also want the book to contribute to the formulation of regional economic development strategies, by providing in - depth analyses of a wide range of pressing issues in each region. at the initial stage of the project we consulted other central banks ’ reports such as the us fed ’ s 「 beige book 」, long well - known worldwide. we can, however, fairly say that we are blazing a new trail now, and that will before long bring the “ golden book ” international recognition as an unique bank of korea report. alongside the central bank ’ s conduct of monetary and credit policies, this is yet another unique way in which, given its 16 local branches, it can contribute to the national economy. in the course of overcoming the global financial crisis, the korean economy ’ s reliance on exports has intensified further still. the challenge facing us is to achieve growth based upon a balance between exports and domestic demand. in other words, we should focus on policies that further promote domestic consumption and investment. while maintaining price and financial stability, it is also desirable that monetary and credit policies be conducted | 0 |
numbers : 600 and 31. the latest figures suggest that the world generally saves at a rate of roughly 20 % of gdp. asean, however, has a gross domestic saving rate of 31 %. applying these figures to the usd2. 395 trillion gdp of asean in 2013, we have asean saving at usd742. 5 billion of which usd263. 5 billion ( i. e., 11 % of gdp ) can be seen as a saving that is higher than the norm for the rest of the world. these are not small numbers, a good portion of which is invested outside of asean. when combined with the estimated asean population of over 600 million individuals, a more organized asean financial market does seem to make its own case. preparing for new foreign interests and added competition this brings me back to the first question : how do we prepare for the new foreign interests coming into our banking industry? perhaps, with one eye equally focused on trying to mobilize a portion of the usd742. 5 billion in asean saving in 2013 alone? unfortunately, there is no switch that we can conveniently toggle between “ on ” and “ off ” for this. the best preparation is simply to have each bank operate with due recognition of the impact of financial risks on its own balance sheet and that of the system as a whole. this combines 1 ) the effective management of risk exposures and the enforcement of a binding governance culture at the bank level and 2 ) the regulatory oversight and mitigation of systemic pressures that may be developing. this is the specific context of what we euphemistically refer to as an “ enabled environment ”. it is simply a regulatory framework that deliberately nurtures the creativity of providers to deliver innovative product and services while giving regulators enough leeway to intervene to address conflicts of interests, including the possibility that what may be good for individual banks may not necessarily be beneficial to the system at large. in the capital market, we need to strengthen and finalize our pricing conventions so that there are no material gaps between reference rates and market valuation. we strongly subscribe bis central bankers ’ speeches to price discovery and we aspire to implement the principles on financial benchmarks soonest. market infrastructure, of course, plays a central role for the efficient transfer of funds and settlement of obligations, whether onshore or offshore. the bsp is playing a very prominent role in regional and global discussions to calibrate the global otc derivatives infrastructure requirements to better reflect the less active | responsive and responsible agents, it is incumbent upon us to adopt and adapt. we adopt the higher norms prescribed for good governance, risk management, market conduct and consumer protection since these define our new market architecture. however, we are equally practical and pragmatic in recognizing idiosyncratic conditions that require us to adapt the global standards in ways that better serve our prudential purposes. moving on to the second issue. we are seeing regional financial integration materialize into a defined reality. what was perhaps a faint prospect at an earlier time and was hardly discussed publicly, we now hear of promises of improved well - being for financial consumers and prospects of larger markets for service providers under the certainty of enhanced competition. the integration timelines have been set and how we handle ourselves against those milestone dates will greatly determine the macro - financial landscape for generations to come. in banking, we have a few short years before qualified asean banks ( qabs ) may enter our market. the integration of asean insurance markets has a more assertive timeline bis central bankers ’ speeches while capital market development has a definitive vision for a harmonized framework for cross - border securities transactions. none of these integrated markets could exist, however, without the necessary pipelines and so interoperable and / or interlinked trading, clearing and settlement systems are likewise a necessity. as you can see, ladies and gentlemen, there is much that lies ahead of us. the new normal has set the bar higher in the manner regulators supervise the financial market and how market participants conduct themselves. against the certainty of change, are we ready? thankfully, the philippine financial system has the advantage of being in a position of strength. but, we have repeatedly argued that this strength is neither permanent nor absolute. change is a certainty because the needs of financial consumers evolve with time. markets, in turn, offer a richer menu of products and services that address the evolving broader needs of financial consumers. and on top of these, we have seen in recent times that markets sometimes need a fresh - but - major reboot and that too will certainly call for change. these changes are most apparent in the recent legislative and policy initiatives to further open our banking market to foreign interests. i am often asked whether the philippines is ready for banking integration. although it is not as often raised, the accompanying question is why we should be part of such integration efforts. let me address the latter question first as a prelude to the former. the answer really may just boil down to two | 1 |
financial market. in october 2005, the pbc approved the ifc and adb to issue at the inter - bank bond market rmb denominated bonds worth of 1. 13 billion and 1 billion yuan respectively. this is an important step forward in the inter - bank bond market. the pan asia fund and the asian bond fund were introduced to the inter - bank bond market as the first foreign institutional investor. in addition, the auto finance market was further opened. five foreign auto finance companies have started their business in china since 2004. further opening up of the financial sector, as a part of china ’ s wto accession commitment, is also a necessary ingredient in developing a socialist market economy in china. opening - up has not only brought challenges and pressures, but also fresh opportunities and more competitiveness. 2. financial reform was boosted by opening up opening up has helped deepen the reform of state owned financial institutions. since state council ’ s decision in 2003 on joint stock reform of commercial banks, piloting banks have moved very fast in their reform by improving corporate governance structure on the basis of international standard on public banks and in accordance with the regulatory requirements, drawing upon the advanced management expertise and technology from foreign banks, and conducting cooperation in risk management, internal control, financial management, human resources. financial indicators of these piloting banks have approached or reached the international standards. these banks have basically become modern joint stock commercial banks with adequate capital and strict internal control mechanism. the bank of communications and china construction bank have already been listed on the hong kong stock market. the opening - up of the chinese economy has promoted the management mechanism reform in the financial sector. one good example is the foreign exchange management system. in recent years, in line with the gradual opening - up of the financial sector, we have speeded up the foreign exchange management mechanism and improved management over the current account. compulsory foreign exchange surrender under the current account has been replaced with quota surrender. the coverage of exporting enterprises ’ automatic verification has been widened ; limit on foreign exchange payment by enterprises under the current account has been eased ; balance ceiling of enterprises ’ foreign exchange account has been raised and regional ceiling abolished. the foreign exchange management over individuals has been relaxed to allow individuals to pay and receive foreign exchange under the trade account. the convertibility of rmb under capital account has been promoted. management over external debt of chinese and foreign banks and the foreign exchange lending in their domestic operation has been strengthened and extended aggregate volume control over | on when - issued trading will be expedited, and guidance provided to intermediary agencies on technological upgrading of relevant systems so deepen the inter - bank bond market. new instruments of interest rate swap will be explored and certain institutions will be allowed to experiment in interest rate swap. fourthly, there has been more innovation in the product and transaction at the foreign exchange market banks have been allowed to conduct foreign exchange swap with their clients ; otc and market makes have been introduced to the market. on may 18, 2005, a market maker driven system of foreign currency to foreign currency spot transaction was launched, offering the market more products. more participants and a larger coverage were introduced in the piloting operation of forward foreign exchange surrender and purchase. we have moved faster to integrate with the international foreign exchange market. in march 2006, the china foreign exchange trade system and the chicago mercantile exchange reached an agreement for chinese financial institutions and investors to trade the exchange rate and interest rate products of the latter through the former. fifth, innovation in financial service philosophy and mode has been promoted. opening - up has introduced advanced expertise, new philosophy, new technology, and new philosophy from developed financial market. the domestic financial institutions have parted ways with their old operational method, adopted the philosophy of putting the customers first, innovated in service system and set up a service mechanism in line with the international practice in terms of financial product, business arrangement, procedure and management. quality of their service, operation and management has been elevated. domestic enterprises and households now enjoy financial services in investment, wealth management, payment and settlement, financial consulting, etc, and the convenience of payment through bank cards, and online payment. thanks to opening - up, the chinese financial sector has become stronger and the domestic financial market has progressed by leaps and bounds. the financial system has functioned better in resource allocation, promoting the rapid growth of financial sector and national economy. 4. further promote the opening - up and enhance the competitiveness of the financial sector china ’ s economic performance has caught global attention because its impact on the global economy has been on the increase. in the years to come, along with the progress of globalization and economic growth in china, we will definitely integrate more deeply in the world economy, and influence the world economy more significantly. it is a challenge for the financial industry to capital account ; the domestic financial market will be further opened ; financial legislation will be strengthened to build a market environment for fair competition ; a financial macro management system | 1 |
out earlier make it imperative for deposit insurers and other financial safety net participants to put in place frameworks for crisis preparedness and management that enhance their ability to manage the failure of deposit taking institutions while mitigating potential contagion effects. crises tend to propagate quickly and hence must include augmented provisions of emergency liquidity assistance and pre - emptive interventions in troubled institutions. the iadi's core principle 6 on " deposit insurer's role in contingency planning and crisis management " suggests contingency planning and crisis management policies and procedures to ensure effective responses to bank failures and other catastrophic events. moreover, as pointed out therein, system - wide crisis preparedness strategies and management policies should be the joint responsibility of all safety net participants and co - ordination between them is essential. core principle 4 also emphasises the strengthening of relationships with other safety net participants. core principle 9 recommends that emergency funding arrangements for the deposit insurance system – 4 / 6 bis - central bankers'speeches including pre - arranged and assured sources of liquidity funding – may be explicitly set out ( or permitted ) in law or regulation, including market borrowing. deposit insurers should actively implement these guidelines and formulate toolkits to address emerging risks. 6. conclusion in closing, i would like to address the environment in which deposit insurance operates in india in the context of these new challenges. india has started a pilot for wholesale cbdc ( e - w ) starting november 01, 2022 and retail cbdc ( e - r ) starting december 01, 2022. india is also leveraging its digital public infrastructure to be in the forefront of the digital revolution sweeping the world. the unified payments interface ( upi ) provides immediate money transfer through mobile devices round the clock 24 * 7 * 365 and brings access to multiple bank accounts and various financial services under a single app. india is also engaged in interlinking upi with fast payment systems ( fps ) of other countries to make cross - border payments instant and efficient. the rbi has joined the project nexus, a multilateral international initiative conceptualised by the innovation hub of the bis to enable instant cross - border retail payments by interlinking fpss of malaysia, philippines, singapore, thailand and india. turning to the climate, the government of india has announced that the net zero target to be achieved by 2070 along with other climate goals ahead of net zero. the rbi has issued a framework for acceptance of green deposits and | , knowledge and experiences shared during the conference will shine light on the path that lies ahead for practitioners in this increasingly multi - faceted field. it is globally accepted that the deposit insurance function is critical to the design and effective functioning of a robust financial safety net in an economy. it operates in conjunction with and enhances the efficacy of the functions of prudential regulation, supervision, lender of last resort ( lolr ) / emergency liquidity assistance ( ela ) and resolution. together, they instil public confidence in the financial system and anchor financial stability on an enduring basis. this assumes critical relevance in the context of the hurtling pace at which the financial landscape is evolving across many dimensions. let me begin with deposit insurance crossing over the virtual frontier. 2. digitalisation of finance 1 / 6 bis - central bankers'speeches the digitalisation of financial services brings a variety of opportunities for deposit insurers to fulfil their mandate in more efficient and effective ways, including modernisation in reimbursement, supervision, resolution and in communication. digitalisation also goes hand in hand with significant economies of scale. yet as the experience with banking sector stress in some jurisdictions in march 2023 showed, it could also amplify and accelerate the materialisation of financial stability risks in the form of episodes of extreme volatility induced by the interaction of online banking and individual depositors coordinating through social media to fuel deposit outflows. in fact, digital financial products and services are confronting deposit insurers with fundamental questions regarding the fulfilment of their mandate – the potential coverage of new financial products ; assessing and pricing associated risks ; the increased relevance of beneficiary accounts through e - money issuers ; and the involvement of third parties. moreover, new business models give rise to new risks or may increase the relevance of existing risks. digitalisation also entails cybersecurity risk. the unavailability of essential technical infrastructure or unscrupulous activity against such infrastructure has the potential to significantly impair deposit insurers'business continuity. two digital innovations in currencies and payment systems merit special attention as both have implications for deposit insurance. the first one is central bank digital currency ( cbdc ) – legal tender or fiat currency issued by a central bank in a digital form. the major advantages of cbdcs are the finality of transactions ( settlement risks is eliminated as there is no bank intermediation ), and real - time and cost | 1 |
policy or with the next interest rate decision. as a rule, central banks direct their attention to both price stability and the stability of the financial system as both subjects are very much intertwined. in my opinion, this simple observation has far - reaching implications for a central bank ’ s research programme. if a central bank ’ s research is to develop on well - organised lines, it has to be “ from the top down ”, with the objectives as the primary focus. you all know, that price stability has long been established as the first objective of central banks and therefore price stability has been and will remain the first objective of central bank research. as i see it, financial stability has now become the second top issue for central bank research. alongside and in cooperation with other departments, our research centre takes an active role in this field. for example we look at the implications of changes in the german financial system for financial stability, the implementation of lending of last resort functions and the link between the soundness of the banking system and its credit supply. in addition, other projects are dedicated to the role of financial intermediaries in the business cycle in germany. furthermore, we investigate the best framework for implementing stress tests for the financial system in germany. on top of this there is no doubt that the financial stability issue has a very important international dimension, which is a big challenge for further research. last but not least our research concentrates on the refinement of econometric models and forecast methods. in this regard, we are particularly interested in promoting the development of “ dynamic stochastic general equilibrium models ” for the use within the bundesbank. these models have become a backbone of theoretical as well as empirical analysis. in modern economic research these approaches provide a consistent framework which connects theoretical foundation with empirical evidence. we at the bundesbank are aware of the necessity to include these methods in our tool box of economic methods. consequently, our research programme contains several projects which will use general equilibrium models. as an example, based on earlier papers by jana kremer, giovanni lombardo and thomas werner, the interaction between monetary and fiscal policy, is to be illustrated in more detail. another project will deal with the cyclical behaviour of beliefs in dsge models. the sheer scope of these research topics constitutes a major challenge for research management. essentially, this is a matter of how research within a central bank is to be organised. i believe research centres like ours at the bundesbank are essential | burkhard balz : public - private partnership - key to the success of a digital euro speech by mr burkhard balz, member of the executive board of the deutsche bundesbank, at the bitkom digital euro summit, virtual event, 15 november 2022. * * * 1 introduction ladies and gentlemen, thank you for your warm welcome to today's digital euro summit. where better to talk about an innovative topic like this than at an event organised by one of germany's largest digital associations? as my virtual participation exemplifies, the digital transformation is fundamentally changing countless aspects of our lives. we are living in times where it seems that practically everything is in a state of flux. that is not only a reference to the fact that football world cups are no longer being played in the wonderful summertime, but in the winter months. changes can be observed in the world of payments as well. driven by digitalisation, new payment methods are emerging and, with them, new providers of innovative payment services. these developments are also impacting on central banks'roles as backbone of payment systems, prompting us to find new answers to new challenges. one answer could be to make our currency, the euro, ready for the digital world of tomorrow. these discussions are centred around the concept of central bank digital currency, or cbdc for short. so let me begin by outlining why we are exploring a digital euro. after that, i will present the potential core features a digital euro might have, before updating you on the current project status. 2 why are we considering issuing a digital euro? why are we considering issuing a digital euro? first of all, we have been seeing a trend towards cashless payments for years now – and that trend even accelerated recently. if we look at germany, for instance, the bundesbank found, in its regular study on payment behaviour that the share of cash transactions of consumers'daily payments has fallen to 58 %. 1 the trend is obvious : in a study from 2017, cash payments accounted for 74 %. one of the main effects we saw was the growing popularity of contactless payments – in particular in the form of card payments. while roughly 20 % of smartphone owners have already paid using digital wallets, total mobile payments still account for only 3 % of all daily payment transactions. it was with great interest that i read the recent results of a bitkom survey, confirming the trend towards cashless, and in particular | 0.5 |
/ 2023 / august - 2023. the outbreak of the pandemic, neither the cpi inflation rate nor the nominal wage growth rate reached even 1 percent in a stable manner. c. the necessity of achieving the 2 percent price stability target taking into account japan's experience just outlined, i consider it necessary for consumer prices to continue to see a steady increase of around 2 percent, so that stable economic growth will continue and people's real wages will keep rising steadily. this is because an excessively low inflation rate that remains at around 0 percent further reinforces the inherently strong rigidity or stickiness of prices and wages, and this can hinder economic efficiency and growth potential. firms'price - setting behavior often reflects a strong tendency to avoid price hikes as far as possible. 3 especially during japan's period of economic stagnation from the 1990s, there were growing instances of price hikes leading directly to sales declines. many firms thus came to prioritize a stance of maintaining selling prices by holding down wage costs. 4 this seems to have caused the zero price and wage norm - - the generally accepted idea that both prices and wages do not usually rise - - to take root thoroughly among firms and households. it is easy to see the strong upward price rigidity taking root in japan by comparing with other advanced economies, where growth in consumer prices has tended to be higher. for example, when comparing the price change distribution by item between japan and the united states, there is a significant difference in both the position of the peak of the distribution and its dispersion, particularly for the pre - pandemic period in september 2019 ( chart 13 ). specifically, in japan, many items cluster around the point where the rate of change in prices is 0 percent, and the degree of concentration is high. by contrast, in the united states, the largest number of items cluster around the rate of increase in prices of about 2 percent, but this phenomenon has long been explained using the concept of a kinked demand curve. the idea behind this is that firms adopt strategies to counter their competitors, so - called strategic complementarity. see koga, m., yoshino, k., and sakata, t., " strategic complementarity and asymmetric price setting among firms, " bank of japan working paper series, no. 19 - e - 5 ( march 2019 ). this corporate behavior can be observed as markdowns. see aoki | the measures best suited to reduce the level of npls further and to gradually and sustainably adjust the level of provisioning will be adopted. account will be taken of the fact that the containment of a credit portfolio ’ s inherent risk must be compatible with the ability to absorb any potential losses from sales. the number and size of firms specialized in credit recovery are increasing, but the level of competition in this sector remains unsatisfactory. some banks have set up ad hoc units. progress in developing a liquid secondary market for npls and advances in the efficacy of recovery procedures depend on a marked improvement in the quality of the information needed for due diligence purposes and the timely monitoring of the status of the procedures. the analytical reporting on bad loans launched two years ago by the bank of italy is making significant strides in this direction. there is still ample room for improvement, however, especially for small banks and with regard to data on real estate appraisals. every effort must be made to catch up. measures to increase the probability that likely - to - fail exposures return to performing status must be stepped up. their success requires different technical skills and operating procedures from those used to manage bad exposures. a market for this type of exposure should also be established and banks should actively seek agreements with turn - around funds to offer firms the managerial and financial resources needed for a re - launch. in recent years there have been improvements in the length of judicial credit recovery proceedings as well. data on the initial phases of foreclosure proceedings indicate that the 2015 - 16 reforms are working towards reducing their duration : the length of the pre - sale phase has fallen by about a tenth ( from 27. 5 to 24. 5 months ), while that of the sale phase has been nearly halved ( from 41. 5 to 23. 5 months ). nonetheless, overall recovery times remain long. additional regulatory reforms may be needed to prevent the accumulation of npls on banks ’ balance sheets and to ensure the necessary flow of loans to households and firms. the enabling law reforming the regulations on corporate crisis and insolvency approved by parliament redistributes the competencies of judicial offices in the context of bankruptcy proceedings in order to increase the level of specialization of judges. it overhauls the courtbased liquidation procedure : priority must be given to significantly reducing the length of the proceedings by simplifying the process and offering appropriate incentives to the parties involved. the judicial system can also be improved by | 0 |
financial turmoil after 14 months of turmoil, global financial markets are at a critical juncture. risk aversion across the system has risen to unprecedented levels, and an aggressive deleveraging process is under way. many foreign financial institutions need to raise significantly more capital at a time when their ongoing earning power appears to have been permanently reduced. these dynamics could intensify the current global slowdown and will have an impact on the cost of capital in canada, despite the relative strength of our financial institutions. in order to illustrate the potential magnitude of these concerns, i would like to emphasize three points. first, the deleveraging process in the global system is far from finished. there are only three ways for a financial institution to reduce leverage : raise capital, sell assets ( at a price at or above their carrying values ) or restrain the rate of credit growth. over the past year, financial institutions in many countries have raised over us $ 350 billion of new equity, which covered only 70 per cent of announced losses. as a result, leverage has actually increased. with virtually all of these shares now trading below issue price, the ability of firms to raise capital appears very constrained. similarly, private asset sales have been limited by the complexity of the underlying assets, the ongoing impairment of securitization markets, difficulties in supplying financing to leveraged buyers and the desire of investors to " time the market. " in sum, banks have an increasing need for capital, but it has become more difficult to raise it. in this environment, the u. s. government's initiative to buy distressed assets is critically important. the plan announced by treasury secretary paulson and being developed through discussions in the u. s. congress is bold and timely. the size and breadth of support provided by this measure will help firms " rightsize " their balance sheets, re - liquefy closed markets and establish market prices for these distressed assets. this should eventually encourage private buyers to re - enter the market and complete the deleveraging process. a well - executed program will undoubtedly speed the resolution of this crisis and limit its economic cost. asset sales alone will be insufficient, and additional capital will still be needed. over time, acquisitions of the weak by the strong will play an important role. at the moment, valuation uncertainties, some accounting standards and investor caution are all restraining mergers and acquisitions in the sector. 3 in the end, reflecting the likely scale of the shortfall, it is possible that, in countries | prices is often due to aggregate demand being significantly lower than the total supply of goods and services in the economy. this type of situation can arise for two reasons : one is that demand could fall heavily, for instance, as a result of households for some reason reducing their consumption. the other is that supply could increase significantly, for instance as a result of technological advances leading to increased productivity. while demand - driven deflation is connected with weak production growth, the opposite applies to supply - driven deflation. these are usually termed “ bad deflation ” and “ good deflation ” respectively. in practice it is not so easy to distinguish between one sort of deflation and the other. problems arise when demand is too low in relation to supply. in my opinion, there could be a possibility that the increasingly skewed distribution of income that has arisen over the past 20 years, particularly in the united states, but also in europe and in ‘ emerging markets, has led to total demand being excessively weak from a global perspective. however, to the extent that the present low price pressure is due to good productivity growth and the increased supply of cheap goods and services from china and india, it can thus be termed “ good deflation ”. these positive supply shocks, combined with the declining rate of inflation, have led to an increasing number of analysts, including fed governor ben bernanke, recently drawing attention to the risk that the negative output gap could be larger than anticipated. this would mean that disinflation is more pronounced than we are currently assuming. the structural changes may have made it even more difficult to assess the economies ’ long - term growth potential and consequently to estimate total resource utilisation. it is, of course, a complicating circumstance that factors a central bank has difficulty in identifying and controlling are important to inflation trends, in both the short term and in a longer perspective. however, there is at the same time a lot a central bank can do to prevent excessively low price increases and to parry the increased complexity following in the wake of globalisation. here i would in particular like to emphasise the importance of having a symmetric inflation target that functions as a clear, credible target for participants in the economy. i would also like to emphasise the importance of central banks ’ communication in a low - inflation economy, as it is then particularly important to create stable, positive inflation expectations. risks of deflation an interesting, but possibly hypothetical, question is whether there is | 0 |
the economic and inflation outlook in europe as well as about our latest monetary policy decisions. 1 / 7 bis - central bankers'speeches 2. the macroeconomic environment last year, the euro are saw an expansion of 3. 5 % in economic activity. the main factor behind the economic expansion in europe was the lifting of covid - related restrictions. however, high inflation dampened private consumption. this was, to some extent, due to the energy crisis caused by the russian war of aggression against ukraine. initially, during the late summer, there were deep concerns that a cut in the russian energy supply would cause a severe recession, at least in some euro area countries. fortunately, european countries and germany in particular made considerable progress in finding alternative gas suppliers and in filling gas storage facilities before the winter. thus, the most negative scenario was avoided. nevertheless, the energy crisis provoked not only surging energy retail prices and higher production costs for firms. it also created considerable uncertainty and made production planning for firms more difficult, especially for those with high energy consumption. these dampening factors had an effect in the second half of the year especially, while the growth effects of the lifting of covid restrictions petered out. for this winter, we expect economic activity in the euro area to increase marginally. according to the ecb's economic projections published last week, gdp in the euro area will grow only by 1 % this year. it should be taken into account though, that the current financial market tensions imply greater uncertainty around projected figures. one of the most striking economic features of the recent past is the comeback of high inflation. to be fair, the high inflation did not emerge only because of the energy crisis caused by the war in ukraine. the inflation rate had already accelerated in the summer of 2021. as the world recovered from the unprecedented economic slump caused by the pandemic, supply chains were under stress. together with expansive monetary and fiscal policies, the rapid recovery pushed up energy prices. moreover, demand for certain goods and services increased strongly. supply bottlenecks and price increases were the result. with the russian invasion of ukraine in february 2022, energy prices skyrocketed. furthermore, the war and its consequences disrupted some other supply chains. in particular, the energy price shock heated up inflation even more. the figures clearly demonstrate how exceptional last year was. according to the imf, 2022 consumer prices in advanced economies rose by 7. 3 %. that was the highest increase in almost | , in particular, should be beneficial. also, in japan the recession seems to have bottomed out. a recovery of the world economy from its recession was by no means a foregone conclusion. nevertheless, the remarkable stabilisation points to strong underlying resilience, fostered by increasingly flexible markets and by timely policy responses. however, the mild recession has not managed to purge all of the excesses accumulated during the previous expansion. the recovery is currently accompanied by several ongoing adjustment processes, with disequilibria that built up throughout the 1990s still being corrected. most visible and much commented on are the marked declines in the stock markets, which have lost further ground worldwide over the past couple of days. moreover, the us dollar has depreciated against other major currencies, thus facilitating the necessary adjustment of the large us current account deficit. equally, the reduced inflow of capital into emerging market economies should be seen as part of the correction of unsustainable trends. this applies also to fdi. particularly in latin america, the earlier high fdi inflows were in large measure attributable to privatisations of utilities, financial institutions and other enterprises, not to greenfield investments. with the supply of such investment opportunities declining, fdi inflows are bound to decline as well. of course, we would be better off today if some of the imbalances could have been prevented. the correction of these imbalances now contributes to economic slack. this raises the question of the extent to which the build - up of the bubbles in the stock markets and, in some countries, on the housing market was due to overly expansionary policies. whether central banks should try to prick such bubbles is open to debate. a good part of the current slack in the world economy reflects a return to more normal underlying conditions. inflated expectations are in a process of being corrected. it is also true that we are moving through a recovery period in which the risks tend to be more on the downside than on the upside. let me mention four potential downside factors. first, risk aversion has soared, as the credibility of profit forecasts has been dented by misreported earnings and uncertainty about the impact of stock options. in this jittery environment, any news that might further impair investor confidence can have a negative impact on the stock markets. the us congress has been quick to take legislative action in an attempt to restore confidence in | 0.5 |
mr meyer highlights several issues on the fed ’ s agenda for bank supervision and regulation remarks by mr laurence h meyer, member of the board of governors of the us federal reserve system, before the institute of international bankers annual breakfast dialogue, held in washington, d. c. on 27 september 1999. * * * i am delighted to have this opportunity to join with the other distinguished members of this panel before the institute of international bankers. my goal this morning is to highlight several issues on the fed ’ s agenda for bank supervision and regulation. the first item never seems to leave the agenda : financial modernization. the issue has two sides : the market process and the legal framework. in the market - driven process, financial institutions are increasingly competing with each other – with banks seeking to expand the financial services they offer within banking organizations and, at the same time, non - bank financial institutions offering many bank - like products. this process has been under way for years, though constrained by the prevailing statutory limits. legislation would allow the market process to evolve further and would, in addition, refine the supervisory and regulatory framework for the diversified financial services firms that would emerge as a result of the legislation. many of you know the details of the disagreement between treasury and the federal reserve over what that supervisory framework and permissible structure should look like. rather than restating those details, let me simply express the hope that the efforts of the regulators and congress will ultimately be successful – in this millennium – in moving the bill to passage. being optimistic by nature, i turn to the challenges for both the banking system and the supervisors in adapting to the changes in banking and financial services that the passage of legislation would set in motion. developing cooperation and coordination among the multiple supervisors of financial services firms would be one of the first. financial modernization envisions a blend of functional and umbrella supervision. depository institutions would continue to be supervised by their current bank or thrift regulators, with functional regulation of the new non - bank activities by their specialized regulators and umbrella supervision of the diversified financial services holding company by the federal reserve. this approach has a lot to recommend it but requires a high degree of cooperation and coordination between and among the bank supervisors and the functional regulators, specifically securities and insurance. this cooperation is essential to limit the regulatory burden otherwise associated with multiple regulators. bank supervisors need to be well informed about the risks to the banking organization – and the depository institution in particular – from activities taking place in affiliates and, perhaps also in | measures implemented to strengthen domestic frameworks. these include wide ranging measures to develop regional financial markets, to improve liquidity management across borders, to strengthen cooperation networks for the supervision of regionally - active financial institutions and to establish regional infrastructure to enhance the efficiency and lower the risks associated with cross - border payments and settlements. regional arrangements between central banks and supervisory authorities have also been significantly strengthened to actively share information on emerging risks to regional stability and where necessary to coordinate regional responses. an important part of this includes the ongoing work to enhance the frameworks for crisis management including the orderly resolution of financial institutions with significant cross - border operations. within the asean region, measures are currently being pursued to promote greater consistency in the adoption of regulatory and supervisory standards in anticipation of a larger role for asean banks in driving regional integration as part of the broader agenda to realise an asean economic community by 2015. collectively, these arrangements aim to ensure that the expansion of bis central bankers ’ speeches cross - border financial linkages takes place within a framework and process that adequately mitigates systemic risk across borders. fifth, central banks and regulatory authorities in most emerging economies in asia have the broader mandate that includes a focus on the development of the financial sector as a means not only to enhance the growth and development potential, but also to reinforce a strong foundation for financial stability. in malaysia, the development and reform of the financial sector in the decade that followed the asian financial crisis has not only developed the financial sector to better serve the malaysian economy, but it has also better positioned financial institutions to withstand the destabilising episodes emanating from external shocks. this has included strengthening financial intermediaries, not only in terms of scale but also in their financial positions, risk management and governance practices. this has contributed to more efficient financial intermediation while improving access to financing, particularly for small and medium scale businesses. efforts to develop a vibrant capital market have meanwhile opened up alternative channels for financing, while mitigating concentration risk in the financial system and enhancing its ability to absorb large and volatile cross - border capital flows. these factors will place asia on a firm foundation to achieve its growth and development goals. while public policy clearly has an important role, it is as important for the financial industry to align itself with the desired outcomes of sustainable growth within a longer term horizon. this will involve a number of important considerations for financial institutions, including the rethinking of business models in the light of a re - assessment of risk and return expectations | 0 |
the same entity, who is accountable to the customer? as the number of 3rd - party intermediaries involved in a financial service grows, there might also be increased operational risks. we will need to adapt our regulatory approaches. pay greater attention to market conduct, consumer protection, and technology risks. regulatory frameworks will need to become more modular and agile. entity - based regulation remains relevant for the provision of key services such as deposit - taking, insurance, and the offer of securities. but for the growing number of players who offer niche financial services, we need to rely increasingly on activity - based regulation. this is all still fairly familiar ground, as the fundamental structure of financial services remains largely intact. intermediaries continue to be at the centre, even as distribution becomes more decentralised with diverse players and new ways of connecting with customers. stepping a layer down, let us now examine the underlying infrastructure of financial services. technology is enabling a fundamentally different approach to financial infrastructure, compared to the centralised systems of today. take for example, open crypto networks based on self - executing smart contracts and noncustodial financial services, where users maintain control over their assets at all times. by replacing intermediaries and central parties, these networks aim to reduce both the cost and risk of finance. by decentralising key aspects of financial infrastructure, such as access, data, and code, open crypto networks can also potentially enhance inclusion and innovation. when firms of all sizes, and even individuals, can directly access financial infrastructure, it could mean more competition and inclusion. when transaction data is available to all participants, and not confined within the intermediary responsible for the transaction as is the case today, it could mean more contestability and transparency. w hen code can run directly and publicly on these networks, unlike proprietary code that runs on private servers, it could mean more interoperability and innovation. we are certainly not at the point where these self - governing networks can meet the high standards of governance, security, resilience that we demand of critical infrastructure. even so, central banks would do well to incorporate these innovations in designing the next generation of payment infrastructure. these ideas could be particularly relevant to the development of cbdcs. finally, we turn to the layer at the base of the system – the instruments, or forms of money that should confer the properties of a public good. 2 / 4 bis central bankers'speeches the decentralisation of instruments is most clearly | - year forward five - year ahead implied rate declined in 2014. currently it is hovering around 1. 7 %, slightly lower than the ecb ’ s spf ( 2015q1 ) results. bis central bankers ’ speeches as far as financial markets are concerned, the impact of the asset purchase programme accounts for most of the fall in euro area long - term sovereign bond yields since last december, as market participants anticipated the ecb ’ s qe programme. government bonds across a wide range of euro area countries traded at historically low and often negative yields. the decline was most pronounced in the longest maturities, with yields on french and german 10 - year bonds falling by around 60 basis points, while those on italian and portuguese bonds of the same maturity shrank by 70 and 90 basis points, respectively. yields on corporate euro - denominated debt have also gone done while the major european stock markets have risen from the end of 2014 by 17 % approximately ( chart 3b ). [ note : charts 3a and 3b do not capture the recent bond sell - off in early may, which was in my view a market reaction to an overshooting of euro area sovereign bond prices following the qe ’ s formal announcement by the ecb in january of this year. ] a case in point is that from just before the announcement of the ecb ’ s expanded asset purchase programme on 22 january to the close of business the day after, german 20 - year maturity yields fell by almost 25 basis points and italian 20 - year maturity yields fell by almost 35 basis points. furthermore, as we mentioned earlier, the euro depreciated by 11 % since last december, hitting a 12 - year low against the dollar ( chart 3a ). on the other hand, the effectiveness of the ecb ’ s qe programme in terms of contributing to a robust recovery in the euro area should have a significant final impact on the global economy and indeed in this part of the world. such an accommodative policy that aims to raise ultimately consumer confidence in the euro area, obviously stimulates imports from the rest of the world. an illustration of this is that total eu trade with asia reached €1. 03 trillion last year, almost double the value recorded a decade ago and, at the same time, the eu accounted for 22, 4 % of asian trade in 2014, with most of eu imports coming from china ( 6. 7 % of total eu imports ). the eu is also a | 0 |
growth in the making of monetary policy? in my view, the philosophy of john rawls is a most helpful guide here. one of his key insights, or one of his three principles of a just society, is that inequalities are acceptable only in case that they benefit the less well - off members of the society. 3 that is by no means a carte blanche for e. g. advocating tax cuts that benefit the richest or believing in some trickle - down theory of economic growth. but it implies that as the main impact of monetary policy in the proximity of effective lower bound has been to raise output and employment, and thus reduce income inequality by helping create millions of jobs and enhance the income of the previously unemployed and other less well - off members of the society, even if it had limited negative side - effects on wealth inequality, then the policy has been in line with the pursuit of a just society. 5. before concluding, i want to touch briefly on the issue of climate change and inequality. climate change mitigation and the needed green transition will play a major role in our economic policymaking going forward. as with all structural changes, there will be winners and losers. for a successful transition, we will need to pay close attention to distributional issues. while central banks are by no means the leading actors in climate change policy, we do have an important supporting role. in addition to ensuring that the financial system is resilient to climate - related financial risks, we must support an orderly economy - wide green transition. among other things, central banks have a role in helping societies understand the economic impacts of climate change. 6. to conclude, central banks must better understand how income and wealth inequality impact the transmission of monetary policy and take that into account in their policymaking. the greatest contribution central banks can make is to deliver on their price stability mandate, as this will also contribute to broad - based and inclusive employment growth. i am confident that the outcome of the ecb ’ s monetary policy strategy review will enhance the effectiveness of our monetary policy and thus also support the attainment of sustainable growth and full employment. 4 let me finish here. thank you for your attention and i look forward to our panel discussion and your questions. see e. g. lenza, m. and j. slacalek ( 2020 ). how does monetary policy affect income and wealth inequality? evidence from quantitative easing in the euro area. european central bank working paper series no. 219 | olli rehn : fiscal statistics and fiscal rules - some lessons from recent years keynote speech by mr olli rehn, governor of the bank of finland, at the high - level seminar “ building trust – the role of supreme audit institutions in ensuring the reliability of fiscal data ”, organised by the national audit office of finland helsinki, 28 november 2019. * * * accompanying slides of the speech. ladies and gentlemen, i wish to thank the organisers for the invitation to address to such a distinguished audience and to so many european friends. i also want to congratulate the organisers for the choice of the venue, as the finlandia hall was the venue of the signing the final act of the csce ( conference on security and co - operation in europe ) in 1975. as a kid i started to follow the europe pretty much thanks to the csce. even your choice of the dinner venue is in line of this, since kalastajatorppa hosted the famous csce reception with the participation ranging from urho kekkonen to olof palme, valery giscard d ’ estaing to helmut schmidt, as well as harold wilson to gerald ford, not to speak leonid breznev to erich honecker. it is a historical fact that the csce final act was a one critical factor of creating the europe whole and free. in recent years, fiscal statistics have played a role in my professional life in various ways, when i have worked as member of the european commission, as finland ’ s minister of economic affairs, and as a central banker. as commissioner i was also responsible for eurostat in 2010 – 11, until i was appointed vice - president with stronger competences in fiscal surveillance, when we created a firewall inside the commission and separated these two functions. as you can probably imagine, data generally are very much present in a central bank governor ’ s typical working day. it starts with a quick look at most recent financial market data and continues with work based, to a large extent, on statistics, regarding particularly inflation and other macroeconomic developments. banking statistics play a special role, as for finland they are compiled by the bank of finland. the importance of fiscal data for us follows from the objectives given to the european system of central banks. the primary objective is price stability, and it cannot be achieved in the long run without fiscal sustainability. therefore, while the responsibility for fiscal policy obviously rests with the governments, central banks cannot ignore issues | 0.5 |
ravi menon : a competent, trusted, and clean financial centre welcome address by mr ravi menon, managing director of the monetary authority of singapore, at the wmi ( wealth management institute ) connection, singapore, 27 october 2011. * * * mr ng kok song, chairman of the wealth management institute, distinguished guests, ladies and gentlemen, good evening. i am delighted to join you tonight, to celebrate the 8th anniversary of the wealth management institute ( wmi ). and i want to add a special word of congratulations to the 258 graduates who have recently completed wmi programmes ranging from the master of science in wealth management to the advanced wealth management programme. explosive growth in asian wealth across the world, we are seeing strong growth in the creation of wealth. globally, the wealth held by high net worth individuals1 has increased by 63 percent over the last ten years. 2 as at end - 2010, there were nearly 11 million high net worth individuals, compared to 7 million ten years ago. wealth is growing most rapidly in the asia - pacific region, accounting for more than half of the increase in global wealth last year. there are 3. 3 million high net worth individuals in the asia - pacific, 18 percent more than the pre - crisis peak. in fact, there are now more high net worth individuals in the asia pacific than in europe and almost as many as in north america. notwithstanding the challenges facing the global economy and the recent increase in market uncertainties, the ranks and fortunes of the wealthy are expected to continue growing rapidly. global wealth is assessed to have the potential to rise 50 percent over the next five years, spurred by a surging middle - class in the asia - pacific, latin america, and africa. the asia pacific region in particular is forecast to have the highest projected compound annual growth rate of 11. 4 percent for assets under management from 2010 – 2015. eight of the twenty fastest - growing high net worth markets are in the asia - pacific. wealth management – the singapore advantage as john rockefeller once asked “ the only question with wealth is, what do you do with it? ” those of you who manage wealth have a key role to play. you are at the heart of this explosion of wealth in asia and in serving the needs of your clients, you help to intermediate merrill lynch – capgemini world wealth reports and global private banking and wealth management – the new realities, by david maude. market defined in terms of individuals with financial wealth of more than us $ 1 | ##quacy and incomes. this is an important challenge, not just for sake of healthcare, but for the sake of retirement security. we need to move towards a fair, progressive and sustainable healthcare financing systems. if we don ’ t, then our ability to afford decent retirement for all our citizens, in a whole range of countries, is going to be severely compromised. emerging opportunities for insurance 29. let me move now to some of the emerging opportunities in the insurance industry. it is a difficult environment in many respects – i ’ ve spoken about low interest rates, here to stay for the long term. it ’ s also a crowded market in traditional insurable risks. you know that better than me. too much capital is chasing after the same risks in traditional insurance lines ( property and casualty for instance ), and that doesn ’ t help returns. 30. but there are still many viable options for growth, and here in emerging asia especially, there are major new underwriting opportunities. • the insurance market in emerging asia is projected to grow by 9 % per year over the next 10 years, which is substantially above the global growth of the insurance industry. • by 2020, asia is expected to account for 40 % of the insurance business. 31. there are three major opportunities that i will highlight briefly, besides traditional underwriting opportunities. infrastructure financing 32. first, infrastructure financing. it is a huge opportunity in asia. whichever infrastructure you look at – transportation, communication and power links, water and environmental sustainability – in every area the needs are growing, the need to remove bottlenecks to economic growth and social development are growing. 33. traditionally, it has been a sector that has been financed by governments and banks. governments will be constrained in the future, across the region. although banks currently have ample liquidity, they too will over time become more constrained. so that combination of governments and banks isn ’ t going to be able to cope with the rapid growth in financing for infrastructure in the future. • this is why institutional investors – insurers, pension funds and other long term investors – have become very important. for insurers, infrastructure is an attractive asset class. it is attractive as a potential diversifier of assets, and has the potential to provide reliable inflation - linked returns over time, and with low correlation to other conventional assets. 34. but we need quality data for infrastructure to take off as an asset class for long term investors. we need quality data for reliable performance benchmarks | 0.5 |
‘ good luck ’ story may have reflected the benign effects of globalisation. this realisation has dawned as it has become clear that globalisation is having pervasive effects on our economies, as well as contributing to some trends which are not so immediately favourable. globalisation, in the present context, is shorthand for the increasing integration of international markets for goods and services, capital and labour. as we all know from first hand experience, the world economy is being transformed by the lowering of all sorts of barriers to the free movement of people, money, knowledge, goods and services. these trends are, of course, as old as human history. but there have been periods, like the second half of the nineteenth century, when globalisation has proceeded rapidly and periods, like the first half of the twentieth century, when it has gone into retreat. the past fifteen years or so have been a period of major advance as a result of far - reaching political and regulatory changes as well as revolutions in technology and communications. the pace of change has been striking in several key areas. first, international capital flows have grown explosively, as financial markets have become more integrated. as a result, the value of the global stock of assets in cross - border ownership tripled over the ten years to 2004. as well as increasing the scope for mobilising savings and allocating capital across different markets, the development of deep and liquid international financial markets has opened up new possibilities for diversifying risks and smoothing the adjustment to unforeseen events. this should promote both economic stability as well as growth. second, the sheer scale and pace of economic development in china is without precedent. what is not new is its strong export orientation – this was the route taken by japan and the east asian tiger economies. china is now a key part of both global and regional supply chains for the production of low - cost manufactured goods. china now produces 80 % of the world ’ s photocopiers, 50 % of the world ’ s textiles and 50 % of the world ’ s computers. these developments will tap the labour of hundreds of millions of people who were previously effectively outside the global market place. they are also triggering urbanisation – and infrastructure investment – on a scale, and at a rate, which makes our own industrial revolution look sedate, even puny. the chinese government expects 300 million people to migrate from the countryside to urban areas over the next 20 years. china had no motorways in 1988, now | and the greater availability of migrant labour to ease domestic labour shortages. a welsh audience will need no reminding of the many ways in which both inward and outward foreign direct investment can affect domestic employment opportunities. hard as it is to quantify, the net effect of these trends may have been to reduce the sensitivity of domestic inflation to changes in the margin of spare capacity in the economy. but while these effects go some way towards explaining why the global inflationary climate may have been relatively benign over much of the past decade, i think they fall short of providing a complete explanation for the strength and resilience of global output growth. for this we might look to the more elusive influence of financial integration, and the added impetus to global growth provided by the increasing weight of fast - emerging market economies, particularly in asia. it is just worth pausing on the remarkable ease with which the world economy has apparently absorbed the impact of sharply higher oil prices. world output expanded at its fastest rate for 30 years in 2004, and this year growth looks like being as strong again. one obvious explanation is that both high oil prices and the strength in the world economy have reflected the rapid pace of development in data from oecd ’ s international migration outlook 2006. china, where growth has been around 10 % a year since 2004, and which last year was responsible for nearly half of the growth in total world oil demand. so the two have helped to offset each other. but the recent behaviour of oil prices has also reflected supply - side problems. the rapid growth in demand seems to have taken oil producers by surprise. the world is currently operating on a very thin margin of spare oil production capacity as a result of low investment in the 1990s. the result is that oil prices have also been volatile, as well as high, moving sharply in response to geopolitical and weather - related news, as well as changing expectations about world demand and supply. in time, both supply and demand will respond to higher prices, but the lead times for new production capacity are very long – around ten years to develop a new field. high and volatile oil prices pose a grisly challenge for monetary policy makers. but so far there has been no surge in inflation across the world as there was following the oil price increases in the 1970s. true, headline inflation rose initially in many countries, especially the us, where it ticked up to nearly 5 %, before falling sharply to less than 1. 5 % when oil prices fell this autumn. but central | 1 |
##smoothed, for a 10 - year rolling window between 1991 and 2015. underlying data are from the annual macro - economic database of the european commission ( ameco ) and from the ecb ’ s harmonized competitiveness indicators database. ecb calculations. bis central bankers ’ speeches financial integration and achieving risk - sharing should be at par with specific proposals such as facilitating funding for corporates in general and for smes in particular. key areas such as securitisation, insolvency regimes, securities holders ’ rights and tax legislation need to be prioritised. all these are important to ensure equal treatment of users of capital markets across member states, the very essence of a cmu. financial stability implications of enhanced risk - sharing and other aspects of capital market development this brings me to the second part of my talk, where i would like to discuss the financial stability implications of enhanced risk - sharing. indeed, financial integration and the further development of non - bank financing may also create new financial stability risks. at a general level, greater integration can exacerbate the size and speed of cross - border contagion. international risk - sharing and cross - border contagion can be two sides of the same “ financial integration coin ”. 7 this explains why taking a macroprudential perspective on the financial system is extremely important for addressing potential new sources of systemic risk. with respect to the banking sector, the further development of capital markets increases competition and may incentivise banks to take on more risk to maintain profitability. 8, 9 to ensure that there are no unintended financial stability risks, we need to strengthen the european macroprudential regulatory toolkit for banks under the capital requirements directive ( crd iv ) / capital requirements regulation ( crr ). the european commission ’ s review of the crr / crdiv will provide an opportunity to revise and complement the current macroprudential toolkit for banking at the european level. it should entail, firstly, ensuring that instruments currently available are more targeted and overlaps are eliminated ; secondly, broadening the toolkit with additional instruments such as the net stable funding ratio ( nsfr ), leverage ratio ( lr ), loan - to - value ( ltv ) / loan - toincome ( lti ) and debt - service - to - income ( dsti ) ratio ; and thirdly, streamlining the process for notification or information procedures both in the | - term plans and implementation of the existing procedures. in particular, countries that still have sizeable fiscal imbalances should take advantage of the coming upswing to strengthen their budgetary positions and attain the targets presented in their stability programmes. finally, in order to put the expected recovery on a broad and sustainable basis, it is of the utmost importance that euro area countries now strengthen their efforts to implement comprehensive structural reforms. over the past few years, considerable progress has been made in enhancing the flexibility of the euro area's product and capital markets, as well as in improving the way its labour markets operate. these reforms, together with moderate wage developments, have contributed to the strong employment growth and the considerable reduction in unemployment witnessed in many euro area countries in the last cyclical upswing. however, unemployment is still intolerably high and much more remains to be done. in this context, it is important to make headway with the reform agenda put forward in the lisbon strategy. we should just not accept that the recovery might again be constrained by the unsatisfactory potential growth level. the sound macroeconomic situation which can be expected presents a perfect opportunity to accelerate badly needed reforms. this requires the acceleration of financial market reforms as well as product markets reforms, such as those related to network industries. as regards labour market reforms, it is worth noting that despite the continued high level of unemployment in the euro area significant mismatches between labour supply and demand in a number of areas in euro area countries are still reported. as concluded in a recent report prepared by eurosystem experts, published on 11 march, this provides evidence that despite some improvements, there is still much work to be done in the labour market reform process. with respect to reform on the financial markets, the ecb very much supports the implementation of the procedures suggested in the lamfalussy report on securities regulation. the ecb believes that the procedures suggested in this report will allow for a swift implementation of the priorities set out in the financial services action plan relating to the integration of securities markets. the reform of financial market regulation, also including the other measures foreseen in the action plan, will complement and enhance the effects of reform in the labour and product market. | 0.5 |
, our perspective of the economy. forced to decide, we chose to err, if anything, on the side of more evidence than needed, rather than disregarding key information ; we opted to be inclusive rather than exclusive. this choice has ruled out the use of simple rules for both internal use and external communication. a central bank does not want to mislead its public with the elementary logic of a two term linear reaction formula, only to surprise them whenever circumstances demand. so observers should never succumb to the easy temptation of blaming a central bank for failing to obey a simple rule. more fundamentally : they should never lose sight of the complexity of the ‘ economic story ’ behind the conduct of monetary policy in a world of uncertainty. in its interactions with the public, the ecb has never departed from an honest and faithful - if at times seemingly unwieldy - account of this complex reality. we have shared with the public the evidence reaching the governing council ahead of policy discussions. we have described in detail the economic rationale behind policy decisions. those decisions are explained in the press conference after the first meeting of the council every month, in the monthly bulletin, in numerous speeches by members of the council and in my testimonies to the european parliament. just listening to what i say about the current state of the economy and its direction can save all that time and effort devoted to uncovering the alleged secrets of central bank thinking, or the individual views of members of the governing council. experience after four years how did these three key factors setting the stage for a successful monetary policy have an impact on the functioning of the governing council and on the ecb ’ s monetary policy? looking back over the past years, i can see that the mutually reinforcing viewpoints of the two pillars have served as a balanced and comprehensive basis for analysis prior to monetary policy decisions. at the same time, the complex process of cross - checking information gathered from each of the two pillars has sharpened - rather than diminished - our awareness of the changing conditions in our economic environment. when confronted with new developments in the economic environment, the governing council has never hesitated to take resolute, timely action to pursue a policy stance which best serves the purpose of maintaining price stability over the medium term. regarding the conditions for maintaining price stability, in january 1999, the single currency was born into an environment of inflation rates hovering around 1 %, below the upper limit of the range considered to be consistent with price stability. | willem f duisenberg : challenges to the ecb ’ s monetary policy speech by dr willem f duisenberg, president of the european central bank, upon receiving the european banker of the year award on behalf of the governing council of the ecb, frankfurt, 16 may 2002 * * * introductory remarks lady mayor, karl - otto, andrew, distinguished guests, ladies and gentlemen, on behalf of the governing council of the european central bank, may i say that it is a special honour to receive the european banker of the year award for 2002. the council, which in two weeks ’ time will have been directing monetary policy for three and a half years, is proud to be the recipient of this prestigious award. since it was set up in june 1998, the governing council has discussed and deliberated in an atmosphere of collegiality and consensus. the search for broadly shared resolutions within the council has ensured that a balanced judgement could be reached regarding the true state of the euro area, which covers a vast geographical area and comprises highly diverse national economies. the council ’ s consensual approach has fostered a long - term perspective and preserved continuity with our past. seeking and obtaining a broad consensus on policy decisions and then explaining them carefully to the public on the basis of euro - area aggregate evidence has a threefold effect. it shields governing council members from pressures originating in their home countries ; it imposes a discipline on monetary policy by having a continuous, multilateral check of time consistency and policy direction within the council ; and it counters any public suspicion that a national bias may inform policy decisions. internal governance has been an essential tool in the response to the many challenges confronting the ecb since its earliest days. at the start of economic and monetary union we were faced with the extraordinary task of having to conduct policy with limited area - wide data, with several conventional statistical indicators still under construction and, of course, with the euro area undergoing a major regime shift. moreover, we were hard pressed - following the asian and russian crises in 1997 and 1998 - to handle a difficult and unpredictable situation which some thought would spiral further downwards. and at the same time we had to attend to the unique task of laying the foundations for our future action, thereby completing the work that had been initiated by the european monetary institute. the ecb had to be guided towards full possession of the necessary economic details about a new and unique monetary area with an economic weight comparable to that of the united states. so it must | 1 |
sethaput suthiwartnarueput : laying the foundations for a sustainable recovery keynote address by dr sethaput suthiwartnarueput, governor of the bank of thailand, at the stock exchange of thailand : thailand focus 2023 " the new horizon ", bangkok, 23 august 2023. * * * distinguished guests, first, let me thank the stock exchange of thailand for inviting me to give a talk at the thailand focus this year. today, i will share with you my thoughts about the economic outlook, along with some observations about the bank of thailand ( bot )'s policy responses, focusing on monetary policy and financial policies in relation to household debt. part 1 : economic outlook before i go on in terms of economic outlook, it will be useful to do a look back and think about where things were a year ago, when i last spoke in august last year. things were quite different then. recovery in thailand was slow and lagged the region, partly due to our economy's heavy reliance on tourism. we closed out last year with about 11 million tourists, down from the 40 million prior to covid, and a fairly slow recovery in terms of the overall economic picture. consumption was recovering steadily from a low base. at the end of 2022, gdp growth came out at 2. 6 %. what was probably top of mind for us then was inflation, which was rising very rapidly as it was all around the world. headline cpi peaked in august 2022 at 7. 9 %, and eventually the outturn for the entire year turned in at 6. 1 %. core inflation peaked in december 2022 at about 3. 2 %. so that was the picture last year. fast forward to today, where are we now? things are on a much firmer ground. recovery is intact. gdp is finally back to pre - covid level in the first quarter of this year. consumption has been growing steadily, at above 6 % last year and above 5 % in first quarter of this year. tourism, which is a key determinant of the overall stage of economic recovery, has been recovering very steadily. year - todate, as of july, we had about 15 million tourists. we still maintain our year - end forecast for tourists of about 29 million, so we are getting closer to the pre - covid level. but the picture is not all wine and roses. there are some soft spots. exports have come in weaker than expected due | mechanism to protect banks'information assets including hardware, software and data. as we all know, after 9 / 11, this issue has become a global concern. most financial institutions are aware of the need to have business continuity management. the business continuity plan has to be established on an enterprise - wide basis with a thorough business impact analysis and risk assessment. it is more than just the recovery of technology ; it is the recovery and continuity of business. with the widespread use of it, it is important that the legal framework is in line with the new environment. thailand has started to legislate five new information and communication technology ( ict ) laws to embrace information technology since 1998. they are the electronic transactions law, computer crime law, data protection law, electronic funds transfer law, and the national information infrastructure law. the cabinet has appointed the national electronics and computer technology center ( nectec ) to take charge of the drafting of these laws. the electronic transactions law was promulgated on april 3, 2002 while the others arc in the process of enactment. 2. e - banking products in thailand and supervisory concerns what i would like to do next is to give you some examples of it - related financial products and services currently offered in thailand and the pertinent risk issues that bring up supervisory concerns. let me start by briefly showing you our data on e - banking service usage by category. in the first four rows of the table, the figures show customers'e - banking transactions that have high transaction volumes but low average values. in the remaining rows, you will find that the bank of thailand is the sole service provider facilitating wholesale payment transactions between financial institutions and the central bank. even the number of transaction is much smaller, the value is certainly much higher. this type of transaction of course has different risk implications from that with higher transaction volume in smaller amount of money. internet banking in thailand can be classified into two categories, informational and transactional websites. the informational website provides banking information including products, services, interest rate, foreign exchange rate, etc. on the other hand, the transactional website is a channel for customer transactions such as money transfers and bill payments as well as inquiries such as balance inquiries and statement download. since internet is ubiquitous and global in nature, it is an open network accessible from unknown sources. messages are routed through unknown locations. therefore, internet significantly magnifies the importance of security control and protection against fraud, hacking and other possible internet security threats. a financial institution | 0.5 |
macao has benefited and will continue to benefit from the “ closer economic partnership arrangement ” ( the “ cepa ” ) signed with china, whereby macao ’ s merchandise and services will have a much freer access to the china market. in addition, in consideration of the scarcity of land resources of macao, which has an area of only 30 sq. km, china allows macao to make reclamation of land from the seabed up to 3. 5 sq. km. the university of macao is also allowed to relocate to hengqin island, a neighbouring island under the jurisdiction of zhuhai. after all these have been completed, the area of macao will be enlarged by over 15 %. in january 2009, the national development and reform commission of the state council of the people ’ s republic of china released “ the outline of the plan for reform and development of the pearl river delta ( 2008 - 2020 ) ( the “ outline ” ). the gist of the outline is to turn the pearl river delta into one of the world ’ s most competitive conurbations with a high quality of life. the outline defines macao as an international leisure destination committed to further its tourism sector. by then, macao will be connected to other major cities of the pearl river delta, including hong kong, by land transport through the completion of the hong kong - zhuhai - macao bridge. ultimately, macao will become part of the pearl river delta conurbation which accommodates a population of 50 million with a gdp equivalent to that of a medium - sized sovereign country. 11 ) another important role to be played by macao is its bridging function between china and portuguese - speaking countries in trade and economic aspect. macao started to acquaint with portuguese - speaking countries some 450 years ago. portuguesespeaking countries are a market of more than 200 million consumers and are endowed with abundant natural resources. china is a thriving economic entity with foreign exchange reserves of about usd2. 5 trillion. macao is also a special administrative region of china. all along, it has always played the leading role of a liaison platform servicing the economic and commercial cooperation between china and portuguese speaking countries. in fact the standing secretariat for the economic and commercial cooperation forum of china and portuguese - speaking countries is domiciled in macao. the way forward for macao is bright and we can conclude that macao together with asia, has emerged from the international financial crisis stronger | anselmo l s teng : overview of recent financial and economic developments in macao speech by mr anselmo l s teng, chairman of the monetary authority of macao, at the spring cocktail reception, macao, 15 march 2007. * * * the honorable secretary for economy and finance, mr. francis tam ; the honorable director of the economic affairs department of the liaison office of the central people ’ s government in the msar, mr. zhou zhikui ; the honorable chairman of the audit committee of amcm, mr. leonel alberto alves ; the honorable chairman of the macau association of banks, mr. ye yixin ; the honorable president of the macau insurers ’ association, mr. si chi hok ; the honorable president of the macau insurance agents and brokers association, mr. tou kam seng ; the honorable president of the federation of macau professional insurance intermediaries, mr. frank ip ; the honorable president of the macau financial markets association, mr. chan kam chun ; the honorable president of the association of macau financial employees, mr. ng chi peng ; the honorable president of the macau money changers association, ho hao chio ; distinguished guests, friends of media, dear colleagues ; spring is around although chill is occasionally being felt. on the occasion of this reception held in the melody of spring, we farewell the past and embrace the future. here, i take the liberty of representing the board of the monetary authority of macao ( amcm ) to extend our warmest welcome to mr. francis tam, the secretary for economy and finance ; mr. zhou zhikui, the director of the economic affairs department of the liaison office of the central people ’ s government in msar ; our distinguished guests and friends of media. moreover, i would like to express my sincere gratitude to mr. francis tam for his unremitting support and guidance ; to the government departments, all sectors of the society and the business communities for their support and co - operation. under the auspices of the central government and the visionary leadership of the msar government, macao manages to sustain its past growth momentum with favourable development noted in consumption, investment and trade. basked in a buoyant market, unemployment rate continues to spiral downwards, gdp regains its double digit growth while surplus is noted in international balance of payment and fiscal account. the credit rating of macao has also been raised from “ stable ” to “ positive | 0.5 |
largely driven by increased domestic demand, and further spending on infrastructure to address present shortfalls and facilitate economic expansion. imf has projected asia to grow by 5. 7 % in 2013, and 6. 0 % the following year, exceeding the outlook for the global economy. 5 growth in asia over the medium term will be supported by continued urbanisation, favourable demographics and increased intra - asian trade and investment. second, multilateral islamic finance agencies are making steady headway in addressing issues that contribute to some fragmentation of the islamic finance industry. work by the ifsb in setting international standards and best practices for the industry is providing greater uniformity of regulatory environment for islamic financial players globally. the international islamic financial markets ( iifm ) is collaborating with isda and industry players to develop standardisation of islamic financial products, documentation and related processes that will facilitate cross - border islamic hedging, risk management and money market activities. efforts by the accounting & auditing organisation for islamic financial institutions ( aaoifi ), islamic “ the new silk road : asia and the middle east rediscover trade and investment opportunities ”, research department, kuwait china investment company ( kcic ), january 2011. ibid. “ economic growth moderates across middle east ”, imf survey, may 21, 2013. “ world economic outlook ”, imf, april 2013. bis central bankers ’ speeches development bank and malaysia ’ s international shariah research academy ( isra ) in research and fostering dialogue between shariah scholars from various jurisdictions are also narrowing the differences in views on shariah issues in finance. as work on all these fronts progress, this will encourage greater interest internationally to participate in cross border financing and investment activities. the prospects for cross - border islamic finance are already very bright. we are beginning to see cross border sukuk issuance within asia, as well as between middle east and asia. as early as 2010, malaysia ’ s khazanah issued a s $ 1. 5b sukuk in singapore, while japan - based nomura issued 2 - year $ 100m sukuk in malaysia. last year, taking advantage of favorable currency swap rates, singapore listed companies natural resources and golden agri tapped the malaysian ringgit ( mr ) sukuk market. in the last two years, two gcc firms, abu dhabi national energy company and kuwait - based gulf investment corp issued mr sukuk in malaysia. there is considerable scope to issue more | identify and address time - to market issues to further facilitate islamic finance activities in singapore. this includes looking into providing greater clarity and certainty in the regulatory and tax treatment to expedite the issuance of sukuk and other islamic capital market instruments. “ beyond borders : the gcc and asia could rev up their economies – and the islamic finance market ”, standard & poor ’ s rating services, sep 2012. bis central bankers ’ speeches the need to raise competency and develop talent to support the growth of the industry cannot be overstated. singapore management university ( smu ) has successfully completed its first masters programme in islamic law and finance ; and smu has reiterated its commitment to support efforts at growing the human capital for the islamic finance industry. industry players here have formed the gulf asia shari ’ ah compliant investments association ( gascia ) to promote and undertake initiatives to further grow the industry. recently, a gascia member introduced islamic finance training to a leading local madrasah to increase the students ’ awareness and promote interest in pursuing a career in the industry. mas will continue to work with industry players and training providers to ensure that we have a ready supply of talent to meet the needs of the industry as it continues to grow. conclusion singapore ’ s success as an international financial sector stems from its high standards of regulation ; deep and liquid capital market, the presence of international buy side players, and a critical mass of financial intermediaries with expertise to address a wide range of financing needs. we will leverage on these strengths to further support the growth of islamic finance. the growing and deepening linkages between asia and the middle east will present significant opportunities. i am pleased to see more players from the middle east, asia and other regions at today ’ s conference. i hope you will take advantage of this event to explore new ideas to spur the further growth of cross border islamic financing transactions between our two regions, and globally. thank you. bis central bankers ’ speeches | 1 |
the beginning of the year while uk food price inflation recently reached 6 percent. in comparison, annual growth in new zealand ’ s food price index has been more muted, around 4 percent in annual terms. however, with dairy and other food prices continuing to increase there may be additional upward pressure on new zealand ’ s food prices in future. this has implications for monetary policy, which will be discussed later on. impacts of higher payouts on nz dairy industry higher dairy prices will flow through into a higher payout for new zealand ’ s dairy farmers. we estimate that fonterra ’ s recent upward revision to its payout forecast for this season and next will add an extra $ 2 billion to dairy farmers ’ incomes ( at current production levels ). just what farmers do with this extra income remains to be seen. the cash windfall is likely to be spread across repaying debt, increasing savings, upgrading equipment, buying more cows, fertiliser and other farm inputs, purchasing / converting land, and, to some degree, cars and holidays. there are also the downstream, multiplier effects to consider, which could see a bigger boost to the rural economy than the $ 2 billion payout increase alone would suggest. but let ’ s not forget the cost side of the equation. farmers often remind us that the cost of producing milk has increased substantially over the last few years. significant cost increases could dampen the overall impact of higher payouts on the rural economy. figure 11 : dairy payout and cost ( per kilogram of milk solids ) higher payouts may also spur a fresh wave of dairy conversions, which was certainly the experience following the record 2001 / 2002 payout. figure 12 : rural land use before the recent dairy price increase, dairy farm prices were looking very top - heavy, and hard to justify on the basis of expected payouts. the rate of increase has been even higher than for house prices. the commodity price increases may have saved some farmers from difficult liquidity positions. figure 13 : dairy land prices and house prices more conversions seem all the more likely considering the less favourable returns available from sheep and beef farming at present. the implications of a higher conversion rate would be another step - up in on - farm investment which would in turn lead to further increases in dairy sector debt levels. figure 14 : dairy sector credit changing land use would also bring fresh consideration of the environmental impacts arising from increasing milk production. examples include water allocation for irrigation in canterbury and the run - off | subsequent rise in international food and energy prices would still have led to headline consumer price index inflation exceeding 6 % now. in an absolute sense, actual and expected inflation is too high and needs to be reduced. subsequent monetary policy committee decisions have seen the ocr rise from 0. 25 % in august 2021 to the current rate of 4. 25 %. our actions display the monetary policy committee's determination and confidence in returning annual inflation to within our 1 % to 3 % target range. our focus on low and stable inflation is the best contribution we can make to the overall wellbeing of new zealanders. in a relative sense, new zealand is in a strong macroeconomic position relative to most oecd nations. we are around the lowest quartile for both inflation and unemployment relative to other oecd nations. we have a stable and well - functioning financial system that is resilient to a wide range of interest rate and employment shocks. and, as outlined in our most recent monetary policy statement, we have resilient household, public, and business sector balance sheets in aggregate. new zealand has a near record low unemployment rate of 3. 3 % and exceptionally high labour force participation rates. households have accumulated financial savings, with average household incomes rising in line with inflation. nominal wage rates have risen, with incomes further bolstered as people moved jobs to earn more, worked longer hours, or gained promotions. average hourly earnings growth for the private sector was 8. 6 % 1 in the year to september 2022, compared with consumer price index inflation of 7. 2 % in the same period. as interest rates rise, we expect spending to slow and unemployment levels to increase as more people join the workforce over the coming year. even with the expected slowdown in the period ahead, it is anticipated that the level of employment will remain high. large scale asset programme 2 / 7 bis - central bankers'speeches i'd like to briefly comment on the large scale asset purchase and funding for lending programmes which featured during the 2021 / 22 financial year. the review and assessment of monetary policy over the past five years showed that the large scale asset programme was highly effective in response to the liquidity crisis that emerged in early 2020 and in lowering longer - term interest rates. the funding for lending programme also gave banks confidence that a stable and secure funding source was available during a period of heightened financial market uncertainty. banks were able to continue their business of financial intermediation, avoiding a credit | 0.5 |
which of these explanations, or some combination of them, is on the mark and whether there are unknown fourth or fifth explanations. in each case there is an international self - interest argument to explain the situation, and it is difficult to assess the durability of this self - interest. the co - dependency view could have a natural stopping point when foreign central banks begin to worry about their heavy asset concentration in dollar - denomination assets and diversify their stock. the world - saving view could have a natural stopping point when the populations of the accumulating countries begin to retire, run down their assets, and sell their dollar - denominated assets to support the consumption of retirees. the disappearing - home - bias view could have a natural stopping point when wealth portfolios are rebalanced. this is all new and unexplored territory. but determining what explanation may be correct and stable may also be somewhat beside the point. however stable the underlying phenomena, it is much more stable for the united states to increase its own national saving and finance its own investment. this approach would support investment in the short run and make this investment more profitable in the long run, because the returns on capital would not be sent abroad. other countries may still invest their saving here, but the united states would have a higher base of its self - financed investment. this situation would seem to be far and away the preferred course from a risk - management standpoint. under such an approach, which i will term co - independence, the united states would gradually cut its budget deficit. doing so would reduce aggregate demand and hence require other changes to preserve full employment. one such change would be that currency rates might shift in the direction of increasing u. s. net exports. to the extent that stimulation of net exports did not offset the fiscal actions fully, there is always monetary accommodation. one of the key mandates of the federal reserve is to preserve sustainable employment levels, and the fed certainly could do that. in this strategy, other countries would have two requirements. to the extent that currency rates might need to adjust to restore international balance, foreign central banks should permit normal market readjustments. and to the extent that foreign net exports might decline as the united states cut its own trade deficits, foreign countries may need to stimulate their own economies, which they could do with some combination of monetary and fiscal policy. the result would be to preserve full employment around the world but with reduced capital account imbalances. conclusion the | recently proposed, household saving would go up but government saving, in the first instance, would go down by the same amount, meaning that the initial impact on overall national saving would be nil. but carve - out individual accounts might eventually reduce saving because households getting individual accounts who are already saving for retirement might cut back on their pre - existing saving. hence carve - out individual accounts seem more likely to reduce than increase national saving. this is not the only criterion for judging between add - on and carve - out individual accounts, but i think it is an important one. there may also be some way to compromise between mandatory add - on individual accounts that raise national saving but could be a tough sell politically, and carve - out individual accounts that are not likely to raise national saving. some have suggested raising employee pension contribution rates by automatic default options for employer defined - contribution account. under such a plan employees would be automatically enrolled in the employer's plan and would have to " opt out " to reject participation. moreover, firms could be forced to carry employer defined - contribution accounts, as is done in ireland. see congressional budget office ( 2005 ), budget and economic outlook, january 25. edward m. gramlich ( 1998 ), is it time to reform social security? ( university of michigan press ). other measures that might raise national saving are tax incentives to increase private saving, such as individual retirement accounts ( iras ). these essentially reduce or eliminate the taxation of interest income and hence provide a price inducement for households to save more. while such measures are often advertised as ways to increase saving, one must be very careful. on one side, many households can easily claim the tax advantages by diverting existing assets into iras and not saving any more. on the other side, iras entail a federal revenue loss and a rise in deficits. since national saving is defined as private saving less deficits, the larger deficits can actually make national saving decline in response to a measure that purports to increase national saving. if the private saving effect were large enough and the revenue loss small, it is also possible that iras would have the anticipated effect of increasing national saving. one cannot give a purely theoretical answer to the question - it depends on how the numbers come out. 7 for years the economics profession has been engaged in a strenuous debate about these numbers, but it should be noted that overall household and national saving rates have declined significantly | 1 |
jens weidmann : what role should central banks play in combating climate change? remarks by dr jens weidmann, president of the deutsche bundesbank and chair of the board of directors of the bank for international settlements, at the ilf online - conference “ green banking and green central banking : what are the right concepts? ”, goethe university frankfurt, 25 january 2021. * * * 1 introduction ladies and gentlemen, i would have been only too happy to meet you all in person. even more so, as from my office it would only have been a short walk to the campus of the goethe university. and allow me the following side remark : there can hardly be a better person to name a university after than johann wolfgang von goethe. goethe combined many disciplines and subjects, and not just as a poet, dramatist, novelist and critic. he also conducted research in various natural sciences, studying minerals, plants, human anatomy and meteorology, to name a few. and let ’ s not forget that he reflected on the nature of money, even serving as finance minister in the duchy of saxe - weimar - eisenach, a small, former state in what is now thuringia. goethe seems to be a true all - rounder, able to turn his hand to any number of things. some would like to see central banks in a similar role. in their view, not only are we supposed to ensure price stability, help with supervising banks and safeguarding financial stability, foster growth or promote employment. some also expect central banks to act as a rapid response unit for every economic crisis, keep sovereign financing costs low or provide savers with adequate interest rates. recently, another item has been added to the wish list : we are being called upon to assume an active role in climate policy. one thing is clear : climate change presents a challenge for all of humanity. the swiss playwright friedrich durrenmatt wrote in an appendix to his play the physicists : “ what concerns everybody can only be solved by everybody. ” therefore, every institution is right to ask itself what contribution it can make to mitigating climate change within the remit of its mandate. 2 dealing with climate - related risks the mandates of central banks and financial supervisors vary, but they typically include price stability, financial stability and the soundness of financial institutions. climate change and climate policies can affect all of these mandates, as they may have an impact on macroeconomic and financial variables such as output, inflation | , interest rates and asset prices, while altering the underlying structure of our economies. it is therefore essential for central banks to gain a full understanding of these repercussions for the functioning of the economy and the financial system. we need to embed climate - related developments and risks in our analyses and update our analytical and forecasting toolkits accordingly. regarding the impact on the financial system and the economy, climate change entails both physical and transition risks. first, physical risks result from persistent changes in climate and more frequent extreme weather events. goethe himself experienced first - hand the enormous impact extreme weather can have. in his day, this was caused by a volcanic eruption far away on an indonesian island. the year 1816 went down in history as the “ year without a summer ”. people suffered from the cold and from persistent rain ; crops failed and famine broke out. second, transition risks relate to the process of adjustment towards a lower - carbon 1 / 3 bis central bankers'speeches economy. both the physical impact of climate change and the transition to a less carbon - intensive economy can be a source of financial risk. for example, the ecb found in a sample of euro area banks that the exposures to the twenty largest emitters of carbon account for 20 % of total large exposures. clearly, it is in every market participant ’ s interest to properly protect themselves against climaterelated financial risks by adjusting their risk management accordingly. thus, first and foremost, it ’ s up to the financial sector to recognise and take into account such risks. whether and how this is done has a bearing on several of our tasks as a central bank. in banking supervision, we do not regard climate - related financial risks as a new risk category, but as a driver of classic categories such as credit risk and market risk. we already expect banks to incorporate such risks into their risk management framework appropriately and to back them with adequate capital. however, climate - related risks have certain characteristics that hamper their inclusion in ratings and internal risk models. first, historical data do not capture them adequately. second, physical risks are potentially non - linear and expected to primarily materialise in the medium to long term. and third, the future pathway of climate change and climate action is highly uncertain, not least because it heavily depends on political decisions. in this context, scenario analysis is a particularly useful tool. furthermore, it is important that banks take a forward - looking approach and consider a longer than usual time horizon. the | 1 |
or microeconomic policies in place that encourage flexibility and adaptability. in canada, we have made good progress in improving the flexibility of our economy. this is evident in the way that the economy has been able to adjust to the various shocks that have come its way in recent years. indeed, although these shocks have had different effects across sectors and regions of the country, growth in overall output and employment has remained solid, while inflation has remained low and stable, as resources have shifted to those sectors whose products have been in high demand. but this does not imply that we should not be looking to improve canada's structural policies. there are some priority areas in this regard. considerably more needs to be done to enhance the flexibility and functioning of our internal markets from coast to coast. business regulations and standards, including those for the financial sector, need to be harmonized across canada. and, to make our labour markets more flexible, trades and professional designations should be recognized and fully transferable across the country. the trade, investment and labour mobility agreement reached between british columbia and alberta is an important step in that direction. but more progress of this sort is needed in canada. policies that support flexibility can obviously help economies adjust to economic shocks. but there is also a longer - term payoff that can come from encouraging flexibility. when policies provide the right environment for entrepreneurship to flourish, economies can adapt to longer - term global economic forces and continuously exploit their comparative advantages. consider some of the iconic firms here in the united states, and how a company such as ibm has evolved. ibm was once primarily a manufacturer of " business machines, " as its name implies. but as other countries and economies developed and became better placed to manufacture goods, ibm redefined itself and used its comparative advantage to become a " business solutions " firm, offering software, consulting, and even financing services in addition to computers. recent economic and financial developments let me now turn to recent developments. a little more than two weeks ago, the bank published its monetary policy report. in that document, we noted that growth in the canadian economy has been stronger than projected, supported by the robust global economic expansion and strong commodity prices. canada's economy is now operating further above its production potential than had been previously expected. we also noted three major and related developments since the summer that have affected the outlook for the canadian economy. first, the canadian dollar has appreciated sharply. in the report, we noted that while the dollar has been supported by firm commodity | francois villeroy de galhau : bank of france - how the commitment to fintechs is being implemented speech by mr francois villeroy de galhau, governor of the bank of france and chairman of the autorite de controle prudentiel et de resolution ( acpr ), at the acpr - amf forum fintech, paris, 11 october 2021. * * * dear minister, ladies and gentlemen, i am very pleased to welcome you to the banque de france this morning for this annual acpramf fintech forum – and i would also like to welcome robert ophele, chairman of the amf. mr. minister, dear cedric, you have once again given us the pleasure of being present for this second forum. the strong attendance of public officials testifies to our collective commitment to fintechs, which i am convinced are indispensable to the financial sector, as a driver of creativity, vitality and efficiency. previously a garden in the making, the fintech ecosystem is now growing in leaps and bounds. this is especially the case since these start - ups have benefited from the acceleration of digitisation in finance resulting from the health crisis. moreover, 2021 was a record year for fundraising in the sector : eur 1. 7 billion had been raised by the end of august 2021, which is already twice as much as for the whole of last year, and this year also saw the birth of the first french fintech “ unicorns ". this morning, i would like to illustrate to you how our commitments to fintechs are being implemented in practice : ( i ) firstly by enhancing dialogue, ( ii ) secondly by facilitating their integration into the regulatory framework, ( iii ) and lastly by conducting experiments with them. i. enhancing the dialogue with fintechs we communicate with fintechs primarily through the specific correspondents of the banque de france and the acpr. at the banque de france, thestart - up correspondents, also french tech correspondents, assist start - ups at all stages of their project ( financing, ratings, etc. ). at the acpr, the fintech innovation unit is a dedicated gateway for fintechs. each year, about 250 discussions are conducted in this context, half of which being initial contacts with innovative project leaders. with the development of the fintech ecosystem, it became necessary to broaden dialogue to all stakeholders, which is what our acpr - amf | 0 |
transformation. if we do not even have the requisite people to understand the risks involved and balance the competing objectives, our journey is going to be arduous. so, let me spend a few minutes to talk about capacity building. 27. with useful contributions from hkib and the industry, the hkma conducted a “ capacity building for future banking ” study last year to take stock of potential talent gaps that the banking industry will face. the study revealed notable skills gaps in fintech and green finance. these are the two key growth areas in the financial world. and their developments are evolving so fast that the skill sets of the existing workforce cannot keep pace with the latest industry needs. 28. this is a global issue, not unique to hong kong. so, we cannot just rely on attracting overseas talent to address the issue. 29. a more sustainable strategy is to build a large, deep financial talent pool locally. to do so, we have embarked on a new talent development strategy – “ connecting talent to the future ” – and a range of new initiatives to address the talent gaps in a more structured and targeted manner. our objective is to build a strong pipeline of future talent on the one hand, and develop a highly skilled local workforce on the other. 30. our new strategy is built on three “ connect ” directions. first, we have to better “ connect ” our younger generation to the banking industry so that they have a better idea of the abundant 3 / 4 bis central bankers'speeches career opportunities out there, especially in fintech and esg fields. we hope this would help attract more new blood to the industry. we are now organising a series of outreach and promotional events, like career talks and social media campaigns. we will also launch a virtual resource centre as a “ one - stop directory ” for various job types, career paths and training pathways in the industry. 31. it is never quantity over quality, as the quality of our future talent is also critical. to ensure our students are “ future ready ”, it is essential to enrich students ’ real - world experience. this can be achieved by forging closer ties between universities and the industry. 32. so, on top of the various internship programmes we have been organising, we have just launched the industry project masters network pilot scheme which provides internship opportunities to postgraduate students to work on real - life fintech projects of banks. another major initiative is the launch of a brand new future banking bridging programme in collaboration with | confidence and sentiment were weak. international predators, with meticulous preparation and organisation, launched an attack on the hong kong dollar and our financial markets. they first discreetly borrowed hong kong dollars and waited for the right moment to profit by short selling the currency and attacking our linked exchange rate system. at the same time, they built up substantial short positions in the stock and futures markets. these global predators also spread doomsaying through the hong kong media to stoke panic among hong kong people, creating an environment ripe for their short selling activities. the hang seng index ( hsi ) dived 50 % to 8, 000 in august 1998 from 16, 000 a year earlier and the predators boasted they would push down the hsi by another 50 % to 4, 000, which was an extremely low level. aggregating the earnings of all listed companies, when the hsi was at 8, 000, the price - earnings ratio was eight, and if the index fell another 50 %, the ratio would drop to just four. the hong kong sar government was facing a “ double - play ” by the predators – manipulation and profiteering in the money market and stock market through massive short - selling. it was a critical situation – not only were we confronted with a sharp fall in the stock market and great losses to shareholders, there were also systemic risks to our monetary system and financial markets. classical economics does not differentiate between big and small markets and assumes that market prices will not be manipulated by just a few players. reality, however, is different from theory. at that time, the market capitalisation of the hong kong stock market was only us $ 340 billion, a mere 3 % of the new york stock exchange ’ s us $ 10. 3 trillion. the predators were unable and hence did not choose to make their move on the big us markets, but were able to plunder hong kong ’ s mid - sized and open market with impunity. 5. however, on 14 august 1998, with the authorisation of the hong kong sar government and backed by the war chest of the exchange fund, the hkma intervened in the stock and futures markets through market operation to counteract the double - play by international predators. when the market operation was completed by the end of august, the hkma had used about hk $ 120 billion to acquire a vast amount of hong kong stocks, propelling the hsi from the pre - operation level of 6, 700 points to 7, 800 points | 0.5 |
##ued currency, from the absence of competitive devaluations, from a market larger than the national one and easily accessible. countries such as ours that came from repeated bouts of inflation and currency crises have obtained stable prices and low interest rates, two basic prerequisites of economic development. we have taken little advantage of it. political inertia, disregard of the rules and mistaken economic decisions have favoured the emergence of internal imbalances, long obscured by the euro and unheeded by the markets, which today put the entire european edifice at risk. we feel the absence of some of the fundamental characteristics of a federation of states : decision - making processes that favour the adoption of far - sighted policies in the general interest ; shared public resources for financial stability and growth ; rules that are truly accepted ; and commonly agreed and timely measures for the financial system and banks. these are tasks and conditions that lie outside the sphere of the european system of central banks : they imply political responsibilities, both at national and european level. the eurosystem and the european central bank cannot be called on to shoulder them ; what they can do is fill temporary vacuums, contribute to policy analysis and design. in the last three years, driven by the tensions in the markets, significant progress has been made in reinforcing euro - area governance. but the decision - making processes, conditioned bis central bankers ’ speeches by the intergovernmental method and the principle of unanimity, remain slow and tortuous. a change of pace is required. in the immediate future, above all the need is for convergent manifestations of the unshakable will to preserve the single currency. if governments, the eu authorities, the european central bank itself, judge the progress of the troubled countries in financial restructuring and structural reform positively, this must be followed by a practical commitment on their part to orient the markets ’ assessments in the same direction. the current yield spreads of government securities do not seem to take account of what has been accomplished : they fuel further imbalances, leading to a redistribution of resources from countries in difficulty to those perceived as sounder ; they impede the correct operation of the single monetary policy ; they are a source of risk to financial stability, an obstacle to growth. the instruments of financial assistance to states in difficulty must be made more effective in operational terms. there must be the possibility of intervening promptly in the securities markets and directly in favour of banks, with procedures that are more | wealth holdings for families in metro areas exceeded average wealth for families in nonmetro areas by nearly $ 500, 000 - - and these gaps have more than doubled over the past three decades. " the original number incorrectly stated the median instead of the mean. - 16 references aaronson, stephanie, tomaz cajner, bruce fallick, felix galbis - reig, christopher smith, and william wascher ( 2014 ). “ labor force participation : recent developments and future prospects, ” brookings papers on economic activity, fall, pp. 197 - 255, www. brookings. edu / bpea - articles / labor - force - participationrecent - developments - and - future - prospects. acemoglu, daron, david autor, david dorn, gordon h. hanson, and brendan price ( 2016 ). “ import competition and the great u. s. employment sag of the 2000s, ” journal of labor economics, vol. 34 ( part 2, january ), s141 - 98. acemoglu, daron, and pascual restrepo ( 2017 ). “ robots and jobs : evidence from u. s. labor markets, ” unpublished paper, march 17, https : / / economics. mit. edu / files / 12763. adamy, janet, and paul overberg ( 2017 ). “ rural america is the new ‘ inner city ’, ” wall street journal, may 26. alichi, ali, kory kantenga, and juan sole ( 2016 ). “ income polarization in the united states, ” imf working paper 16 / 121. washington : international monetary fund. https : / / www. imf. org / external / pubs / ft / wp / 2016 / wp16121. pdf. autor, david ( 2010 ). “ the polarization of job opportunities in the u. s. labor market : implications for employment and earnings. ” washington : center for american progress and hamilton project, https : / / economics. mit. edu / files / 5554. autor, david, david dorn, and gordon hanson ( 2013 ). “ the china syndrome : local labor market effects of import competition in the united states, ” american economic review, vol. 103 ( october ), pp. 1553 - 97. autor, david, david dorn, and gordon hanson ( 2015 ). “ untangling | 0 |
limit for indirect agricultural credit is plotted in terms of share in total agricultural credit to make it comparable. for working this out, the sub - limit of 4. 5 per cent of adjusted net bank credit ( anbc ) was first converted into absolute amount by taking actual data on anbc. second, the share of this amount in total ( both direct and indirect ) agricultural credit was calculated. ( vii ) decline in the share of long - term agricultural credit starting the 1990s, the share of short - term agricultural credit in total agricultural credit has been going up, and that of long - term credit has been declining. this is disturbing but not surprising given the slowdown in capital formation in agriculture [ chart 6 ]. indirect credit to agriculture includes loans to food and agro - based processing units ( with investments in plant and machinery up to 100 million ), credit to all activities that contribute to the development of diary business, credit for purchase and distribution of fertilisers, pesticides, and seeds, credit for purchase and distribution of inputs for the allied activities ( up to 4 million ), two - third of loans ( in excess of 10 million ) to corporates, partnership firms and institutions for allied activities, finance for setting up agri - clinics and agri - business centres, finance for hire - purchase schemes for distribution of agricultural machinery and implements, loans to farmers through primary agricultural credit societies ( pacs ), farmers ’ service societies ( fss ) and largesized adivasi multi purpose societies ( lamps ), loans to cooperative societies of farmers for disposing of the produce of members, loans for construction and running of storage facilities, finance extended to dealers in drip irrigation / sprinkler irrigation system / agricultural machinery subject to certain conditions, credit outstanding under loans for general purposes under general credit cards, loans to mfis for on - lending to agriculture subject to certain conditions, loans granted to rrbs for on - lending to agriculture and allied activities sector, and overdrafts, up to 25, 000 ( per account ), granted against “ no - frills ” accounts in rural and semi - urban areas. the sub - limit for indirect credit to agriculture is fixed at 4. 5 per cent of adjusted net bank credit ( anbc ) under the priority sector guidelines. indirect credit in excess of this sub - limit is not reckoned for assessing performance under the 18 per cent priority sector target for agriculture. bis central bankers ’ speeches source : handbook of | per cent by january 2016 and 5 per cent by q4 of 2016 – 17. 2016 onwards : flexible inflation targeting 17. amid this, a monetary policy framework agreement ( mpfa ) was signed between the government of india and the reserve bank on february 20, 2015. subsequently, flexible inflation targeting ( fit ) was formally adopted with the amendment of the rbi act in may 2016. the role of the reserve bank in the area of monetary policy has been restated in the amended act as follows : “ the primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth ”. 18. empowered by this mandate, the rbi adopted a flexible inflation targeting ( fit ) framework under which primacy is accorded to the objective of price stability, defined numerically by a target of 4 per cent for consumer price headline inflation with a tolerance band of + / - 2 per cent around it, while simultaneously focusing on growth when inflation is under control. the relative emphasis on inflation and growth depends on the macroeconomic scenario, inflation and growth outlook, and signals emerging from incoming data. since then rbi has been conducting monetary policy in a forward - looking manner and effectively communicating its decisions to maintain inflation around its target and thereby to support growth. at the same time, rbi is also fine - tuning its operating procedures of monetary policy for effective policy transmission across the financial markets and thereby onto the real economy. as an outcome, inflation has fallen successively and has averaged below 4 per cent since 2017 – 18, notwithstanding recent up - tick in inflation driven by food prices, especially the sharp increase in vegetable prices reflecting the adverse impact of unseasonal rains and cyclone. evolution of monetary policy in line with the changing theoretical developments and international best practices 19. the monetary policy framework in india has also been guided by developments in theory and international best practices. for instance, the collapse of the bretton - woods system of fixed exchange rates and high inflation in many advanced economies during the 1970s provided the necessary background to the choice of money supply as a nominal anchor. since the late 1980s, however, experience of many advanced countries with monetary targeting framework was not satisfactory inter alia due to growing disconnect between monetary aggregates and goal variables such as inflation. a similar instability in money demand function was also evidenced in the indian context in the 1990s which led to a shift from monetary targeting to multiple indicators approach in 1998. 4 / 6 bis central bankers'speeches 20. since early 1990s, beginning with new zealand | 0.5 |
that affects the way they behave when they take decisions about wages and prices. the less helpful legacy is that even a small movement in inflation away from target – one percentage point – has prompted some highly coloured media coverage, and may have unsettled people ’ s expectations about where inflation is headed in the short run. how does this less helpful legacy affect the policy debate? remembering the earlier discussion of constrained discretion, a temporary spike in inflation, as a result of a large cost shock like the recent rise in energy prices, is exactly the sort of shock to which policy - makers should be able to react flexibly within an inflation targeting framework. that enables them to avoid excessive volatility in output and employment, as long as public expectations of inflation over the medium term remain pegged to the inflation target. on the other hand, the mpc can never afford to ignore evidence that medium - term inflation expectations are becoming dislodged : anchoring these expectations is fundamental to the success of the framework. but direct evidence of inflation expectations is very hard to come by ; the measures we have are patchy and poor. so there is a difficult dilemma here, which the mpc has been grappling with over the past few months. and it has left me with a nagging worry. my concern is this. if the price of maintaining the public ’ s confidence is that we have to try to keep inflation within a whisker of the target at all times – even in the face very large shocks – the flexibility that is such an important feature of our present arrangements may get significantly eroded 7. that is why the open letter procedure remains important – and why it is a great pity that it has been widely misrepresented as a punishment, rather than as an opportunity for the mpc to explain itself. our monetary policy framework can only offer flexibility as long as it remains credible. but our credibility needs to reflect reality. it is important that the unprecedented stability of the past decade does not lead people to believe that central banks can walk on water. they can ’ t. when that becomes clear – as at some stage it will – i see some risk that people will be excessively disillusioned. so let me end by being very clear about what i regard as reality. the mpc cannot keep inflation exactly on target, at all times and in all circumstances. large price shocks will sometimes drive us away from target, and we need to be able use our judgement in deciding how | to react. but we can and will keep inflation close to target on average. short run deviations from the target should not leave anyone in any doubt about that. conclusions the stability of the period since 1992 has been almost as unexpected as the falling of the berlin wall, and every bit as welcome. it remains something of a puzzle and we cannot assume it will continue indefinitely. we do not know quite how big a part the mpc has played in achieving this outcome. but it has certainly been shaped by it. success – however earned – has its price. it may have bred expectations of the mpc and what monetary policy can deliver which are frankly unrealistic – and unsustainable in the longer term. in the original concept, the defining characteristic of inflation targeting and the mpc was the scope it offered for exercising constrained discretion. we need to hang on to that big idea. i would have a similar concern if people came to believe that the mpc could keep output growing steadily, quarter by quarter, irrespective of wider economic circumstances. | 1 |
inclusion may also pose risks to financial stability. as central bankers, we should promote greater financial inclusion but not without due care and caution. among the questions before us are : ( 1 ) what institutional structure and regulatory regime should we promote in order to maximize the benefits from financial innovations while minimizing the risks? ; ( 2 ) what mechanisms should be instituted to manage distressed institutions arising out of financial innovation? ; and 3 ) how should the public be protected from the associated risks including cyber - crime, among others? bis central bankers ’ speeches naturally, we would also be concerned to ensure reliable data management so as to monitor and appropriately adjust our monetary policy operations in tandem with the related structural changes. this symposium will help us to master the role of central banks in harnessing financial innovation so as to prudently maximize financial inclusion. it is now my pleasure to invite our eminent experts to make their presentations and to also encourage the active participation of every one of us in the deliberations. bis central bankers ’ speeches | continually strengthening and providing opportunities for our respective institutions, in order to share their best practices, implementation experiences, and novel proposals, to address the issues that emerge in this dynamic, evolving and challenging risk environment. for us, at banco de mexico, it is a privilege to be part of the international operational risk working group ( iorwg ) and i am sure that during these three days of work, in this space and platform, countless ideas and strategies will arise that will allow us to expand our vision to successfully address the challenges that we are all facing. once again, i welcome you all to banco de mexico and i thank you in advance for your valuable contributions to these topics of interest to all of us. | 0 |
##coin, libra. https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201104 ~ 7908460f0d. en. html 1 / 5 04 / 11 / 2020 the two sides of the ( stable ) coin global stablecoins are initiatives which aim to achieve a global footprint [ 3 ], without necessarily relying on existing payment schemes and clearing and settlement arrangements. for example, libra is an integrated construct that simultaneously encompasses a new settlement asset, a new payment rail and new end - user solutions. global stablecoins could drive further innovation in payments, responding to the need for cross - border payments and remittances that are more efficient and cheaper. indeed, the financial stability board has proposed a roadmap to enhance cross - border payments that recognises a role for sound global stablecoin arrangements. the flip side of stablecoins is the host of risks they can pose to our social and economic life. for example, data - driven models could pose a risk of misuse of personal information for commercial or other purposes, which could jeopardise privacy and competition and harm vulnerable groups. another concern is that wide acceptance of stablecoins offered by foreign companies would make european payments dependent on technologies designed and governed elsewhere. this could raise potential issues of traceability in the fight against money laundering, terrorist financing and tax evasion. it could also make the european payment system unfit to support our single market and single currency and vulnerable to external disruption, such as cyberattacks. risks to financial stability and monetary sovereignty other risks involve the monetary and financial system. in fact stablecoins, if widely adopted, could threaten financial stability and monetary sovereignty. as i mentioned earlier, stablecoin issuers often promise that their stablecoins can be converted into fiat currencies. but this promise generally differs significantly from the convertibility mechanism for bank deposits or e - money. in the case of bank deposits, one - to - one convertibility to the fiat currency is safeguarded by deposit insurance schemes and prudential regulation and supervision. the value and safety of e - money holdings are protected by the fact that e - money issuers must hold customer funds in custody by third parties. these safeguards may not apply to stablecoins, which are therefore vulnerable to runs. if the issuer does not guarantee a fixed value, the price of the | entire 2000s. the number of cash withdrawals has been around sek 320 million. does this mean that we have reached a lower limit for how much the use of cash can decline? has the heyday of the account - based payments ended? i do not believe we should be so sure of that. cash is still expensive to transport and manage and a heightened risk of robbery in recent years has not made cash management cheaper. in the end, it is we consumers who pay the costs in different ways. however, we must probably point out that we swedes like our cash more than most analysts believed a few years ago. how then have the account - based payment instruments developed? the use of cards has increased rapidly card payments have increased rapidly in sweden in recent years. in ten years the value of card payments has almost quadrupled and the number of payments by card has increased sevenfold. six years ago, in 2002, for the first time ever more card payments were made in payment terminals than atm cash withdrawals. in the most recent statistics available, from 2006, card payments in payment terminals were three times more common than atm cash withdrawals. if one calculates in terms of the number of transactions, cards are now the most used account - based payment instrument. like cash, card payments are mainly used for payments that are made at the actual time of the transaction. according to a 2006 temo survey, 45 per cent of those questioned used cards as legal tender in at least four of five purchases. 3 the value of an average card payment has almost halved in the past ten years, from around sek 730 to around sek 380. we are then using cards to a greater degree to pay smaller amounts. in this way cards increasingly appear to act as a substitute to cash. this is particularly so in the case of younger people, which is indicated in a study recently published by the riksbank. 4 the economist, 17 - 23 february 2007. the stock of banknotes and coins totalled sek 114 billion on 31 december 2007. sveriges riksbank. “ allmanhetens syn pa bankerna ” ( the swedish public ’ s opinion of banks ), temo survey, march 2006, the swedish bankers ’ association. bergman, guibourg and segendorf, “ the costs of paying – private and social costs of cash and card ”, working paper series, ( no. 212 ), sveriges riksbank, september 2007. moreover | 0 |
effectiveness and security of our financial system. because this nascent ecosystem is also a source of many risks. the international work of public authorities highlighted these issues from the risk of money laundering to the risk of the consumer or investor. i would like to highlight one of them : the risk related to the network effect. this risk was mentioned when some bigtechs considered creating supra - national “ currencies " : by offering to an extremely large customer base, these projects raised questions about monetary sovereignty of the states, as well as serious questions about the functioning of competition. users may de facto be captured by an ecosystem and have no choice of their payment service, or at least be 1 / 3 bis central bankers'speeches influenced by bigtechs to use their services at the expense of competitors. but the opposite risk exists : payment system fragmentation, which can lead to a deterioration in the service to users. central banks have a long experience with these issues, especially in the field of payments. in this respect, the balance of cooperation and competition between industry players, in other words “ co - opetition ”, has proven to be historically valuable. one of the challenges now is to maintain these “ co - opetition ” relationships over time, ensuring that they can include all players and coordinate effectively the payment systems ( and ecosystems ) – traditional or innovative. 2. the banque de france ’ s action to help meet these challenges, at the banque de france, we develop our actions along two lines : ( i ) the first one is to support and implement regulatory frameworks and supervisory practices that promote both innovation and the stability of our financial system most of the current regulatory framework was designed before the technological “ breaks ” that we now face. it therefore seems logical to adapt it to these technological changes and to the challenges and risks associated with them. the same applies, of course, to our supervisory framework and methods. in terms of regulating crypto - assets, france pioneered the establishment of a legal framework in 2019, with two objectives : creating legal certainty and trust to promote the development of a healthy and innovative ecosystem ; preserving innovation by being careful not to curtail further development opportunities and risk depriving the economy of beneficial innovations. with these two objectives in mind, we also support the european project for markets in cryptoassets ( mica ), which will, in particular, provide a first harmonised eu - wide regulatory framework for stablecoins. ( ii ) be involved | and as such, regulatory arbitrage must not become an option. * * * let me conclude. credibility for central bankers now rests on admitting that monetary policy and macroprudential policy are somewhat porous, especially in a situation where we could have an upward financial cycle associated with weak inflation. this calls for a consistent action by central banks that covers both areas : price and financial stability. moving away from an overly strict separation principle, let us try to be complete and consistent central bankers playing an active role in monetary policy as well as in macroprudential policies. 1 altavilla c., boucinha m., peydro jl, 2017, monetary policy and bank profitability in a low interest rate environment, ecb working paper series # 2105, october 2017. 2 ratio of non - financial agents ’ debt to gdp, first quarter 2017. source : eurostat, federal reserve, banque de france calculations. 3 “ the future of finance and the outlook for regulation ”, remarks by vitor constancio, vice - president of the ecb, at the financial regulatory outlook conference organised by the centre for international governance innovation and oliver wyman, rome, 9 november 2017. 4 / 4 bis central bankers'speeches | 0.5 |
should have control over suitable tools to attain its objectives. this is to establish a clear responsibility. moreover, they recommend that the central banks should play a leading role in macroprudential policy and that the macroprudential supervisory body should have operational independence. it is now time for me to return to the financial crisis committee ’ s proposal, and how this relates to the demands i consider should be made regarding a framework for macroprudential policy – demands that are also expressed in the esrb ’ s recommendation. … but the financial crisis committee ’ s proposal does not go very far … two days ago, 23 january, the financial crisis committee published its proposal as to how we should organise macroprudential policy in sweden. 13 in principle, the proposal is that the current council for cooperation on macroprudential policy between the riksbank and finansinspektionen is confirmed by law and supplemented with independent experts and an observer from the ministry of finance. the council shall work to promote greater knowledge of systemic risks and to develop macroprudential tools. moreover, it shall analyse risks and discuss suitable measures. a secretariat for the council will be established at the riksbank. however, the council will not have any powers of authority ; its work will consist of exchanging information and discussion. decisions on the application of macroprudential tools will lie with finansinspektionen or the riksbank, with both being given responsibility for macroprudential policy. they are also to consult with one another prior to decisions on applying macroprudential tools. the committee does not offer any suggestions as to which macroprudential tools are needed or how they should be divided between the authorities. my assessment is therefore that the financial crisis committee ’ s proposal, which means that both the riksbank and finansinspektionen will become macroprudential bodies, does not fulfil the important criteria regarding decision - making powers, independence and accountability. and nor does the proposal appear to be in line with the esrb ’ s recommendation. … and differs from the practice that is emerging in europe moreover, the financial crisis committee ’ s proposals differ from the structures emerging in other eu countries. two models are predominant in this context, and both of them are in line with the esrb ’ s recommendation. either the responsibility for macroprudential policy is given to the central bank, as in the united kingdom, or it is | a framework in place, with a clear division of responsibility and which clarifies how the various instruments should be used. one reason why monetary policy in sweden has needed to give consideration to financial imbalances is because there has been no framework for macroprudential policy. while awaiting a permanent framework in sweden, the riksbank and finansinspektionen started a joint council for cooperation on macroprudential policy at the beginning of 2012. but even if this council offers an important forum for analysis and discussion, it has no powers of decision - making and no tools of its own at its disposal. two days ago, however, the financial crisis committee produced a proposal for macroprudential policy in sweden – which i will return to later on. central banks should play an important role in macroprudential policy when drawing up a framework for macroprudential policy in sweden, i think there are good reasons for giving the riksbank a central role. one important reason is that the riksbank has long been conducting extensive analysis of macroprudential policy issues. ever since the swedish bank crisis in the early 1990s, the riksbank has gradually built up substantial knowledge and experience of analysing the risks that can threaten the stability of the financial system. the basis for this was the bank ’ s task of promoting a safe and efficient payment system – what we in practice define as financial stability. 10 in 1997 the riksbank began publishing its assessment of the stability of the financial system, in the form of the financial stability report, published twice a year. it was one of the first central banks in the world to do this. the special macroprudential policy division at the riksbank ’ s financial stability department has as one of its tasks to assess the need for specific macroprudential policy measures. the riksbank ’ s monetary policy department has long conducted macroeconomic analysis to provide a good guidance for interest - rate decisions, which are based on macroeconomic analyses and forecasts. the analysis of financial stability, combined with the monetary policy analysis, provides good grounds for understanding the repercussions between the financial and real economy, which is essential for successful macroprudential policy. in recent years the cooperation between the financial stability and monetary policy departments at the riksbank has intensified. there are also clear links between monetary policy and macroprudential policy. both policy areas ultimately aim for a stable macroeconomic development – macro | 1 |
abdul rasheed ghaffour : opening address - malaysia's climate finance day opening address by mr abdul rasheed ghaffour, governor of the central bank of malaysia ( bank negara malaysia ), at malaysia's climate finance day at cop28 uae, dubai, 3 december 2023. * * * assalamualaikum, good morning and welcome to the malaysia pavilion. over the past few days, pressure has intensified for advanced economies to deliver on their promises to support developing economies navigate the effects of climate change. one highlight has been the agreement by world leaders on formal adoption of the loss and damage fund. with commitments trickling in, a pragmatic solution towards the delivery of these commitments is critical. another major issue taking centre stage is the debate surrounding phasing out of fossil fuels. this has a direct bearing on many developing economies, including malaysia. with the undeniable high cost of reducing emissions, a balanced approach is crucial to ensure progress both in building climate resilience, and economic and social developments. we take great interest in the outcomes of these conversations. let me now turn to malaysia. we see the climate agenda not only as a pressing challenge but an opportunity for growth. through the national energy transition roadmap, the hydrogen economy and technology roadmap, and the new industrial master plan, malaysia is taking concrete steps that will enable us to advance sustainable practices across the economy. this is consistent with a just and orderly climate transition. effective and coordinated implementation of national and sector - level transition plans by the government is crucial. it addresses a key condition for malaysia to benefit from the opportunities offered by the green transition. this can be achieved by reducing strategic and policy risks for investments in the green transition and effecting partnerships between the public and private sectors. this would mean better higher skilled jobs, more sustainable and higher income, as well as overall shared prosperity. the malaysian financial sector is working closely with the government as part of the whole - of - nation approach to turn these plans into reality. significant efforts have been invested in strengthening our collective capacity, institutional frameworks and coordination arrangements that will drive financial flows towards malaysia's climate transition efforts. you will hear today some of these efforts at this pavilion. we have a packed programme, with an exciting line up of speakers who will share what malaysia is doing to innovatively bridge traditional financing mechanisms with sustainability to fund green initiatives. 1 / 4 bis - central bankers'speeches to kick things off | trillion by 20501. our vision for malaysia to facilitate and catalyse green finance flows for the betterment of the planet aligns closely with our aspiration of becoming the renewable energy hub for asean, as well as to serve as an international gateway for islamic finance. we see the opportunity for more innovative solutions such as blended finance to support a just and orderly transition. to illustrate, by combining concessional financing and commercial funding, blended finance can help increase the bankability of high - risk green and transition projects. blended finance can also ease transition costs especially for small and medium - sized enterprises. being a nation blessed with unparalleled biodiversity, nature conservation holds paramount importance for malaysia. our rich ecosystems not only contribute to the global tapestry of life but also form the backbone of our economy and the livelihoods of many malaysians. by safeguarding our natural treasures, we ensure the sustainability of vital resources, supporting agriculture, forestry, and fisheries. as stewards of this diverse and precious land, embracing nature conservation is not just a responsibility but a pathway to a sustainable and resilient future for malaysia and beyond. 3 / 4 bis - central bankers'speeches climate and nature - related risks are tightly intertwined. climate change, driven by factors like emissions and deforestation, exacerbates extreme weather events and biodiversity loss. these changes, in turn, heighten risks of more frequent disasters, shifts in disease patterns, and challenges to food and water security. recognising these interconnections, bnm has been and will continue to actively build its knowledge and understanding of nature and role of the financial sector in nature conservation. as i wrap up my remarks, let me reiterate that malaysia welcomes the opportunity to work with partners to deliver on our commitments to fight climate change. on its part, bnm is fully committed to providing a sound and facilitative policy environment that allows for innovation to meet the large financing needs for climate risk mitigation and adaption, while strengthening climate risk management practices within the financial sector. malaysia also recognises that while the climate challenge requires urgent action by all, it is equally important for the world to chart the path forward in a just and orderly manner. this means striving to improve the wellbeing of communities all over the world, particularly for those most affected by climate change and the transition. only by promoting positive outcomes that benefit everyone and by minimising negative impacts and unintended consequences – such as | 1 |
focus on the implications of the crisis for what i have been calling economic science, that is, basic economic research and analysis. i will first provide a few examples of how economic principles and economic research, rather than having misled us, have significantly enhanced our understanding of the crisis and are informing the regulatory response. however, the crisis did reveal some gaps in economists ’ knowledge that should be remedied. i will discuss some of these gaps and suggest possible directions for future research that could ultimately help us achieve greater financial and macroeconomic stability. how economics helped us understand and respond to the crisis the financial crisis represented an enormously complex set of interactions – indeed, a discussion of the triggers that touched off the crisis and the vulnerabilities in the financial system and in financial regulation that allowed the crisis to have such devastating effects could more than fill my time this afternoon. 1 the complexity of our financial system, and the resulting difficulty of predicting how developments in one financial market or institution may affect the system as a whole, presented formidable challenges. but, at least in retrospect, economic principles and research were quite useful for understanding key aspects of the crisis and for designing appropriate policy responses. for example, the excessive dependence of some financial firms on unstable short - term funding led to runs on key institutions, with highly adverse implications for the functioning of the system as a whole. the fact that dependence on unstable short - term funding could lead to runs is hardly news to economists ; it has been a central issue in monetary economics since henry thornton and walter bagehot wrote about the question in the 19th century. 2 indeed, the recent crisis bore a striking resemblance to the bank runs that figured so prominently in thornton ’ s and bagehot ’ s eras ; but in this case, the run occurred outside the traditional banking system, in the shadow banking system – consisting of financial institutions other than regulated depository institutions, such as securitization vehicles, money market funds, and investment banks. prior to the crisis, these institutions had become increasingly dependent on various forms of short - term wholesale funding, as had some globally active commercial banks. examples of such funding include commercial paper, repurchase agreements ( repos ), and securities lending. in the years immediately before the crisis, some of these forms of funding grew especially rapidly ; for example, repo liabilities of u. s. brokerdealers increased by a factor of 2 – 1 / 2 in the four years before the crisis, | union, and which have led to an improvement in our standard of living that the current difficulties should not let us forget. yet that should not mask the fact that belonging to a monetary union entails a series of constraints or commitments which, among other things, involve the necessary adaptation of economic agents ’ behaviour and of the means of pursuing economic policy. in a monetary union, the control of two essential instruments usually at hand to combat crises passes to a supranational level and, therefore, they cease to be available to meet the specific needs of the member countries : both very short - term interest rates – the key tool used by a central bank when setting its monetary policy – and the exchange rate have been set in the european monetary union, since 1 january 1999, on the basis of the aggregate bis central bankers ’ speeches situation of the area as a whole. they cannot be managed to serve the specific needs of any national economy. it is the national economies that have to be in a position to live with the standards set for the whole. national authorities retain control of the other economic policies, which remain under their responsibility ; however, the proper functioning of the area evidently requires that their handling should observe specific common principles, preventing misalignments in one country from prompting imbalances in the rest, or from destabilising the monetary union as a whole. the way in which these common principles have been implemented has differed depending on the specific economic policy tool in question. thus, for instance, fiscal policy coordination mechanisms have been the focus of particular attention, with monitoring and surveillance procedures to avoid excessive budget deficits ( of over 3 % of gdp ) and high public debt proportions ( over 60 % of gdp ) coming into play. indeed, these thresholds, along with the procedures for their prevention and ultimate correction, took the form in 1997 of an agreement known as the stability and growth pact. in contrast, the rules for coordinating “ structural ” policy ( e. g. those governing the workings of the labour market or the markets for goods and services ) were fairly lightweight as a result of their broader scope for application and of the difficulties involved in setting common objectives. also, in the area of financial regulation and supervision policies, countries continued to enjoy a high degree of independence. the limitations of the monetary union ’ s adjustment mechanisms as events have shown, the constraints imposed by the institutional framework were not powerful enough to ensure the appropriate response by national authorities in the face of potential slippage from the | 0 |
laws become more draconian to give creditors powers laws applied more quickly to small firms, sometimes with a bias to creditors. operational and speedy bankruptcy code will level the playing field. • issues of excessive market power and predation. o o • o o o d ) need to ensure awards survive appeals the jobs agenda : job is the best form of inclusion. growing small firms as job creation protection of property rights o c ) competition commission showing its mettle why greater concern now on issues of competition and entry? o b ) negotiating in the shadow of bankruptcy private property protection needed to incentivize activity : i eat what i kill. broadly protected in india is it too well protected – land for infrastructure moderate and predictable taxes and estate duties – government has delivered. administrative steps to rein in unnecessary tax demands automation of significant parts of the tax process retrospective taxation : clear government statement. however, base erosion and profit shifting – worldwide issue that large corporations need to answer – equal requirement of transparency on corporate side : need for global agreements. broadening access to capabilities o aam aadmi attaches no value to free enterprise if he cannot participate. o increasingly, enterprises of the future require employees to have decent education and health. o malnutrition curses an individual for life, as does poor early education. o effective delivery of social programs so that everyone has the ability to compete is absolutely necessary. o capitalism starts at age 21! a basic safety net o competition can be ruinous despite one ’ s best efforts. bis central bankers ’ speeches o need a basic safety net, not focused on firms but on individuals : o o unemployment insurance, basic healthcare, old age pensions should not be prohibitively costly for government. cost entitlements and incorporate into budget liability projections charge reasonable premiums for the insurance recognize that if insurance is not explicit, it will be implicit in a democratic society. safety net can also encourage people to take risks they would shy away from otherwise. in conclusion o india has come a long way in encouraging free enterprise. o from tiny shops to large internet start - ups, the spirit of entrepreneurship is alive. o graduates increasingly want to start businesses or work for start - ups rather than go to an established consultancy or bank. o doing business is more reputable, as is getting rich. o but a lot more work is needed to improve the environment so that everyone has a chance. rather than looking for special dispensations, business has to push for improving the business | , year after year, which puts pressure on the absorptive capacity of the market. the banking system at end - march 2001 held government securities of around 35. 0 per cent of its net demand and time liabilities as against the minimum statutory requirement of 25. 0 per cent. in terms of volume, such holdings above the statutory liquidity ratio ( slr ) amounted to as much as rs. 1, 00, 000 crore, which is substantially higher than the net annual borrowings of the government. sixth, in addition to the changes in the monetary policy framework, targets and indicators, and the institutional context in which monetary policy is being conducted over the past five years, a major transformation has also taken place in the operating procedure of monetary policy. the reform of monetary and financial sectors has enabled the reserve bank to expand the array of instruments at its command. the reliance on reserve requirements, particularly the cash reserve ratio ( crr ), has been reduced as an instrument of monetary control. the crr has been brought down, notwithstanding intra - year variations, from a peak of 15. 0 per cent in 1994 - 95 to 8. 0 percent in 2000 - 01. the objective of policy is to reduce crr to its statutory minimum of 3. 0 per cent over a period of time. the statutory liquidity ratio has already been brought down to its statutory minimum of 25. 0 per cent. the liquidity management in the system is carried out through open market operations ( omo ) in the form of outright purchases / sales of government securities and repo and reverse repo operations. the omo are supplemented by access to the reserve bank ’ s standing facilities and direct interest rate signals through changes in the bank rate / repo rates. for transmitting signals of monetary policy, the bank rate was initially operationalised as a signaling and reference rate for influencing the interest rates in the economy. interest rates on advances from the reserve bank were linked to the bank rate. refinance / liquidity support at the bank rate and repo rates were intended to serve as a ceiling and a floor, respectively, setting an informal corridor for money market particularly the call money market to operate. in the context of the continued large market borrowing programme of the government, the reserve bank on occasions adopted a policy of strategically accepting private placement of government securities and then releasing those to the market at an appropriate time without putting undue pressure on interest rates. in terms of further progress in the use of market - based | 0.5 |
. i begin with a simple identity, taken from the national income accounts : ns = s - bd = i - b the left side of this identity covers the sources of national saving ( ns ), which are private saving in the economy ( s ) less budget deficits ( bd ). budget deficits are subtracted because budget deficits imply that private saving is in part going to pay for the deficits of the government and not going into private investment. the more interesting part of the equation involves the uses of national saving, given on the right side of the identity. in an economy closed to international trade and capital flows, the long - time staple of undergraduate macroeconomics classes, national saving equals just domestic investment ( i ), which is spending on new capital equipment. this is the spending that raises productivity and output in the long run, and for that reason it is of special interest. but since economies are now open to international trade and capital flows, the identity must also account for the portion of national saving lent abroad or the portion of investment financed by borrowing from abroad ( b ). this is done by deducting b, essentially the nation's current account deficit ( through another accounting identity of which i will spare you discussion ). one value of writing out the national saving identity is to bring out an important short - run, long - run dichotomy. in the short - run, international borrowing can go up or down depending on cyclical movements, exchange rates, and a host of other factors. very few countries do without any international borrowing or lending in a particular year. but over a longer period of time international borrowing kept close to zero stabilizes a country's ratio of international obligations to its gross domestic product ( gdp ). 1 when this liability ratio is stable, a nation's saving is implicitly financing most of its domestic investment. persistent borrowing, keeping investment above saving, may be possible, but it is not common, and in any case it automatically implies a buildup of international liabilities relative to its national output. if a nation wants to have its investment and not pay increasing shares of income in interest or dividends, it has to finance this investment by its own national saving. or, turning the equation around, high national saving will raise future living standards whether it finances investment directly or reduces international borrowing. a further value in writing out the identity is to tie all this to budget and current account deficits, which are the focus | brian p sack : managing the federal reserve ’ s balance sheet remarks by mr brian p sack, executive vice president of the markets group of the federal reserve bank of new york, at the 2010 chartered financial analyst ( cfa ) institute fixed income management conference, newport beach, california, 4 october 2010. * * * it is a pleasure to be here today to discuss the management of the federal reserve ’ s balance sheet. the federal reserve currently holds more than $ 2 trillion of securities in its portfolio, making it a key participant in u. s. fixed - income markets. moreover, the portfolio is managed in a manner that differs from any other market participant, as the federal open market committee ( fomc ) has adjusted the size and composition of the portfolio with the intention of achieving its monetary policy objectives of full employment and price stability. thus, it is important for market participants to understand the balance sheet decisions of the fomc and the implementation of those decisions to fully assess the implications for fixedincome markets. the evolution of the balance sheet going forward will depend on how the economic outlook unfolds. the current forecasts of fomc members show the economy moving in the right direction, with a sustained recovery in gdp, a gradual reduction in the unemployment rate over time, and an increase in inflation towards the level that fomc members see as desirable over the intermediate term. however, the anticipated recovery is relatively tepid and thus delivers only slow progress toward meeting the federal reserve ’ s dual mandate. indeed, according to their most recently published forecasts, most fomc members expect the unemployment rate to remain above 8. 25 percent through 2011 and the inflation rate to remain below its mandate - consistent level through 2012. in addition, the economy remains vulnerable to downside surprises that could take both output and inflation further away from the fomc ’ s objectives. the sluggish outlook for the economy and the risks that surround that outlook have raised the possibility of further monetary policy accommodation. the most recent fomc statement indicated that the committee “ is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate. ” the fomc has several policy tools that it could use to achieve more accommodative financial conditions, as chairman bernanke discussed in his speech at the jackson hole symposium in august. my remarks today will focus on one of those options – changing the size of the federal | 0 |
among others, that banks maintain this margin is underlying uncertainty over risk exposures, valuations and earnings prospects. when as at present this uncertainty increases, the margin required by the market also rises. to a degree, this is unavoidable. but to reduce the tendency that market reaction lead banks to raise capital ( or reduce exposures ) to possibly inefficient levels in a systemic crisis, we need a more robust ex ante framework of transparency about risk exposures, along with provisions, margins and reserves for valuation uncertainty, than we have at present. the appropriate size for liquidity buffers is even harder to mandate, or to predict, than for capital buffers, given the unpredictable nature of shocks to market and funding liquidity, and the understandable reluctance of monetary authorities to create perfect certainty about when and how they will provide emergency liquidity. but, as with capital, greater ex ante transparency about banks ’ liquidity risk management frameworks, cushions and supporting arrangements should help reassure investors and counterparties and reduce the risk of sudden drains on liquidity, as well as the uncertainty that, over the past year, has led to wide and volatile liquidity premia in interbank funding markets. as we consider how to strengthen buffers, more thought needs to be given to how to promote higher buffers above the regulatory minimum in good times, and more flexibility for the system to make use of these buffers when they are comfortably above regulatory minima. both the banks themselves and their counterparties should be more confident about the banks ’ ability to draw on such buffers in bad times. banks will only be willing to do this if they do not fear they will be punished by the market – which brings us back to the importance of transparency improvements. if banks can credibly assure markets and their regulators that risks to their asset values and earnings prospects are being soundly managed and contained, then they may be able to survive a temporary decline in capital levels, while still above their regulatory minimum, during cyclical downturns. authorities will be closely monitoring banking conditions to inform decision on the best timing for introducing tighter capital requirements. we will not unduly burden financial institutions during the adjustment phase, but also not miss the opportunity of the next calm phase in financial markets to strengthen the structure of the financial system. pacing regulatory changes, but firmly committing to them, will contribute to reducing the potential for cyclicality in the system to be deepened by regulatory capital requirements. | distortions in the real economy, both during the upswing and during the subsequent retrenchment, and this is especially significant the more the financial system is leveraged. while we cannot and would not want to eliminate the bouts of optimism and pessimism that are part of human nature, we must address some of the pro - cyclical implications of our own policy making. the conviction of the fsf, called a year ago by the g7 to draft the first report in response to the crisis, is that, due in part to a perverse set of incentives, leverage had reached a level that was both excessive for the risk management capacity of many institutions, and misperceived in its real entity. therefore, improving the incentives in the system so that risks are appropriately managed and risk control frameworks keep pace with financial innovation ; improving the resilience of the system to shocks, whatever their source ; and introducing frameworks for dampening the cyclicality of risk - taking, have become the cornerstones of our work plan. our aim should be to produce a system more immune to the perverse incentives that we have seen, where leverage is lower, and where the sources of leverage and their associated risks are better identified and addressed. regulatory and supervisory changes will need to go hand - in - hand with enhanced transparency about risk exposures and valuations throughout the system. let me start with actions to improve incentives. under the umbrella of the fsf, and in a collaborative effort of national and international regulatory and supervisory authorities, we urged prompt implementation of basel ii, which will align capital requirements more closely to banks ’ risks ( and i will have more to say about this in a moment ). we also recommended strengthening basel ii with respect to capital charges for credit risk in the trading book, for resecuritised assets, and liquidity lines for off - balance - sheet vehicles. we encouraged the basel committee to strengthen liquidity management practices and buffers. we have called on financial institutions to align compensation better with long - term, firm - wide profitability, and recommended a range of measures to discipline the practices of credit rating agencies and to reduce regulatory reliance on ratings so that investors engage in proper due diligence rather than relying exclusively on ratings. we also set out several recommendations to enhance transparency and valuation practices. we outlined “ leading practices ” for disclosures by financial firms, and urged financial institutions to use these as part of their financial reports starting in mid - year | 1 |
the september projections, the euro area economy is expected to grow by 0. 7 % in 2023, 1. 0 % in 2024 and 1. 5 % in 2025. as regards inflation, a notable drop in headline inflation in the euro area was recorded from 5. 2 % in august to 4. 3 % in september. according to the ecb september projections, inflation is expected to drop from 8. 4 % in 2022 to 5. 6 % in 2023 and 3. 2 % in 2024. it is then forecast to continue its decline to 2. 1 % in 2025. so the numbers and trends indicate that the ecb monetary policy transmission is indeed taking place and it is working to tame inflation with the aim to bring it back to target. 1 / 3 bis - central bankers'speeches under the treaty on the functioning of the european union and the statute of the european system of central banks and the european central bank, price stability is the primary objective of the ecb and it is defined by the ecb as a 2 % inflation target, over the medium term. other major central banks, such as the federal reserve in the us, the bank of england and the bank of japan, also consider 2 % as the level of inflation compatible with price stability. keeping inflation in check by achieving price stability is essential for preserving the purchasing power of the euro area households and ensuring that the euro area economy remains stable and predictable for businesses and consumers, so that they can proceed with their financial planning and carry out investments, thus supporting economic growth. high levels of inflation create uncertainty, which discourages financial planning and investment. the main tool that central banks have to combat inflation, is the adjustment of interest rates. to reinforce progress towards its 2 % inflation target in the medium term, the ecb governing council, in which the central bank governors of the euro area participate, decided last month the 10th successive interest rate increase, amounting to a total increase of 450 basis points since july 2022. in its most recent assessment, the governing council considers that the key ecb interest rates have now reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target. however, material uncertainty continues to persist in the euro area. for instance, the recent increase in energy prices could transmit again to the rest of the economy and have an upward pressure on prices. furthermore, the elevated wages and profit margins, the profiteering | , observed in the euro area last year and part of this year, need to be monitored closely, even though they are currently expected to normalise. the liquidity conditions in the euro area banking system is another area to monitor, since it plays a role for transmitting monetary policy and, consequently, affects inflation. these uncertainties are the reason why i believe the ecb governing council approach to be data - dependent in its interest rate decisions, is indeed the right one. in other words, determine the appropriate level and duration of its tightening policy stance, based on incoming economic and financial data and the consequent projections. at this point, i would like to emphasise the complementary role of fiscal policy in supporting and not counteracting the effectiveness of monetary policy, in this currently challenging environment. it is important that governments employ only targeted fiscal measures, supporting the most vulnerable in society. any horizontal measures should be avoided or rolled back to prevent an escalation in medium - term inflationary trends. such horizontal measures risk extending the duration of high inflation, and consequently would force the extension of the duration of high interest rates in order to tame inflation and bring it back to the 2 % target. i would finally like to address another important aspect, which is the synergetic relationship between price stability and financial stability. the pursuit of price stability through monetary policy, as we just discussed, and of financial stability through macroprudential policy, are to a large extend complementary. monetary policy needs to take financial stability and the stance of macroprudential policy into account. monetary 2 / 3 bis - central bankers'speeches policy and macroprudential policy operate through common transmission channels, meaning that the scope for interaction between the two policy spheres is wide. the bottom line is that a stable price environment can foster economic growth and financial stability, while a stable financial system can make it easier for central banks to achieve their price stability objectives, through monetary policy. there are a number of macroprudential measures in the toolkit of macroprudential authorities, which are typically the national central banks, that assist in preserving and safeguarding financial stability. these include capital - based measures, borrower based measures and liquidity - based instruments. capital - based measures target the banks'capital to increase the overall resilience of the banking sector by mitigating the build - up of risk exposures. borrower based measures, in other words for loan holders, impose quantitative restrictions, such as | 1 |
keep in mind what we are trying to do. we are developing a replacement for the current capital accord, basel i, an agreement that simply is no longer consistent with the way the world's largest banks conduct their business. from the perspective of banks, supervisors, and, let us not forget, counterparties and stakeholders, capital is a cushion to ensure safety and soundness and to provide a benchmark against which the financial condition of banks can be measured. the large banks of the world have so changed the nature of how they do business that for them basel i neither provides an appropriate cushion nor an accurate risk benchmark. it must be replaced, particularly in a world whose financial markets are so interrelated that substantial difficulties at any one of the largest banks, let alone a failure, could place all the large banks of the world at risk. indeed, with due regard for an international level playing field, which i will discuss later, we should consider that the need of all of our countries for economic stability should be paramount in our supervisory and regulatory judgments. it is worth emphasizing that substantial disruptions in our financial systems linked to a large bank failure could raise the risk of a regulatory, if not legislative, response that would likely add restrictions greatly limiting the flexibility and efficiency of our banking system. in addition, perhaps one of the largest risks to the safety of the world banking system is the competitor - either local or cross - border - that erroneously evaluates risk, acts on that evaluation, and induces a competitive response that increases risk exposures broadly. for both reasons, action is imperative. it must be taken both by banks and by their supervisors to improve risk measurement and management ; to link to the extent we can the amount of regulatory minimum capital to the amount of risk taken ; to attempt to further focus the supervisor - bank dialogue on the measurement and management of risk and the risk - capital nexus ; and to make all of this transparent to the counterparties and uninsured depositors that ultimately fund - and hence share - the risk positions. in a rather large nutshell, that is what basel ii seeks to do, while at the same time seeking a level regulatory playing field for banks that compete across borders. cyclicality many critics - in and outside of the industry - have raised concerns that the framers of basel ii have unintentionally overlooked a byproduct of the package that will tend to destabilize the world's economies. with all the world ' | less inclined at most income levels to invest in stocks, and black families are less likely to be owners of small business. although it is difficult to draw precise inferences regarding the key factors that have limited minority wealth accumulation, one endeavor should pay off in terms of greater saving by and higher net worth of minority households : increased efforts in financial education. we at the federal reserve have embarked on a program to raise the level of financial literacy in our country, and i believe that similar programs offered by private financial institutions will also yield a high return. thus, i encourage all of you to work to increase the knowledge of your depositors about financial issues. conclusion let me briefly conclude by restating my main points. probably nothing is more critical to the long - run well - being of the u. s. economy than ensuring high rates of productivity growth. productivity growth requires adequate levels of investment. while foreign saving is currently a feasible source of investable resources, it would be more economically advantageous in the longer run if we could raise the amount of household and government savings and close the gap between domestic investment and national savings. within the household sector, the accumulated saving of minority households, relative to their income, appears to be lower than that of nonminority households. in this regard, increased efforts at financial literacy programs can have a positive payoff, especially since at least one source of the minority - nonminority differential is apparently due to lower rates of return earned by minority households. | 0.5 |
you will excuse the expression ) speculation. my tentative conclusion is that speculative activity may help to account for part of the recent volatility in oil prices. however, the available evidence does not provide clear support for the view that speculative activity has made oil prices during the past year much higher on average than they otherwise would have been. 11 a rather different explanation of the recent increase in oil prices holds that the rise is in large part a symptom of inflationary monetary policies. an extensive literature exists on this topic. the general idea is that, if most prices adjust slowly, the effects of an excessively easy monetary policy will show up first as a sharp increase in those prices that are able to adjust most quickly, such as the prices of commodities ( including oil ). if this idea were valid, then commodity price movements could be used as a guide for setting monetary policy. however, the consensus that emerges from this literature is that the relationship between commodity price movements and monetary policy is tenuous and unreliable at best. moreover, applied to the recent experience, economic models that support the use of oil prices as a leading indicator of monetary policy make a number of other predictions that are strongly contradicted by the facts. these predictions include ( 1 ) that all commodity prices should move proportionally in response to changes in monetary policy ( in fact, oil prices have risen sharply since the spring as other commodity prices have generally stabilized ) ; ( 2 ) that the dollar should have rapidly depreciated as the oil price rose ( in fact, the dollar has been broadly stable during 2004 ) ; ( 3 ) that inflation expectations should have increased substantially ( but long - term nominal interest rates, the level of inflation compensation implicit in inflation - indexed bond yields, and survey measures of inflation expectations concur in showing no such rise ) ; and ( 4 ) that general inflation, though lagging commodity - price inflation, should also rise over time ( but inflation excluding energy prices remains quite low ). models of commodity - price “ overshooting ” also imply that the current surge in oil prices will be almost entirely temporary, a prediction strongly at variance with market expectations as revealed in the futures markets. i conclude that an increasingly tight supply - demand balance, rather than speculation or easy monetary policies, probably accounts for most of the recent run - up in oil prices. i have focused on near - term developments in the oil markets. what about the longer term? in that regard, we can safely assume that world | within the bangko sentral's forecast range of between 5 to 5. 7 %. as the institution mandated to stabilize prices, the bangko sentral is satisfied with this trend. essentially, the continued softening of fuel prices and the strengthening of the peso supported the further deceleration in inflation in october. latest forecasts of the bangko sentral continues to indicate a generally declining path for inflation, with average inflation for 2007 expected to fall within the 4 - 5 percent target, barring unforeseen adverse shocks of course. as a result, the monetary board, in its last policy meeting on november 2, kept the bangko sentral's benchmark policy rates unchanged, but reinstated a tiering of interest rates on bank placements with the bsp to encourage further bank lending. treasury bill ( t - bill ) rates also declined across the board in early november, due primarily to the improved fiscal position of the national government, manageable outlook for inflation and ample liquidity. on the external front, the overall balance of payments position for the first six months of 2006 recorded a surplus of $ 2. 04 billion, an improvement from the us $ 1. 98 billion surplus recorded in the same period in 2005. the improvement resulted from higher inflows in current transfers, particularly from remittances of overseas filipino workers ( ofws ), higher exports and investment inflows. during the first nine months this year, ofw remittances reached us $ 9. 1 billion, up 14. 4 percent from the same period last year as more filipinos found work overseas and banks became more aggressive in offering remittance services to ofws. based on this trend, we expect total ofw remittances in 2006 to set a new record and approximate $ 12 billion. i am also pleased to inform you that our country's gross international reserves ( gir ) reached a new record - high level of us $ 22. 3 billion in october this year. given the sustained uptrend in our international reserves, we have in fact pre - paid some of our foreign loans. likewise, these developments on the external front continue to sustain the appreciation of the peso versus the us dollar. i am sure you are all aware that the peso hit p49. 60 to one us dollar yesterday, its highest level since 2002, as market sentiment continues to be positive. better - than - expected fiscal performance is a key factor in this | 0 |
age and experience of the workforce has grown ; more people have gone into higher education and higher - paid occupations. but on top of that underlying trend, we ’ ve seen sharp movements, in both directions, during the recent cycle. both the drop in job creation during the great recession, and the corresponding pick - up during the recovery, were skewed towards the less skilled, less well paid end of the jobs market. chart 8, which plots the differences in job creation across three classes of occupational characteristics, depicts one aspect of that pattern5. you can see similar differences in rates of job creation between young and old, less and more educated. and as i outlined in the introduction, the effect of these swings was to add materially to the growth of average earnings during the downturn and to subtract from it in 2013 and 2014. unskilled employment generally more cyclical before asking why this has happened let me make a few points about the estimates. first, there are some approximations involved. one involves the mix of surveys : we ’ re estimating the impact of compositional changes on lfs pay data and assuming the effect simply carries over to the awe. that ’ s the most reasonable assumption, but it ’ s an assumption nonetheless. also, because of the way we ’ ve done this regression – for the sake of simplicity it ’ s been estimated in one go, using the entire 20 - year sample – we ’ re implicitly as i said, there are potentially hundreds of detailed occupational descriptions from which lfs respondents can choose. the ons ’ s standard scheme then makes high - level classifications – “ high skill ” occupations, for example, whose job creation rates are plotted in blue in chart 7, are defined as “ managers, directors, professional, associate professional and technical ” ; “ low skill ” refers to sales and “ customer services, process and plant operatives, elementary ”. bis central bankers ’ speeches assuming that changes in each of the characteristics have constant effects over time6. but there ’ s a substantial economic literature explicitly devoted to explaining changes in some of these coefficients, notably the labour - market returns to better qualifications ( the “ skill premium ” ). i ’ ll come back to this point later. second, the estimated compositional effects have been driven mainly by changes in the mix of people, and their individual characteristics, not by shifts in employment across sectors. pay clearly differs across industries, even controlling for those characteristics. and on occasion sectoral shifts | , either organically, or through the isda protocol. the message remains clear : those who can transition away from libor should do so on terms that they themselves agree with their counterparties. conclusion libor transition is challenging. it has been embedded in the financial system for a number of decades across a broad range of products. but we are moving away from libor and the problems of libor. this means facing up to transition now, taking action to ensure new issuance moves to robust alternative rates and concrete plans are in place to deal with https : / / www. parliament. uk / business / publications / written - questions - answers - statements / written - statement / commons / 2020 - 0623 / hcws307 / all speeches are available online at www. bankofengland. co. uk / news / speeches legacy exposures. the uk government announcement on its intention to legislate and the finalisation of the isda protocol are important steps in the ‘ endgame ’ becoming clearer. there is more to do and work is underway to remove the remaining barriers to transition. after john has spoken we ’ ll be joined by the chairs of the uk and us industry groups who continue to lead this work, building consensus on key areas such as product conventions and cash fallback mechanisms. hopefully, the message is now clear to those who have remained on the side - line : this is a necessity not a choice and there are eighteen months left to transition. and, for the avoidance of doubt, i ’ m taking it that eighteen months in libor is past the middle of the seventh, so you don ’ t need to get up now, stretch and sing ‘ take me out to the ball game ’ before john speaks. all speeches are available online at www. bankofengland. co. uk / news / speeches | 0.5 |
' s economy is undoubtedly confronting important challenges. the environment surrounding japan's economy faces significant changes such as progress in information and communication technology and the rapid rise of emerging economies as well as economic maturation and globalization. faced with such drastic changes, the bank believes that the existing economic model, which supported japan's postwar economic growth, needs to be replaced, and that the driving force of the new model should be innovations, both in technology and knowledge. the bank considers it essential for the private sector, the government, and the bank to coordinate their efforts toward the same goal in order for japan's economy to adapt itself boldly to the new environment. the bank will continue to do its utmost to carry out its mission of achieving price stability and maintaining an orderly financial system. | in banks'stock prices is becoming conspicuous, mainly reflecting market participants'severe view of the profitability of japanese financial institutions. in corporate finance, the financing conditions of firms are accommodative on the whole, but the environment continues to be severe for firms of relatively low creditworthiness. governor fukui made the same statement regarding the semiannual report on currency and monetary control for the first half of fiscal 2002 before the committee on financial affairs, house of councillors, on april 17, 2003. iii. conduct of monetary policy for almost a month now, i have taken the initiative to address the following two problems : first, to prevent any immediate crisis taking into account the developments in iraq ; second, to strengthen the effectiveness of monetary easing for the longer term. the bank has been closely monitoring how the development of the situation in iraq would affect the economy, especially through the stock and foreign exchange markets, and provided a large amount of additional liquidity to ensure financial market stability with the approach of the fiscal year - end. in addition, the bank has decided for the time being to apply the official discount rate to the lombard - type lending facility on any business day, suspending the restriction on the maximum number of days for such use. use of this lending facility enables financial institutions that hold current accounts with the bank to borrow funds from the bank at need within the value of collateral submitted. reflecting the above measures, liquidity concern in the money market has been dispelled, and there was no significant disruption at the turn of the fiscal year. in its future conduct of monetary policy, the bank considers it an important task to ensure that the provision of ample liquidity leads to a revitalization of economic activity and the overcoming of deflation. based on this understanding, the bank is examining the basic framework for the conduct of monetary policy, with a view to enhancing the transparency of monetary policy and strengthening the transmission mechanism of monetary easing. the bank's current quantitative easing policy has contributed significantly to ensuring financial market stability and to preventing the economy from falling into a deflationary spiral. however, the financial intermediary function of banks has been weak and economic activity has yet to be sufficiently stimulated. it is apparent that the nonperforming - loan ( npl ) problem is the largest impediment to the effectiveness of the financial intermediary function in the financial system. thus, it is essential for the private sector and policymakers to coordinate their efforts to resolve | 1 |
alan greenspan : bank regulation remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, before the independent community bankers of america national convention, san antonio, texas ( via videoconference ), 11 march 2005. * * * i am pleased to join you once again at the annual meeting of the independent community bankers of america. in past years, i have discussed many and varied issues with you, from technological change to the future of community banking in the united states. today, i sense that concern about the burden of regulation is high on your agenda. i thought it might therefore be useful to share some views on regulatory burden from the perspective of a bank regulator. a framework american banking dates to the earliest days of our nation, and its long history has, i believe, taught us some valuable lessons. foremost is that our banking system plays a central role in allocating resources, pooling capital, and funding and fostering economic growth. that role has not changed as our financial system has become more complex and diverse. we also have learned that leveraged banking systems can be both an initiator and a conduit of painful financial and real economic instability. we must keep both of these historical lessons in mind in any evaluation of banking regulation for they explain the tension between our appreciation for the central role that banks play in our prosperity and our concern about banks'potential effects on economic stability. over the years, that tension has been reflected primarily in " safety and soundness " regulation, the supplement to banking supervision. banking supervision is intended to be flexible and to be carried out case by case ; it is designed to limit - - not eliminate - - the risk of failure. over the past fifteen or so years, supervision has focused on ensuring that bank management has in place policies and procedures that will contain such risk and that management adheres to those policies and procedures. supervision has become increasingly less invasive and increasingly more systems - and policyoriented. these changes have been induced by evolving technology, increased complexity, and lessons learned from significant banking crises, not to mention constructive criticism from the banking community. regulations, on the other hand, prescribe and proscribe what must be done and what may not be done in specific areas, and most reflect past events. many regulations are thus backward - looking, adopted in response to specific problems but often remaining after the problems are resolved. however, public comments, changing market realities, and our internal programs help us to identify | cyril roux : supervision and financial regulation at the central bank of ireland address by mr cyril roux, deputy governor ( financial regulation ) of the central bank of ireland, to the financial services ireland annual dinner, dublin, 4 december 2013. * * * ladies and gentlemen. many thanks for this opportunity to share my thoughts and views on supervision as i begin my term as deputy governor for financial regulation at the central bank. i ’ ve started in my new role at a very busy period for supervision and regulation, both here in ireland and internationally. it has certainly become very clear to me in the two months i have been here that supervision and financial regulation is high on the irish public agenda and an area which elicits many opinions and views from the general public, the media, and the regulated firms themselves that you represent. in recent weeks financial firms and the central bank's supervisory activities have been very much in the public eye. some of this attention has cast a public light on individual firms, their provisioning practices and their solvency, some has been on topics touching the main banks, namely the balance sheet assessment ( bsas ) the central bank has recently concluded, and its relevance for our supervisory dialogue on provisions and capital requirements, as well as some broader issues such as mortgage arrears and conduct of business. you will be aware that we have confirmed the outcomes of the balance sheet assessments with the respective banks in recent days. the bsa exercise was conducted by the central bank at this particular juncture as it was necessary to do so before ireland exited the eu / imf programme. the bsa exercise conducted by the central bank will now feed into the ecb ’ s assessment of banks within the single supervisory mechanism ( ssm ) which will culminate with the european stress testing next year. as such, the results of the bsa were not published separately by the central bank, as to do so would be inconsistent with the broader european approach. of course, the banks themselves may have an obligation to make certain disclosures under their own reporting requirements and we have seen some of that over the past few days. all the issues i have mentioned have a common thread – they pit the corporate and client facing behaviours of your firms against our proactive and assertive, risk based, supervisory engagement aimed at ensuring the appropriate outcomes that protect both financial stability and consumers. as an issuer of guidelines and regulations, the central bank has stepped up its game on prudential issues, | 0 |
jerome h powell : community banking opening remarks by mr jerome h powell, member of the board of governors of the federal reserve system, at the webinar on “ community banking ”, washington dc, 20 october 2014. * * * thank you for the opportunity to speak with you today about some of the key issues facing community banks. as the chairman of the federal reserve board ’ s community and regional bank subcommittee, i try to meet with groups of community bankers whenever i can to better understand what is on community bankers ’ minds. while today ’ s webinar is no substitute for face - to - face meetings with bankers, it is a special treat to be able to leverage technology to speak to and hear from so many community bankers across the country at the same time. as all of you surely know, community banks play a vital role in the u. s. financial system. community banks have strong links to the people and businesses in their communities, as well as direct knowledge of local economic conditions. these close ties give community bankers a clear advantage in understanding local needs and tailoring their products and services to meet those needs. my colleagues on the federal reserve board and i are committed to making sure that we understand the issues that are most important to community banks as you strive to serve the financial needs of your communities. one way that we further our understanding is by talking to the bankers themselves in a variety of venues, such as this webinar and a community banking research conference that i attended last month in st. louis, which was co - sponsored by the federal reserve system and the conference of state bank supervisors. and there is another opportunity to communicate with the federal reserve and our fellow regulators that i want to make sure you are aware of. the economic growth and regulatory paperwork reduction act ( egrpra ) of 1996 tasked financial regulators with reviewing regulations issued by the agencies at least every 10 years to identify outdated, unnecessary, or unduly burdensome regulations. the agencies kicked off that process earlier this year, and in addition to collecting comments in writing, we are beginning a series of meetings with the public in december. one of the themes that we hear in our interactions with community bankers is concern that the regulatory environment could be tailored more effectively for community banks, and the egrpra process gives all interested parties a voice in identifying areas where regulatory requirements may be disproportionate to risk. i therefore encourage you to participate in this important process and hope you will raise | restraint to be realized, especially on inflation. the economy is also facing headwinds from tighter credit conditions for households and businesses, which are likely to weigh on economic activity, hiring, and inflation. tighter credit conditions are a natural result of tighter monetary policy. but the bank stresses that emerged in march may well lead to a further tightening in credit conditions. the extent of these effects remains uncertain. at our last meeting, the federal open market committee ( fomc ) decided to maintain the target range for the federal funds rate at 5 to 5 - 1 / 4 percent while continuing the 1 / 4 bis - central bankers'speeches process of significantly reducing our securities holdings. we made this decision in light of the distance we have come in tightening policy, the uncertain lags in monetary policy, and the potential headwinds from credit tightening. as noted in the fomc's summary of economic projections, a strong majority of committee participants expect that it will be appropriate to raise interest rates two or more times by the end of the year. 1 when bank stress emerged in march, we acted in concert with other government agencies to address it, enabling the federal deposit insurance corporation to resolve two failed banks in a manner that protected all depositors. we also used our liquidity tools to make funding available to banks that might need it. in addition to our discount window, we established a new facility under our emergency lending authorities, the bank term funding program. our provision of liquidity through these tools supported the stability of the financial system without restricting the use of our monetary policy tools to firm the stance of policy as part of our efforts to reduce inflation. the banking system remains sound and resilient, deposit flows have stabilized, and strains have eased. evolution of the system since the great recession a little more than a decade ago, the global financial crisis required extraordinary interventions by governments around the world. stabilizing the u. s. financial system required coordinated efforts by all parts of the government, including $ 700 billion in taxpayer funds to recapitalize banks, a suite of fed emergency liquidity facilities, as well as government guarantees on bank transaction accounts and money market mutual funds. despite these efforts, the great recession brought misery to countless millions. as the crisis slowly receded, authorities in the u. s. and around the world implemented a host of reforms. the goal was to build a system that could withstand severe shocks, including unanticipated ones that might arrive from any direction | 0.5 |
to be recognized that pakistan ’ s banking system has witnessed a sea change : ( i ) in terms of size, structure and ownership, the banking assets doubled over cy00 - 05 reaching rs 3, 649 billion ( over $ 62 billon ) by end - cy05. around two thirds of the banking system is with local private banks and 9 % with foreign banks, while the share of public banks has been scaled down to approximately 20 % by end cy05, relative to 50 % at end cy00. interestingly, while foreign banks have a low deposit base, foreign shareholding of banks is quite significant, spread across 8 banks that account for 42 % of the deposit base. large foreign presence would facilitate adoption of international norms and practices and expose pakistan ’ s banking industry to e - banking etc. ( ii ) banks declared unprecedented profits in cy05 close to rs 95 billion before tax and rs 64 billion after tax, relative to losses of rs 4. 5 billion ( after taxes ) in cy00. aside from the gains of a relatively high interest environment, banks benefited from an increase in the volume of business ( especially increase in lending activities which are well supported by fee - earning activities ), improvements in operational efficiency and better risk management ( that helped contain administrative costs and loan infection ). ( iii ) banks have managed to contain their credit risk at prudent levels, with the net npls to net loans ratio at 2. 4 %, and gross npls to advances ratio at 9. 0 % for the overall banking sector. among the various categories of banks, foreign banks have the lowest levels of npls and domestic private banks are second in ranking. ( iv ) concentration in size and ownership structure is prominent. 5 large banks account for over half of the deposits and assets and remaining is held with smaller banks. the consolidation of the banking system generates efficiency and economies of scale as long as high system risks are well managed. ( v ) cross shareholding among banks and other financial institutions and the ownership of banks by big business houses and other segments of financial industry pose regulatory challenges for banking supervision where individual and group risk exposures in family owned banks need closer monitoring. from a development perspective the key factor that the pakistani banking industry has to work towards is enhancing access and improving financial intermediation, stimulating domestic savings, and broader financial innovation in services and products. undoubtedly, banks have realized high profits by maintaining sizeable spreads and keeping deposit rates low, while charging higher | philipp m hildebrand : current monetary policy situation and economic prospects speech by dr philipp m hildebrand, member of the governing board of the swiss national bank, at “ finanzinstitute thurgau bei der universitat konstanz ”, kreuzlingen, 26 april 2004. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * due to the vigorous monetary and fiscal policy stimuli from the us, the global economy is expanding again. in switzerland, too, the upswing has become a reality. in the current year, the swiss national bank ( snb ) is expecting growth of 1. 5 % - 2 %, which slightly exceeds the present growth potential. since capacity utilisation is still fairly modest, such economic growth does not bring an immediate threat of inflation for switzerland at the moment. the downward risks still existing therefore justify a cautious monetary policy. in order to be able to ensure price stability in the medium term, the snb must, however, bring its expansionary monetary policy back on normal course again as soon as the economic recovery sets in and capacity utilisation improves markedly. | 0 |
been combined into large, complex, and opaque trust companies that were not members of the nych. this resulted in runs on those trusts, which led to broader liquidity problems. although the nych had the ability to provide liquidity to those trusts, the provision of that liquidity was delayed. it appears that at the time, the nych was, reasonably, observing some form of bagehot's dictum when deciding whether to provide liquidity. under that dictum, you want to know that the institution to which you're providing liquidity is solvent. if it isn't, then the liquidity extension could be akin to throwing good money after bad. but because the trust companies at the time weren't member institutions, the clearinghouse didn't have a good enough understanding of their balance sheets to know whether they were solvent. 5 some banks refused to clear checks from other institutions, which led to an erosion of depositor confidence and more failures. this historical example points to another aspect of a payment system that is important - resilience of the system. these problems highlighted by the 1907 panic - coordination failures and a lack of resilience - could have been mitigated with the help of a central bank. paul warburg, an influential banker at the time, argued that such a central bank could " establish and maintain a perfect system of credit, enabling the general banks to transform cash credits into actual cash with such absolute ease and certainty that the use of cash credit, instead of actual cash, will not cease, no matter what may happen. " 6 in 1913, congress agreed and created the federal reserve. it positioned the federal reserve at the center of the banking system by establishing a nationwide check - 2 / 5 bis - central bankers'speeches clearing system and a telegraph wire transfer service that is now known as fedwire®. the fed was also intended to function as a lender of last resort so that suspension of payments would no longer be necessary. in the 1970s, the fed promoted more efficient check - clearing by adding the automated clearinghouse service. our job in providing these services and carrying out our responsibilities was and continues to be to make sure the payment system functions efficiently and resiliently, promoting the kind of confidence that is vital for a modern economy. the lesson from this history, as relevant now as ever, is that the payment system has been one of those areas in which the best efforts of the private sector have sometimes fallen short. the | city of new york, vol. 1 ( january ), pp. 302 – 42. 7 see bank for international settlements ( 2024 ), " private sector partners join project agora, " webpage, september 16. 5 / 5 bis - central bankers'speeches | 1 |
, some of the strains that accompanied the difficult business environment of the past several years apparently still linger. although businesses are replacing obsolescent equipment at an accelerated pace, many managers continue to exhibit an unusual reluctance to anticipate and prepare for future orders by adding to their capital stock. despite a dramatic increase in cash flow, business fixed and inventory investment, taken together, have risen only moderately. indeed, internal corporate funds exceeded investment over the course of last year for the first time since 1975. similar cautious behavior has also been evident in the hiring decisions of u. s. firms, during the past several years. rather than seeking profit opportunities in expanding markets, business managers hunkered down and focused on repairing severely depleted profitability predominately by cutting costs and restricting their hiring. firms succeeded in that endeavor largely by taking advantage of the untapped potential for increased efficiencies that had built up during the rapid capital accumulation of the latter part of the 1990s. that process has not yet played out completely. many firms seem to be continuing to find new ways to exploit the technological opportunities embodied in the substantial investments in high - tech equipment that they had made over the past decade. when aggregate demand accelerated in the second half of 2003, the pace of job cuts slowed. but because of the newfound improvements in the efficiency of their operations, firms were able to meet increasing demand without adding many new workers. as the opportunities to enhance efficiency from the capital investments of the late 1990s inevitably become scarcer, productivity growth will doubtless slow from its recent phenomenal pace. and, if demand continues to firm, companies will ultimately find that they have no choice but to increase their workforces if they are to address growing backlogs of orders. in such an environment, the pace of hiring should pick up on a more sustained basis, bringing with it larger persistent increases in net employment than those prevailing until recently. still, the anxiety that many in our workforce feel will not subside quickly. in march of this year, about 85, 000 jobless individuals per week exhausted their unemployment insurance benefits - more than double the 35, 000 per week in september 2000. moreover, the average duration of unemployment increased from twelve weeks in september 2000 to twenty weeks in march of this year. these developments have led to a notable rise in insecurity among workers. most of the recent increases in productivity have been reflected in a sharp rise in the pretax profits of nonfinancial corporations from a | . of course, the timing and force with which that process of recovery plays out will depend on the behavior of final demand. in that regard, the demand for capital equipment, particularly in the near term, could pose a continuing problem. despite evidence that expected long - term rates of return on the newer technologies remain high, growth of investment in equipment and software has turned decidedly negative. sharp increases in uncertainties about the short - term outlook have significantly foreshortened the time frame over which business are requiring new capital projects to pay off. the consequent heavier discounts applied to those long - term expectations have induced a major scaling back of new capital spending initiatives, though one that presumably is not long - lasting given the continuing inducements to embody improving technologies in new capital equipment. in addition, a deterioration in sales, profitability, and cash flow has exacerbated the weakness in capital spending. pressures on profit margins have been unrelenting. although earnings weakness has been most pronounced for high - tech firms, where the previous extraordinary pace of expansion left oversupply in its wake, weakness is evident virtually across the board, including most recently in earnings of the foreign affiliates of american firms. much of the squeeze on profit margins of domestic operations results from a rise in unit labor costs. gains in compensation per hour picked up over the past year or so, responding to a long period of tight labor markets, the earlier acceleration of productivity, and the effects of an energy - induced run - up in consumer prices. the faster upward movement in hourly compensation, coupled with the cyclical slowdown in the growth of output per hour, has elevated the rate of increase in unit labor costs. in part, fixed costs, nonlabor as well as labor, are being spread over a smaller production base for many industries. the surge in energy costs has also pressed down on profit margins, especially in the fourth and first quarters. in fact, a substantial portion of the rise in total costs of domestic nonfinancial corporations between the second quarter of last year and the first quarter of this year reflected the increase in energy costs. the decline in energy prices since the spring, however, should be contributing positively to margins in the third quarter. moreover, the rate of increase in compensation is likely to moderate, with inflation expectations contained and labor markets becoming less taut in response to the slower pace of growth in economic activity. in addition, continued rapid gains in structural productivity should help to suppress the rise in | 0.5 |
isabel schnabel : interview in to vima interview with ms isabel schnabel, member of the executive board of the european central bank, in to vima ( greek daily newspaper ), conducted by mr angelos athanasopoulos and published on 4 april 2020. * * * the ecb recently decided to unleash its firepower once more to protect the euro area economy. the introduction of the €750 billion pandemic emergency purchase programme ( pepp ) is the latest in a series of measures, with the ecb having already announced an additional envelope for its asset purchase programme of €120 billion in net purchases until the end of 2020, on top of the monthly net asset purchases of €20 billion. why was an ad hoc, temporary programme like the pepp needed? the outbreak of the coronavirus ( covid - 19 ) has led to a humanitarian crisis, and has put enormous strain on the euro area economy and the financial sector. over the past few weeks, the outlook for the economy deteriorated sharply as countries had to intensify containment measures, dampening both production and consumption. this posed downside risks to the inflation outlook in the euro area. we also observed a sharp tightening of financial conditions at a time when the economy needed support. signs of financial fragmentation were re - emerging, impairing the transmission of our policy. we responded forcefully to this deterioration in the economic outlook by launching a new temporary asset purchase programme, the pandemic emergency purchase programme ( pepp ), which also includes purchases of greek government bonds. this helps stabilise financial markets, and contributes to much more favourable financing conditions, not least in greece, where interest rate spreads have dropped markedly. what are the main characteristics of the pepp? would you say that it is different from a typical monetary quantitative easing ( qe ) programme? if so, what are the differences? our existing asset purchase programme ( app ) was designed for normal times, providing monetary policy accommodation in order to support the gradual return of inflation to our aim. the pepp is a separate programme. it is our response to the extraordinary economic shock caused by the pandemic. the pepp is temporary, significant in size, and flexible. we expect it to run until we judge that the current crisis is over, but at least until the end of the year. one of the key aspects of the pepp is its flexibility. how do you respond to those who say that | future? in principle, non - financial corporate bonds issued in any euro area country, including greece, can be included in the pepp if they meet the relevant eligibility requirements, including the minimum rating threshold. for the time being, no greek corporate bonds qualify. but i hope that this will change in the future. over the past decade, prudential issues such as non - performing loans ( npls ) have been very challenging to deal with. npls have been one of the main structural problems in the greek banking sector, preventing investment and growth in the greek economy. as the euro area economy is heading towards a recession, which could prove long and deep, a new generation of npls could appear – and not only in greece. how is the ecb planning to deal with such a contingency? will the plans put in place to deal with the current challenge of npls be enough when the coronavirus crisis comes to an end? the crisis will certainly have negative effects on bank balance sheets. but this time, banks are not the cause of the crisis ; they rather have to be part of the solution. and they are in much better shape now, with more capital and a better liquidity position. the supervisory arm of the ecb has implemented significant measures to allow banks to continue to provide funding to firms and households. ecb banking supervision has communicated to banks that it will use maximum flexibility in evaluating the progress of ongoing plans to reduce past npls. it is important that we find the right balance between helping banks absorb the impact of the current downturn and identifying risks, deploy sustainable solutions for viable distressed debtors. only a strong, but at the same time sufficiently flexible, banking system is able to meet the financing needs of people and businesses. christine lagarde has mentioned that aside from what the ecb can and will do, the member states of the euro area should assume their responsibilities on the fiscal side. the esm is exploring various options towards that end, although differences among member states remain. would the ecb consider eurobonds in the form of “ coronabonds ” as a proper way forward in order for the euro area economy to counter 2 / 3 bis central bankers'speeches the economic impact of the virus? and could urgent circumstances lead to the activation of the “ omt bazooka ” being delinked from an eccl programme? these are political decisions, which are not within the ecb ’ s remit. that being said, | 1 |
a payment infrastructure development fund ( pidf ) to expand the reach of digital payments infrastructure into less penetrated regions is aimed at making payments more inclusive. the emphasis of the reserve bank is on operationalising all our payment systems round the clock, 365 days a year and i am happy to say that with 24x7 neft and rtgs systems, we are among a few countries that provide the facility to transfer any amount at any point of time. 17. the success of upi in india has attracted immense admiration from the international community and several countries across the globe have expressed interest in developing a system on similar lines which could provide a basis for stronger bilateral business operations and economic partnerships. the upi system also has the potential to unfold into a cheaper and faster alternative to available means for multilateral cross - border payments as well. it would be appropriate to mention that our rtgs also has multi - currency capabilities and with 24x7 operations now, there is a scope to explore whether its foot - prints could be expanded beyond india. with the reserve bank at the forefront of nurturing innovation, the day is not far, when we will experience cheaper, faster and safer cross border remittances. also, the indigenous rupay card network has shown astounding growth across strata and has a significant market share. with rupay having international presence, our home - grown card network could make a mark in the global financial landscape, going forward. 18. the reserve bank is intensively involved in developing an ecosystem, which would not only nurture the future technologies, but also stimulate the technological aspirations of the financial community. on these lines, to enable the growth of fintech in india, the reserve bank in august 2019 entered into the elite class of select few countries which have their very own regulatory sandbox ecosystem, where any regulated or unregulated entity can come and live test their innovative products or services in a controlled environment. this is a collaboration between the regulator, the innovators, the financial service providers and the end users ( customers ) which would ensure that indian consumers continue to receive the best in class financial services. the responses to the 1st cohort on “ retail payments ” and the 2nd cohort on “ cross border payments ” were encouraging. additionally, the reserve bank has also created our own innovation hub ( rbih ). this hub will collaborate with financial sector institutions, technology industry and academic institutions for exchange of ideas and development of prototypes related to financial innovations. | probabilities attached to different states of nature to a world of total uncertainty. such regime changes are " tipping points " for the system as a whole, whose behavior is suddenly transformed. when they occur, agents respond by making decisions using “ worst - case ” scenarios and covering themselves against the possibility of their own demise. doing so, they faced and created a collective action problem since the general rush for protection only aggravates the stress. this is the best way to rationalize and understand the liquidity and market freezes which occurred in august 2007 and, again, in september 2008. facing such unprecedented reactions, policy makers may have wondered, " does the market know something that we don't ". actually, markets participants knew that they could not know. because they were directly involved, they were aware it was impossible for them to fully master the complexity they had themselves created. and they acted accordingly. overall, complexity may have resulted in more fragility, an evolution already foretold by minsky who saw structural changes in financial systems over time as an essential cause of their vulnerability complexity has deep implications for public policy and the future of financial regulation. • first, about transparency. improving transparency is the first item on the g20 international agenda, for financial regulation reform. transparency is normally considered as a prerequisite to the existence of efficient financial markets. more recently, full transparency on aggregate positions and exposures by main financial intermediaries tends to be seen by financial supervisors as necessary to assess potential systemic risk. however, when the system is constantly morphing into new structures, and permanently changing networks, a comprehensive, but static vision may prove inadequate, because it will not eliminate the uncertainty stemming from the potential discontinuities embedded in market dynamics. what is needed, at least, is an overall understanding of the complex dynamics at work, which may be better reached through a permanent reexamination of their structure and constantly testing against very adverse circumstances. • second, robustness. a natural reaction to financial fragility is to strengthen the ability of financial institutions to withstand shocks by increasing their capital and liquidity requirements. while necessary, it is doubtful whether this " buffer " approach will help when uncertainty settles in. then, the net demand for both liquidity and capital becomes infinite, because gross demand is unknown and hoarding creates little or no supply. in sum, in times of stress, " enough " capital or liquidity is never enough. even explicit contra | 0 |
because of the feared negative impact on the economy. 2. as countries show hesitation in addressing their budgetary problems, access to financial markets tends to become more difficult. 3. when market access deteriorates, the budgetary measures required to restore confidence are much more drastic and painful. some observers, especially outside europe, have suggested that european democracies are not able to deal with such a vicious circle. they consider that the only way out of the dilemma is a default, or a partial default. some have – even recently – voiced openly this view, maybe with the intent to influence financial markets and increase the probability of such an event to occur ; an event from which they would presumably take profit. this view, however, does not take into consideration that in advanced economies a sovereign default is very damaging for the citizens of the country concerned, as it would drastically affect their wealth. increasing the primary surplus, either by cutting expenditure or by increasing – in certain cases by starting to pay – taxes, has in most cases less damaging effects on the economy and on citizens ’ well - being than a cut in the value of their financial assets. to sum up, consolidating public finances is painful economically and politically, but the alternative is worse. governments in europe are fully aware of this. let me move to the second issue, which concerns the strengthening of the institutional framework underlying the single currency. to understand the issue one should first consider what did not work as expected during the first ten years of the euro. two main things did not work. first, in some countries the behaviour of the private and public sector was not fully consistent with the long run requirements of a single currency area. divergences may occur in currency unions, or even within countries, as some regions may grow more than others and experience booms which then burst. in the euro area, the lack of a federal budget transforms country - specific shocks into public finance shocks and thus financial stability shocks. this is why a currency union like the euro area needs a system of discipline for both the public and the private sector, to be exercised at the level of the member states. the euro area had a system aimed at disciplining the public sector, i. e. the stability and growth pact ( sgp ), with rules and procedures aimed at avoiding excessive deficits. the pact worked in some cases, but not all. the main reason has been that the eurogroup, which comprises the finance ministers of the euro area and | the visayas region, the security thread of the 200piso banknote changes colors from green to blue. lastly, the 100 - piso was designed after an indigenous textile from the bicol region and with colors that shift from violet to bronze. all these banknotes also have three - dimensional and holographic features. in addition, the 1000 - piso and the 500 - piso banknotes feature design elements that use optically variable ink, which enables change in color when viewed at a different angle. the value panels of these two banknotes were added with a rolling - bar effect when tilted from left to right, and vice versa. finally, a distinct security feature will help us achieve our mission of bringing bsp closer to filipinos. we added tactile marks to the banknotes specifically intended to help the elderly and 1 / 2 bis central bankers'speeches visually impaired to quickly identify the value or denomination of the banknote. pairs of short horizontal bands are printed in intaglio or engraved at the extreme right and left sides of the note. a 1000 - piso has five pairs of this tactile mark ; the 500 - piso will have four pairs ; three pairs for the 200 - piso ; two pairs for the 100 - piso ; while a 50 - piso will have one pair of tactile marks. through this distinguishing feature, the elderly and the visually impaired will be more confident in using the banknotes for their transactions, paving the way for financial inclusion. needless to say, our banknotes are the treasure of our nation — as we always remind the filipino public, “ ingatan natin ang ating salapi, salamin ito ng ating yamang lahi. ” let us all do our part in preserving and safeguarding its value. maraming salamat at magandang hapon sa ating lahat! 2 / 2 bis central bankers'speeches | 0 |
. the year - on - year rate of increase in the cpi slowed after its peak in april this year. the background to this is somewhat weak developments in demand following the consumption tax hike and the substantial decline in crude oil prices since the summer. to avoid any misunderstanding, let me be clear that the additional easing was not a response to the decline in crude oil prices itself. japan, a commodity - importing country, gains a large advantage from the decline in crude oil prices, especially when the decline is caused mainly by supply - side factors such as developments in oil - producing countries as it is this time. on the price front, while the decline in crude oil prices put downward pressure in the short term, it will lead to an improvement in the output gap and to an increase in underlying prices from a somewhat longer - term perspective. the reason for deciding on the additional easing despite this is that the bank judged that we are still in the midst of converting the deflationary mindset and there is a risk that a slowdown in the actual rate of increase in the cpi might delay this conversion. two engines have so far brought the conversion of the deflationary mindset. the first is the bank ’ s strong commitment to achieve the price stability target of 2 percent at the earliest possible time and in a stable manner, and the second is the actual inflation that has been realized under the commitment. although the decline in crude oil prices is desirable over time, if a pause in the actual price increase becomes protracted, the latter engine may be weakened. if this raises doubts on the achievement of 2 percent inflation, there may be a risk that the mechanism of the qqe as a whole will be weakened. therefore, the bank decided to pursue monetary easing more powerfully under the qqe, and to reiterate its unwavering resolution to achieve the price stability target of 2 percent at the earliest possible time through its “ action. ” looking at responses in financial markets, it appears that the bank ’ s resolution to achieve the price stability target of 2 percent at the earliest possible time has been well understood. i believe that many of you also understand it very well. i strongly expect that there will be positive effects of the expansion of the qqe on wage negotiations next spring and on firms ’ price setting. if it is the case, conversion of the deflationary mindset under the qqe will keep going forward. that is the intended effect of the expansion of the | has not been observed since the bubble period in the early stage of the 1990s, and manufacturers ’ business sentiment remains resilient, although japan ’ s production has been unfavorable ( chart 8 ). the resilience in business sentiment can be attributed in part to firms ’ high consolidated profits, reflecting the favorable business performance of their overseas subsidiaries. firms ’ favorable performance on a consolidated basis seems to have been playing a complementary role to the recent weakness in exports. this may mean that a new pattern of generating income is strengthening, through the repatriation by japanese firms of their overseas subsidiaries ’ profits in the form of dividends ( chart 9 ). although some weakness certainly remains in japan ’ s economic indicators, i feel that it is necessary to make a more comprehensive assessment, taking into account the current globalization of firms. risk factors to the outlook for japan ’ s economy also warrant attention. the first factor is developments in exports. japanese manufacturers are likely to continue shifting production sites to overseas – although the pace is slowing – amid uncertainty over whether overseas economies will steadily increase their pace of growth. therefore, it is uncertain whether the recent further depreciation of the yen will support the recovery in exports. the second factor is the effects of the yen ’ s depreciation. while the decline in energy prices will raise the real purchasing power of households and firms, clearly exerting positive effects on japan ’ s economy, the depreciation of the yen will become a downside factor in terms of trade for the nonmanufacturing industry, which accounts for a large share of gdp and is a driving force of bis central bankers ’ speeches the current economic recovery. the third factor is developments in household and business sentiment. sentiment indicators – especially of manufacturing – had been resilient, despite the weakness in japan ’ s economic indicators ; however, sentiment now seems to have weakened, as evidenced by the fact that developments in the diffusion indices ( dis ) in the latest economy watchers survey have become more sluggish recently. developments in these dis warrant attention as these indices are leading indicators of the economy in the short term. looking at the comments made by the survey ’ s respondents, those regarding the second round of the consumption tax hikes, irregular weather, and depreciation of the yen stand out. the effects of these factors on sentiment warrant attention. d. developments in prices the year - on - year rate of increase in the consumer price index ( cpi, for | 0.5 |
sector. in times of economic crisis, continued access to finance for small businesses is essential. they are at the heart of the economy. development finance must operate counter cyclically, which means fighting the credit crunch around the globe, in particular in emerging europe including southeast europe, and that is exactly what efse does. but apart from this financial dimension, efse is still taking on other roles in contributing to financial sector development in southeast europe : we appreciate efse ’ s role as a responsible investor. as such, efse promotes responsible lending practices in the region, refraining from promoting consumer lending or speculative activities. why is this crucial for financial sector development? the financial crisis was in part caused by irresponsible lending practices, in particular by credit technologies employed in the subprime market, the very origin of the current crisis. against this background, there is indeed the valuable lesson to be learnt that responsible finance is a must to ensure a sound financial system. last but not least, i am proud to say that i, as well as my other colleagues from the central banks of the efse partner countries, are all members of the efse advisory group. as such, we are involved in efse ’ s work. but it is more than a sole advisory board, serving efse as an information source to stay abreast of financial sector developments in the region from a policy maker ’ s perspective. it provides a platform for regional exchange on financial sector issues. thus, it is a crucial vehicle to strengthen integration and cooperation in southeast europe, which in these current times of turmoil has never been so important. no southeast european country has the resources or the means to make it out for the current crisis alone. thank you for your attention. | - 6 - 6 sources : ceic ; rba ; thomson reuters rather than run through more of the recent economic data, i would like to touch on three broad issues that are likely to play a major role in shaping how the world economy evolves over the next few years. the first of these is the need for the advanced economies to consolidate their public finances. the second is the realignment of capital flows, given the likelihood of an extended period of low interest rates in the advanced economies. and the third is the challenge of increasing domestic demand in asia. ( i ) public finances of these three issues, the one that has attracted the most attention recently is public finances. this is partly the result of what has been going on in greece but, more broadly, it reflects the difficult fiscal positions in which many advanced economies currently find themselves. in the united states, the federal budget deficit for 2009 was around 10 per cent of gdp. in japan, the deficit was almost as large, and for the euro area as a whole it was around 6 per cent, with some euro area countries having much larger deficits than this average. furthermore, these large deficits come after three decades over which the ratio of public debt to gdp for the g7 economies as a whole trended higher ( graph 4 ). they also come at a time when there will be significant medium - term budget pressures due to the ageing of the population. graph 4 g7 – net public debt per cent of gdp % % source : imf over coming years, many governments will need to take significant steps to improve their public finances. the flexibility that they have to determine the timing and size of these steps is limited by the fact that they went into the current downturn with already high levels of debt. as a result of the poor starting points, many are now treading a fairly narrow path. on the one hand, tightening fiscal policy in the very near term risks derailing the recovery, while not doing so risks a damaging loss of confidence. how these risks are managed is likely to have a major effect on how the world economy evolves over the next few years. presumably, what is required is for the affected countries to have credible medium - term fiscal consolidation strategies. while this is easier to say than to do, ensuring the confidence of investors is an important ingredient if the recovery is to be sustained. ( ii ) capital flows this brings me to the second, but related, issue – that of capital flows. most | 0 |
in several ways, but let me highlight two that are particularly relevant in the current context. first, when inflation is low and stable, relative price signals are clear and readily apparent, and this helps businesses and households to make sound economic decisions. second, meeting the inflation target helps to anchor inflation expectations to the target which, in turn, helps to keep inflation low and the economy more stable. in the 1970s, which was the last time canada experienced a commodities boom on the scale of recent experience, monetary policy failed to anchor inflation expectations. so, when sharply higher oil prices pushed inflation up, workers and firms extrapolated this higher inflation forward, and prices and wages more broadly began to rise more quickly. the result was higher and more variable inflation, and a more painful economic adjustment. the other element of our monetary policy framework is the flexible exchange rate. the flexible exchange rate helps the economy to absorb shocks. just as the manitoba floodway absorbs some of the deluge of a spring flood, the floating dollar helps the economy to absorb shocks – especially external shocks that affect our economy differently than those of our major trading partners. the flexible exchange rate also supports economic adjustment because it is much easier to have changes in the relative price of canadian goods and services come through movements in the exchange rate than to require all domestic prices and wages to adjust. now, i said that the inflation target and the flexible exchange rate work together to promote our economic well - being. what this means in concrete terms is that relative prices can change without spilling over into generalized inflation, and the economy can operate close to its potential. this means that labour and capital are allocated more efficiently, and resources that move out of contracting sectors are put to work in expanding sectors. and that's what we've been seeing in canada. with unemployment at a 33 - year low, it's clear that canada has been going through this difficult process of adjustment with considerable success. our job at the bank of canada is to continue to aim for 2 per cent inflation so that when some prices change, these are clearly relative price changes, and longerrun inflation expectations remain anchored at the 2 per cent target. to summarize, our monetary policy framework has served us well in maintaining a domestic environment of growth and stability. together with other domestic policies, it has helped canada to adjust to some significant changes in the global economy. but sound domestic policies are not sufficient to eliminate spillover effects from decisions and events on the other side of the | declined by about 250, 000 jobs. at the same time, the primary and service sectors have been expanding capacity and employment in response to strong demand. over the past three years, employment in these sectors has increased by about 900, 000 jobs, more than offsetting the reduction in manufacturing employment. of course, this adjustment is not affecting all parts of the country in the same way. growth in output, employment, and incomes has been fastest in western canada. nevertheless, growth in canada has been broad based. strength in domestic demand has supported solid growth of output and employment right across the country. manitoba is in the middle of canada in more ways than one. it has a well - diversified economy that closely resembles the structure of the canadian economy. and in the past three years, gdp in manitoba has grown by an average of 2. 8 per cent, very close to the national average. economic adjustment is always difficult, but it's necessary if we are to put capital and labour to work where they are most needed. this, in turn, helps to support rising living standards for canadians. the main point here is that the canadian economy has adjusted – and is continuing to adjust – to take advantage of our opportunities in an integrated global economy. now let me turn to the role played by monetary policy. the role of monetary policy the bank of canada act directs the bank to " promote the economic and financial welfare of canada. " what we've learned from experience is that the best contribution monetary policy can make to canada's economic and financial welfare is to maintain low, stable, and predictable inflation. since 1991, canada's monetary policy framework has consisted of two main elements – an inflation target and a flexible exchange rate. this framework has allowed canada to pursue an independent monetary policy – a policy suited to our own circumstances. the two main elements work together and reinforce each other. the result has been low and stable inflation, with less volatility in output and employment. let me elaborate on each of these elements. first, the inflation target. since 1995, the target for inflation has been the 2 per cent midpoint of a 1 to 3 per cent inflationcontrol range. to keep inflation at 2 per cent, the bank tries to keep a balance between the overall demand for and supply of goods and services in the canadian economy. when overall demand and supply are in balance, the economy can operate at its full potential, and inflation is stable. inflation control contributes to better economic performance | 1 |
. unfit, in various aspects of its national economic and especially supervisory policies. all of this made it not well equipped to counteract the emerging imbalances at an early stage and to match the challenges facing the economy when the crisis took hold. ireland ’ s current account deficit was 5. 3 % in 2007 and accounted for 5. 6 % in 2008. and certainly overweight, in some sectors at least. ballooning credit and spending excesses had overheated the economy and misdirected resources. in 2007 ireland was an economy that had become dangerously dependent on construction and housing as a source of economic growth and tax revenue. overly optimistic expectations both in the private and the public sector played a major role. an over - sized and lightly - regulated financial system not only fed on these excesses but actively supported them. and government expenditures had been set on a clearly unsustainable course, based on the false assumption that very high tax receipts stemming from the booming housing sector and exceptional real growth where a lasting feature of the irish economy. for example, from 1998 to 2010 nominal public wages per government employee increased by more than 90 %, significantly outpacing public wage increases in most other euro area countries by 40 or more percentage points. only greece saw larger increases than ireland. 2. the adjustment process as anyone who has ever undergone the grinding process of recovering fitness will attest, the process can be long and painful. and so it has proved. domestic demand has shrunk. this was unavoidable as both public and private spending had increased to levels well above the sustainable productive capacity of the economy. unemployment has strongly increased. programme milestones i would identify three major milestones of the macroeconomic and fiscal adjustment programme : first, a return to growth, already in 2011. bis central bankers ’ speeches second, the progressive return to market funding well in advance of the end of the programme in 2013. third, reaching a fiscal deficit of 3 % in 2015. measured against these milestones, i must admit that i am truly impressed by the way ireland has handled its tough challenges, especially since the beginning of last year : the economy is well on the way to restoring competitiveness, reducing the fiscal deficit ( – 10. 6 in 2011 ; – 8. 6 goal for 2012 ), overhauling the institutional framework and restructuring the banking sector. it is the only programme country that has managed to close its trade deficit and to return to growth last year, even if at modest | low inflation and good growth go hand in hand when inflation converges internationally and long - term inflation expectations are permanently lowered to the level of the target for price stability, the core of the inflation process lies in the relationship between prevailing demand and the sustainable level of output. if resource utilisation is so high that it becomes strained, inflation will tend to rise. conversely, when resource utilisation is low, inflation tends to fall. to a large extent it is the interaction of demand and supply that determines whether inflation is rising, falling or constant in relation to the 2 per cent target. monetary policy is capable of exerting a direct effect - through the repo rate - on only one of these two sides of the economy, namely demand. the supply side is essentially influenced by structural factors that the riksbank cannot control directly. but permanently high inflation can indirectly impair the workings of the economy, leading to weaker growth. by the same token, today ’ s low inflation should help the supply side to function more efficiently. seen from this angle, it is easy to appreciate that a policy for safeguarding price stability should be able to go hand in hand with a development of demand that matches the supply side ’ s sustainable capacity. in the event of a demand shock, even in the short run the riksbank ’ s objective therefore coincides with that of general economic policy - a favourable real economic trend. in view of the discussion that arises from time to time about objectives for the riksbank, this should be borne in mind. consider these two examples : • suppose, first, that a shock causes demand to fall ; resource utilisation will then decline, with a risk of inflation dropping below the 2 per cent target. the monetary stance must then be adjusted so that the rate of inflation returns to the target. this involves lowering the repo rate so that demand recovers. [UNK] • suppose, instead, that a shock causes demand to rise faster than the supply side can cope with. inflation will then be liable to rise above the targeted rate. the monetary stance must therefore be tightened so that inflation falls back to the target, which involves subduing demand to output ’ s sustainable level. in the various situations, the impact of monetary policy can be contractive, expansive or neutral, depending on the degree of resource utilisation and the risk of inflation deviating from the target in either direction. the relevant rate of inflation here and the one that is affected by total demand | 0 |
philipp m hildebrand : major challenges facing the swiss national bank speech by mr philipp m hildebrand, chairman of the governing board of the swiss national bank, at the general meeting of shareholders of the swiss national bank, berne, 30 april 2010. * * * mr president of the bank council dear shareholders dear guests i. the recession has run its course a little over a year ago, we were still in the midst of the worst financial crisis in post - war history. true, we were able to discern the first tentative signs that the tide might be turning, but the outcome was still highly uncertain. today, the worst is behind us. we can look to the future with a measure of optimism. yet the challenges that the crisis has left in its wake are still substantial. while 2008 will go down in history as an annus horribilis for the financial markets, 2009 was dominated by the gloomy economic environment. the global economy contracted for the first time since the second world war. the huge loss of confidence on financial markets in autumn 2008 caused economic activity to nosedive. indeed, one of the most striking features of this recession was the speed and severity with which economic growth dropped in a number of countries. faced with such a dramatic situation, governments and central banks across the world found themselves having to swiftly implement innovative support and rescue measures on an unprecedented scale, in a bid to stabilise the global financial system and limit the economic downturn. the decisive economic policy intervention was a key contributor in calming the markets, halting the downward spiral and clearing the way for economic recovery. as a small open economy, switzerland could not avoid being drawn into the global recession. the sharp fall in economic activity, which had begun in the second half of 2008, continued in the first half of 2009. around the middle of the year, the trough was reached and the economy began to grow again. over the year 2009 as a whole, gdp dropped by 1. 5 %, the largest decline since 1975. nevertheless, switzerland has so far weathered the effects of the financial crisis better than most industrialised economies. this may come as a surprise, given the importance of our financial centre. a deciding factor behind the comparative mildness of the recession in switzerland was private consumption, which proved to be an important buttress of growth. moreover, no major distortion was observed in the property market, and banks did not restrict access to lending. last but not least, the rapid and decisive expansion of | thomas jordan : repercussions of the financial markets crisis in switzerland summary of a speech by mr thomas jordan, member of the governing board of the swiss national bank, at the zuger wirtschaftskammer, zug, 28 april 2008. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * the turbulence in the financial markets that began in august 2007 is having a generally negative impact on the swiss economy and is spreading through different transmission channels. the downgraded growth prospects for the us economy are resulting in fewer imports from the rest of the world. since net exports and the global economic developments are of particular importance for switzerland, they are having a negative effect, which may be reinforced by the appreciation of the swiss franc. because of the major importance of banking in the industrial structure of the swiss economy, falling turnover on the financial markets can also affect switzerland more severely than other countries. moreover, rising credit risk premiums result in higher financing costs for companies, and the deterioration in bank balance sheets could be an additional factor in compromising the availability of credit in switzerland. finally, the increase in commodity prices has had a significant impact on the inflation rate in switzerland. despite the fallout from the financial crisis, the outlook for switzerland ‘ s economy remains good. in europe – which is crucial for switzerland – the economy will probably weaken only gradually. what is more, the swiss franc has only seen a moderate rise against the euro. as swiss households and companies are on a solid financial footing, they are shielded – so to speak – against a tightening in credit conditions. lastly, the stronger swiss franc vis - a - vis the us dollar has limited the impact of higher commodity prices. several other factors, like a robust labour market and a competitive industrial sector, could cushion the negative repercussions of the financial crisis in switzerland. against this backdrop, the snb is expecting real gdp to grow between 1. 5 % and 2 % this year. inflation should be below the 2 % mark again in the course of 2008. these forecasts still involve substantial uncertainties. given the present state of the economy, the current interest level seems to be appropriate. however, the snb will keep a close eye on further economic developments and inflation so that it is able to identify when action needs to be taken and react in a quick and flexible manner. | 0.5 |
an orderly retreat which inevitably relies on increasing discount rates at which future income streams are priced. this is particular true if some projects were only funded to begin with due to the exceptionally low interest rate environment, and / or if such investments were intermediated by fund managers who care not only about income streams, but also ( and mostly ) about short - term price fluctuations. here we will have an interesting discussion including papers by stephen morris, michael woodford, and gustavo suarez, which will enlighten us about the theoretical aspects to keep in mind when evaluating the broader consequences of asset purchase programs, as well as the empirical evidence regarding the effects of the risk - taking channel on the quality of loans originated. but this is not only a conference about monetary policy in developed economies. indeed, securities from emerging markets fit naturally into the category of riskier assets that are expected to be affected by investors ’ search for yield in an environment of low interest rates, as has been documented by a growing and exciting empirical literature. this will be the topic bis central bankers ’ speeches of the third and final session of the conference, and will include presentations by helene rey, simon gilchrist, and elias albagli. this topic is of particular concern for central bankers and policymakers in latam and other emerging regions, which have good reasons to be worried with the consequences of us monetary normalization in an environment where further exchange rate pass - through will put increasing pressure on our inflation targets, while at the same time interest rate pass - through puts increased pressure on subpar levels of growth. before giving an official start to our nineteenth annual conference, let me end by stressing a related but perhaps less appreciated aspect by which the events of the last few years have changed, i believe in both a fundamental and desirable manner, the way monetary policy is handled and communicated. and if you permit me, i will illustrate the point using the recent chilean experience. in chile, although economic conditions have been far less complex than in developed countries, we have also experimented with unconventional policies... and frankly, i think the experience has been successful. first, in response to the global financial crisis of 2008 the bank increased the supply of liquidity in pesos and dollars – through repos and swaps –, augmented the extensions of the swap program, and broadened the range of eligible collaterals. they were all measures designed to align market rates with the monetary policy rate and to mitigate foreign currency liquidity tensions. forward guidance was also | b ) liquidity ; and c ) rating agencies. accounting methods and valuation at the onset of the financial turbulences, there were strong concerns on how precise was the information reported by banks, how large were the losses, and who was bearing these losses. this uncertainty was a critical factor in the shutdown of key financial markets. the international accounting standards board ( iasb ) and the financial stability board ( fsb ) have been working and promoting recommendations on accounting and disclosure standards for off - balance - sheet investment vehicles, and fair value methods, among others. however, these “ information ” requirements by themselves are not enough, and other measures could be necessary, such as forcing originators and other agents to hold part of the risk of the assets created. liquidity the current financial turbulence has highlighted that for the banking sector liquidity considerations are as relevant as solvency issues. in spite of this, most of the attention in banking regulation has been focused on solvency ( rochet, 2008 ). however, some steps have been taken in this direction by the bis in terms of contingent liquidity demand and related triggers associated with off - balance - sheet positions ( bis, 2008 ). the literature has identified several elements that could generate externalities related to liquidity, and therefore could justify some degree of regulation, where the main arguments are linked to asymmetric information and market incompleteness. 1 moreover, policies put in place by central banks after september 2008 have made moral hazard concerns for liquidity management more pressing. nonetheless, there are still open questions as to the kind of regulation to reduce the potential consequences of the imperfections in this area. there are no straightforward answers on this matter. some pending questions are : should a capital charge be put in place for liquidity allen and gale ( 2000 ), freixas and rochet ( 2000 ), and morgan, ( 2002 ). risk? is it necessary to impose an additional liquidity requirement to intra - day liquidity needs? should central banks act as the lender of last resort in this market? credit rating agencies the role played by risk rating in the subprime crisis is also an important corollary to the current crisis. to illustrate why some authors have gone as far as calling this “ the credit rating crisis ” ( benmelech and dlugosz, 2009 ) consider that before the crisis more than half of the structured finance securities rated by moody ’ s carried an aaa rating and, during the period 2007 - | 0.5 |
yves mersch : intergenerational justice in times of sovereign debt crises speech by mr yves mersch, member of the executive board of the european central bank, at the minsky conference in greece, organised by the levy economics institute, athens, 8 november 2013. * * * ladies and gentlemen, the last time i gave a speech here in athens was in early january 2008. how much the world has changed since then. yet it has not always changed in the ways that observers predicted. i still remember clearly, in the early weeks of may 2010, the prophetic claims that greece would leave the euro area within weeks, that other countries would follow within months, and that the collapse of the euro would be complete before the year was out. those claims were wrong – and the greek people have played an important part in proving them so. since the loss of market access in early 2010, the greek people have made extraordinary efforts to refute the naysayers and turn the economy around. they have executed a fiscal adjustment of historic proportions and embarked on the difficult road of structural reforms. the results of these actions have accrued first and foremost to greece – but they have also accrued to the wider euro area. however, this turnaround is still only half complete. there is still much work to do. and what i would like to emphasise in my remarks today is that staying on the path of reform is essential not only for the citizens of today. it is also essential for those of tomorrow. like all western societies, and some rapidly ageing eastern ones, greece faces long - term fiscal challenges linked to high public debt levels and demographic developments. these challenges raise profound questions about intergenerational justice. and it is only through reforms that they can be answered in a fair way. for all ageing societies, this implies, first, ensuring sustainable public finances and, second, achieving stronger economic growth. both are necessary because they are mutually reinforcing : fiscal sustainability creates the stability and confidence necessary for future growth ; and higher growth creates the revenues and debt - to - gdp ratios necessary for fiscal sustainability. let me therefore deal with each in turn, starting with what is being done to ensure fiscal sustainability in the context of intergenerational justice. strengthening sustainability the fiscal challenges that greece is facing today, while more severe than others, are not unique to this country. all western societies are being confronted with difficult questions about the distribution of consolidation and spending between current and future generations. | s. ( 2009 ), “ the crises and the policy response ”, stamp lecture at the london school of economics, 13 january 2009, london, england. bernanke, b. s. and reinhart v. r. ( 2004 ), “ conducting monetary policy at very low shortterm interest rates ”, american economic review, papers and proceedings, 94 ( 2 ), 2004, pp. 85 - 90. bullard, j. ( 2009 ), “ effective monetary policy in a low interest rate environment ”, the henry thornton lecture, cass business school, london, 24 march 2009. caballero r. j., hoshi t. and kashyap a. k. ( 2008 ), “ zombie lending and depressed restructuring in japan ”, american economic review, vol. 98, no 5, december 2008. eggertsson, g. b. and woodford m. ( 2003 ), “ the zero bound on interest rates and optimal monetary policy ”, brookings papers on economic activity, 2003, no 1, 139 - 211, 230 - 233. eggertsson, g. b. and woodford m. ( 2004 ), “ policy options in a liquidity trap ”, american economic review papers and proceedings 94, may 2004, 76 - 79. hiroshi, u. ( 2006 ), “ effects of the quantitative easing policy : a survey of empirical analyses ”, bank of japan wp series, july 2006. jeanne, o. and svensson l. e. o. ( 2007 ), “ credible commitment to optimal escape from liquidity trap : the role of the balance sheet of an independent central bank ”, american economic review, vol. 97, no 1, march 2007. kashyap, a. ( 2002 ), “ sorting out japan ’ s financial crisis ”, 4q / 2002, economic perspectives, federal reserve bank of chicago. krugman, p. ( 1998 ), “ it ’ s baaack! japan ’ s slump and the return of the liquidity trap ”, brookings papers on economic activity, 1998, ( 2 ), pp. 137 - 87. stella, p. ( 2005 ), “ central bank financial strength, transparency and policy credibility ”, imf staff papers 52 ( 2 ). svensson, l. e. o. ( 2004 ), “ comment ”, brookings papers on economic activity, 2004, no 2, 84 - 93. sven | 0.5 |
##ties about the sustainability of the recovery have arisen. if this continues, it will help to reverse the trend in this component of the index. but, the most significant cause of reversal is likely to be a moderation in food prices over the next few months in response to a reasonably good monsoon. the other supply - side driver of inflation in recent months has been energy. the inflation rate for the fuel component of the wpi began rising in june 2009. though it remained in negative territory until october 2009, the rise itself contributed to a rise in the overall inflation rate. from october 2009 onwards, fuel inflation has been positive and rising quite rapidly. in short, the indian economy has clearly seen a spurt of inflation, significantly driven by supply - side factors in a period during which growth was relatively slow. prevailing wisdom on monetary policy suggests that supply - side pressures, particularly if they are temporary in nature, are not effectively tackled by conventional monetary measures, which are more directly aimed at reining in demand. apart from the temporariness of these supply - side factors, the overall state of the economy should also be considered. the same wisdom argues that, if the economy is at or close to full capacity utilization, monetary actions in response to supply - driven inflationary pressures may be appropriate. while they will not directly address the cause of the inflation, by signaling a willingness to compress demand, they will rein in expectations of inflation spiraling out of control. the fact that the economy was still growing at a relatively slow pace in the second half of 2009 – 10 implied that there was some slack still available in capacities across sectors and that the threshold for strong monetary actions had not yet been reached. however, monetary assessments at that time could not be made independently of the very drastic measures that had been taken when the global crisis precipitated in september 2008. those actions took the monetary position, as reflected in the repo and reverse repo rates and the cash reserve ratio ( crr ) quite some distance from what would be considered normal levels. even in the early stages of recovery, therefore, every opportunity to revert these instruments to normal needed to be exploited. i shall return to this point a little later in the article. the rising significance of demand coming back to the inflationary situation, while a significant proportion of the rise in the inflation rate over the past year can be attributed to supply - side factors, demand pressures became visible in early 2010. while it is difficult to identify a | the utmost determination, in line with our mandate. today, however, i do not want to talk primarily about monetary policy, but about the swiss financial industry. allow me to start by explaining why the financial industry, in general, and a healthy and stable banking sector, in particular, are of vital interest to the snb. there are two main reasons. first, the banking system fulfils a key financial intermediary role in the economy. due to this pivotal function, the banking sector plays a crucial part in the transmission of monetary policy. on the other hand, however, it may also be the source of financial shocks that impact on the real economy. second, the industry is itself a large part of the swiss economy. the significance of the financial industry and our position as a global financial centre are important contributors to the wealth of our nation. this is especially apparent here in zurich, where the financial sector generates much employment, wealth and tax revenue. in my remarks, i will first discuss the macroeconomic challenges associated with the banking sector ’ s key role in the transmission of monetary policy, as well as the risk that it may bis central bankers ’ speeches propagate financial shocks to the economy. then, i will discuss the challenges for the industry itself. lastly, i will address the main implications from the snb ’ s point of view. macroeconomic challenges let me start by focusing on the macroeconomic challenges associated with the importance of the swiss financial industry, and, in particular, the banking sector, for the rest of the economy. the main reason why the banking sector is so important for the swiss economy and the snb lies in its traditional function as financial intermediary. as banks collect funds and provide financing to firms and households, they are the “ life blood ” of the economy. related to this traditional function, there are two distinct aspects i would like to point out. first, banks play a crucial part in the transmission of monetary policy. there are various channels through which monetary policy is transmitted to the economy, but the primary channel is via changes to the short - term nominal interest rate, in other words, via the cost of borrowing and the return on savings. monetary policy thereby affects investment and consumption decisions throughout the entire economy, thus influencing business level activity and price dynamics. in its implementation of monetary policy, the snb provides short - term liquidity to the banking system, and not directly to firms and households. banks, as financial intermediaries, | 0 |
simple and complex, old and new, uk - based and overseas businesses. all told, we spoke to firms accounting for about three - quarters of current reserves balances. what did we find? unsurprisingly, different firms thought about their reserves holdings in quite different ways – and no - one used the term ‘ demand curve ’! nevertheless, we can build up a picture of demand for reserves by understanding three core drivers of demand, common to all firms. first, at the most basic level, firms hold reserves to meet both expected and unexpected sterling payments during each day. the shape of this demand depends on firms ’ business models. calendar effects are important for retail banks, for example ; whereas wholesale banks and gilt - edged market makers are more affected by the ebb and flow of capital markets activity. and access to ( and efficiency of ) payment and settlement systems can have important implications for the reserves that firms need to hold. so innovations such as the bank ’ s rtgs renewal programme14 have the potential to transform demand levels. second, reserves are an important form of insurance against liquidity outflows over short, but multi - day, horizons. regulatory rules require firms to hold liquid assets to cover projected outflows over a https : / / www. bankofengland. co. uk / payment - and - settlement / rtgs - renewal - programme all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx thirty day period. this doesn ’ t have to mean reserves – firms could instead hold liquid government bonds, mortgage backed securities or even equities. but, unlike reserves, such assets have to be liquidated in the market before they can be used to meet outflows. of the firms we spoke to, even those with strong market access showed a marked reluctance to rely on that access as their only source of liquidity, particularly to meet projected needs in the initial days of a liquidity stress. for that, they preferred to hold reserves. taken together, these two factors make up what i will call a ‘ preferred minimum range of reserves ( pmrr ) ’ for firms. chart 9 illustrates the aggregate pmrr for the market as a whole, defined as the region where reserves begin to become scarce. we expect market interest rates to be relatively stable around bank rate in this region. this range will naturally include any buffers that firms are holding above their true minimum | with acceptably low risk. that, of course, is a sign of the times in which we live. very, very low interest rates for “ safe ” assets, and even many “ not quite so safe ” ones, have persisted for quite a long time now, and may well continue for some time yet. when i gave the first of these addresses 10 years ago, about the conduct of monetary policy, i certainly did not imagine that the world would look like this in 2016. since this is the last of these addresses i shall deliver, and since in fact it is the last public address i expect to give as governor, i intend to use it to look back at those 10 years. this will be my account of the bank's stewardship over that time. bis central bankers ’ speeches rather than a chronology of events, i will take the approach of looking at average outcomes over decade - long periods, which i think is more useful. i shall conclude with some observations about the future, though these should not be seen in any way as constraining the actions of the bank under the guidance of my successor. [ 1 ] the world economy the times have certainly been anything but boring, mainly because of events beyond our shores. ten years ago, the “ great stability ”, as lord mervyn king [ 2 ] labels it, was about to come to an end in the advanced economies. that period of reduced economic volatility dating from the mid 1980s was associated with macroeconomic outcomes that were remarkably good. but it wasn't a permanent state of the world. in fact, in some ways, that period of stability and confidence could be said to have sown the seeds of its own demise. low volatility in economic outcomes encouraged under - pricing of risk and a sense that higher leverage was safer for the individual household or firm ( or government ). but as leverage increased, this left the world financial system and economy more vulnerable when an adverse shock eventually came along. as we know, the international financial crisis was very serious and had major deleterious effects on economic activity in the advanced countries. at the same time, the “ china boom ” really started to find its legs in the mid 2000s. the associated rise in australia's terms of trade was something my predecessor had already remarked upon. [ 3 ] it ultimately went much further than even the optimists a decade ago would have expected. some of this was due to the financial crisis. as the crisis unfolded | 0 |
and products both in their own countries and outside. singapore has a good brand name in the middle east and awareness about us is increasing. there are many opportunities for our businesses there. 20. during my visits to the middle east, i sensed their interest in investing in asia. many are keen to engage china and india but their businessmen told me that they were not so familiar with doing business in china. singapore can serve as a bridge, given our knowledge and connections. furthermore, indian, chinese and singaporean financial institutions could tap into islamic funds from the middle east for infrastructural and other major projects in india and china. 21. as an international financial centre, singapore is well placed to intermediate and facilitate investment flows between asia and the middle east. already, funds managed in singapore from the middle east have increased by over 70 % to s $ 22 billion in 2004. but this is still a small figure, given the trillions of dollars of wealth in the middle east. we should work with credible partners to offer a wider suite of islamic financial services and products. the role of mas 22. mas will continue to support and partner the financial industry to seize the opportunities. last year, i highlighted three strategic priorities for mas and our financial sector. they are first, strengthen our position as a leading financial centre in asia ; second, maintain excellence in a riskier environment ; and third, leverage and build on our reputation. we have made good progress on all three fronts. strengthening our position as a leading financial centre in asia 23. as mas chairman, i regularly meet ceos of global banks and big companies. they give me a feel of how singapore is viewed. one of the top bankers told me that he saw singapore emerging as one of the top financial centres in asia in the longer term. our strong fundamentals will enable us to play a role in asia's transformation. another ceo told me that his bank found skill levels and costs in singapore competitive enough for them to outsource processing work, including operations and it development from europe to singapore. 24. in 2004, our treasury and capital markets grew strongly. for instance, the singapore debt market grew by 20 % to s $ 123 billion. our fund management industry has continued to flourish, with assets under management ( aum ) rising to almost s $ 600 billion. on the singapore exchange, the structured warrants market has seen tremendous growth. 25. a vibrant and dynamic financial centre depends on a vibrant and dynamic talent pool | lim hng kiang : increasing and broadening private sector participation in infrastructure development opening remarks by mr lim hng kiang, minister for trade and industry and deputy chairman of the monetary authority of singapore, at the world bank - singapore infrastructure finance summit, singapore, 29 may 2013. * * * ms sri mulyani indrawati, managing director of the world bank group mr cesar purisima, secretary of finance of the philippines mr sergey storchak, deputy finance minister of russia mr areepong bhoocha - oom, permanent secretary of the ministry of finance of thailand distinguished guests ladies and gentlemen introduction – infrastructure financing is crucial to maintain sustainable growth for countries a very good morning to all of you. it gives me great pleasure to join you at the opening of this year ’ s world bank - singapore infrastructure finance summit. let me extend a warm welcome to all our guests, and especially to our overseas guests. this is our fourth meeting, and we are meeting under more stabilised circumstances. emerging market economies have experienced a strong rebound in capital inflows post global financial crisis. mckinsey estimates that some us $ 1. 5trn in foreign capital went to emerging markets in 2012. these flows are due in part to institutional investors ’ hunt for yield in the shorter term, and in part also to the longer - term shift in liquidity from the advanced to the emerging world. the g30 working group on long - term finance has estimated that infrastructure spending must increase nearly 15 % for countries to achieve even moderate levels of economic growth. the scale of spending required is significant ; it raises questions on whether and how our financial system can deliver the required financing. policy - makers recognise this ; international fora such as the g20 and apec have made long - term investment a priority agenda topic this year. a key challenge is how we can better channel capital flows towards infrastructure development, a major element in countries ’ pursuit of sustainable, equitable growth. to address this challenge, we must pursue enhancements in three areas – first, to catalyse private sector involvement in project financing ; second, to optimise the project delivery value chain ; and third, to build capabilities in both the public and private sectors. private sector investment in infrastructure is critical, and solutions must be created to support a necessary shift in sources of financing over time let me first turn to private sector investment in infrastructure. at present, governments drive about 60 % of infrastructure spending globally | 0.5 |
, could be placed in the market. banks hoarded liquidity in order to be safe from unexpected outflows or the unknown extent of write - downs. because the usual market refinancing possibilities were blocked banks relied on highly rated collateral for their funding and the liquidity provided by the central bank. the spread between eonia and three - month euribor rose to the highest level ever at 70 bps and has remained high. unsecured trading in the money market beyond one week effectively ceased to exist. ii. central bank reaction function as liquidity retracted first from the credit markets, then money markets, intermediation vanishing, central banks had to move in : to restore orderly market conditions ; ensure the integrity of monetary transmission channels, and to ensure financial stability or prevent a systemic crisis. in view of the confidence crisis among market participants, due to uncertainty about financial individual exposures, the issues at stake were : 1 ) to have money market rates evolve close to the policy rates ; 2 ) to address the term structure problem to the extent that it was threatening the first issue ; 3 ) and thirdly to address the distributional problem of liquidity among market participants for reasons of financial stability. the somewhat more complex and elaborate toolbox of the eurosystem proved very valuable in this respect. - this applies to the instruments used to provide liquidity : the mro and ltro - this applies to minimum reserve features - this applies to the number of counterparties with direct access to central bank money - this applies finally to the range of eligible collateral let me say a word about each of these features of the eurosystem operational framework : 1. at moments of term structure difficulties and shortening of the liquidity constraints, it is of advantage to have both : one - week and three - month liquidity providing tenders conducted weekly and monthly. fine tuning operations and extraordinary additional tenders, according to standard procedures, allowed a commensurate response within a familiar context, rather than adding to prevailing uncertainty by introducing, in an emergency context, untested new facilities, instruments or procedures. 2. in monetary policy operations, the eurosystem grants direct access to liquidity to a large number of credit institutions. all euro - area institutions subject to minimum reserve requirements and which fulfil the relevant contractual or regulatory arrangements applied by their respective ncb, may access the standing facilities and / or participate in open market operations based on standard tenders. at the end of | august 07, 1 676 counterparties had access to the open market operations, 2 809 to the facility, and 2 141 to the marginal lending facility. 3. the combination of relatively high reserve requirements at 2 % and the monthly averaging principle allowed banks to dip into their reserves to meet their liquidity needs. this averaging principle, which grants the banks more flexibility in meeting their reserve requirements, is conducive to more orderly market conditions. since the start of emu in january 1999 the ecb has been providing its ( weekly ) refinancing to the euro area banking system based on the concept of a benchmark allotment. this benchmark allotment is defined by the ecb as the allotment amount which allows counterparties to smoothly fulfil their reserve requirements until the end of the day before the settlement of the next mro, when taking into account the aggregate liquidity need of the banking system. 4. the eurosystem accepts a wide range of collateral to underlie its operations, including marketable and non - marketable assets. the eurosystem has put in place a single framework for eligible collateral, which covers marketable and non - marketable assets that fulfil euro area - wide eligibility criteria. as far as marketable assets are concerned, there are four liquidity categories : the first and best category is made up by central government debt instruments, the second by jumbo covered bonds, agency, and local or regional government debt instruments, the third by covered and uncovered bank bonds and the fourth by asset backed securities. there are two types of non - marketable assets that are accepted as collateral : credit claims and non - marketable retail mortgage - backed debt instruments. although different levels of haircuts are applied to the different categories, one might say that the eurosystem also allows banks to use collateral easily where either the interbank repo markets are less liquid ( such as in category 3 + 4 ) or where there is even no interbank repo market at all ( such as for non - marketable assets ). banks have the choice to use more or less liquid assets as collateral, a facility which constitutes a big advantage in critical liquidity conditions such as those currently experienced by market participants. some recent figures : the available eligible marketable collateral amounts to eur 9 trillion. while the amount submitted to the eurosystem nearly reached 11 % of all eligible collateral by 31 august 2007 ( nearly eur 1 trillion | 1 |
negative consequences on the ability to achieve stable inflation with low output costs in the future. perhaps the main apprehension of policymakers in tightening monetary policy is the fear of further appreciation of their currencies. as monetary policy in advanced economies is expected to remain very expansionary for a prolonged period of time, many emes that have been tightening monetary policy have also experienced appreciation of their currencies. not dealing with inflationary pressures in a timely manner, however, could result in economic overheating and rising inflation. most emerging markets have enjoyed great success from trade openness and export - led growth, and hence their worries arising from exchange rate appreciation are well justified. however, it is important to distinguish between real appreciation – the relevant variable from bis central bankers ’ speeches the competitiveness standpoint – and nominal appreciation. exchange rate actions that attempt to mitigate a real exchange rate appreciation will have only transitory effects, which could provide valuable time for the economy to adjust to a new global environment and might hence be relevant from the point of view of welfare, but cannot be thought of as a permanent tool to foster competitiveness. in order to sustain the real exchange rate, real actions need to be taken, such as increasing domestic savings. it is time to rebuild fiscal buffers in emerging market economies and accelerate the pace of reforms to achieve productivity gains that can sustain competitiveness. it is important to note that the economic strength of emes relative to advanced economies is the main reason why their real exchange rates are appreciating. in addition, the correction of global imbalances requires both an increase in consumption in surplus economies and a shift of this greater demand towards goods produced by advanced economies, especially since in the latter growth of domestic demand will be sluggish because of the post - crisis deleveraging process. relative price adjustments around the world should help this process. many emes have been trying to mitigate the appreciation through exchange rate intervention, with partial success. chile is one of the latest to join this group. others have sought the use of capital controls or macro - prudential regulations, not only for exchange rate reasons, but also to avoid the buildup of excessive market or liquidity risk associated to the foreign exchange position. in january this year we announced a program of reserves accumulation of 12 billion dollars, about 5 percent of gdp. this measure had a dual purpose. on the one hand, it would relieve some pressures on the exchange rate, facilitating the adjustment of the economy | of capital and would hit especially hard bankdependent firms and consumers while other borrowers would turn to other sources of financing. furthermore, the relatively high - frequency changes that managing macro bis central bankers ’ speeches conditions may require may create unnecessary policy - driven volatility in financial markets. all this indicates that it is more appropriate to tackle each goal with its own type of tool. the separation of the instruments does not necessarily mean that the achievement of the goals can be separated operationally. because of the dual causality of price and financial stability, monetary and financial policies should be explicitly coordinated. how this coordination is achieved varies across countries. at the very least, instances to monitor global risks to financial stability should exist. central banks should be involved in these monitoring instances ( or should centralize the monitoring and supervision functions ) because of their relative advantages in providing a macro view of the economy and their market contacts, due to the implementation of monetary operations. in addition regulation that could have systemic implications should be discussed in these instances. in the case of chile, the supervisory landmark is made up of three superintendencies ( including banks ). in this setting, coordination for systemic stability is achieved at two levels. one the one hand, the central bank is involved in several aspects of financial regulation directly by dictating regulation, or by participating in consultations with other agencies. on the other hand, the central bank participates in two coordination instances with the superintendents and finance ministry. the experience during the last years has shown that during periods of financial turmoil, mainly as result of external shocks, the central bank, the finance ministry, and the financial regulation agencies have indeed worked in close coordination, and, as the global financial crisis testifies, results have been positive. moreover, in chile, as banking supervision takes place outside the central bank it is key that it is not out of touch with the broader macro environment, so that financial system stance visa - vis the risks perceived in the macro - outlook is the natural first step in the supervisory process. recently, these instances have been formalized with the creation of a financial stability council, headed by the finance minister. this council will, amongst other things, identify systemic risks and mitigation policies, and discuss the systemic impact of regulation. summing up, monetary and prudential policies are closely connected, first because macroeconomic and financial stability are closely interlinked, and second because instruments designed to achieve stability in each front have cross effects. this | 0.5 |
banks has passed from the banco de espana to the ecb. but this does not mean that there are no important tasks for the banco de espana – or other participating countries ’ national supervisors – to perform in the ssm, in addition to the functions that remain intact as they are not assumed – or are assumed only partially or in exceptional circumstances – by the ssm. in recent months there has been talk of the banco de espana becoming devoid of its powers. this reflects a lack of knowledge or misunderstanding of how the ssm is organised and how it will operate and is reminiscent, in a sense, of the talk afoot when monetary union came into being and the ecb assumed responsibility for the main monetary policy decisions. the model then adopted entailed full decentralisation of monetary policy implementation. this meant that it relied on the national central banks for its implementation ( in fact, credit and deposit institutions have no direct operational relationship with the ecb ) and that in practice, although the ecb assumed decision - making powers, there was no decrease in either the workload or the staffing needs of the national central banks. bis central bankers ’ speeches albeit for different reasons, the start - up of the ssm is expected to have a similar impact on workload and staffing needs at the banco de espana and at the other national supervisory authorities. * * * in any event, the creation of the ssm poses an organisational challenge for the national authorities. since 2013, and in addition, naturally, to our contribution to the preparatory work, we have been working hard at the banco de espana in two directions : a ) first, to adapt our structure to the new needs ; and b ) second, to encourage the presence of experts from the banco de espana at the ecb. a few weeks ago a reform of the directorate general banking supervision was approved, designed to create a structure that mirrors that of the ecb, to facilitate interaction between the two authorities and achieve efficient management of resources. the new organisation replicates the arrangements envisaged by the ecb : two departments will be responsible for ongoing supervision of the significant banks, a third will be responsible for the less significant banks, and a fourth will perform the so - called “ horizontal ” tasks, in addition to on - site inspections of the significant banks. to underpin the position of the banco de espana ’ s representatives on the ssm ’ s governing bodies, a new ssm coordination service was created in february, which | drawn up, accounting for approximately 85 % of euro area bank assets. 15 of these are spanish groups, representing around 90 % of the assets of our country ’ s deposit institutions. it should be borne in mind that when we talk about 120 groups, we are referring to consolidated groups ; that is to say, the number of individual banks is far higher. in total there are 1, 244 individual institutions, which is essentially explained by the importance of cooperative banks in certain euro area countries, in particular france, the netherlands, austria and finland. to directly supervise the significant banks, the ecb has created two directorate generals, which shall perform the continuous monitoring of the 120 groups. dg i will supervise the 30 biggest banks in terms of balance sheet and activities, while dg ii will cover the remaining 90 significant banks. however, the supervision of specific aspects or matters, what is known as on - site inspection, will be carried out by different teams. the ecb has thus adopted a different model to that place at the banco de espana to date : functionally separating the continuous monitoring of banks and inspection visits. the centrepiece of the supervision of significant banks will be the joint supervisory teams, responsible for the day - to - day oversight of these banks. these teams will be made up of specialists from the ecb and from the national authorities, under the leadership of a coordinator designated by the ecb, and a sub - coordinator designated by the national supervisor. approximately 75 % of those making up the teams will be drawn from and designated by the national supervisors ; in the case of spanish banks, it will of course be staff from the banco de espana. inspection visits to significant banks, what is known as on - site inspection, will continue to be conducted by the national authorities, and their results will be passed onto the ecb for the adoption of the appropriate measures. with regard to the less significant banks, national authorities will continue to directly supervise them as they have to date. over 3, 600 banks across the euro area are involved here. the ecb will define common practices and criteria, it will monitor the actions and position of these banks and it will always be entitled, if it considers it necessary, to re - claim direct supervision over any of these banks. bis central bankers ’ speeches the competences and responsibilities of the banco de espana in the framework of the new mechanism i would now like to address the competences and responsibilities of the banco de espana, as a national supervisor, under | 1 |
in the period from 2007 to 2009, the chinese economy, which was approaching the time it would experience a structural slowing anyway, decelerated abruptly, as did many other economies. the chinese authorities responded with a very large stimulus that brought the boom back bigger than ever. this helped global growth recover in 2010 after its 2009 performance, which was the weakest since world war ii. this in turn saw australia's terms of trade rise to the highest sustained level for more than a century. at the peak they were more than 80 per cent above the average level for the preceding hundred years. of course, nothing is forever and the terms of trade have been falling for about five years now, and are down from the peak by about a third ( though they are still about 20 per cent above that very long - run average ). overall, then, the past decade has been a much more volatile time, from the external point of view, than either of the two preceding decades. this is easily demonstrated with some simple metrics for the growth and variability of the world economy, and australia's terms of trade. the tables show data for four decade - long periods. global growth has been lower than it was in the “ great stability ” period, led by much weaker outcomes for the major advanced countries. those outcomes were in substantial part a legacy of the financial crisis, of course, though other longer - run factors may also have been at work. global growth would have been weaker still were it not for two factors : emerging market economies as a group did not slow on average ; and in addition, their weight in the global economy increased significantly. this change in weights alone added about one - third of a percentage point to the imf's measure of global growth in gdp in the latest period. [ 4 ] the world economy has also been much more variable – even more variable than in the late 1970s / early 1980s, a period not fondly remembered by economic policymakers. inflation among the advanced economies was lower on average, but noticeably more variable. [ 5 ] as noted above, australia's terms of trade rose quite a bit in the period of the great stability, then rose even further, and became much more variable, over the past decade. bis central bankers ’ speeches table 1 : selected indicators ( a ) world gdp growth g7 gdp growth advanced economies inflation australia's terms of trade index ; 1976 – 1986 = 100 annual standard annual standard annual standard standard average average deviation average deviation | left idle. this is usually referred to as providing the economy with a nominal anchor. when households and enterprises can base their economic decisions on low and stable inflation, this provides an important foundation for higher activity and welfare over time. as long as there is confidence that inflation will remain low and stable, monetary policy can contribute to smoothing fluctuations in output and employment. when the economy is exposed to shocks, such as a financial crisis or a fall in oil prices, monetary policy can respond rapidly. sufficiently flexible inflation targeting could help ensure that lower employment levels do not persist over the long term following a downturn. this can reduce the risk of unemployment becoming entrenched at a high level. the probability of a pronounced downturn in the economy has been shown to increase after periods of rapid asset price inflation and debt growth. monetary policy can also to some extent contribute to high and stable output and employment by giving weight to counteracting the buildup of financial imbalances. however, monetary policy must not be overburdened. if norges bank pursues objectives it does not have the instruments to fulfil, confidence in monetary policy may be eroded. the regulation and supervision of financial institutions must be the primary means of addressing shocks to the financial system. employment levels over time are determined by structural conditions, such as the functioning of the labour market, the tax and social security system and the wage formation process. in norway, a well - functioning wage formation process has enabled unemployment to remain low while wage growth has remained moderate. the new regulation underpins norges bank ’ s flexible approach to inflation targeting. in the conduct of monetary policy, substantial weight will continue to be given to the real economy. in this context, whether the inflation target is 2. 5 percent or 2 percent is less important. at 2 percent, the inflation target is now at the same level as that of most of norway ’ s trading partners. the reduction of the target will not in itself significantly affect the short - term interest rate outlook. never before have global interest rates been as low for such a long period. growth abroad has now picked up, and there are prospects of a gradual interest rate increase among norway ’ s 3 / 4 bis central bankers'speeches trading partners. the outlook is also brighter in norway. in the two years since the cyclical trough was reached, growth has gained a firm footing and the unemployment rate has declined. the outlook suggests that it will soon be appropriate to raise the key policy rate – and | 0 |
this last decade of the 20th century has seen the japanese economy experience its lowest growth since the end of the second world war. despite several economic stimulus measures from both the monetary and fiscal side, the response of the economy has been generally slow and we have yet to confirm any clear revival of economic dynamism led by private demand. taking into account the weakness of private demand over the past ten years, it is perhaps natural to think that there might be something “ structural ” which has contained economic dynamism. if this is the case, it is difficult to expect a long - lasting recovery, if any, based solely on macroeconomic stimulus measures. hence, to restore vitality to the japanese economy in the medium term, painstaking efforts must be made to resolve each structural problem so as to enable the nation ’ s economic potential to fully blossom. and such efforts are also necessary if both monetary and fiscal policy are to have their full effect. since many structural problems stem from the supply side of the economy, resolving them requires that we send the appropriate signal and give the right incentives to the public. as evidenced by reaganomics in the u. s. and thatcherism in the u. k., supply - side policies would most likely be accompanied by various pains and require a long period until reforms take root among the public and bear real fruit. it is indeed for this reason that we need to reach an early consensus as to the nature of the structural problems in japan and thus come up with the right prescriptions. some say that structural problems encompass a variety of issues, not only economic ones but also demographic, educational, and environmental ones. but, today, i will focus on three economic issues which are interrelated and have a particularly strong impact on japan ’ s macroeconomic performance : first, the delay in cleaning up the balance sheet of firms ; second, changes in economic growth mechanisms under globalization ; and third, the imbalance between savings and investment. iv. delay in cleaning up the balance sheets of firms the most immediate lingering structural problem is that we have not yet completed the disposal of assets and liabilities that ballooned during the bubble period. in the wake of the bursting of the bubble, we first saw the collapse of firms which had expanded their liabilities based on aggressive management plans, and then the accumulation of non - performing assets on the part of financial institutions. this, in turn, reduced the risk - taking ability of financial institutions by eroding their capital position, resulting | zeti akhtar aziz : developing effective leaders in asia speech by dr zeti akhtar aziz, governor of the central bank of malaysia ( bank negara malaysia ), at the launch of the iclif ’ s asian leadership index, kuala lumpur, 1 april 2014. * * * it is my pleasure to welcome you here this morning for the launch of iclif ’ s asian leadership index. the asian leadership index, is part of an important stream of global research on the expectations on leaders in today ’ s world. the world is rapidly changing, and is becoming more challenging. effective leaders must act in full recognition of the fact that their best followers will demand more of them. this is because in many cases their expectations of leaders have shifted in an age where information flows have intensified and where travel has removed all our known boundaries. the asian leadership index is a substantive, broad - based research on asia. the focus on asia is because the region is becoming increasingly more significant in the global landscape. and yet, there exists little, if any, systematic study of leaders doing business in asia. the asian leadership index therefore aims to contribute towards a greater understanding of “ what do business leaders in asia need to do to get more energy and commitment from their most important followers? ” as part of the study, selected senior leaders and emerging leaders in companies operating in asia were asked to describe what their leaders need to do for them as professionals if they were to participate wholeheartedly with that leader, and be fully invested in their organizations over the longer term. they also indicate what they see as missing from the leaders to whom they report. as leadership is about being able to deliver results even in the most challenging of environment, it is therefore also about generating the drive and energy in the organisation, and thus creating an environment in which the best talent will gravitate to, and contribute with the same energy and drive. in an international environment in which high quality talent is scarce, this aspect of the expectations of leadership becomes important. in essence, leaders need to be supported by high powered and committed teams. the expectations of talent is however not only rapidly evolving but may differ when contextualised to different parts of the world. this study undertaken by iclif provides insights on such expectations of leaders in asia and on the areas that need to be addressed if sustainable impact and influence is to be achieved. what then are the findings of the study? i will leave this for the presentation by kate sweet | 0 |
bernanke has noted, the ability of basel ii to promote safety and soundness is the first criterion by which these regulatory capital proposals should be judged. a key aspect of basel ii implementation in the united states relates to scope of application. in the united states, basel ii is expected to apply to only a handful of large, complex organizations, which is the principal reason why the u. s. agencies are proposing only the advanced approaches ( a - irb for credit risk and ama for operational risk ). perhaps the main difference between the implementation of basel ii in the united states and the implementation in most other countries is that the u. s. banking agencies plan to retain a revised form of the existing basel i - based capital rules for the vast majority of u. s. banks ; most other countries are replacing basel i entirely and will apply basel ii to the entire banking system. notably, the initial u. s. basel ii proposals, issued in an advance notice of proposed rulemaking ( anpr ) in august 2003, suggested that only the advanced approaches be used in the united states ; comments on the basel ii anpr did not indicate any opposition to the agencies'proposed approaches. it should also be noted that, based on the latest information, apparently none of the large, complex organizations in other basel - member countries plan to adopt the standardized approach for credit risk. therefore, our proposal that large, complex u. s. banking organizations use the advanced approaches of basel ii seems generally consistent with approaches to be used by large, complex organizations in other countries. the u. s. agencies remain open to considering the full set of possibilities for basel ii, so the basel ii npr specifically seeks comment on whether some form of the basel ii standardized approach for credit risk should be adopted in the united states. when deciding whether our large, internationally active banks should have access to a standardized approach, the agencies will need to consider a number of important issues : whether such an approach would accommodate the risks those banks take, now and in the future ; whether it would provide adequate risk sensitivity ; whether it would be useful to have a transition period in order to give some banks more time to prepare to use the advanced approaches, and whether other transition arrangements are available ; whether taking the time needed to develop an appropriate u. s. version of the standardized approach would unduly delay the basel ii implementation process ; and, finally, whether the marketplace would find such an option for those banks meaningful and acceptable. in developing | the years, the u. s. agencies have consciously chosen to maintain a more conservative stance in some aspects of basel i, as applied in the united states, compared with versions of basel i adopted by other countries. for example, the u. s. banking agencies currently impose a supplemental leverage ratio, and risk - based capital is linked to our prompt - corrective - action framework. however, we do not believe that elements of conservatism in existing u. s. capital rules, relative to other countries'rules, have been a barrier to the financial success of our banks, nor have they constrained foreign banks from participating in our markets. on the contrary, we believe that capital strength and the resilience it demonstrates offer some competitive advantages and instill market confidence. that is a key reason that most of the world's largest banks hold capital in excess of minimum regulatory standards. creditors and counterparties will always consider capitalization when assessing the risks associated with these banks. indeed, many factors other than minimum regulatory capital requirements - including domestic and international tax policies, economies of scale and scope, risk - management skills, and the ability to innovate - also affect competition and profitability. on balance, the federal reserve believes that an appropriately conservative approach to capital adequacy serves the united states'interest in maintaining the safety, soundness, and resiliency of our banking system. however, we also recognize the impact that differences among countries can have and that it is worthwhile to minimize them whenever possible. as chairman bernanke noted earlier this fall, before issuing a final rule we intend to review all international differences to assess whether the benefits of rules specific to the united states outweigh the costs. of course, that will include a review of whether u. s. - specific rules are having an adverse impact on the competitiveness of u. s. banks visa - vis foreign counterparts. conclusion i believe that forums such as this one are very useful places to discuss actual and potential differences in capital requirements across countries. as supervisors, we must always strive to minimize these differences and reduce burden on bankers as they conduct business across national borders. however, bankers must also realize that national boundaries still matter, and that some differences in capital requirements across countries will remain. while there may be opportunities here and there to reduce burden through broad policy changes, generally the most productive way to address crossborder issues is on a case - by - case basis. in most cases, blanket | 1 |
26 in the u. s. valuation metrics for the euro area as a whole suggest that residential property prices are broadly in line with fundamentals and below their historical average, with the opposite holding for prime commercial property, given continued strong price increases. likewise, our internal model - based assessments of the euro area corporate bond market do not signal overvaluations and excessive bond premia to date. in the present context, there is nevertheless, the need to remain vigilant and continuously monitor developments. monetary policy must however remain focused on inflation and / or on growth. therefore, such risks need to be addressed by policy instruments dedicated to ensuring financial sector resilience while curbing financial cyclical excesses – that is, by supervision and macroprudential policy. macroprudential policy has two main objectives : to enhance the resilience of the whole system and to smoothen the financial cycle, i. e. the fluctuation of credit, leverage and asset prices that may lead to boom - bust episodes. as financial and business cycles are not always aligned across countries and sectors in the euro area, area wide monetary policy needs to be complemented by more targeted macroprudential policy. unlike monetary policy that influences the euro area across the board macroprudential policy instruments can be applied in a granular manner, addressing risks at the country, sector and institutional level. macroprudential policy therefore provides the most appropriate instruments for mitigating financial stability risks, thereby supporting the price - stability focused monetary policy. an effective macroprudential policy requires policy interventions in a timely and bold manner, significantly affecting the normal behaviour of financial markets or financial institutions. this poses challenges. first, should there be a need for policy intervention measures need to be admittedly intrusive, going well beyond the new capital and liquidity regulatory framework. secondly, the macroprudential tool - kit that has been legislated – including the one entrusted to the ecb / ssm – is centered on banks. instruments would need to address other financial activities and institutions, notably those pertaining to the shadow banking sector. this growing sector is posing new potential risks, albeit in an incipient way, as identified in the ecb financial stability review. regarding the instrument tool - kit at its disposal, the ecb may use all macroprudential instruments laid down in the european legislation crd iv / crr, in the sense that it may topup specific macro - | prudential measures if it considers actions by national designated authorities as insufficient to mitigate systemic risks. it covers capital instruments, such as the counter - cyclical capital buffer, the systemic risk buffer, capital surcharges of systemically important institutions as well as liquidity instruments, such as the liquidity coverage ratio. in addition, the ecb can also increase risk weights on real estate exposures or set higher limits on large exposures. bis central bankers ’ speeches in a single currency area, macro - prudential policies are particularly important to deal with sectoral and regional risks that cannot be accounted for by a common monetary policy. measures such as the caps on loan - to - value ( ltv ) or debt - to - income ( dti ) ratios are suitable instruments to address these developments. in this context, recent research suggests that exposure - based measures, such as ltv and dti could be more efficient than capital - based measures. on the other hand, they may generate important cross - border spillovers and leakages, and moreover, are now solely in the remit of national authorities. implementing them will therefore require co - ordination and the ecb will play an active role to facilitate this in the euro area. now, the present tools of macroprudential policy are mostly focused on the banking sector while important risks are emerging from the steadily growing shadow banking sector. the sector is engaged in maturity transformation and, while mostly funded via equity, shadow banks are also subject to the short - term redemption risk. if they experience substantial redemptions, they may, like banks, be forced to promptly sell assets to fulfil their obligations, which may give rise to fire sales. this is particularly worrisome, since 98 % of almost 95 thousand non - money market investment funds operating in the euro area in 2014 are open - ended funds, which means that the investors can redeem their shares in the funds at any time. moreover, the funds ’ buffer of liquid assets has dropped in recent years thereby increasing the illiquidity risks. in this context, it is necessary to intensify the supervision of systemically important non - bank institutions the u. s. fed has been given the competence to place non - bank financial institutions within the supervised perimeter. some shadow banks grew too - big - to - fail and hence, should be subject to the same surveillance as global systemically important banks ( g - sibs ). in fact, the financial stability | 1 |
policy will normally be tightened to ensure that demand is compatible with long - term sustainable growth. and as long as demand in the economy increases at a rate compatible with long - term growth, there is less risk of exaggerated indebtedness. inflation targeting should thus, at least in theory, reduce the risk of extensive financial imbalances accumulating. however, even with an otherwise successful inflation target policy, real and financial imbalances created by exaggerated asset prices can build up. if there are exaggerated expectations regarding growth in productivity and profits in a particular country, this can lead to a strong inflow of capital and strengthening of the currency. the increase in real demand, which is caused by exaggerated increases in asset prices, can thus be partly met by increased imports, while the currency strengthens and domestic inflationary pressure is reduced. there are also other factors not connected with the expectations that push up asset prices and can temporarily lead to the increase in demand that is created by exaggerated asset prices not being expressed as inflation and thus not being counteracted by tighter monetary policy. a high level of credibility for the central bank can also create low and stable inflation expectations, which can mean that inflation will not rise for a period of time, despite strained resource utilisation. deregulation on globalised markets can also temporarily subdue inflationary pressure. is there reason to change strategy? the question is whether it is possible to raise ambitions for monetary policy to prevent financial bubbles arising? most people advocate a strategy where asset prices are merely taken into account to the extent that they affect inflation forecasts during the normal forecast horizon. however, there are also advocates of a strategy where monetary policy also prevents the occurrence and effects of financial bubbles. those who maintain that monetary policy cannot counteract the occurrence of financial bubbles point out that the central bank has no possibility of determining whether or not asset prices are fundamentally motivated. they also point out that it is difficult to motivate an interest rate hike that is essentially aimed at counteracting an excessively large expansion in credit and an overly high real demand if the assessments of inflation do not at the same time show that the target level will be exceeded. interest rates must be raised before overly large imbalances accumulate. the motive would be to reduce the risk of a recession and low inflation during the period following a fall in asset prices. if the central bank is successful, it is not possible to demonstrate afterwards that one has been right. a further argument is that it | emmanuel tumusiime - mutebile : banking issues in uganda speech by prof. emmanuel tumusiime - mutebile, governor, bank of uganda, on the occasion of eid - el - fitri celebrations at bou western gardens, kampala, 25 september 2009. * * * your eminence the mufti of uganda distinguished guests ladies and gentlemen asalaam aleikum, eid el - fitr, al - mubarak. it gives me great pleasure to welcome you to this annual auspicious occasion when we at the bank mark the end of the holy month of ramadthan and the celebration of eid el fitr. let me take this opportunity to congratulate your eminence and all muslims in uganda for having been steadfast in observing the fast throughout the holy month of ramadthan. to the bank muslim staff who observed the fast, i highly commend you and urge you to maintain this noble act of worship. the virtues of fasting should be upheld throughout your daily life both at work and elsewhere. the bank of uganda as a public institution upholds the freedom of worship for every member of staff. it is our conviction that religion plays a great role in enhancing morality in the society leading to ethical conduct, discipline in the work place and invaluably contribute to better outcomes. our commitment is demonstrated by the bank values which each staff is required to uphold. this blends very well with the requirements of fasting in the holy month of ramadthan. fasting brings a reminder to all of us to go back to god, to do the right things and shun evil. let me take this opportunity to address you on the health of the uganda's financial sector. first of all there was a baseless rumour in the red pepper of september 14, 2009 that a “ top bank faces closure over gadaffi cash ” that the workers of " an islamic founded bank " were about to become jobless and that the top management faced arrest because the bank was being used as a conduit for money " to some officials at mengo " from foreign sources. let me reiterate the statement in the press release i issued on september 15, 2009 – “ i assure everyone that no bank in uganda is under any threat of closure whatsoever ”. the general public should continue to ignore these completely baseless allegations. all banks and other supervised financial institutions are well managed, well capitalized | 0 |
external demand was still weak, we saw the surge in public sector spending to jump start the economy and avoid a potential downward spiral in domestic demand. but, once global economy is back on a recovery track, our exports have started to grow strongly, in particular, in electronics, electrical appliances, and vehicles. in fact, our export sector has already recovered to the pre - crisis level. as the growth momentum gained strength, domestic consumption started to pick up. overall, the conditions for recovery look favorable enough and there is general optimism that the thai economy looks set on a continuous growth path. that said, a key weak pocket in the current recovery process appears to be the domestic investment climate but even that should get better as the external environment is improving. unfortunately, the political unrest during april – may had somewhat set back the recovery process. most activities slowed down during may on a month on month basis. the tourism sector, in particular, was hit hard. in may, the number of foreign tourist arrivals in thailand declined by 11. 8 percent year - on - year. correspondingly, hotel occupancy rate fell to 34. 9 percent, mainly from a significant drop in bangkok and the central region. nevertheless, the impact was rather confined. the occupancy rate in the southern region remained intact at 45. 5 percent, higher than the last 5 - year average of 42. 9 percent. on the whole, we expect that the second quarter gdp growth would be less buoyant than that of the first quarter. nevertheless, economic data during april – may came out better than expected, reflecting the ongoing momentum of the thai economic recovery led by exports. in fact, the export value in may continued to expand by 42. 5 percent year - on - year in line with favorable expansions in all export categories and markets. ladies and gentlemen, despite headwind from both external and domestic factors, it is now important to embark on policy normalization, both fiscal and monetary policies. as the thai economy is getting stronger, returning fiscal and monetary policies gradually to pre - crisis normal levels will not obstruct the recovery path. rather, it is essential to enhance our economic resiliency and save the policy space for the medium term. for our monetary policy, it has been extra - eased for quite some time and there is less need now. although the domestic inflationary pressure has been kept in check and we have not observed asset price bubbles at this time, the central bank is well | m r chatu mongol sonakul : national central bank and building world peace speech by mr m r chatu mongol sonakul, governor of the bank of thailand, at the 27th international conference on world peace “ building a culture of peace in the new millennium ”, held in bangkok on 1 december 2000. * * * members of the professors world peace academy, participants of the 27th international conference on world peace, ladies and gentlemen. the history of central banking is normally agreed to have begun around four thousand years ago in the greece, roman and other empires up to the middle ages when banks were put up primarily for the purpose of getting finance for governments to wage war. so the first period of central banking cannot very well be said to have been in conformity with the topic i ’ ve been asked to talk about here today, which is entitled “ national central bank and building world peace ”. but in the sixteenth and seventeenth centuries and especially later on when industrialisation began in earnest, there were great needs for finance for the many various industries that sprang up around that time. commercial banks and great finance houses became common but the limitations of the technology of that period of using precious metals as currency became quickly apparent. commercial banks began issuing their own paper notes, for the amount of the valuable metals that they had in stock being much more transportable. but human nature being what it is, they also began issuing paper notes equivalent to the value of precious metal which they don ’ t have in the vaults and the various currencies issued by the various banks became devalued very quickly. another aspect to the whole thing is that people do cash in paper notes at times and banks have to hold large reserves sometimes up to 30 % of their liabilities in order to make sure that they have adequate liquidity that may be used in case of unforeseen events. the first central banks in its relatively modern form were therefore established to provide the function of being the sole issuer of currencies and the single keeper of reserves as defined by law, notably the bank of england in 1694 and epitomised in a tome in 1873, lombard street by bagehot, editor at the time of the economist, where the concept of the banking department and the note issuing department was so clearly explained. this gave credibility and value to paper currency and it was also a very much more efficient system in that the single reserves at the central bank could be used by the many commercial banks who there | 0.5 |
the first issue only last week, following the passage of enabling legislation in october. so nearly all the secured issuance this year has been in the form of mbs. bis central bankers ’ speeches credit growth in australia, while slow relative to recent australian history, has outstripped that in the other three regions ( graph 5 ). but it is apparent from the australian data that total wholesale issuance is broadly the same in 2011 as it was in 2007, and hence a smaller share of overall funding, with deposits accounting for the difference. graph 5 differences in central bank support the nature of central bank support has also had an influence on the developments in bank funding. the balance sheets of the fed, ecb and bank of england have increased significantly since 2007. the ecb ’ s balance sheet has approximately doubled, while those of the fed and the bank of england have roughly tripled over the past four years ( graph 6 ). the reserve bank of australia ’ s balance sheet, while increasing in 2008, 4 is smaller than it was in 2007 ( reflecting the withdrawal of deposits at the rba by the future fund to invest in a broader range of assets ). graph 6 see the “ operations in financial markets ” chapters in the reserve bank of australia annual reports of 2009 and 2010 for more discussion. bis central bankers ’ speeches in the us, the fed ’ s program of quantitative easing has injected a large amount of liquidity into the banking system. moreover, the fed ’ s program of asset purchases has included over us $ 1 trillion of mortgage - backed securities. similarly in the uk, the bank of england has conducted a large asset purchase program. it has also provided support to the banking system through the special liquidity scheme, whereby banks were able to exchange mbs or covered bonds for treasury bills to more easily obtain liquidity in the market. at its peak, £287 billion of securities were exchanged for £185 billion of bills. drawdowns under this scheme closed in january 2009, and a large part has been repaid this year with the remainder to be repaid by january 2012. in europe, the ecb has assisted bank funding through its fixed rate full allotment liquidity provision operations. this has enabled banks that are having difficulties obtaining funding in the market to borrow from the ecb against acceptable collateral at the ecb ’ s policy rate for terms of up to one year or so. as mentioned above, some of this collateral has taken the form of secured iss | can do. the program “ banking on your future ” is therefore an important component of our economic and financial education program. the support of the banking sector for this program is essential as you are the practitioners and therefore the ideal mentors to work with the youth regarding financial education. the key is knowledge sharing. we do look forward to banks and its branches to get involved in their neighbor elementary schools to mount parallel financial education activities and to reward best performing schools and students with prizes including savings account. the idea is to make it hip and cool for our students to have savings account that they can nurture and grow. this way, they develop the habit of saving on a regular basis. aasahan po nang ating mga kabataan ang programang ito, kasama na ang ating mga bisitang mag - aaral mula sa aurora a. quezon elementary school. there are about 38, 000 elementary schools there are about 7, 000 bank offices and branches. i hope we can cover most, if not all of these schools. ladies and gentlemen. the 16th anniversary of the bangko sentral ng pilipinas also coincides with the celebration of national savings consciousness week. for this year, our theme is particularly appropriate : “ kinabukasan siguruhin, pag - iimpok ugaliin. ” it is only fitting therefore that together we launch the program “ banking on your future ” on this auspicious day. mabuhay ang philippine banking sector! mabuhay ating mga kabataan! maraming salamat po sa inyong lahat. | 0 |
market must take precedence. and it takes precedence by taking particular cognizance that you are typically smaller than the tbs which are part of a banking group. ladies and gentlemen, what all this says is that the future rests with your choices. while we have, as a country and as a banking industry, done well, we are at that proverbial fork in the road where strategic decisions will have to be made. resources have always been relatively scarce but our new banking framework requires of us to be more conscious of the unseen risk, the allocation of scarce risk capital, and remaining competitive as a corporate entity but with a heightened sense of governance. these are the strategic issues. bis central bankers ’ speeches eleanor roosevelt once said that “ great minds discuss ideas ; average minds discuss events ; small minds discuss people ”. the likely “ events ” have crystalized before our eyes. it is now time to venture into the market of strategic ideas, not only to discuss but more so for the greater minds to lead the way towards a better banking future. thank you and good morning. bis central bankers ’ speeches | njuguna ndung ’ u : financial inclusion through the agent banking model and credit reference bureaus remarks by prof njuguna ndung ’ u, governor of the central bank of kenya, at the official opening of fina bank ’ s, ngong road branch, nairobi, 17 june 2010. * * * the chairman and board members ; group chief operating officer ; management and staff ; distinguished guests ; ladies and gentlemen : it gives me great pleasure to be with you today at the official opening of fina bank ’ s, ngong road branch. as the regulator for the banking sector, the central bank is pleased to be associated with the achievements of the banks we regulate, particularly where these developments lead to increased access to banking services for the kenyan public. this is what fina bank is doing this evening. it is evident that fina bank is focused on its programme of expansion and growth strategy, having started its operations as finance institution of africa in 1986 before converting to the present day fina bank in 1996. with the opening of this branch, the bank will have a network of 14 branches in the country. i also note that the bank has established its presence regionally by opening subsidiaries in uganda and rwanda. this is encouraging indeed. mr. chairman, let me take this opportunity to compliment the board, management and staff of fina bank for this great achievement. i note that as at april 2010, the bank commanded an impressive asset portfolio of ksh. 13. 5 billion and customer deposits of ksh. 11. 5 billion, while riding on a capital base of ksh. 1. 3 billion. the central bank is particularly encouraged by the bank ’ s leading role as a lender in the small and medium enterprise ( sme ) sector, a growth sector in kenya ’ s economy which has been described as the “ jewel ” of kenya ’ s economic growth. this is indeed important following from the budget proposals that created a revolving fund for sme – it may well be the best policy in our times to support the growth pole provided by smes. ladies and gentlemen, kenya ’ s growth picked up in the last quarter of 2009, extending into 2010 and on the back of good rainfall and a resurgence of tourism, we are optimistic that this positive trend will continue, and therefore forecast that the economy will post a 4 to 5 percent growth in 2010 on average. equally the banks have had a spectacular performance. for the period ended march 31, 2010, the | 0 |
of course, more people means more demand for accommodation. is there more to this story? yes, we think so. in part the demand for housing reflects the fact that people with savings to invest have become disenchanted with the share market and other financial instruments. savers still remember the 1987 share market crash and more recent tumbles in the us and europe. as well, savers have seen global interest rates fall to historic lows and headlines of pension funds losing money. at the same time property markets have stayed uncharacteristically buoyant and so there ’ s been a flight to “ bricks and mortar ”. the proportion of the housing stock owned as rental property has been rising over recent years. increasing numbers of people prefer to hold wealth in housing assets, as opposed to other investments. property investment has been rising over the past year. of course this isn ’ t all bad. if lifestyles are changing and housing needs are changing and if aggregate demand is up because more people live here, then we want more house construction. if supply meets demand without bottlenecks that ’ s good. there are, however, some initial signs that housing market activity and expectations of future activity are starting to exceed demand as indicated by demographic fundamentals. credit demand has accelerated over the last year. borrowing has begun to accelerate. debt - to - income ratios, which began to level out in the late 1990s, are starting to rise again. people working in real estate and financial planning indicate a marked increase in the numbers of would - be investors. the newspapers are running advertisements for seminars offering to coach people on how to invest in property, often promising significant returns. census and household expenditure survey. i am concerned, as i said at the release of the reserve bank ’ s monetary policy statement last week, that this could end in disappointment, especially for unsophisticated investors who are rushing to get on the housing - investment bandwagon. my worry is what if things reverse and supply exceeds demand? what if recent buyers, heavily in debt, find that rents have fallen, making outgoings more than incomings? what if they decide to exit property and then can ’ t sell at prices paid a few months earlier? how could supply exceed demand? we think that net immigration is likely to ease a little over the next two years. partly that will reflect government policy. also the number of new zealanders who want to begin their oe may go up again, as the | alan bollard : the new zealand housing market extract from an address by dr alan bollard, governor of the reserve bank of new zealand, to the property council of new zealand, 9 september 2003. * * * i ’ d like now to consider in more detail the new zealand housing market, it being one of the factors behind our strong domestic economy, at a time when many exporters have seen their incomes retreat in recent months. new zealand ’ s housing sector has experienced a strong cyclical upswing over the past 18 months. it ’ s not just auckland. sales growth and rising house prices are prevalent in many parts of new zealand. building consents are at cyclically high levels. that ’ s both including and excluding apartments. residential investment is expanding the nation ’ s housing stock rapidly, yet demand continues to outstrip supply. we see this in rising prices and a shortage of properties listed for sale. the median time it takes to sell a house currently sits at an unprecedented low of just 26 days. as a consequence, recently house prices have been rising rapidly. what ’ s driving this? the answer is demand exceeds supply. demographics are part of the story. new zealand has had rapid population growth in recent years, driven by net immigration. this includes not just people coming here but people here choosing not to leave. the longstanding drift of new zealanders north and into town is also a factor. in addition, social changes are seeing the average number of persons per home reduce. life - style changes are increasing demand for new kinds of accommodation, such as inner - city apartments and coastal and lakeside properties. some of these factors have been at work for a long time. even in the late 1990s, when population growth was relatively weak, there was substantial construction activity. however, more recently population growth has been marked. the natural increase in population currently is slower than a decade ago, but recent immigration has been very strong. in terms of permanent and long - term migration we had a net outflow of 10, 000 persons per year in early 2001 and a net inflow of more than 40, 000 per year in mid - 2003. that too undersells the story. in addition we have short - term stays, such as students and those on work permits, and those who apply for residency once they are here. total migration has been running at more than 60, 000 persons per annum over the past two years. this is well in excess of the mid - 1990s. | 1 |
buffers in a stress scenario. in such a situation, they will, in fact, come into conflict with other requirements. these are now the rules of the game, and the institutions must and need to take this into account in their capital planning. page 5 of 7 the new requirements are a result of the global concerns about the banks and their risk assessments in the years after the financial crisis. firstly, the internal statistical models of the big banks had been shrouded in too much mystery. secondly, the standard methods used by the small and medium - sized institutions weren't precise enough. these are some of the new and old challenges that the basel committee and the european commission intend to address with the last part of the rules. i think that the proposal contains several good elements. here, there is no getting around mentioning the output floor. that is the lower limit for how low large banks can set their risk assessment – and that regardless of how small the risks are according to their internal statistical models. the prospects of a new floor requirement and higher capital adequacy requirements for mortgage lending have made the whole danish financial sector sit up and take notice, prepared to advocate alternative solutions. we have also been skeptical about the need for the output floor. but it's time to move on. the output floor has been long in the making. it replaces an old and an even more incomprehensible floor requirement. the european commission has also adjusted the floor requirement to a european reality with several relaxations relative to the original proposal from basel. we've previously seen some imaginative calculations of what the output floor will cost in denmark's gdp accounts. let me first stress that capital is not an expense. it's a source of funding of a bank's activities that can cushion a bank before the crisis hits. of course, many of you here are well aware of this, but i think you have been quite reluctant to share this knowledge with the general public in recent years. in danmarks nationalbank, we cannot arrive at the same results as in these calculations. our calculations show that the revised output floor proposed by the commission can be expected to lead to a relatively modest increase in the capital adequacy requirements for some large banks and mortgage credit institutions, while others may not be affected at all. when we subsequently insert these increases in our macroeconomic models, we must conclude that the pass - through to the danish economy is very limited. page 6 of 7 on the | relatively low energy prices on the global markets an increase in food supply driven by higher productivity in agriculture. the nbu has also performed scheduled revisions of other macroeconomic forecasts 1 / 3 bis central bankers'speeches the nbu has revised its economic growth forecast upwards, to 3. 5 % in 2019 – 2020 and 4 % in 2021. the revision was driven by the sustained domestic demand, higher productivity in agriculture, and improved consumer sentiment. in the meantime, slower growth in the global economy and worsened terms of trade will weigh on economic growth in 2020. the 2019 – 2021 current account deficit will remain acceptable. in particular, it will narrow to 2. 9 % of gdp this year despite the stronger hryvnia. that will be driven by an improvement in the terms of trade and the rich grain harvest. conversely, the current account deficit will widen slightly in the years to come, as a result of a decrease in gas transit and less favorable global commodity prices. in particular, the nbu expects somewhat lower iron ore prices and higher energy prices. what does the realization of the said macroeconomic forecast depend on? further cooperation with the international monetary fund remains the basic assumption of the macroeconomic forecast. the current nbu forecast assumes a new imf cooperation program will be approved by the end of 2019. this will allow ukraine to attract other official financing, improve the conditions of access to the international capital markets, and support the interest of investors in ukrainian assets. as a result, notwithstanding large external debt repayments, international reserves will range at around usd 23 – 24 billion in the coming years, which is sufficient to cover three months of future imports. the nbu currently sees two key risks to the above macroeconomic forecast, and in particular to inflation decreasing to its target in 2020. the first risk is a delay in signing a new program with the imf. the second risk is about increasing threats to macrofinancial stability, mainly due to ukrainian court rulings. if materialized, these risks could worsen exchange rate and inflation expectations, and make it harder for ukraine to access the international capital markets in order to repay a heavy debt load in the coming years. the following risks also remain important : a complete halt of the transit of russian gas through ukraine intensified trade tensions and more turbulent global financial markets an escalation of the military conflict and new trade restrictions introduced by russia. why, given the said risks, did the nbu cut the key policy rate by 1 pp? although still | 0 |
, providing client clearing services means devoting a significant amount of leveraged balance sheet to the activity. since client clearing is a relatively low profit - margin business, many industry participants argue that the leverage ratio is having a negative impact on clearing and is thus undermining the aim of the g20 reforms. acosta - smith, ferrara and rodrigez - tous ( 2018 ), analyse empirically the impact the leverage ratio has had on client clearing in the uk. using detailed data on interest rate derivative transactions and clearing members ’ balance sheets, the authors study the impact of two ‘ leverage ratio events ’ : the introduction of the leverage ratio as a mandatory requirement in the uk in january 2016 ; and the subsequent change in the leverage ratio disclosure requirements in january 2017 to address window acosta - smith, ferrara, rodriguez - tous ( 2018 ), ‘ the impact of the leverage ratio on client clearing ’, bank of england staff working paper no. 735, https : / / www. bankofengland. co. uk / - / media / boe / files / working - paper / 2018 / the - impact - of - the - leverage - ratio - on - clientclearing. pdf? la = en & hash = ee95d4d26969019c3e984dfb3e564b58e5c1ac93. for example, https : / / fia. org / articles / fia - analysis - leverage - ratio - proposals - will - negatively - impact - client - clearing. all speeches are available online at www. bankofengland. co. uk / speeches dressing ( see above ), which effectively made the requirement more stringent. the analysis identifies a causal effect of the leverage ratio requirements by comparing the reactions of clearing members who were subject to the introduction of the mandatory leverage ratio requirement in january 2016, and the subsequent change in reporting requirements, to the reactions of a control group of clearing members that were unaffected by these events. the results suggest that the affected clearing members became more reluctant to provide client clearing services after the events : compared to unaffected clearing members, they reduced both the number of transactions they were willing to clear on behalf of clients and their number of clients. in magnitude terms, they reacted to the january 2016 event by clearing on average 5 % fewer transactions per client and operating with around 4 - 5 fewer clients on average than otherwise. this impact on clients seems to have | not subtracts, from the knightian uncertainty problem. the us constitution is four pages long. the recently - tabled dodd bill on us financial sector reform is 1, 336 pages long. which do you imagine will have the more lasting impact on behaviour. second, faced with uncertainty, the best approach is often to choose a strategy which avoids the extreme tails of the distribution. technically, economists call this a “ minimax ” strategy – minimising the likelihood of the worst outcome. paranoia can sometimes be an optimal strategy. this is a principle which engineers took to heart a generation ago. it is especially evident in the aeronautical industry where air and space disasters acted as beacons for minimax redesign of aircraft and spaceships. third, simple, loss - minimising strategies are often best achieved through what economists call “ mechanism design ” and what non - economists call “ structural reform ”. in essence, this means acting on the underlying organisational form of the system, rather than through the participants operating within it. in the words of economist john kay, it is about regulating structure not behaviour. 23 taken together, these three features define a “ robust ” regulatory regime – robust to uncertainties from within and outside the system. using these robustness criteria, it is possible to assess whether restrictions might be preferable to taxation in tackling banking pollution. to illustrate this, contrast the regulatory experience of glass - steagall ( a restrictions approach ) and basel ii ( a taxation approach ). glass - steagall was simple in its objectives and execution. the act itself was only 17 pages long. its aims were shaped by an extreme tail event ( the great depression ) and were explicitly minimax ( to avoid a repetition ). it sought to achieve this by acting directly on the structure of the financial system, quarantining commercial bank and brokering activities through red - line regulation. in other words, glass - steagall satisfied all three robustness criteria. and so it proved, lasting well over half a century without a significant systemic event in the us. the contrast with basel ii is striking. this was anything but simple, comprising many thousands of pages and taking 15 years to deliver. it was calibrated largely to data drawn from the great moderation, a period characterised by an absence of tail events – more minimin than minimax. basel ii was underpinned by a complex menu of capital risk weights. this was fine - line, not red - line, regulation | 0.5 |
“ monetary policy liabilities ” is used as a generic term for the items ‘ liabilities to credit institutions in sweden related to monetary policy operations denominated in swedish kronor ” and “ debt certificates issued ”. bis central bankers ’ speeches how has the riksbank ’ s balance sheet developed over the past decade? let us examine ( a simplified version of ) the riksbank ’ s balance sheet from the year - end 2004. ten years ago, the balance sheet total was sek 183 billion. the asset side was dominated by the gold and foreign currency reserves, which amounted to sek 166 billion. in addition, we had a monetary policy claim on the swedish banks of sek 17 billion. 2 at that time the riksbank lent money to the banking system and this was done through the monetary policy repo transaction ( therefore the name repo rate ). the assets are largely funded through the riksbank over the year issuing banknotes and coins to a value of sek 109 billion. the bank ’ s equity amounted to sek 65 billion. the small liability to the imf is a result of sweden ’ s membership of the international monetary fund. i do not intend so say so much about this item now. let us now compare this with how the balance sheet looks today. as you can all see, a lot has happened over the past ten years. for instance, we can observe that : the foreign currency reserve is sek 325 billion larger. this increase is mainly because we have borrowed the equivalent of sek 200 billion in foreign currency through the swedish national debt office to strengthen the foreign currency reserve. the riksbank ’ s balance sheet 2004 and 2014 sek billion source : the riksbanken the formal term in the balance sheet is “ lending to credit institutions in sweden related to monetary policy operations denominated in swedish kronor ”. bis central bankers ’ speeches we have once again acquired a securities portfolio in swedish krona. the riksbank previously had a portfolio of swedish securities but then this was phased out more than ten years ago. the stock of notes and coins has declined, partly due to card payments and electronic payments becoming more common. as a consequence of this, we now have monetary policy liabilities instead of a monetary policy claim. this means that we are now borrowing excess liquidity from the banking system instead of lending money to cover a liquidity deficit. i will return to this issue later on. one thing that is | the banknotes and coins item is declining and that there is nothing the riksbank can do about this – it is part of the technological developments taking place. with regard to foreign currency loans, i mentioned that the interest expenditure for them exceeds the income on the assets the loans fund. the riksbank ’ s equity exceeds sek 100 billion. this means that the riksbank has a good capacity to manage potential losses. and it is important for our credibility. eu legislation prescribes that it is the highest decision - making body in the central bank that shall decide on the size of the bank ’ s equity. it is of course important that the decision is made after a preparatory process that is transparent and predictable, with a healthy balance between promoting on the one side the need of the riksbank to have sufficient equity on each occasion and on the other side the interest of the swedish government to minimise the riksbank ’ s costs for tying up capital. to summarise, we can note that the riksbank currently only has one source of funding that it determines itself, namely monetary policy liabilities. in other words, the riksbank can always make payments by increasing liquidity in the banking system. but all other forms of funding are affected in one way or another by things beyond the bank ’ s control. at present, the repo rate is at zero and this means that the riksbank does not have any interest expenditure for the monetary policy liabilities. but this is temporary, and as the repo rate is raised, the bank ’ s interest expenditure will increase. this will also mean that profits decline. the coming years – profits declining, no dividends i have now spent some time on describing the riksbank ’ s balance sheet and discussing some of the challenges the bank is facing. but i have not yet said anything about the largest challenge for the bank in the short term. by this i mean the extremely low interest rates, both here in sweden and abroad. as i have already mentioned, the foreign currency reserve shall be managed so that the riksbank can provide emergency liquidity assistance in foreign currency at short notice. the assets therefore need to be easy to sell. they must also retain their value. therefore, the foreign currency reserve largely consists of very safe government bonds, mainly from the united states and germany. the yields on us and german government bonds are currently very low. as the riksbank ’ s income largely consists of the | 1 |
expected to be modest. the commission forecasts growth rates of 0. 7 per cent in 2010 and 1. 5 per cent in 2011. foreign demand is seen as the main engine of growth, while the required de - leveraging of balance sheets in the financial sector, along with excess capacity and unemployment heading for double digit levels will continue to weigh on domestic demand. in short, a recovery that will be both weak and protracted by historical standards, and characterised by credit constraints and reduced levels of consumption and investment, as both consumers and firms seek to repair balance sheets. in the process, export markets will become more competitive. the imf ’ s forecasts, published in the world economic outlook ( october 2009 ), cover 2009 and 2010. the forecasts in the european commission ’ s autumn 2009 economic forecasts extend to 2011. … could benefit the maltese economy although euro area membership cushioned the domestic impact of the global crisis, the economy ’ s resilience has come under strain. as expected in an open economy, the shock was transmitted primarily through the trade channel as external demand shrank. following average annual growth of almost 4 per cent in 2005 - 2007, the pace slowed to 2. 1 per cent last year. the contraction was particularly pronounced in the manufacturing and tourism sectors, though ongoing expansion in the services sector mitigated the overall decline. the government measures targeted to support affected companies, moreover, served to contain job losses, such that the unemployment rate has remained below that of the euro area. until very recently, inflation, however, has failed to drop as fast as in the euro area, acting as a drag on purchasing power. these trends produced a sharp drop in output in the first half of the year and the bank expects annual real gdp to shrink by about 2. 2 per cent. looking ahead, we expect economic activity to pick up over the next two years, but growth, while positive, will likely remain below trend. exports will be conditioned by weak growth prospects abroad and by unfavourable cost trends in the price - sensitive electronics and tourism sectors. private consumption should remain relatively subdued on account of continuing high unemployment and slow income growth. in this scenario, the risks to the domestic macroeconomic outlook could tilt to the downside if the expected revival abroad fails to materialize and if investment falters. so while the impact of the recession has not been severe and seemingly effective counter measures have been, and continue to be, taken, there is clearly no | , a precondition for achieving more rapid growth, which in turn is the key to accelerating convergence with euro area income levels. faster growth is achievable but depends on … the roman writer ovid said that times change and we change with them. that may be so, but what really matters in today ’ s circumstances is how rapidly we read the signs of the times and adapt to them. i will focus on three directions of necessary change. the first is towards greater competitiveness. the second, and related thrust, would be to promote higher productivity. the third focuses on fiscal consolidation and the pursuit of sound public finances. before proceeding, however, i should stress that none of these objectives is attainable without further structural reforms, debunking the popular notion that the state has an unlimited capacity to satisfy demands for free goods and services and an end to inefficient practices that involve subsidies. … greater cost competitiveness … first of all, in malta ’ s case sustained economic growth depends largely on our ability to attract export - oriented foreign direct investment. given the past increases in unit labour costs, the only way of maintaining a competitive edge is by ensuring that these costs rise by less than those of our competitors. the magnitude of the task is compounded by the fact that a high proportion of malta ’ s exports go to non - euro area countries whose currencies have tended to depreciate against the euro. in this regard, the example of germany is significant. despite the appreciation of the euro, the real effective exchange rate based on unit labour costs actually declined by almost 2 per cent in 2000 - 2008, primarily because wage growth was moderate and was, in any case, accompanied by productivity gains. the resulting strong competitive position enabled germany to take full advantage of the global rebound, becoming one of the first, and few, countries to register positive growth in the second quarter of this year. there is a clear message implied here, that wage adjustments not accompanied by more efficient production methods result in a gradual erosion of a country ’ s competitiveness, especially when inflation is driven by internal cost pressures as in malta today. a priority task, therefore, should be to change market structures and practices that tend to distort prices. a parallel endeavour should be to foster a culture where wage increases reflect higher productivity. the first challenge then is inflation. we cannot compete successfully in export markets if prices rise faster here than abroad. for instance, despite the downward correction in global | 1 |
, then the likelihood of problems arising in the first place is dramatically diminished. it was wholly appropriate that this was the focus of bagehot ’ s writings – at the time, the structure of the banking system meant that illiquidity was often the key problem. and central banks did not appreciate the importance of the role that they could play. bagehot ’ s whole purpose was to convince the bank of england to fulfil this role. but the changes in the banking system over the past fifty years mean that a much more diverse range of problems can strike today. in september 2007, everyone thought that the crisis was one of liquidity and as a result there was an expectation central banks could provide the solution. but it quickly became clear that it was in fact a crisis of solvency. diamond and dybvig ’ s analysis consciously omitted the fact that, in reality, banks ’ assets are risky. and not only are banks ’ assets risky, but banks are highly leveraged institutions. this leaves them heavily exposed – with very high debt - equity ratios, small movements in asset valuations are enough to wipe out their equity and leave banks insolvent. that means the distinction between illiquidity and solvency can be difficult in practice – the difference in timing might be just a few days. if a crisis is in fact one of insolvency, brought on by excessive leverage and risk, then central bank liquidity provision cannot provide the answer. central banks can offer liquidity insurance only to solvent institutions or as a bridge to a more permanent solution. it is this structure, in which risky long - term assets are funded by short - term deposits, that makes banks so hazardous. yet many treat loans to banks as if they were riskless. in isolation, this would be akin to a belief in alchemy – risk - free deposits can never be supported by long - term risky investments in isolation. to work, financial alchemy requires the implicit support of the tax payer. when all the functions of the financial system are heavily interconnected, any problems that arise can end up playing havoc with services vital to the functioning of the economy – the payments system, the services of money and the provision of working capital to industry. if such services are materially threatened, governments will never be able to sit idly by. institutions supplying such services are quite simply too important to fail. everyone knows it. so, highly risky banking institutions enjoy implicit public | consumer price inflation has slowed in recent months, and despite the recent rise of gasoline prices, we expect inflation to moderate further in 2012. looking ahead, the key challenge for the long island economy will be to continue to prepare its residents for the best jobs being created here. expanding educational access and opportunity and the skills that go along with it will go a long way to broadening participation in the economy to all residents and bolstering long island in the future. thank you for your kind attention. i would be happy to take a few questions. for more information, see the new york fed ’ s consumer credit panel. bis central bankers ’ speeches | 0 |
. like the us in the late 1990s, we have experienced our own positive “ supply shock ” in the form of a significant wave of inward migration, especially from the accession states, of people looking for work. that has reduced the risk of a rising demand for labour leading to faster wage inflation. but despite greater availability of labour, businesses have not over the past year expanded employment sufficiently to prevent stronger demand from increasing capacity pressures. the bank ’ s agents report that capacity utilisation is now at an unusually high level. these pressures encourage businesses to raise prices. and that is exactly what the business surveys suggest has been happening. a position in which growth is above its long - run average and businesses are already operating with pressures on capacity is unlikely to be one without inflationary risks. that is one reason why the monetary policy committee has raised interest rates over the past year. the second question is about money and credit. the quantities of broad money and bank lending are now around 14 % higher than a year ago – rates of growth last seen in 1990 when inflation was more than 8 %. but again, we should be cautious. if credit becomes cheaper and more widely available, thereby increasing the stock of money ( a “ money supply shock ” ), households and businesses will increase their spending on goods and services and on assets, both financial and real, and this will push up on inflation. but if they wish to hold more money in their portfolios – a “ money demand shock ” – then the extra money will have few, if any, implications for inflation. so why have money and credit been growing so rapidly? given the pace of their expansion, it is likely that there has been both a demand and a supply shock. the supply shock is that banks have become increasingly willing to provide finance. credit has been readily available and the spread between interest rates paid by households and businesses and interest rates available in the money market has fallen. that is one factor behind the rapid growth of business investment spending over the past year. in light of the greater availability of credit, any person or family that borrows at a variable rate should recognise that the interest rate they will pay in the future may vary. obvious though the point may seem, it is unwise to borrow so much that the repayments are affordable only if interest rates remain at their initial levels. indeed, wider and cheaper availability of credit was a “ shock ” that boosted spending, and so was a further reason why the monetary policy committee raised interest rates | . access to central bank money or asset swaps should, as far as possible, encourage banks to manage liquidity risk prudently. without the correct pricing structure, the incentives to encourage future risk taking are obvious and potentially large. valuation margins – or haircuts – are used to protect our balance sheet. by themselves, they aren ’ t sufficient to create a general pricing structure. the cost imposed by a margin depends primarily on the difference between the costs of secured and unsecured funding, and that will vary across banks and over time. so the key is in the interest rates charged by the central bank. the second challenge is to overcome the ‘ stigma ’ problem that has plagued the use of central bank facilities throughout the crisis. commercial banks have feared that, by accessing funding from the central bank, they would acquire a ‘ black spot ’ in the market. they have been reluctant to come to their central bank unless in good and extensive company. these are challenges that all major central banks are grappling with. they will not be easy to overcome. but with our international colleagues we are aiming to devise a framework that does so. the prize will be an integrated framework, covering all our lending to the banking system and one that i hope, by making clear the terms on which liquidity will be provided in times of stress, will focus the minds of banks long before those stresses emerge. during my second term as governor i would like to see us establish a framework for financial stability that is on as sound a footing as the one we have successfully established for monetary stability. the measures i have described would go a considerable way to achieving that. but just as no framework for monetary policy can prevent shocks from hitting the uk economy, we need to think carefully about why financial crises have been both persistent and damaging. that leads me to one final thought on which i want to end. for reasons of historical accident we have created over many decades a financial system in which the incentives to monitor risk - taking have been sharply reduced. it is often said that the role of a central bank is to take the punch bowl away just as the party is getting going. that approach has served us well in monetary policy. but all those efforts will come to naught if the opposite applies to the financial sector. if banks feel they must keep on dancing while the music is playing and that at the end of the party the central bank will make sure everyone gets home safely, then over time the parties will become | 0.5 |
amando m tetangco, jr : the role of communication in ensuring effective central banking keynote address by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the second imf regional seminar on central bank communications, makati, 8 july 2007. * * * mr ariyoshi, mr. reza baqir, members of the bsp monetary board, distinguished speakers, fellow central bankers around the region, other officers of the imf, good morning. on behalf of the bangko sentral ng pilipinas, i bid our guests a warm welcome to our country! you have traveled far for this second imf regional seminar on central bank communications. this conveys, in very strong terms, the significance you attach to the role of communication in ensuring effective central banking. no doubt, the sea changes in global finance and markets as well as in the domestic macroeconomy have posed significant effects in the conduct of monetary policy. in particular, we have seen the rapid evolution of monetary policy towards increased transparency. i share the general observation that secrecy or deliberate obfuscation are no longer the buzzwords in central banking circles. 1 in sharp contrast to the past practice of reticence among monetary authorities, greater emphasis on effective communication is now a best - practice policy among central banks around the world. in fact, in the last two decades or so, we were witness to an expansion in disclosure mechanisms employed by central banks. moreover, there has been a dramatic change in the nature and quality of information that monetary authorities are now willing to disclose. this morning, i will share some of my thoughts on central bank communication in general and provide you with an overview of the communication strategy that we employ at the bangko sentral, with focus on our framework for communication with other government agencies. i. the importance of central bank communication the move toward greater transparency is a key element of good corporate governance. central banks have become increasingly independent so there is scope for greater accountability. after all, a central bank is a public office whose policy decisions have an important bearing on the direction of the economy. thus, the central bank should be able to clearly define its goals and provide a compelling explanation behind its policy actions. in turn, transparency allows for an honest assessment of central bank performance, given the goals it has pledged to achieve. the emphasis on better transparency practices also recognizes the idea that transparency makes monetary policy | patrick honohan : ireland ’ s eu - imf programme – delivering what it says on the tin address by mr patrick honohan, governor of the central bank of ireland to the european commission dg - ecfin conference, dublin, 10 january 2014. * * * accompanying charts can be found at the end of the speech. introduction the eu - imf programme of financial support for ireland, negotiated in november 2010 and with the final tranches of lending being completed about now, delivered what it said on the tin. amid turbulent market conditions, it provided a safe harbour into which ireland was able to retreat, in order to clarify its ability and determination to deal with the severe financial problems that had so destructively erupted during the global financial crisis in september 2008. those problems had their origin in the property bubble that had already begun to deflate a little earlier, and which had not only generated the huge latent banking losses that have been so much discussed, but also incubated severe fiscal and macroeconomic imbalances. the key to the return of market confidence to the extent that now exists has undoubtedly been rigorous adherence to fiscal goals. over the three years, a continuation of the momentum of fiscal adjustments already initiated in 2008 has brought the public finances back within striking distance of eu norms. the debt - to - gdp ratio has reached a peak and is on target to fall in the coming year. economic growth, albeit modest, has returned on a broad front ; both full time and part - time employment have been growing for many months now. residential property prices in the capital have bounced back a little from their lows of two years ago, and have on average been broadly stable in the rest of the country also for some months. later i will speak a bit about how far the economy is nevertheless away from where we need it to be. but it cannot be denied that, reflecting both policy and general economic conditions, market confidence in irish creditworthiness is higher than at any time since well before the greek crisis developments of may 2010. it was not always obvious that this restoration of market confidence was going to work out. the imf staff appraisal of the initial programme proposal in december 2010 emphasised that the risks were high. and, after the programme began, the euro area slipped into a second dip recession which had its effect in slowing the irish recovery. the cumulative change in gdp, consumption and employment over the three years may have been as much as 2 percentage points lower than | 0 |
of jgb trading and their settlement. the other is to widen the use of a ccp and the reinforcement of its risk management that is commensurate with the wider use. a. shortening of jgb settlement cycle first, let me talk about the issue of a settlement cycle of jgbs ( chart 2 ). since the late 1990s, a shorter settlement cycle for jgb transactions has been a major goal in the reform of japan ’ s securities settlement systems. the longer the time - lag between trading and settlement, the more unsettled positions, leading to a build - up of settlement risk. actually, the risk became imminent in the financial crisis of autumn 2008, when the failure of lehman brothers resulted in a significant amount of settlement failures in the delivery of jgbs. market participants who had entered jgb trading with the failed financial institution had to go through time - consuming procedures for terminating unsettled transactions and replacing them with new ones in the markets. those events highlighted the importance of reducing the time - lag between trading and settlement and led market participants to establish a working group under the japan securities dealers association in order to identify and examine the issues related to a shorter settlement cycle for jgb transactions. based on the study by the working group, the jgb market moved to the shorter settlement cycle, from t + 3 to t + 2, in april 2012. there are on - going efforts by market participants toward a shorter settlement cycle with an aim of achieving t + 1 for jgb transactions by the earliest possible time after 2017. the issues currently being reviewed include possible changes to trading practices and the creation of a market - wide infrastructure for collateral management. in addition to the dvp is a mechanism which ensures that “ a delivery of securities occurs if, and only if, payment occurs. ” dvp mechanism eliminates the principal risk associated with settlement of a securities transaction, which sometimes results in a large - scale loss. compared with dns, rtgs substantially reduces systemic risk. systemic risk materializes when one participant fails to settle its transactions, especially in a dns system. dns is a settlement mode which effects settlement of transactions among counterparties on a net basis at designated times. in conjunction with those improvements in the safety of jgb settlement, a number of improvements have been made in terms of the efficiency of jgb trading and settlement, including ( 1 ) the introduction of market practices on the bilateral netting and fails - to - deliver | markets around the world. the outstanding balance of jgbs is fairly close to that of the u. s. treasuries, but the u. s. treasuries are currently used as collateral much more widely in global financial markets. if we look at the bright side of this, jgbs have much room for expanded use as collateral in global financial markets. more broadly, various initiatives are already underway to achieve more efficient and convenient settlement systems, in particular with respect to cross - border settlements. in the asean + 3 region, market participants and the authorities, including central banks, are working to improve cross - border securities settlement infrastructure in their efforts to stimulate cross - border securities transactions in the region. in europe, international central securities depositories are upgrading their global collateral management services that help mobilize collateral assets across borders. in japan, as i mentioned earlier, market participants are reviewing the case of developing a collateral management infrastructure that will support the achievement of the shorter settlement cycle for jgbs. such a collateral management infrastructure, if established, will also provide leverage in the improvement of cross - border settlements of jgbs in the future. combining those initiatives in japan and abroad, the bank of japan ’ s efforts to improve its payment and settlement systems will be one piece of the puzzle to make global settlement infrastructure safer and more efficient, and hopefully contribute to the growth of the japanese and global economies. b. central bank cross - border collateral arrangements now, let me talk about another example of the enhancement of cross - border settlement infrastructure, which is a cross - border collateral arrangement for jgbs among central banks. the bank of japan has been collaborating with other central banks to establish such arrangements, where a foreign central bank provides liquidity in its local currency against jgbs to its counterparty financial institutions, using the bank of japan as a custodian for receiving jgb collateral from those financial institutions. the bank has been working with asian central banks to establish such cross - border collateral arrangements. for example, we worked with the bank of thailand to establish an arrangement for providing the thai baht liquidity against jgbs, which has been put into effect since november 2011 ( chart 6 ). in addition, we have made an agreement with the monetary authority of singapore and separately with the bank indonesia to establish similar arrangements. 5 with those arrangements, japanese banks and other financial institutions will have additional sources of local currencies from local central banks in stressed funding conditions | 1 |
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