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the difference that we publish these statements almost immediately and other central banks only publish their minutes after a delay of at least a few weeks. in addition, our monthly bulletin contains an explanation of recent policy decisions and an extensive account of the economic developments underlying them. what we do not do is publish individual arguments and voting records, for several good reasons. the ecb conducts a single monetary policy for 11 countries and the governors of the national central banks do not represent their individual countries on the governing council, but are obliged to base their arguments on euro area - wide considerations. to publish voting records and arguments put forward by individuals would be to risk undermining their independence by exposing them to national pressure. i do not believe that maximum transparency is the same as maximum information. it would, for example, be rather confusing and not at all transparent to publish a full transcript of the meetings. this would also diminish the frankness and quality of the exchange of views which takes place. i should like to emphasise that our concept of accountability is a collective one. we are accountable for the decisions taken by the ecb β s governing council as a body. therefore, our external communication focuses on these decisions and the underlying reasons for them, including arguments for and against. we are convinced that accountability is better served by a clear understanding of the decisions which we take than by a public debate on who are the hawks and who are the doves. the relationship between the monetary and budgetary authorities independence should not rule out communication with politicians. on the contrary, it is important for the central bank to have a regular exchange of information and views with the budgetary authorities. according to the maastricht treaty the president of the ecb is invited to meetings of the ecofin council whenever there are issues on the agenda relevant to the tasks of the central bank. the president of the ecofin council and a member of the european commission have the right to attend meetings of the governing council of the ecb. the president of the ecofin council even has the right to submit motions for deliberation. however, neither has the right to vote. apart from these formal channels, there are also informal ways of communicating. one of these is through the so - called euro - 11, an informal meeting of the ministers of finance of the 11 member states which have introduced the euro. the president and i are invited to these meetings and attend whenever there is anything on the agenda which is relevant to our tasks and mandate | capital account ; and the strengthening of exchange rate flexibility, as envisaged by chinese authorities. the latter two are pre - conditions for further currency internationalisation to allow foreign investors to invest in china, deepen financial markets and improve the allocation of capital in the economy. what is the role of monetary and fiscal policies in this process? in those cases where unsustainable fiscal policies were at the very origin of imbalances, the priority is to restore and ensure the medium - term sustainability of public finances. another priority is to strengthen financial sector stability and avert the build - up of risks and vulnerabilities, including unsustainable lending booms, through adequate regulatory, supervisory and macro - prudential tools. as regards monetary policy, central banks in advanced economies have also been doing their part, helping to make the rebalancing process as smooth as possible. central banks acted within their particular mandates, which in the euro area is to preserve price stability over the medium term. they have taken non - standard measures, which have helped avoid an abrupt deleveraging of the banking sector, which might have had highly - damaging consequences. there have also been concerns, notably among emerging market policy - makers, that measures taken by central banks in advanced economies could foster excessive flows of capital to their economies, put upward pressure on their exchange rates and lead to bubbles in domestic financial asset prices. the relation between monetary policy in advanced economies and global financial flows is not purely mechanistic, however. financial flows to emerging economies depend on a host of factors over and beyond interest rate differentials, including the attractiveness of emerging market economies themselves in terms of growth potential or global risk aversion. moreover, the monetary policy of major advanced bis central bankers β speeches economies is not only beneficial to their domestic economies, but has positive externalities for the growth of the global economy as a whole, including emerging market economies. let me now conclude. the outbreak of the crisis triggered a β great rebalancing β process at the global level. it is a painful, but necessary, process, which is partly cyclical. each continent, america, europe and asia, must continue making every effort to ensure that this process remains durable. in recent years, particular attention has been paid to the situation and reform agenda in the euro area. however, not only euro area countries, but all other countries too, have to implement structural reforms, many of which are discussed within the g20 | 0.5 |
a tighter selection of new firms during downturns, and slacker entry requirements when the economy is doing well. while this phenomenon is a stylized fact, its implications for the propagation and persistence of aggregate shocks have only been studied quite recently. moreover, the impact of recessions induced by financial rather than real shocks is still comparatively underexplored. today β s presentations will also cover these important issues, which have clear implications for policies to stabilize the business cycle. let me conclude with a few words on italy. its lack of business dynamism has been an important determinant of the sluggish productivity growth over the last 20 years according to most research in this field, much of which has been conducted by the bank of italy β s economists. from the mid - 1990s onwards, aggregate productivity in italy has grown at a significantly slower pace than in the rest of the euro area. total factor productivity ( tfp ) has been virtually flat, and yet at the same time the ict revolution and the ensuing globalization of production were exploding, helping most other economies to reap enormous benefits in terms of productivity and growth. the inability of italian firms to do the same is normally attributed to the large share of micro and small firms in the system : those firms invest less in innovation and technology adoption, and are more vulnerable to global competition. yet the small size of most firms is a dynamic malaise of the system, not a static one, and is caused by the lack of business dynamism. italian startups grow less and for a shorter period of time than new businesses in other oecd countries. they are poorly selected over their early years of life : exit rates are generally flat over the age distribution, meaning that less productive firms are not wiped out from the market when they are young. as a result, italian firms are older, smaller and less productive than those from other developed countries. the causes of this lack of business dynamism are manifold. italy holds negative records for some of the frictions i discussed before : judicial efficiency is particularly low and financial leverage is among the highest by international standards. we have several specific dysfunctions, such as widespread tax evasion, the political connections of entrepreneurs, and cronyism, all of which distort competition in the economy, and slow down creative destruction and firm churning, with negative consequences for aggregate growth. the structural reforms that are needed to put italy back on track should address these diverse and complementary issues in a bold and coherent | supply shocks, and translate all that into action as expressed in the prices of a bewildering array of debt, equity, and derivative instruments. varieties of errors while the market activities of traders and investors can importantly reinforce and strengthen the actions taken by the fomc in the pursuit of its broad macroeconomic objectives, they cannot replace the fomc. sometimes, believe it or not, they turn out to complicate, rather than advance, the cause of monetary policy. before i turn to the good the market does in complementing policy action, let me start by deflating the notion that an omniscient bond market always gets it right so as to render the fomc redundant. because many of the instruments in which you deal have long maturities, the judgments that have to be made to price them by necessity stretch well into the future. the scope for error can be large and the consequences costly. i think it is useful to separate the grounds for mistakes into two groups : market participants could be wrong about the economy, or wrong about policymakers β objectives. two examples can make this distinction clearer. for one, we know, after the fact, that most analysts misjudged the full extent to which unusual restraint on credit was exerting a drag on spending from around 1989 to 1993. essentially, both households and firms recoiled from the explosion of debt in the 1980s. they were burdened by high interest service and took steps to bring their balance sheets into a more sustainable configuration. lenders, too, had their own imbalances, brought on importantly by the real estate bust. among them, banks drew back from extending loans to a wide variety of borrowers, including businesses. in this environment, spreads of private over public rates widened in the market, and borrowers and lenders who went to depositories were confronted with far less favorable terms than they had grown accustomed to. while chairman greenspan and his fellow policymakers identified the credit crunch in a fairly timely fashion, it took some time to appreciate the full force of its power. by my reading, in the aggregate, market participants were slower on the uptake. thus, the policy easings of 1991 and 1992 were greeted with some skepticism as market participants apparently interpreted those actions as reflecting a lessened concern about inflation on the part of the federal reserve, rather than the appropriate response to a softening in aggregate demand. the effect of those mis - assessments was to produce a stunning steepening | 0 |
##pedite the claims process and to ensure economic activity was restored. unfortunately, not all businesses have resumed to full or even partial activity following the riots. of concern was the significant number of affected businesses that were uninsured or under - insured and many were forced to shut down their operations. it is estimated that close to two million people were left unemployed by the july 2021 riots. this highlights the concerns around the insurance protection gap. in light of this, i would like to challenge this sector to develop products that will enable better protection and to ensure economic recovery post events of this nature. some learnings from these events, and which require further work include : β’ improved consumer education initiatives that clearly spell out what is covered and what is excluded under an insurance policy ; β’ clear proposals to address the insurance and risk protection gap, not only as a sector but also in partnership with the government ; and β’ the development of insurance products and solutions that take into account this changing landscape. the current economic outlook the domestic economy experienced rapid growth during 2021, after a sharp contraction in 2020. despite the steep contraction in gdp during the third quarter of 2021 due to the riots in kwazulu - natal, the domestic economy grew by 4. 9 % during 2021. gdp growth which would have surpassed pre - covid - 19 levels in the first quarter of 2022 was hampered by the january and march 2022 floods in kwazulunatal, the sharp correction in commodity prices and intensified load - shedding. the sarb forecasts gdp growth of 2 % in 2022 and 1. 3 % in 2023. global inflation has been on the rise since the first quarter of 2021, largely driven by the recovery in the oil price and consumer demand since the low levels experienced during the pandemic. inflationary pressures were exacerbated by the renewed lockdowns in china as well as the war in ukraine. this not only heightened uncertainty but also caused supply bottlenecks and disrupted food and energy markets. as a result of the combination of these adverse shocks, global growth is projected to slow down. central banks in advanced economies have begun with policy normalisation as they potentially face double - digit inflation over the next few months. emerging and developing economies are not exempt from the rise in inflation and now also face capital - flow and exchange - rate risks in the face of monetary policy normalisation. south africa β s headline inflation has also been rising, with the latest inflation number averaging 7. 4 % | , as insurers, to provide the safety net required in our economy and to society at large, proactive management of the risks is required. in this regard, strengthening risk management within institutions as well as our collective thinking on mitigation of emerging risks will be crucial. the financial sector as a whole has remained resilient, despite the multiplicity of shocks over the past two years. the prudential authority, much like many of you at this conference, remains resolute in contributing to the resurgence, resilience and revival of the insurance sector through clear supervisory guidance and providing regulatory certainty. in this regard, we will continue to collaborate with the financial sector conduct authority and industry associations to enhance the resilience of the sector. thank you again for the opportunity to address you this morning, and to the insurance institute of south africa and south african insurance association for honouring me with this award. | 1 |
first place. after first describing some of the current implementation challenges associated with title ii resolution, i will return to this second issue. implementing the resolution regime on a cross - border basis remains one of the most significant challenges. u. s. authorities are working with authorities abroad on the issues that require international collaboration, but the financial industry also has a role to play in overcoming these challenges. i encourage the industry to promptly address the matters that require action on their part. in particular, i am worried about two current shortcomings : β’ the reach of title ii β s one - day stay on the close - out of qualified financial contracts is incomplete and does not extend to contracts governed by non - u. s. law with nonu. s. counterparties. bis central bankers β speeches β’ the placement of the parent company into receivership may be treated by these counterparties as an event of default due to the presence of a parent guarantee or other cross - default provisions triggered by the parent - level insolvency. unless market participants make the appropriate contractual changes that will ensure that the entry of the parent company into title ii will not trigger the close - out provisions of those over - the - counter derivatives and other qualified financial contracts that are outside the reach of title ii β s u. s. application, foreign counterparties to the systemically important firm will tend to exercise this right whenever it is in their individual economic interest to do so. this would create significant difficulties because such actions could greatly complicate the operations of the firm during a time when it is already under considerable stress and would propagate stress more broadly in financial markets. there are two main options for addressing this issue, and they are not mutually exclusive. existing derivative contracts need to be amended and future contracts need to provide that the parent β s entry into the title ii proceeding does not trigger the close - out option, or legal changes need to be implemented abroad so that the β one - day stay β that applies to qualified financial contracts governed by u. s. law is enforceable against those contracts governed by foreign law. only by making these changes can we avoid the potential for disruptive closeouts. i strongly encourage the ongoing efforts to address this critical issue. a second issue with respect to title ii resolution is that we cannot be certain how foreign authorities will react when the parent is put into the title ii proceeding. while the u. s. authorities have been in discussion with our colleagues abroad to enable the coordination needed | root causes of their problems and identify longer - term strategies that will need to be employed as other recovery options to restore capital and liquidity are being executed. and firms must support the viability of their contingency and recovery plans by implementing the internal governance necessary to develop, test, update and implement them credibly. there is also more work that we, as supervisors, can do to reduce the probability of failure and to incent firm managers to act well before resolution becomes necessary. we need to do more to create incentives to force banks to act sooner to steer away from impending icebergs β cut capital distributions earlier, raise new capital faster, restructure businesses sooner, and restructure senior management and boards of directors more radically when the firm is not performing well. for example, one approach might be to implement a long - term debt requirement in a way that enhances market discipline. another reform would be to reduce the incentives of large, complex firms to rely on shortterm wholesale funding to finance longer - term, illiquid assets. among other benefits, reducing a firm β s susceptibility to sudden runs associated with short - term wholesale funding will lengthen the β runway β for management to implement the strategic actions that would restore the firm to health. let me conclude by emphasizing that these two paths β reducing the financial stability costs associated with the failure of a systemically important financial firm versus applying tougher capital and liquidity standards for such firms that reduce the probability of failure β are complements not substitutes. we need to keep pushing forward with both approaches in order to make the financial system more resilient and robust. thank you for your kind attention. i would be happy to take a few questions. bis central bankers β speeches | 1 |
character β speech by andrew bailey | bank of england conclusion winston churchill, jane austen, jmw turner. these are the figureheads who grace our other banknotes, and through their leadership and cultural contribution, they helped shape the vibrant society that is modern britain. the person chosen to feature on a currency, can embody the spirit of a nation. in his remarkable achievements, turing did just that. and in doing so, showed us the way to the future. as the artist anthony gormley remarked, alan turing " unlocked the door between the industrial and the information age β. and although turing was under appreciated in his lifetime, we can now see how accurate this description is. alan turing was a gay man, whose transformational work in the fields of computer science, codebreaking, and developmental biology, was still not enough to spare him the appalling treatment to which he was subjected. by placing him on this new Β£50 banknote, we celebrate him for his achievements, and the values he symbolises, for which we can all be very proud. andrew bailey governor, bank of england sign up for latest updates banknote character β speech by andrew bailey | bank of england | relatively high leverage ratio. reduced profits hamper firms β ability to generate internal financing while, at the same time, external financing conditions are likely to remain tight, as long as banks continue to de - leverage and other funding markets remain under stress. non - financial corporations β default rates for both euro area and european firms have started to increase. the european speculative grade - rated corporations β default rate is expected to jump to almost 20 % by the end of 2009, as shown in chart 5. furthermore, credit rating agencies began revising downwards their ratings of non - financial corporations in december 2008. box 6 of the review takes a closer look at the outlook for corporate defaults. it concludes that given the extraordinary nature of recent developments in the financial markets, current forecasts could prove too pessimistic despite the sharp decline in economic activity. the prospect of global and european speculative - grade corporations β default rates increasing substantially implies a significant risk to the financial system. another source of risk is the commercial property market where conditions continued to deteriorate over the past six months. in the first quarter of 2009, commercial property prices actually fell in all 13 euro area countries for which data are available. the outlook will remain unfavourable until economic and financial conditions improve and investor appetite for commercial property returns. potential further losses constitute a significant risk for many banks since commercial property loans in the euro area on average account for about 10 % of total loans and, in many cases, exposures are even much larger. euro area household sector turning to the household sector, euro area house price increases continued to ease in 2008, as shown on chart 6. in at least six euro area countries house prices have declined on an annual basis. these developments have been associated with a moderation of both housing demand and supply, but the balance of the changes in demand and supply has been putting downward pressure on prices. the annual rate of growth of loans to the household sector declined sharply in the final quarter of 2008 and in the first quarter of 2009, reflecting the deterioration in housing markets, weakening economic conditions and prospects, and the ongoing tightening in credit standards. according to the results of the april 2009 ecb bank lending survey, a further dampening of households β demand for housing loans is expected due to worsened housing market prospects and low consumer confidence. ii. 3. risks in the euro area financial system euro area money markets let me now focus on the euro area financial system. over the past few months, developments in several financial | 0 |
initiatives of mfis. may this year β s conference bring fresh insights and renewed zeal to help the poorest and most vulnerable through digital innovations. in closing, allow me to cite a passage from the book of philippians that, like hebrews 13, speaks of dedication and selflessness : β do nothing out of selfish ambition or vain conceit. rather, in humility value others above yourselves, not looking to your own interests but each of you to the interests of the others. β may we all continue to embrace our financial inclusion mission. for in doing so, we can bring a message of hope and help others live with dignity and purpose, especially in these trying times. thank you and stay safe. 3 / 3 bis central bankers'speeches | . while we have worked hard and over long hours to achieve these developments, the real challenge for all of us must be in providing a better tomorrow to future generations. the bsp has long held the view that financial education, financial inclusion and consumer protection form the triumvirate that holds the key. each mutually reinforces the other. while financial inclusion and consumer protection do require regulatory intervention, financial education will have to be a commitment that all of us puts forward. cmip has already invested itself into this agenda by pursuing a passion that became an advocacy that is now a program. the institute has taken great steps but it cannot end here. let us use this 1st national convention as a springboard for setting milestones of performance going forward. will you simply want to have more graduates of the cmitap? or will you measure yourselves against what the graduates themselves can do individually and collectively as part of the cmip family? how do you pay forward the investment that you have made for yourself? how does this investment pay off when working with your students, interacting with office colleagues or operating with fellow market practitioners? how can cmip contribute to the development of the philippine capital market in resolving longstanding issues? how will you ensure financial stability knowing that your individual actions may have macro - prudential consequences? there are many questions that can be raised. what is clear is that the answers must come from you, just as other stakeholders must have their own answers. pause and take time to recognize what you have already achieved. but i enjoin all of you to use that success as a commitment to a better tomorrow. i do not have any doubt in our collective ability to make a better tomorrow for future generations. i also am firm in my belief that financial education is a key element in developing markets and instilling systemic stability. cmip has taken major strides forward to - date. and i look forward to hearing, seeing and being part of your future successes. maraming salamat po. mabuhay ang cmip. mabuhay ang ating bansang pilipinas. bis central bankers β speeches | 0.5 |
zeti akhtar aziz : nurturing young talent in malaysia speech by dr zeti akhtar aziz, governor of the central bank of malaysia ( bank negara malaysia ), at the kijang emas scholarship award ceremony for high achievers, kuala lumpur, 6 may 2014. * * * while the global economy continues to face uncertainties and significant challenges, the malaysian economy has every potential to remain on a steady growth trajectory and move up the value chain. this is however only achievable if we can nurture the required talents. talent development strategies and implementation is therefore one of the key priorities of the nation. we need to invest in our talent pipeline the kijang emas scholarship award is an eminent scholarship award reflecting the bank β s commitment in creating a sustainable talent pool for the nation. the kijang emas scholarship is distinct from the kijang scholarship whereby the recipients are given the freedom to pursue any field of study at top - notch universities in any country of their choice. the bank also does not impose any bond on the recipient except that they return, contribute and take part in the progress and development of our beloved nation. to date, 42 high potential talent have been awarded the kijang emas scholarship. the recipients are currently pursuing their studies in diverse field of studies including medicine, dentistry, genetics, biochemistry, dietetics, physics, engineering, law, psychology and architecture in top universities around the world such as m. i. t., university of pennsylvania and the university of cambridge. thus far, 6 kijang emas scholars have completed their studies and have returned to serve the nation, while another 7 of them are expected to complete their studies in the next six months. for the 2014 kijang emas scholarship, we received a total of 331 applications, representing 82 % of the 405 straight a + students in the country. from this, the bank had shortlisted 26 students based on their spm results and also their level of involvement in co - curricular and sports activities. the students then underwent a rigorous evaluation process under the bank β s β kijang academy β assessing their technical and leadership competencies, as well as their values. we are pleased to award 3 outstanding students the kijang emas scholarship this year. having just completed their spm, justin and nurizati will be enrolled into the pre - university programme, whilst alicia will be pursuing her undergraduate studies. alicia has successfully obtained a conditional | the determination and perseverance of a series of visionary leaders. and we owe it to the effective interplay between european institutions. the european parliament played a crucial role at the pioneering stage. the parliament was the first european institution to make proposals for a single currency, back in 1962. and in the past ten years, since the establishment of the ecb, our institutions have maintained a very close and fruitful dialogue. this dialogue has involved over 50 hearings of the members of the executive board before this parliament. the dialogue between the parliament and the ecb is a very important exchange in terms of accountability, allowing the ecb to explain its decisions and actions to the general public and their elected representatives. ladies and gentlemen, during its first years of existence, the euro had to face major trials : the establishment of a sound and credible central bank and the creation of a stable new currency inspiring confidence. these challenges were overcome successfully and the euro is today firmly established. hence, this is certainly a time for celebration. but it is no time for complacency. current challenges are pressing, and new challenges will arise. the continued success of emu will depend on how these challenges are addressed. this is the main responsibility for all authorities involved. let me mention three major challenges. first, the financial crisis. the crisis has revealed fundamental weaknesses in the global financial system. we are playing an active part in the global efforts to address these weaknesses and redesign the regulatory and institutional framework. a lot of work remains to be done. second, economic union. the solidity of the single currency rests on two pillars : a monetary policy firmly geared towards price stability and a set of sound economic policies. the particular challenges on the economic front include the firm and credible implementation of the stability and growth pact, constant efforts to render our economies more productive, innovative and dynamic, and the avoidance of major competitive divergences within the euro area. third, enlargement. when we started out ten years ago, we were 11 countries. as of 1 january this year, we are now 16 countries. this says a lot about our historic endeavour. handling enlargement in the best fashion possible is a very inspiring and demanding challenge for all of us. the euro is a historic achievement. what matters most today is our responsibility for the future. new challenges are arising. if these challenges are faced with utmost lucidity and audacity, they can generate the powerful ideas which jean monnet referred to, and which | 0 |
necessary. the importance of a resilient financial system let me now turn to our assessment of the financial sector. during my last appearance before this committee, we discussed the importance of maintaining a resilient financial system following the banking sector turmoil in the united states and switzerland. since then, the euro area financial system has remained strong, aided by declining inflation. confidence in euro area banks has benefited from strong rules and supervision. banks have maintained sizeable liquidity and capital buffers, and non - 2 / 4 bis - central bankers'speeches performing loan ratios remain close to historically low levels. at the same time, firms and households have shown resilience in the face of rising debt servicing costs resulting from higher interest rates. however, this positive outlook for financial stability in the euro area should not be taken for granted. it could face significant challenges if growth prospects weakened, inflation stayed above target for a longer period or further geopolitical risks materialised. we are also closely monitoring developments in euro area real estate markets as tighter financing costs, a move towards hybrid working practices as well as environmental, social and governance requirements are likely to continue to put pressure on this market segment. although mild signs of asset quality deterioration are becoming visible in commercial real estate ( cre ) lending, risks to this asset class are broadly contained given that banks'cre exposures, standing at around 5 % of total assets, are limited. our financial stability review, which is due to be published midmay, will provide more details of our assessment on this. to support continued financial sector resilience, legislators still have a lot of work to do in the coming years to close the gaps in our banking union. besides urgent reform of the bank crisis management and deposit insurance framework, we must set up a european framework for liquidity in resolution and, most importantly, a fully - fledged european deposit insurance scheme. we also need a solid institutional and policy framework for the non - bank financial sector and we welcome the european commission's forthcoming macroprudential framework review. moreover, during the next eu institutional cycle, the level of ambition and commitment devoted to the capital markets union ( cmu ) agenda must finally match the urgent need to make progress. completing cmu is key to strengthening resilience, enhancing eu competitiveness, growing our economy and achieving the eu's policy objectives, such as funding the green and digital transitions. in this spirit, the ecb governing council recently published a statement on advancing cm | followed the high risk and high return business strategy, with a skewed priority for serving only the interest of their investors. the active role of the board, especially in challenging the proposals of the management, thus becomes critical. this will contribute towards a more diligent and balanced approach to decision making. 21. fourth, another major challenge would be in dealing with the stressed borrowers impacted by covid - 19. during the two waves of covid - 19, the reserve bank announced resolution framework 1. 0 and 2. 0 to provide relief to the borrowers and banks. while the resolution in respect of large borrower accounts restructured under resolution framework 1. 0 was to be implemented by june 30, 2021, they have time till september 30, 2022 to achieve the operational parameters. on the other hand, resolutions invoked under resolution framework 2. 0 before 4 / 5 bis central bankers'speeches september 30, 2021 in respect of individuals, msmes and other small businesses, have to be implemented by december 31, 2021. as the support measures start unwinding, some of these restructured accounts might face solvency issues over the coming quarters. prudence would warrant proactive recognition of such non - viable firms for pragmatic resolution measures. 22. fifth, it may not be an overstatement to say that financial services industry today is in the midst of a β technological invasion β. the ongoing digitalisation of finance has led to positive disruptions on many fronts. needless to say, the reserve bank has been actively fostering innovation in this cross - fertilised space by envisaging mechanisms like regulatory sandbox for fintechs, co - lending models, account aggregators, etc. we would expect lending institutions to leverage upon these mechanisms to enhance the overall customer experience, product customisation, adoption of alternative credit appraisal methodologies, monitoring measures, among others. a word of caution is in order : globally, the β phygital β revolution has played out into several collaborative models between banks, nbfcs and fintech players such as incubation, capital investment, co - creation, distribution and integration. while lenders are free to explore any of these models, the regulatory expectation is that the eventual tie - up decision should be as per their own commercial wisdom in terms of their internal policies subject to extant regulatory guardrails. they should also ensure that compliance requirements in terms of regulations such as the banking regulation act, the | 0 |
prices, which grew at an annual rate of 5. 4 % in april. the announced changes in indirect taxes will also have a bearing on inflation next year. this outlook for inflation is also reflected in the june 2006 eurosystem staff projections, which foresee annual hicp inflation in a range between 2. 1 % and 2. 5 % in 2006, and between 1. 6 % and 2. 8 % in 2007. compared with the march 2006 ecb staff projections, these ranges embody a slightly higher baseline profile for hicp inflation in 2006, largely reflecting the assumption of higher oil prices. this outlook for price developments remains subject to upside risks including further increases in oil prices, a stronger pass - through of past oil price rises to consumer prices than currently anticipated, additional increases in administered prices and indirect taxes, and β more fundamentally β stronger than expected wage developments due to second - round effects of past oil price increases. turning to developments in monetary aggregates and credit, liquidity in the euro area remains ample by all reasonable measures. the annual growth rate of m3 increased to 8. 8 % in april 2006, from 8. 5 % in march 2006, supported by the robust expansion of its most liquid components. credit growth has also remained very strong, with the annual rate of growth of loans to the private sector standing at double - digit levels. the rapid rate of monetary growth continues to be driven mainly by the expansion of its most liquid components. thus, the latest developments confirm that the stimulative impact of the low level of interest rates remains the dominant factor behind the current high trend rate of monetary expansion, which signals inflationary risks over the medium to longer term. the further acceleration of monetary and credit growth in this environment of already ample liquidity points to increased upside risks to price stability at longer horizons. monetary developments therefore require careful monitoring, in particular in the context of continued strong dynamics in housing markets. to sum up, annual hicp inflation rates are projected to remain elevated in 2006 and 2007, mainly as a consequence of upward pressures from high oil prices and indirect taxes. risks to this outlook for inflation remain on the upside. against the backdrop of strong monetary and credit growth and the ample liquidity situation, the cross - checking of the outcome of the economic analysis with that of the monetary analysis confirms that upside risks to price stability over the medium to longer term prevail. on 8 june 2006 the ecb β s governing council increased the key ecb interest rates by | . the new series of targeted longer - term refinancing operations ( tltro - ii ) are also providing additional stimulus by allowing banks to secure long - term funding under very attractive conditions, which they can pass on to their customers. in terms of quantities, bank lending to the private sector has been gradually recovering since early 2014. in the latest bank lending survey, banks continued to report that the ecb β s asset purchase programme ( app ) and the negative deposit facility rate had contributed to more favourable terms and conditions on loans, and are supporting lending volumes. 2 meanwhile, other survey data indicate improvements in the availability of external sources of financing for smes. 3 1 / 3 bis central bankers'speeches corporate bond issuance has also picked up since the announcement of the cspp in march, while the tltro - ii should help to further support bank lending volumes to the non - financial private sector. so our policy measures are clearly effective and are trickling down to the funding rates that matter most for the real economy, such as the ones faced by smes, which provide jobs for around two - thirds of those in employment in the euro area. 4 favourable financing conditions, along with other factors such as employment gains and improvements in the demand outlook, are expected to further support private consumption and investment expenditure going forward. investment however remains well below its pre - crisis levels and its sensitivity to the borrowing conditions faced by companies is lower than historical norms. according to the september ecb staff macroeconomic projections, annual real gdp growth is expected to increase by 1. 7 % this year, and by 1. 6 % in each of the next two years. turning to price developments, headline inflation increased in october to 0. 5 % in year - on - year terms, owing to a continued increase in annual energy inflation. so although price dynamics are improving, inflation remains at low levels β far below the level which we consider consistent with our price stability objective β reflecting past declines in oil prices and weak wage growth. underlying inflation in particular has yet to show clear signs of a more dynamic upward movement. the annual rate of hicp inflation excluding food and energy has hovered around 0. 8 % for the last three months as domestic cost pressures remain fundamentally weak. yet, as the effect of past oil price declines fades, annual hicp inflation is expected to pick up from 0. 2 % this year to 1. 2 % in 2017. moreover, we expect that as the recovery continues and economic | 0.5 |
s event because it shares the sense of urgency that is felt across industries and territories. bis central bankers β speeches global population growth, climate change and dwindling natural resources are threatening the wellbeing and welfare of every person on this planet over a period of many decades. furthermore, the financial crisis has awoken us to the fact that many existing approaches to business and finance are unsustainable. economic development cannot be considered durable when : β natural resources are being depleted ; β growth rates do not fully reflect potential long - run costs to society ; β - and short - term gains of a small group are achieved at the expense of the long - term health and stability of the system as a whole. now, originally, sustainability was driven by the climate debate and its many passionate stakeholders. as a result of the recent crisis, however, the financial industry has become fully aware that sustainability is its responsibility, too. after all, climate change, economic growth, financial stability and social wellbeing are inextricably and systemically linked. the unep β s inquiry comes to a similar conclusion. as simon zadek will discuss later, central banks and regulators are considered key to achieving a financial system that contributes to sustainable development. this potential is unfulfilled, however, in spite of many encouraging efforts by peers from around the world. the bank of england is one of them. in a recent address, governor mark carney spoke about the profound and long - term effects of climate change on issues such as property, migration, political stability and food and water security. in spite of the threat this poses to our financial resilience and long - term prosperity, little is done to mitigate it. this is because of short planning horizons related to short business cycles, short political cycles and the mandate of central banks. carney called this the tragedy of the horizon and he argued it could be broken by combining data, technology and expert judgment. this, he said, can help us achieve : β a better understanding of risks ; β better pricing for investors ; β better decisions by policymakers, β - and a smoother transition to a lower - carbon economy. these and other concerns are being shared by the financial stability board, of which i am member and which carney chairs. in april, g20 finance ministers asked the financial stability board to consider how the financial sector could take account of the risks climate change poses to our financial system. in response, the fsb initiated the | klaas knot : the role of central banks ; the netherlands bank and sustainable finance opening speech by mr klaas knot, president of the netherlands bank, at the sustainable finance seminar, organized by the united nations environmental program and the sustainable finance lab, and hosted by the netherlands bank, amsterdam, 27 november 2015. * * * ladies and gentlemen, it is my great pleasure to welcome you to de nederlandsche bank at this seminar organised by the united nations environment program and the sustainable finance lab. i am glad to see so many leaders from the banking, insurance and pension sector. it tells me that sustainability is given the prominent attention it deserves. and today β s programme reflects that belief. it features respected colleagues from around the world, who will argue in their own way that sustainable finance is crucial to our industry and the stakeholders we serve. it has taken us a while. we have been occupied by the global financial crisis and its consequences for financial stability and economic growth. now that the worst seems to be over, we have to carefully consider the future. it is evident to me that a stable financial industry and sustainable economic growth are only possible if we integrate sustainability into our operations and business models. this is a complex discussion full of dilemmas and unanswered questions, and we are still in the early stages of charting a course. my hope is that today β s speakers and discussions will contribute to more clarity and action. this morning simon zadek from the united nations environment programme will summarise the unep β s inquiry into the role of the financial system in achieving sustainable development. ma jun, chief economist at the people β s bank of china, will join us via video link and share china β s expertise in the area of sustainable finance. and eminent economist herman wijffels will facilitate two roundtable discussions. you are also invited to join this afternoon β s session, which will be open to a broader audience. this will feature : β - simon zadek, co - director of the unep inquiry into the β design of a sustainable financial system ; β professor dirk schoenmaker from the vu university ; β james orr, chief actuary for general insurance at the prudential regulation authority, which is part of the bank of england group. β in addition, my fellow governing board member frank elderson will elaborate on de nederlandsche bank β s vision on achieving sustainable development. the role of central banks de nederlandsche bank is hosting today β | 1 |
economy, and at the same time develop new foreign exchange earning activities, be they in services or in the manufacturing sector. about a decade ago we seemed to be well on the way to creating a platform for a strong non - energy economy. you will all recall that coming out of the collapse of the first oil boom, successive governments introduced a range of macro - economic and structural reforms that set the stage for the current economic expansion. specifically, trade liberalization forced several manufacturers to re - tool and modernize their operations to compete in a more open environment. the response of our manufacturing sector remains to this day a shining example of its ability to adapt to new challenges and opportunities, a point strikingly borne out by our dominance in the caricom market. some of our manufacturers went even further afield such that we can point to some international success stories in soft drinks, alcoholic beverages and [ chocolates β perhaps there are more ]. basically, however, the relatively small size of our regional market has limited our export expansion. under these circumstances, it would have seemed a logical next step to turn in the direction of latin america. but this strategy has not been pursued as vigorously as expected. the slow progress of the ftaa negotiations may also further constrain the ability of our firms to penetrate extra - regional markets. we are now seeing from the private sector a rather interesting response to our current oil boom. what are the main elements of this response? ( i ) a couple of our large firms have made a foray in the downstream energy sector ( and this is as it should be if more of the returns from our natural resource wealth are to accrue to the national economy ). ( ii ) more generally, however, the increase in private investment in the non - energy sector has been disproportionately in nontradeables β in services directed to the domestic market rather than to exports β in shopping malls and in other kinds of real estate. ( iii ) our private sector has also developed a tremendous appetite for foreign portfolio investment ( and i would return to this later ). in short, in the midst of this current oil boom, ladies and gentlemen, our export manufacturing sector seems to have lost its dynamism to the non - tradeable service sector ( real estate, distribution and retail franchising ) and to increased portfolio investment. ladies and gentlemen, this new phenomenon is clearly reflected in the current statistical indicators. in the years immediately following trade and financial liberal | the ofso remains the only financial ombudsman scheme in the caribbean and is a respected member of the international network of financial services ombudsman schemes. β’ of the 230 banking complaints which qualified for review under its terms of reference, the ofso resolved an impressive 98 per cent over the period 2003 β 2012. more than 45 per cent of these complaints, which were directed toward issues related to accounts transactions, card services and loans and credit, were settled within 90 days ; β’ of the 2, 076 insurance complaints which qualified for review under its terms of reference, the ofso resolved an equally impressive 97 per cent over 2005 β 2012. at least two - thirds of these complaints, mainly relating to undue delay in settling claims, inadequate settlement and denial of claims, were settled within 90 days ; β’ creation of the ombudsman β s office has catalyzed banks and insurance companies into strengthening their own internal dispute resolution mechanisms to better address customers β complaints. more than one - quarter of the complaints handled by banks were resolved by agreement between the two parties. in the case of bis central bankers β speeches insurance companies, more than two - thirds of the complaints were resolved by agreement between the insurers and clients. the ofso has, therefore, earned the right to begin the transition to a more prominent role in the country β s financial architecture. against this background, the central bank and the ofso commissioned mr. david thomas, who served as chairman of the international network of financial services ombudsman schemes and was the chief ombudsman of the financial ombudsman service in the united kingdom, to prepare a report on upgrading the existing regime of financial consumer protection in line with international best practice. we have received the draft report entitled β financial services ombudsman in trinidad and tobago : a strategy for the future. β the study highlights several issues which we need to take into account in crafting a financial ombudsman scheme that complies with the fundamental principles of independence, fairness, clarity of scope and powers, effectiveness and efficiency, and accessibility, transparency and accountability. please allow me to elaborate on what i consider to be some of the critical design issues, going forward. perhaps the first and most critical design issue relates to changing the voluntary nature of the financial services ombudsman regime to one under - pinned by legislative authority. the voluntary nature of the ombudsman scheme has restricted the jurisdiction of the office to a | 0.5 |
##2 was 66. 4 million euros with an annual increase of 8. 7 percent. the gross premiums written by insurance companies until september 2022 marked the value of 98. 2 million euros or an annual increase of 13. 0 percent, while the gross paid claims marked the value of over 42 million euros or an annual increase of over 25 percent. even the pension sector during this year was characterized by growth, compared to the previous year. the total value of pension sector assets in september 2022 reached 2. 3 billion euros compared to 2. 2 billion in september 2021, which corresponds to an annual increase of 4. 2 percent. the pension sector until september 2022, due to the unfavourable conditions in the international financial markets, recorded a poor financial performance, marking a negative return on investments in the amount of about 170 million euros. the new pension contributions during this period marked the value of around 177. 5 million euros. as for the sector of microfinance institutions and non - banking financial institutions, until october 2022, the assets of this sector reached the value of 386. 1 million euros, marking an annual increase of 12. 6 percent. in total, the active loans of this sector in october reached the value of 276 million euros, or an annual increase of 18. 4 percent. the average interest rate on new loans issued by microfinance institutions in october was 19. 0 percent, which in the same period last year was 20. 6 percent. even in this sector, the good quality of the credit portfolio is assessed with a rate of nonperforming loans of 2. 9 percent. cbk has continued its commitment also in the function of protecting the rights of consumers of financial services, thus directly serving the protection of citizens'interests. until november of this year, the number of complaints reviewed by the cbk reached 810 complaints. the cbk's commitment to protecting the rights of consumers of financial services, either through financial education programs or through corrective measures against financial institutions, has been and will remain a priority of the cbk in the coming years. 4 / 5 bis - central bankers'speeches as far as internal developments are concerned, cbk has also continued during 2022 with the advancement and development of its professional capacities in all areas of its operation. despite the created situation and not very favourable conditions in the international markets, the central bank of the republic of kosovo has managed to maintain its financial stability and good performance of the institution, | the provision of services for fees are the basis of islamic finance contracts. islamic finance is therefore systematically backed by real assets. moreover, it prohibits speculation and the financing of production or trade in specific sectors. on the one hand, these principles can be considered to provide stability for the financial system. indeed, in islamic finance, unbacked expansion of credit is precluded, and banks cannot initiate or accentuate a speculative process. credit is based on real savings and savings can only earn a return if directly invested in creating activities. finance and the real economy are closely linked. in the islamic system, banks can neither carry highly leveraged exposures nor acquire risky financial structured products. by the way, even if the islamic nature of their finance is not the only explanation, we can note that islamic finance countries, compared with those of conventional finance, have been relatively less impacted by the crisis. but on the other hand, islamic banks pose risks to the financial system that in many regards differ from those posed by conventional banks, with respect, for example, to liquidity, operational and legal risks. indeed, islamic banks face specific obstacles in liquidity management, as the prohibition of interest has led to the underdevelopment of funding sources. moreover, operational risk and legal uncertainty can be amplified by the lack of product standardization and the lack of harmonization of islamic standards, with for example possible differences between shariah scholars'interpretations, accounting standards, and so on. in the same way, prohibition from financing specific sectors limits the kind of eligible assets for investment, which contributes to increasing the risk of concentration in potentially cyclical sectors such as real estate. this is what happened in certain gulf countries. β’ as the analysis of the principles of islamic finance does not settle the issue of the relationship between islamic finance and financial stability, it needs to be supplemented by an empirical analysis. in fact, there is relatively little empirical analysis regarding the role of islamic banks in financial stability. nevertheless, a working paper of the international monetary fund was published at the beginning of 2008. 5 the findings of this paper are to be viewed as preliminary. nevertheless, it has the advantage of being, as far as i know, the first and, up to now, only cross - country empirical analysis of islamic banks β impact on financial stability. even if the situation may in principle differ from country to country and even from bank to bank, the paper finds that : - ( i ) small islamic banks tend to be financially stronger than | 0 |
of the policy makers and practitioners to find the right solutions for various groups of people. ladies and gentlemen, i truly believe that this seminar would allow an invaluable opportunity for us to learn how to solve these puzzles from honorable speakers who have come a long way to share with us their enriching experiences and lessons - learnt. the achievement of effective financial education and behavioral change would eventually drive the global community towards a more financial - literate and disciplined population who would help ensure sustainable growth and equality in our society. lastly, i wish the seminar a great success. i also wish to express my sincere appreciation for all of your endless efforts in promoting financial inclusion and financial literacy. thank you. bis central bankers β speeches | peer - to - peer lending platforms. these developments are results of our shared visions and collaborative efforts undertaken by all stakeholders to advance our digital finance ecosystem. these include thai banks β aim to reduce cash usage and payment cost, leading to collective investment in the new faster pay infrastructure ; banks β and non - banks β leveraging on the interoperability of our open infrastructure and common standards to compete and expand the range of products and services ; and regulators β and policy agencies β active roles in promoting financial innovations and digital adoption. fintech and digital finance have been and will continue to be among the top policy agenda of the bank of thailand. we need to further develop digital finance infrastructure, promote innovation, enable dynamic competition, and enhance adoption by the thai people and businesses. ladies and gentlemen, while technology advancement and technology adoption will remain crucial, there is another important aspect of financial services that we must not forget as we move on with our fintech agenda : the value of financial network. unlike other products and services, financial services will serve the people and the society best only when money β either in the form of physical cash or digital money β can freely flow without cost and friction. in today β s digital world, it is equally important that individuals and society can benefit from financial transaction data. therefore, preserving and strengthening the value of financial network will be imperative in advancing the development of our financial system. on the opposite end of a strong financial network is fragmentation, whereby financial systems and payment services become fragmented by the use of different core infrastructures or different standards that are controlled by a few dominant players. with different standards and core systems, financial transactions and data flows will face frictions, which will discourage competition, collaboration, and innovation. in the world of big tech, strengthening the value of our financial network is critical for a small economy like thailand, and it needs to be done so that our network remains dynamic and efficient, fostering an ecosystem conducive to innovation and competition. the nature of financial services requires that we emphasize on strengthening the value - added of our financial network. therefore, the transformation towards digital finance cannot be efforts of individual firms alone, and we need to focus on creating the digital finance ecosystem with active collaboration from a wide range of stakeholders. ladies and gentlemen, today i would like to take this opportunity to highlight four important principles that have underpinned our recent developments and will continue to guide our fintech agenda. these are principles that will strengthen the value of our financial network | 0.5 |
metrics, such as price - to - earnings ratios, corporate bond yields, and property capitalization rates, appear notably less stretched when judged relative to low treasury yields. that said, treasury yields reflect historically low term premiums β the compensation investors demand to hold assets over a longer horizon. this poses the risk that term premiums could rise sharply β for instance, if investor perceptions of inflation risks increased. i will return to this risk later. although asset valuations are elevated, vulnerabilities due to debt owed outside the financial sector appear to be moderate β in the middle of their historical range. this reflects elevated leverage in the nonfinancial business sector and a moderate pace of borrowing in the household sector. in the nonfinancial business sector, the debt - to - earnings ratio has increased to near the upper end of its historical distribution, and net leverage at speculative - grade firms remains especially elevated. overall, however, the ratio of nonfinancial - sector borrowing to gross domestic product has been below an estimate of its trend for several years as a result of the deleveraging of the household sector following the crisis. while the sustained period of postcrisis household deleveraging appears to have come to an end and savings rates have recently moved down, overall borrowing has been at a moderate pace and, on net, concentrated among borrowers with high credit scores. even though the balance sheet of the household sector as a whole appears relatively strong, recent years have seen a rapid rise in student debt as well as rising default rates for borrowers with subprime credit scores on auto loans and, more recently, credit card balances. beyond the nonfinancial sector, the vulnerabilities associated with maturity and liquidity transformation in the financial system appear to have fallen significantly relative to the levels seen prior to the crisis. the amount of wholesale short - term funding, which proved to be a substantial source of run risk during the crisis, has dropped substantially since its peak in 2008. money market funds, which had been an area of vulnerability in the crisis, have undergone important reforms, including a move to floating net asset values for prime institutional funds along with the imposition of fees and restrictions on redemption. the anticipation of the enactment of these reforms in october 2016 led to a large decline in the level of assets under management at the affected funds, which has since held steady. so far, the growth of alternative short - term investment vehicles that could pose similar risks appears | large banking institutions releasing the capital and liquidity buffers that they have built so effectively over the past few years, especially since credit growth and profitability in the u. s. banking system are robust. of course, if cyclical pressures continue to build and financial vulnerabilities broaden, it may become appropriate to ask the largest banking organizations to build a countercyclical buffer of capital to fortify their resilience and protect against stress. alternatively, if there were to be a 5 / 7 bis central bankers'speeches material adjustment to the calibration of the structural buffers held by the large banking institutions, it would be important to make a compensating adjustment to the countercyclical buffer in order to achieve the same overall resilience to financial vulnerabilities. as a rough rule of thumb β and as described in the board β s framework for implementing the ccyb, which was finalized in september 2016 β the criteria for setting the ccyb are calibrated so that the ccyb will be above its minimum value about one - third of the time, assuming that vulnerabilities evolve as they did pre - crisis. it is worth noting that some other jurisdictions have designed their countercyclical buffer requirement to be above zero roughly half of the time β spanning a greater range of economic conditions than in the united states. this may reflect a difference in the relative emphasis on structural buffers relative to cyclically varying buffers. it is worth noting that, although u. s. structural buffers are on the stronger end of the range internationally, the u. s. banking system is also among the healthiest and most competitive in the world. credit growth is robust, and banks are registering strong profitability relative to their international peers. conclusion our financial stability agenda seeks to reduce the likelihood and severity of financial crises. in the wake of the 2007 β 09 financial crisis and recession, we learned important lessons about the critical necessity of monitoring emerging financial vulnerabilities in a systematic fashion and taking corresponding prudential, macroprudential, and countercyclical policies to build resilience. we undertake systematic assessment of financial vulnerabilities as an important input into our policymaking processes β helping to calibrate the prudential, macroprudential, and countercyclical policies that are our first lines of defense, in addition to informing fomc deliberations because of the important feedback loops | 1 |
is not a sufficient reason for dismantling one of our most successful sectors. moreover nationalisation has been tried in many countries and its record is poor. it may reduce the risk of shocks but generally only at a heavy cost in misallocation of resources ( and usually a continuing drain on the public purse ). in my view it should only be a very last resort. the aim of the game should be to manage the system so that society can enjoy the gains of a flourishing financial sector β the efficient allocation of resources and transfer of risk β whilst minimising the threats to economic stability. so we need to have effective systems not just for preventing crises but for dealing with bank failures if and when they happen. the collapse of securitisation markets in august 2007 and the failure of northern rock revealed gaps in the uk β s arrangements, with the benefit of hindsight, the main problem was not the handling of the initial rescue β although the tripartite β s footwork may have owed more to john sergeant than fred astaire. but i don β t think anyone believes now that the business could have been saved. it was in terminal difficulties and it was right to rescue it and protect depositors. the bigger problem was that, having stepped in, the authorities were hamstrung by the inadequacy of the legal powers to resolve it quickly and cleanly. we have learned from that autumn β s experience. since then we have found imaginative ways to provide the market with the liquidity it needs ( through the special liquidity scheme, long term repos, and now the discount window ), we led the world in recapitalising banks in the autumn and we have resolved the banks which could not survive swiftly and effectively both through private sector solutions and through the use of statutory measures. i am delighted that tomorrow the first parts of the new banking act come into effect and give the bank of england new powers to resolve failing banks and protect depositors. at the heart of the act is the creation of a special resolution regime for uk banks and building societies. the fsa will have the power to trigger this regime before an institution becomes insolvent. and once a bank is in the regime, the bank will have the powers to arrange for it to be wound up, drawing on a new bank - specific insolvency - procedure, or to transfer the whole or part of the bank to a commercial purchaser, if necessary via a temporary bridge bank owned | 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 β 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 β coronabonds β 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 β omt bazooka β being delinked from an eccl programme? these are political decisions, which are not within the ecb β s remit. that being said, | 0 |
said, β if you had asked people what they wanted, they would have said a faster horse β. the industry needs to lead development. as a regulator, we want our financial sector to benefit from continuous progressive development, but without creating undue financial or monetary stability risks. our message to investors and fintech players would then be, keep innovating with these perspectives in mind. rest assured, we will play our part in promoting a safe and conducive environment for innovation. as part of our initiative, we also from time to time, organise challenge events to recognise innovation and impactful solutions through incentives and awards. the most recent being during myfintech week. but later in the year, we will have another event and recognition series. i would thus like to invite you to participate in the royal award for islamic finance impact challenge prize 2022. this is a new initiative that aims to reward innovative creations and solutions that strengthen the economic and social resilience of financially impacted communities globally through the application of shariah principles. but you β ll have to hurry as applications have been open awhile and will close on 25 march 2022. with that, i wish you success and a productive engagement today. thank you. 1 various publications of fintech malaysia report mckinsey article, june 2021, β financial data unbound : the value of open data for individuals and institutions β [ link to article ] 4 / 4 bis central bankers'speeches | challenges lie ahead of us. volkan bozkir, president of the united nations general assembly, somewhat summed it up for us as follows ; β during this pandemic, the most vulnerable have been the hardest hit. we must increase our resilience. we must work together and take an integrated approach to health, hunger, climate and equity crisis β. in facing some of these challenges and to significantly help us along the way, we need to make the best use of technology, and more specifically for us, fintech as it can play an instrumental role in supporting malaysia β s long - term resilience, growth and sustainability. connecting this with capital, and entrepreneurs, as we are today, is the right step forward in this undertaking. let me now share some specific thoughts on how capital can address some of the key pressing gaps in malaysia. the first is advancing the sustainability agenda. as malaysia charts its path towards net zero, significant investments are required to fund a range of mitigation and adaptation efforts. 1 / 4 bis central bankers'speeches initiatives such as renewable energy, green buildings and low carbon cities work to reduce malaysia β s carbon footprint, whereas measures such as safeguards against rising sea levels and extreme weather are needed to improve climate resilience. these add up to an estimated rm350 β 450 billion of investment needed over the period of 2021 β 2050 to reach our net zero ambition. from the perspective of businesses including fintech startups, aligning with the nation β s sustainability objectives could require pivoting to new sustainable business models, recalibrating existing practices, adopting new technology, and subscribing to certification and mitigation efforts against possible climate - related disruptions. all of these will create significant demand for green and transition funds in the coming years. public sector funding is being directed towards these efforts, but the private sector plays a critical role in completing the picture. institutional investors and large asset managers, through their capital allocation, can directly steer the flow towards climate supportive activities. institutional investors have the capacity to take on a stewardship or active ownership role, encouraging and influencing investee companies to seriously consider their sustainability impact. by choosing to actively support malaysia β s sustainability journey, investors not only contribute to the generation of positive impact, but also best position themselves to benefit from green and transition business opportunities in the future. progress has been promising. investments into global sustainable finance stand at around usd30 trillion to date. closer to | 1 |
andras simor : anchor 2013 speech by mr andras simor, governor of magyar nemzeti bank ( the central bank of hungary ), at the anchor 2013 conference, budapest, 7 december 2012. * * * ladies and gentlemen, two statements, three proposals : these will be the main points of my speech today. let me begin with the first statement. first statement : predictability and stability are required for growth let us try to imagine that hungary is a successful country once again. admittedly, this is no easy feat as we enter the fifth year of the crisis. still, let us toy with the idea. what does success mean in economic terms? it means at least three things. if you want to work, you can find a job. your income increases. and last but not least, you need not worry about inflation, or your savings losing their value. in other words, success also requires price stability. every country that we can consider as a model has price stability. even where inflation is not on target at present, monetary policy has managed to create a persistently low inflationary environment, which ensures that the expectations of economic agents are well anchored. price stability is not the luxury of rich countries, it is a prerequisite for growth. price stability is an indispensable component of a predictable economic environment where it is worth investing and creating jobs. when prices are stable, the highest rate of economic growth can be reached over the longer term, not only in developed countries but also in emerging ones. however, in addition to price stability, growth also requires predictability in terms of laws, regulations, taxes, that is, the predictability and stability of the entire regulatory environment for businesses. second statement : hungary has a severe growth problem, which cannot be remedied by fiscal and monetary stimulus. what is more, the recovery from the debt trap is hindered not only by the adverse international environment, but also by a complex crisis of confidence. hungary β s potential growth already slowed down before the crisis, and the process of catching - up with the euro area halted close to a decade ago. before the crisis, analysts mostly blamed the problem on the long - term unsustainability of the budget and the disincentives prevalent in the labour market. the tax wedge, which was excessively high compared with other countries of the region, the welfare benefits system, which was too generous for our level of development, and tax evasion due | of money markets as soon as possible. after the acute stage those risks abated, even though the high level of debt and the volatile risk environment continues to demand great care in the implementation of monetary policy. on the other hand, the decisions of the central bank may gradually return to normal, as inflation and growth prospects come into focus again. what are the current dilemmas of monetary policy? at the beginning of the crisis, we saw that the protracted recession upset all of the price and wage - setting routines that had led to the stubborn inflation of previous years. disregarding bis central bankers β speeches the effects of tax increases and commodity prices, hungary has as low rate of inflation as its neighbours. price stability, however, is not merely a question of the level of inflation today ; rather, it depends on what economic agents think about future inflation. even though demand continues to be subdued, we think that the disciplined price and wage - setting behaviour which the private sector has exhibited in the past two or three years is beginning to loosen up, and analysts β longer - term inflation expectations have also risen. it is to be feared that β as a result of the repeated additional price rises due to a sequence of tax measures, rising commodity prices and soaring food prices β economic agents will consider an inflation rate considerably above the target to be normal. in such a situation, it is very difficult to assess the level at which inflation will settle when the extra price increase generated by the government no longer has an effect. the various answers to this question also contribute to the division in the monetary council. in my opinion, when inflation expectations, i. e. the longer - term inflation outlook, become uncertain, the central bank should act much more firmly to keep price and wage - setting behaviour disciplined. why is price stability important now? some think that β regardless of the answer to the question of whether the high inflation will β fall or stick β β the central bank must abandon its rigid stance and give priority to growth. this is a peculiar idea in a country where economic policy in the past two decades has always seen the solution in inflating away macroeconomic problems, without any tangible improvement in growth, i might add. indeed, we had to learn the hard way that even though leniency on inflation may appear attractive in the short term, it has never produced any welfare gain. by contrast, our neighbours β who have created price stability with consistent and tight monetary policy and a supportive fiscal policy β are leaving us | 1 |
of the new environment. this may involve significant changes to the governance arrangements, the empowering legislation, the skills required, the role of communications, the human capital management and development and the organisational culture. indeed, capacity building is a further robust area of collaboration in the asian region. going forward, asia β s participation in the global economic and financial system is set to increase exponentially. as the countries of the region connect with each other and the rest of the world, there is every reason to hope for a better future of sustained stability and enhanced growth prospects for the benefit of the regional and world economy. | zeti akhtar aziz : the mandate and roles of asian central banks keynote address by dr zeti akhtar aziz, governor of the central bank of malaysia, at the bank of korea international conference 2010 β the changing role of central banks β, seoul, 31 may 2010. * * * it is my great honour to be invited to speak at the β bank of korea international conference 2010 β, held this year in conjunction with the 60th anniversary of the bank of korea. let me take this opportunity to congratulate the bank of korea on this special occasion. the bank of korea can take great pride in its achievements during these six decades. from its establishment in june of 1950, the bank of korea has devoted great efforts to provide a stable and conducive macroeconomic environment and to build an effective financial system that has facilitated the growth of the korean economy and its long - term sustainability. this recent decade has been the most challenging for policymakers, in particular, for central banks. in the late 1990s, the asian region was confronted with a severe crisis, and about a decade later, the world was confronted with a financial crisis of unprecedented global proportions. while asia was adversely affected by these crises, there was a rapid return to recovery, both during the asian financial crisis and during this recent global financial crisis. for the bank of korea, the courageous policy responses to some of the very tough challenges presented during these episodes can be judged by the results that have been achieved. there is now a cause for optimism in the present circumstance. korea is recognised as one of the economies that has been the fastest to recover from the crisis. the exceptional work by the bank of korea has been an important element in this unwavering resilience of the korean economy. as the nature of globalisation changes and as financial innovation intensifies, the world has become more complex and less predictable. while the trend for greater trade orientation continues, changes in comparative advantage and shifts in the direction of global demand have transformed the trade patterns in the global economy. in addition, the financialisation of savings and the increased diversification of these funds into financial markets have increased the impact of these markets on the real economy as the performance of these markets experience booms and bust. the greater integration of financial markets across borders has also increased the potential for its effects to be rapidly transmitted from one financial system to another market in another part of the world. in this new environment, the greater interdependence arising | 1 |
##ized supervisory approach has been adopted for commercial banks, nonbanking financial companies ( nbfcs ) and urban cooperative banks ( ucbs ), with greater emphasis on identifying and addressing the root causes of identified vulnerabilities. 13. to enhance the effectiveness of supervisory frameworks, the reserve bank has employed various analytical tools. these include an early warning system, stress testing models, vulnerability assessments, cyber key risk indicators, phishing and cyber reconnaissance exercises, targeted evaluations of compliance with kyc / aml norms and micro - data analytics, among others. additionally, the reserve bank is in the process of adopting advanced analytics, artificial intelligence, and machine learning 2 / 5 bis - central bankers'speeches into supervisory data, while taking necessary safeguards, to gain even deeper insights into the operations of supervised entities. these initiatives reflect the reserve bank's commitment towards harnessing the power of technology and data - driven approaches to strengthen its supervision. 14. realising the importance of adequate skill and capacity building in supervisors, the reserve bank has set up a dedicated college of supervisors ( cos ). the college has been conducting a large number of general and specialised training programmes. an integrated learning management system has also been rolled out to facilitate continuous learning and updation. focus areas for supervisors 15. moving forward, i would like to emphasize nine specific areas where supervisory rigor should be directed more emphatically. 16. firstly, governance is of paramount importance and invariably at the root cause of supervisory concerns. effective corporate governance and sound regulation go hand in hand, reinforcing each other. the recent bank failures in advanced economies have underscored the pressing need to address governance concerns head - on. 17. secondly, supervisors must closely examine the business models adopted by banks and meticulously assess whether these models align with the institutions'risk appetite. this evaluation should delve into the level of business growth projections, sustainability of earnings potential, extent of diversification, provisioning cover, and appropriate pricing mechanisms, etc. 18. thirdly, supervisors need to examine it issues holistically. it is crucial to determine whether banks have the capacity to develop robust it systems that align with their business strategies. future - proofing by banks of their it infrastructure becomes imperative, necessitating strategic investments in both capital and operational expenditure. as virtual work environments and cyber risks become more prevalent, effective it governance takes on heightened significance. 19. fourthly, supervisors must focus on the efficacy of assurance functions viz | innovative mechanisms through memorandum of understanding between the rbi and the state governments to overcome issues of dual control and ensure better co - ordination, which were found to be successful when adopted for re - vamping the urban co - operative banks, have also been adopted in the ongoing programme of revival of the rural cooperative system. beyond deregulation and competition as the reform progressed, it was assumed that deregulation and competition would enhance efficiency and ensure better than before quality of service at reasonable but competitive cost to the customers. however, while many improvements have taken place, entirely as expected, several adverse features in regard to retail customers were noticed particularly in respect of a few banks. apart from issues of appropriate pricing, instances of unequal contracts, unfair trade practices, non - transparent fees, intrusion into privacy, excessive penalties, delays in cheque - clearing, arbitrary revision of interest rates or equated monthly instalments, usurious interest charges in some cases and excesses by loan recovery agents have been noticed warranting several institutional, policy and procedural interventions by rbi. a delicate balance between competing considerations is needed but to the extent banks have special privileges, the regulator who has granted such privileges has a responsibility to ensure financial deepening and widening in an efficient, fair and equitable manner. rbi considers delicate balances of these considerations to be critical for both growth of financial sector and a meaningful contribution of financial sector to growth and employment. latest initiatives the rbi β s mid - term review of annual policy statement, october 30, 2007, refers to some new initiatives that are worth noting. first, an internal working group has been constituted to consider recommendations made by a committee on agricultural indebtedness ( chairman : dr. r. radhakrishna ). second, recommendations of a technical group ( chairman : s. c. gupta ) on improving the legal and enforcement framework relating to money lenders was forwarded to state governments for appropriate consideration. third, the national commission for enterprises in the unorganised sector ( chairman : dr. arjun k. sengupta ) submitted a comprehensive report to the central government. a working group is being constituted to study those recommendations which relate to the indian financial system. fourth, it is proposed to review the working of lead bank scheme and related arrangements of coordination between rbi, banks, nabard, state government at the state and district levels. the review of these institutional arrangements for development oriented banking would help design a new framework reflecting not only the new orientation such as financial inclusion | 0.5 |
jerome h powell : semiannual monetary policy report to the congress testimony by mr jerome h powell, chair of the board of governors of the federal reserve system, before the committee on financial services, us house of representatives, washington dc, 21 june 2023. * * * chairman mchenry, ranking member waters, and other members of the committee, i appreciate the opportunity to present the federal reserve's semiannual monetary policy report. we at the fed remain squarely focused on our dual mandate to promote maximum employment and stable prices for the american people. my colleagues and i understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2 percent goal. price stability is the responsibility of the federal reserve, and without it, the economy does not work for anyone. in particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all. i will review the current economic situation before turning to monetary policy. current economic situation and outlook the u. s. economy slowed significantly last year, and recent indicators suggest that economic activity has continued to expand at a modest pace. although growth in consumer spending has picked up this year, activity in the housing sector remains weak, largely reflecting higher mortgage rates. higher interest rates and slower output growth also appear to be weighing on business fixed investment. the labor market remains very tight. over the first five months of the year, job gains averaged a robust 314, 000 jobs per month. the unemployment rate moved up but remained low in may, at 3. 7 percent. there are some signs that supply and demand in the labor market are coming into better balance. the labor force participation rate has moved up in recent months, particularly for individuals aged 25 to 54. nominal wage growth has shown some signs of easing, and job vacancies have declined so far this year. while the jobs - to - workers gap has narrowed, labor demand still substantially exceeds the supply of available workers. 1 inflation remains well above our longer - run goal of 2 percent. over the 12 months ending in april, total personal consumption expenditures ( pce ) prices rose 4. 4 percent ; excluding the volatile food and energy categories, core pce prices rose 4. 7 percent. in may, the 12 - month change in the consumer price index ( cpi ) came in at 4. 0 percent, and the change in the core cpi was 5. 3 percent. inflation has moderated somewhat since the | yves mersch : interview in wall street journal interview with mr yves mersch, member of the executive board of the european central bank, in wall street journal, conducted by mr brian blackstone and mr tom fairless and published on 1 february 2016. * * * over the last few months we β ve seen oil and commodity prices bringing down inflation. how worried should the ecb be about this, or is it providing the economy with a stimulus? the whole issue is how you see it on the time axis : is it a temporary, exogenous phenomenon where you can look through it, or are you to be worried that over a longer period you have second - round effects and a dis - anchoring of inflationary expectations. there are obviously some positive effects from low oil prices. it gives many companies additional leeway to invest or repair their balance sheets. all in all this is also a signal which is pointing to future resilience of the moderate pace of recovery. how much should the ecb respond to deviations from its target of just below 2 %, when it β s being driven by oil? is there a danger the ecb is reacting too mechanically to deviations from its target? let me first put things straight : i do not consider that we have an inflation target. we have a quantitative definition of price stability over the medium term and we assess the risks to price stability according to our two pillars, the real economy and the monetary pillar. we see that both pillars show a lot of positive developments. there is resilience in output, and there is reduction of slack in the economy and the labor market. but overall there is still slack in the system. then we see this is happening in an environment of abnormally low inflation. we will probably move into negative territory from spring until early summer if we mechanically adjust our projections. this brings us into a zone of discomfort. we have not precisely defined what we understand as medium term, but it is not necessarily equal to our projection horizon. for example some of our measures that we have decided in december will last until 2019. the reinvestment and the liquidity effect of the recalibration in december will exceed three years. we will be seen in the category of flexible inflation targeters but not inflation targeters where we have a point landing promised on day x. does this indicate a hesitance about doing more in march? no, each time we meet, we assess the economic situation. and each | 0 |
board or the federal open market committee. 2 / 2 bis - central bankers'speeches | michelle w bowman : brief remarks - " fed listens " brief remarks by ms michelle w bowman, member of the board of governors of the federal reserve system, at a fed listens event on transitioning to the post - pandemic economy, hosted by the federal reserve bank of richmond, richmond, virginia, 18 october 2023. * * * thank you, tom. it is a pleasure to join you to take part in today's conversations. 1 when we started fed listens back in 2019, the initiative was part of a broad, comprehensive review of the decisionmaking framework we use to pursue our monetary policy goals of maximum employment and price stability. we met with people across the country from a wide range of backgrounds and perspectives, and we learned a lot about how our monetary policy actions affect them, their businesses, and their communities. in light of the valuable insights we gained in those original listening sessions, we decided to expand the scope of fed listens to become an ongoing process of consultation with the public. i look forward to learning from the perspectives of today's participants, our panelists, as well as those of you in the audience. through fed listens and other board and system convenings, we are able to gain important insights about economic conditions by engaging directly with those experiencing the economy. your views and experiences supplement the economic data that we monitor, providing important color and context. these discussions help us gain a deeper understanding of the ongoing burden from high inflation - from the considerations for families in making spending decisions to the factors weighed by business owners in applying for loans to make capital investments like new buildings or equipment to expand operations. these conversations help us look beneath the national level to see how americans in different areas of the country are faring. i am sure that some of the issues and challenges that we will hear about today are unique to the federal reserve's fifth district, while other themes will be broadly similar to those experienced in different areas of the country. this local perspective is one of the great advantages of the federal reserve system's regional structure and of the fed listens initiative. the conversations here today also help inform our thinking as we head into the next meeting of the federal open market committee. inflation has come down, but we know that it is still too high, and it can be especially difficult for those least able to manage the higher costs of essentials like food, housing, and transportation. my colleagues and i are highly focused on returning inflation to | 1 |
this but 40 % of our budget goes to social services. our growth story has been supported by structural and policy reforms in the economy for around three decades. these reforms enable growth by expanding the role of market forces in key sectors of the economy ; encouraging investments and private sector activity ; removing bottlenecks to doing business and investments in the country ; and strengthening the country β s fiscal position and the financial sector. these, and other structural reforms in the pipeline, will continue to play a significant role in propelling the economy toward a balanced, sustainable, and inclusive growth. in addition, recently approved legislation β such as the bsp charter amendments, philippine identification system ( philsys ) act, national payment systems act and the gold law β allow us to pursue our mandate with more vigor and in effect, enable us to espouse the interests and uplift the lives of all filipinos. so what is the role of bsp in the philippines β growth narrative? our mandate is clear : β maintain price stability conducive to a balanced and sustainable growth of the economy and employment. β our objective in the bsp is to protect the real purchasing power of the peso to support conditions for long - term economic growth. with your presence in this annual corporate planning and budgeting process summit, i know you are fully aware of the importance of efficient allocation of resources. as a central banker, i would argue that price stability is closely linked with financial efficiency. if the prices are low and stable, financial planners are better equipped to allocate resources to their most efficient use. lesser price volatilities would also enable us to anticipate risks and plan better. and with our amended bsp charter, we are now in a better position to implement sound policies to promote and maintain price stability, a strong financial system, and a safe and efficient 2 / 6 bis central bankers'speeches payments and settlements system. in terms of price developments, we are on track to achieving our inflation target of 2 to 4 percent for 2019. to give you some context, our june inflation declined to 2. 7 percent from 3. 2 percent in may, the lowest inflation recorded in more than 20 months since august 2017. later this morning, the philippine statistics authority ( psa ) will announce the average percentage of inflation for july. my forecast is that it will settle within the range of 2. 2 β 2. 8 percent. this sits comfortably within the government β s target band, in line | all an additional perspective that you can use in your future corporate planning process going forward. i look forward to an engaging discussion with you this morning. 6 / 6 bis central bankers'speeches | 1 |
mumbai interbank outright rate ( mibor ), first introduced by the national stock exchange ( nse ) in 1998 and computed through a polling process, is now based on actual transactions. the mumbai interbank forward outright rate ( mifor ) has been transformed into the modified mifor using the alternate reference rate, secured overnight financing rate ( sofr ) instead of libor in line with the global transition away from the libor. modified mifor is now being used for all new contracts. new benchmarks have also been introduced in various market segments viz., market repo overnight rate ( mror ), t - bill rate and certificate of deposit ( cd ) rate. 8. indian financial markets have witnessed substantial growth in the last few years, facilitated, in part, by the availability of robust benchmarks. the mibor benchmark is the underlying reference rate for mibor overnight indexed swap ( ois ) contracts. the open interest has increased from βΉ19 lakh crore in fy 2017 to βΉ77 lakh crore in current fy 2023. there is also a growing offshore market for mibor based ois ( nd - ois ). in the currency market, the usd - inr reference rate is used by many domestic users, including corporates. the reference rate is used for settlement of non - deliverable forwards ( ndfs ) and exchange - traded futures as well. the average daily turnover in inr ndfs has increased from around us $ 16. 4 billion in 2016 to us $ 46. 4 billion in 2022. during the same period, the average daily turnover in exchange traded currency futures in india increased from us $ 2. 8 billion to us $ 6. 6 billion. as markets have grown, the pool of assets using fbil benchmark rates for valuation has also grown. 9. an ideal benchmark is one which is anchored in observable transactions in a liquid market with a diverse set of participants and which remains robust in the face or market disruption and minimises scope for market manipulation. but the realities of many markets β globally and in india β are far from this utopian world. the reforms associated with benchmarks over the last several years have, therefore, focussed on effectively addressing the shortcomings in benchmark design and the absence of robust governance processes that contributed to past abuses and in instilling confidence in financial benchmarks through reforms in benchmark governance, design, quality and accountability mechanisms. challenges | , published a new vision and strategy document ( vision 2010 ) for the nps in april this year. the purpose of this document was to provide high - level strategic guidance for the payment system up to 2010. finally, there appears to be a general misunderstanding that the bank has a " hands off " approach to the oversight and regulation of the nps. i would remind all nps stakeholders that section 10 ( i ) ( c ) of the south african reserve bank act states clearly that the bank, " perform such functions, implement such rules and procedures and, in general take such steps as may be necessary to establish, conduct, monitor, regulate and supervise payment, clearing or settlement systems β. furthermore, as i noted earlier, the 2004 amendment to the nps act makes provision for the bank to issue directives pertaining to the nps. we raise this issue as the bank will soon be issuing directives in terms of the nps act which will regulate non - bank participants in the nps for the first time. we have noticed that the number of nonbank participants has increased to the extent that the risk associated with their operations and the risk that they bring to the clearing and settlement environment requires some formalisation. of particular relevance in this regard are system operators and third party service providers, who mostly operate in or on behalf of the retail sector. we want to make it clear, particularly to the banking sector, that strict regulation will be applied as far as the nps is concerned. this should not be perceived negatively, nor do we wish to stifle innovation or competition in the industry. however we need to apply strict supervision and regulation to both bank and non - bank participants in the critical area of the nps and avoid the risk of turbulence that may emanate from a hands - off approach to regulation. this may require some adjustment to current structures in the nps and the bank will have to start playing a far more prominent role in areas such as supervision, regulation and licensing of participants. we also need to ensure that these newly regulated entities have channels to engage with the bank and other stakeholders, including pasa, in a fair and transparent way. the bank has already initiated discussions with various international central banks and consulted with nps stakeholders with a view to adopting a model which will facilitate such engagement. this may take some time but i can assure you that the bank will continue with the collaborative approach it has used for nps matters in the past before making any final decisions in | 0 |
listening. i look forward to taking your questions. bis central bankers β speeches | more or less forward - looking ) phillips curves. for example, by now in academia and in central banks, the new keynesian dynamic stochastic general equilibrium framework, which includes an expectations - augmented phillips curve, provides one of the workhorse models for monetary policy analysis. the policy advice offered by this framework stresses the importance of the management of private sector expectations even more than the traditional time inconsistency literature. according to woodford ( 2003 ), β not only do expectations about policy matter, but... very little else matters. β even if one does not completely share this view, well - anchored inflation expectations are a prerequisite for achieving the primary objective of many central banks nowadays : price stability in the medium - term and also undoubtedly are a crucial measure of a central bank β s performance and credibility. inflation expectations therefore closely link the success of monetary policy to its credibility ; and the latter is supported if the central bank follows a systematic decision - making process, that is a rule - based policy strategy, and the general public has as clear an understanding of it as possible : in other words, monetary policy is transparent and communicated effectively. these advances in monetary policy, especially the anchoring of inflation expectations, in my view have been the main driving forces for globally declining inflation rates over the past few decades. but what is important to understand at the current juncture : the successful anchoring of inflation expectations and the more effective monetary policy response to inflationary shocks will both show up in a flatter phillips curve when it is estimated in reduced form. this is, in fact, an application of goodhart β s law : for example : once monetary policy is responding more effectively to inflationary pressures due to changes in capacity utilisation, the output gap will empirically lose the information content that has qualified it to play the role of a leading indicator. the empirical evidence of a flatter phillips curve is an empirical phenomenon that has been documented for several economies, including the united states and the euro area ( see, for instance, bis ( 2006 ) ). one common explanation for this phenomenon has been that globalisation of goods markets changed both trend inflation as well as the cyclical dynamics of the inflation process. but as also stated by rick mishkin ( 2007 ), the main reason for this is as i believe monetary policy having been more successful in stabilising both inflation and output. the question of who deserves the credit is by no means a theoretical exercise. it has | 0 |
overall effect of these interactions would impact overall on growth. these perspectives call for measures that boost both labour productivity and labour input. in a market economy, employers, employees and the self - employed have a number of instruments and options at their disposal to increase labour productivity and labour input. however, there is also room for improvement with regard to the economic conditions within which businesses operate. first, the capacity for innovation in switzerland should not be allowed to decline. therefore, policies fostering education and research are called for. second, switzerland ought to continue to attract more investment. in other words, domestic investment should become more attractive. in a globalised world, switzerland's attractiveness as a business location in an internationally competitive environment should continue to improve. third, the economically active population could be strengthened by increasing the number of qualified immigrants. there is a substantial pool of labour from which to recruit not only within the european union ( eu ), but also in other regions. at the same time, switzerland's employment quota could be lifted if more women now living in switzerland entered the workforce. the key to achieving this goal is striving for a greater work life balance, i. e. combining a career and family life for both parents. for example, more women should have the option to work fulltime on a permanent basis. | niklaus blattner : the demographic challenge β macroeconomic perspectives summary of a speech by mr niklaus blattner, vice - chairman of the governing board of the swiss national bank, at the conference " die alternde gesellschaft als sozio - okonomische herausforderung " ( the aging society : a socio - economic challenge ), university of basel, basel, 9 february 2007. the complete speech can be found in german on the swiss national bank β s website ( www. snb. ch ). * * * demographic aging, i. e. the growing average age of the population, or the reversal of the age pyramid, is also a matter of concern for a central bank. without a careful analysis of the long - term developments in the real economy, any monetary policy assessment, and consequently any inflation forecast, will be inadequate. in addition to the activities in the money and capital markets, the longterm growth outlook β and thus also the population perspectives β are factored into the swiss national bank's monetary policy assessment. the aging of the population is a fact. it is linked to three main trends, which will greatly influence switzerland's demographic landscape in the decades to come : first, the economically active population will decrease, second, the old - age ratio, i. e. the ratio of people over 65 to those between 20 and 64 is on the rise, and third, longevity is increasing. in future, switzerland will have to produce more with fewer resources. " fewer resources " because the economically active population is declining, " produce more " because the old - age ratio is worsening and longevity increasing. the consequences for the macroeconomic outlook are clear : if labour productivity and / or labour input fail to improve, the impending demographic development will lead to slower medium and long - term growth. it is thus all the more important that labour productivity increases. the growth in labour productivity depends primarily on workplace capital and product market success. it would be ill advised, however, to make oversimplified calculations. neither technological progress nor capital investment are unaffected by demographic aging. while enthusiasm for embracing innovation may decrease with old age, greater experience can enrich human capital. on the one hand, a tighter labour market can be counteracted by shoring up investment. on the other hand, both the savings and the investment rate can decline. if foreign locations become more attractive, the latter is a particularly likely scenario. it is not clear how the | 1 |
d., pesenti p. ( 2006 ) β would protectionism defuse global imbalances and spur economic activity? a scenario analysis β, nbew working paper 12704, november 2006. β’ anglo - saxon countries which are very good at producing financial assets have already shown enormous imbalances, with us current account deficit and housing market bubbles as the headline examples ; β’ emergence of ( long lasting ) asset bubbles and drop in inflation ( and possibly even emergence of deflation ) are market mechanisms to bridge the asset gap ; β’ bursting an asset bubble makes asset shortages problem worse ; β’ while financial markets development moves ahead ( think about large listings in china, improving corporate governance or rapid development of credit derivatives ) it is unlikely that excess demand for assets will be eliminated soon, as it seems to have a structural origin, related to demographics ( aging ), or to higher uncertainty for corporations operating in more competitive global economy in xxi century, which probably explains why profits to gdp ratio is at 40 - years high and investments fail to recover to pre - asia - crisis and pre - dot - com - boom levels it does matter to what view of the world you subscribe, as it dramatically alters the subjective likelihood of competing scenarios for 2007. as pimco michael gomez puts it in september emerging markets note titled β is it safe? β 19 : β em has historically been vulnerable to deteriorating economic and financial conditions in the united states and other developed countries. slower growth, tighter liquidity, and heightened risk aversion in mature markets generally mean lower commodity prices, less capital flows, and higher interest rates for em borrowers - conditions that helped produce some spectacular financial crises in the past dozen years. not a pretty picture, and one that begs the question of what lies around the corner β. however, if asset shortages story is correct, then upcoming us slowdown ( or brief recession according to some non - consensual forecasts ) would likely further increase excess saving ( as fading growth prospects will discourage investment projects and encourage more private saving amid rising uncertainty, only partly offset by higher public dissaving due to automatic stabilizers ), and lower valuation of us equities will make the world supply of assets even more scarce. in such situation us economy having hard times may not necessarily lead to higher risk premia for emerging markets ( as it was the case in the past ) rather any increase in risk premia would be used by investors to enhance returns, spread compression | β, summary of a speech given by toshihiko fukui, governor of the bank of japan, to the japan chamber of commerce and industry in tokyo on 16 march 2006. woodford m. β for not only do expectations about policy matter, but ( β¦ ) very little else matters. β β interest and prices : foundations of a theory of monetary policy, princeton university press, 2003. been followed recently by the norgesbank 21. at first ( since 2003 ) the norwegian mpc published its monetary policy intentions only for the next four months in the form of an interest rate forecast interval. last november it went further and started publishing a forecast for interest rates three years ahead in the form of a central forecast ( with two alternative scenarios ) along with a fanchart ). these bold steps made new zealanders and norwegians push the frontier of central banking ahead and set a new benchmark for inflation targeters 22. are we ready to follow? in 2000 mahadeva and sterne measured central banks transparency 23. back then the polish central bank was below the average among inflation targeters. however since then the nbp has made considerable progress. major changes to communication have been introduced such as publication of inflation forecasts, modification of inflation reports and decision statements in order to make them more forward - looking. Εyziak et al. have applied the mahadeva - sterne and eijffinger β geraats indices to assess current transparency of the nbp and showed that it has markedly improved 24. nevertheless, we are not resting complacently. there are still ways to go and things to learn. later today marek rozkrut will present results of an empirical study conducted at the nbp 25 showing that central bank communication strategies in the czech republic, hungary and poland exhibit large differences. the czech national bank seems to do a much better job than the other two banks in matching words with deeds. there is also some evidence that pursuance of too many targets under it framework leads to inconsistencies also in central bank communication, as in the case of the hungarian national bank. finally, to those of you, who intend to adopt it in the future let me say one last thing. a standard view is that it should not be introduced unless a number of criteria are fulfilled. as piotr szpunar will tell you in the first presentation, at the time poland adopted it one could claim we were not ready | 0.5 |
of exchange controls the existing exchange controls in the region were analysed by a sub - committee of the governors β committee with a view to gradual harmonisation. participating countries are being encouraged to remove remaining exchange controls for transactions within the region as quickly as possible. arrangements were made for the repatriation of banknotes amongst participating countries, and for an easing of private sector investments across borders in the region. three countries, i. e. botswana, mauritius and zambia, have removed all exchange controls and some others are making steady progress in the implementation of this programme. a vision for the future as already mentioned, the sadc organisation is a political association that covers a much wider objective than just financial cooperation within the region. this wider objective, however, has more potential for disputes and friction, and will also at times be constrained by the red - tape of a long drawn - out inter - governmental decision - making process. i believe that the committee of governors of the central banks of sadc provides a unique body that should be able to proceed with a programme of financial cooperation in the region, without being unduly constrained by the more complex political decision - making processes. at this stage, i believe work should continue to proceed on the accepted road of focusing on identified projects that can be developed on a regional basis without full economic integration of the 14 countries now forming part of sadc. most of these programmes will also not require any formal inter - governmental agreements. in the process, we shall provide a basis for gradual but effective cooperation and integration of the financial systems and markets of southern africa. in the longer term, the vision should be : β’ to make it possible for residents of the whole sadc region to move funds around within the region without formal exchange control restrictions or border controls ; β’ to make it possible for residents of the region to invest in the shares of companies in every country of the region without restriction, to buy and sell on any one of a series of closely - linked stock exchanges, and to arrange for settlement anywhere in the region ; and β’ to make it possible for business people to do their business, whatever kind of business it might be, anywhere in the region without any undue financial restriction. to reach these objectives, however, i believe that the central banks of the region should, for the time being, continue to work on an almost informal way to establish a sound basis for the more ambitious plan of eventual full economic integration of the region. the momentum built up over the past | . this downward revision is mainly as a result of the downscaling of the growth projections for the emerging economies. the downwardly revised growth outlook for emerging - market economies is mainly attributable to the relative slowdown in china which faces overcapacity in its traditional industries, a property oversupply, an erosion of its competitive advantages, and elevated levels of debt. other large emerging - market economies are, however, also feeling the strain, in particular those which have a high degree of dependence on commodity exports. furthermore, investor risk aversion towards emerging - market assets has been rising against a backdrop of market uncertainties about the timing and impact of us policy rate normalisation coupled with concerns about the economic slowdown in asia and the impact of lower commodity prices. this has contributed to significant capital flow reversals from bis central bankers β speeches emerging - market economies, and the institute of international finance has recently projected that emerging markets will see net capital outflows this year for the first time since 1988. 1 why these developments matter to africa these international developments are highly relevant for sub - saharan africa. at the time of the global financial crisis, regional growth was relatively sheltered from adverse developments in the major economies. regional gdp, for instance, continued to grow by 4, 1 per cent in 2009, whereas most of the advanced economies and some emerging - market economies were in recession. the lack of depth in most african financial markets as well as the limited linkages between their banking systems and those of the advanced economies had in part explained africa β s relative resilience. however, africa appears to have become more vulnerable to global developments since then. the exposure of sub - saharan economies, particularly to china β which is now a key contributor to the global slowdown β has continued to increase over recent years. 2 the region β s exports to china have grown, on average, by around 25 per cent per year between 2000 and 2014, far outpacing the growth rates of less than 10 per cent for exports to the us and the eu. according to the imf, china in 2014 accounted for more than 20 per cent of exports in about 15 sub - saharan countries, including angola, the drc, south africa and zambia. interestingly, exports to the other brics economies also increased over the past decade, by close to 20 per cent on an annual basis. but china β s relevance for african economies is not limited to trade links. according to the united nations conference | 0.5 |
, amounting to 3. 7 % of gdp the budget deficit was almost halved last year, while the current account deficit was cut by one fifth and was fully covered by foreign direct investment. in addition, the public often debates whether the noticeable fall in bank lending rates and the cost of government borrowing is attributable more to the monetary easing of the national bank of serbia or the european central bank. i will give you nothing but facts. the fall in dinar lending rates began in september 2013, after the national bank of serbia initiated a cycle of key policy rate cuts in may that is also their lowest level on record. and these are the facts. lower interest rates also reflect competition among banks which increased, inter alia, as the national bank of serbia made sure that citizens have access to transparent information on lending terms offered by different banks. during the same period, though lesser than that for dinar loans, a decline was recorded for interest rates on euro loans ( by 2. 8 pp, to 4. 4 % in december ), which is by all means due to the european central bank β s monetary accommodation and the consequent fall in euribor. there is no doubt however that this is also a result of serbia β s better macroeconomic performances and lower risk premium, and hence lower cost of borrowing for both government and private sector. bis central bankers β speeches after cutting the key policy rate in its february meeting, the executive board particularly underlined the expectation that further monetary policy easing will be followed by a further recovery of lending activity, which will contribute to investment. the 1. 8 % credit growth in 2015, in the face of maturing of rsd 110 bln worth of subsidized loans, was beyond our expectations. new investment loans were 2. 5 times higher than in 2014, while a significant rise was recorded also for loans that were refinanced under much more favourable terms. we expect positive tendencies in the credit market to continue in 2016. ladies and gentlemen, dear guests, what is certain, despite numerous uncertainties in the international environment, is that we will maintain monetary and financial stability and thus, give a full contribution to sustainable economic recovery and prosperity of our country. i now give the floor to ana ivkovid to present the key messages from the february inflation report. bis central bankers β speeches | business and investment environment in serbia is favourable is evidenced also by the continuing high inflow of foreign direct investment, which this year again will more than suffice to cover the current account deficit. i am particularly pleased to be able to say today that as of recent there are housing loans in dinars in the serbian market, offered at the interest rate of below 5 % and a repayment term of up to 30 years. this means that there is confidence that the stable macroeconomic environment will be maintained over the long - term horizon. the key message i would like to leave with you today is that inflation in serbia is low and stable and that it will remain so in the period ahead. let me remind you once again that, as of 2017, the inflation target will be one percentage point lower than the target since end - 2012. this shows that convergence to the eu in the financial sector has already been fully achieved. thank you for your attention. i will now give the floor to my colleagues who will give a presentation of the key messages from the inflation report. | 0.5 |
/ 4 bis - central bankers'speeches the sandbox serves four major purpose : a. first, it enables industry participants to explore the use case for tokenised assets in a controlled environment ; b. second, it allows industry participants to test and review the technical compatibility among digital assets, tokenised deposits and cbdcs ; c. third, the technical parameters and design protocols of the pilot use case will serve as important inputs in setting common industry benchmarks for tokenisation ; and d. and finally, it promotes innovative use cases that contribute to resolving pain points in financing the real economy, including in supply chain financing. the sandbox will also cover cross - border payment functionalities. in relation to this, i would like to highlight our recent collaboration with the banque de france, where our sandbox and their equivalent system have been successfully connected. pilots have been done to demonstrate that atomic cross - border settlement can be performed through the linked systems. under the mou signed between the two institutions, we will continue to experiment with innovative cross - border pilots in cbdcs and tokenisation. central banks are well positioned to lay the foundations for the tokenisation ecosystem. but for the trend to take off, we need industry innovators to actively participate, to try out new use cases, and to assess their commercial viability and scalability. we need to get into this together. our theme today aβ¬ β " tokenising together, today and tomorrow " or four " t " s as our team calls it - is more than just a slogan. it embodies the essence of project ensemble, and represents a strategic path for collaboration. allow me to elaborate on how we plan to put these four " t " s into action. tokenising together " tokenising together " captures the spirit of " co - creation ", which is central to project ensemble. the word " ensemble " indicates cohesion and unity, which reflects our wish to unite industry efforts to push forward hong kong's tokenisation market. in fact, the participation of so many of you today is a clear example of how such an " ensemble " is already being brought to life. since the establishment of the architecture community in may, we have been working closely with community members to co - develop the sandbox architecture and interoperability standards, which are foundational to the successful launch of the sandbox. i would like to congratulate all our banks in the architecture community on successfully integrating their tokenised deposit infrastructure | several broad themes, which to some degree overlap. these areas are : basic monetary and financial stability β the hkma β s core mission ; the capacity of our financial services industry β specifically the ongoing upgrading of competence and skills, which i like to call the β soft power β of the industry ; the issue of financial inclusion β how we make sure the financial services industry serves the whole community, including those market segments that may be less profitable ; the role of technology β a fast - changing aspect of how we all do business, which brings huge potential benefits, but also some serious possible threats ; 1 / 5 bis central bankers'speeches and the overall concept of culture β the individual and corporate qualities without which there is no trust and the system fails. these include qualities like integrity, honesty, openness and respect. 11. i would like to go over these areas β not just to look back at what all of us here today have achieved, but to think about what lies ahead. monetary / financial stability 12. i would like to start with our core mission β the stability of our monetary and financial system. 13. many of us here today are old enough to remember times when hong kong suffered a serious currency crisis, as well as bank runs and bank failures. to the younger generation, this is hard to imagine. 14. i will not go into detail about the linked exchange rate system today β i will just say that currency stability is something the whole of hong kong takes for granted. it is a fundamental priority of the hkma to ensure that the community can have full confidence in the system. 15. confidence in our banks is also key to the functioning of our economy and society. and our work in this area in the last 10 years has affected all of you here today. 16. i think the most high - profile example is the loan - to - value ratio and debt - serving ratio limits on property mortgage loans. the last 10 years have seen strongly rising property prices, and competition between banks has been fierce. to some observers, including home - buyers, mortgage caps seem like a nuisance and make it harder to buy a property. but to the hkma, it is an important matter of credit risk management and the stability of the banking system. we call these measures β counter - cyclical macroprudential β. and it would be highly irresponsible of us if we did not impose these limits. 17. this is also the case with mainland - related lending. you | 0.5 |
. regulatory and political risks heighten the likelihood of default, transaction lead times are long, projects require prohibitively large amounts of start - up capital, and there is limited access to expertise in project development and financing. the current model of multilateral bank lending is inadequate to mobilise the capital that countries need for their transition. a good part of multilateral bank lending goes to bankable projects that could well have been financed by private capital. multilateral banks tend to prioritise projects with lower risks to support their mandates of macroeconomic stability and growth. but in truth, their capital is most needed for riskier projects that are only marginally bankable but can support the transition. what we need is public - private partnership in financing that is synergistic not duplicative. we need to make every dollar of public capital count. we need blended finance. catalytic and concessional funding from the public sector, multilateral development banks, and philanthropic sources can potentially enhance project bankability and help to crowd in private capital. they can : mitigate a portion of project risks to improve the risk - return profile and attract a broader set of private investors ; provide technical assistance at the project design stage to increase the pipeline of investable projects ; and facilitate the development of a mature climate blended finance ecosystem in emerging markets and developing economies. blended finance is not new but we need to scale it up and this requires a collective effort. central banks and financial supervisors can support this effort to varying degrees, depending on their mandates. the ngfs has launched a blended finance initiative to contribute to this collective effort in two ways. we will use our convening power to raise awareness of blended finance for climate action and help to bring the relevant parties into the room. we will identify any potential market, policy or regulatory barriers that hamper the scaling up of blended finance. the ngfs aims to launch at cop28 a handbook on blended finance. we will release next month a conceptual note on the handbook which will serve as a preamble. the handbook will be organised around three key themes. first, identify key elements needed to build a climate blended finance ecosystem. to scale up blended finance for climate adaptation and mitigation, we need financial instruments and vehicles that can align incentives in both the public and private sector and entice private capital with varying appetite for risk. 4 / 5 bis - central bankers'speeches for example, green bond funds or outcome - based debt instruments such as sustainability - linked | ravi menon : mas β annual report 2015 / 16 remarks by mr ravi menon, managing director of the monetary authority of singapore, at mas β annual report 2015 / 16 media conference, singapore, 25 july 2016. * * * good morning. welcome to mas β annual report media conference. economic growth the global economy is headed for another year of lacklustre growth. recovery in the advanced economies is hesitant and uneven. economic activity is slowing in the emerging market economies. the imf has just released its latest projection for global gdp growth in 2016 β at 3. 1 %. this is the same as last year. mas is closely watching these developments, especially three factors that are key to the growth outcomes this year : one, brexit and its implications ; two, the shape of the recovery in the us economy ; and three, slowdown in the chinese economy. the uk referendum vote to exit the eu will have an impact along several dimensions : first, on financial markets and possible consequences for financial stability ; two, on investment and gdp growth in the uk, with potential spill - overs to the eu and beyond ; and three, on political and social developments, and what they mean for globalisation. brexit β s impact has been most keenly felt so far in the financial markets. this is to be expected as prices need to adjust to reflect the new reality of a uk that is outside the eu. so, exchange rates, bond yields, and equity prices have all seen sharp movements as markets search for a new equilibrium. uncertainty prevails over exactly when and how brexit will take place ; we can expect recurrent bouts of market volatility in the months ahead. central banks across the world have said they will do what it takes to safeguard financial stability and maintain smooth functioning of their markets. we expect the global financial system to stay resilient, given ample liquidity and the generally stronger balance sheets of banks. but the uk economy is expected to take a hit and there will be some fallout on the eu. uncertainty, especially over the terms of the uk β s exit from the eu and its future access to eu markets, will weigh on business confidence and investment spending. growth in the eu will be weighed down by brexit, on account of its significant trade and financial linkages with the uk. this in turn is likely to have a small dampening effect on global growth. the political and social implications of brexit could have more significant economic consequences | 0.5 |
. in order to protect critical financial information of users and to enforce a mechanism for obtaining proper consent from customers, the consent of the customer to be obtained by the account aggregator shall be a standardised electronic consent format as prescribed under regulations. the aa is required to inform the customer of all necessary attributes to be contained in the consent format and the rights of the customer to file complaints. the customers are also provided a functionality to revoke consent post which a fresh consent would have to be obtained. explicit onus has also been placed on financial information provider ( fip ) to verify β validity of the consent, specified date and usage of it and the credentials of the aa. 12. different jurisdictions have taken a different approach on the issue of open banking. while some have adopted a prescriptive approach, requiring banks to share customer - permissioned data and requiring third party users to register with regulatory authorities, others have taken a facilitative approach by issuing guidance and recommended standards, and releasing open api standards and technical specifications. some jurisdictions also appear to be following a marketdriven approach, currently having no explicit rules or guidance. 13. the aa is a regulatory initiative in india under a hybrid model which is a combination of prescriptive & facilitative approaches and is in its early stages of development. one of the key things to look out for is whether the market forces will drive the adoption of this initiative or further regulatory nudge will be required. the pace of adoption will also depend on the strength of the community to come together and continue to drive the technical specifications standards and scalability potential. now, to continue with the tradition of a central banker and regulator, let me also enunciate few risks and spread some words of caution along the way. risks associated with open banking 14. open banking may offer benefits in the form of convenient access to financial data and services to consumers and streamlining some costs for financial institutions. however, it also potentially poses significant risks and concerns around : financial privacy and data security : in open banking frameworks, risks associated with the loss or theft of personal data on account of poor security, data protection violations, money laundering, and terrorist financing concerns cannot be ruled out. therefore, large scale adoption of open banking frameworks should ideally be preceded by strong data protection and privacy laws. such laws should anchor the ownership rights and ensure control and consent - based use of the data. they should also establish the boundaries of rights and obligations of third - party | use, down - streaming of data to fourth parties and reselling it. india has already embarked upon the same and the personal data protection bill, 2019 has already been introduced. the bill seeks to provide for protection of personal data of individuals and establishes a data protection authority for the same. customer liability : in absence of explicit arrangements for redressal of customer grievances and limiting their liability in case of erroneous or fraudulent activity, the acceptability of open banking frameworks may remain limited. therefore, the jurisdictions should look to address customer liability for third party access of data through customer protection or indemnity laws. rbi has issued charter of customer rights in december 2014 which lists β right to privacy β along with β right to grievance redress and compensation β among others. the right to privacy requires that customers β personal information should be kept confidential unless they have offered specific consent to the financial services provider or such information is required to be provided under the law or it is provided for a mandated business purpose. 3 / 5 bis central bankers'speeches cybersecurity and operational risks : use of open banking architectures, which is premised on the enhanced sharing of data, increases the surface area for cyber frauds. as the open api provides uncluttered access to customer banking data such as transactions and balance stored within the infrastructure, it may also pose a severe cybersecurity risk. losses caused to customers on account of cyber events would require financial institutions to compensate customers for such losses. institutions may also face a variety of potential operational and cyber security issues related to the use of apis, including data breaches, misuse, falsification, denial of service attacks and infrastructure malfunction. compliance and reputational risk : while open banking expands vistas of traditional banking and offers unique business opportunities, it also reposes extreme responsibilities with respect to compliance with applicable prudential regulations and privacy laws. risks arise due to exposure to fines, penalties, or punitive damages resulting from supervisory actions, as well as private settlements due to omissions and commissions of the third - party service provider. grievance redressal : with more parties and intermediaries involved in the provision of financial services in an open banking model, it is more difficult to assign liability. if the regulations governing customer grievance redressals are not updated to take open banking business models into consideration, the national authorities may find it difficult to provide the customers adequate levels of protections. in | 1 |
was substantially below a level reconcilable with long - term equilibrium. this occurred at a time when the price of key exports was very high, making the years 2000 and 2001 especially favourable for the export sector and in fact also for import competing sectors. enterprises in these sectors now understandably feel the effects of the rise in the exchange rate. it is not to be expected, however, that the same conditions will again arise in these sectors as prevailed, for example, during 2001 and in the early part of 2002. in this connection it could be mentioned that, based on the predictions on performance made by financial enterprises, the contribution margin in fisheries companies will be fairly good this year, although not as good as in 2001 and 2002, which were quite exceptional. in the february issue of its monetary bulletin, the central bank published an analysis of the proposed major construction projects in east iceland and possible responses for economic management. the article concludes that unless economic counter - measures are taken, the projects will create overheating in the economy, inflation and instability. although their scope will be considerable, the projects are not so large that economic stability cannot be preserved and inflation contained by means of appropriate responses in economic management. mitigating measures would be most effective if they involved both monetary and fiscal restraint, as well as internal adjustment of the national economy, including a rise in the exchange rate. the more restraint shown on the fiscal side, the less need there will be to raise interest rates. a higher krona exchange rate also means less cause to raise interest rates. the exchange rate was fairly stable from the spring of 2002 until early this winter. it then began to rise and continued to do so steadily until early february of this year. the central bank has stated its view that the exchange rate rise in recent months has been primarily due to the effect of the proposed major construction projects in east iceland. the operations of the aluminium smelter will likely cause the equilibrium exchange rate for the krona to be higher than otherwise. furthermore, it appears evident that the influx of foreign currency in connection with these projects will be considerable, with higher domestic interest rates than otherwise. all of this affects market expectations and makes the krona exchange rate higher than it would be in the absence of plans for major development in east iceland. the economy could thus be said to have already begun adaptation to the coming projects, i. e. the exchange rate adjustment has begun and is even well on its way. in view of what has | the central bank expended substantial sums in intervening on the foreign exchange market, over isk 40 billion in total, without this sufficing to halt the slide of the krona. at best, it may have slowed the depreciation until the economy had cooled somewhat, and it also contributed to making the inflationary impact of the exchange rate drop less than it would otherwise have been. an article by gerΓ°ur isberg and ΓΎorarinn g. petursson in this february β s issue of the central bank β s monetary bulletin describes the bank β s actions on the foreign exchange market during 2000 and 2001 and assesses their impact. the article concludes definitively that at best the intervention had only short - term effect in each case and the market soon returned to its previous situation. in other words, their conclusion is that intervention on the foreign exchange market against strong prevailing currents has precious little effect unless accompanied by corresponding changes in the domestic interest rates. this is in full accord with the experience in other countries. in recent public discussion the claim has often been made that the exchange rate of the krona is far too high and that the central bank needs to take steps to bring it down again. the fact of the matter is that the bank β s means of controlling the exchange rate are overestimated and the power of the market underestimated when the claim is made that the central bank can, through its actions, direct the krona to a specific level. the proposal has been made, for instance, that the central bank cut its interest rates substantially with the aim of lowering the exchange rate. in this context it should be pointed out that the bank has cut its policy rate substantially, from 10. 4 % only a year ago ( 11. 4 % two years ago ) to 5. 3 % at present. the bank β s nominal policy rate has not been lower since 1994 and the real policy rate is at its lowest since 1996. the domestic and foreign interest rate differential has narrowed significantly. in addition, the central bank β s interest rate is now below the estimated equilibrium interest rate and thus has a stimulating effect on the economy. the impact of interest rate changes generally is only visible after a certain time lag, prompting one to conclude that the effect of the major decrease in interest rates during the past year has yet to be fully felt. as is well known, the exchange rate for the krona plummeted in 2000 and 2001, and for quite some time | 1 |
home mortgage loan products became commonplace. this led to securitization of a variety of other consumer loan products, such as auto and credit card loans. the current banking structure today's fiercely competitive market for consumer credit evolved into its present form slowly but persistently. along the way, critical structural changes occurred, including entry of, and expansion through, new players. deregulation of u. s. banking markets has contributed to an approximately 50 percent decline in the number of banking and thrift organizations since the mid - 1980s, when industry consolidation began. from 1995 to 2004, the ten largest u. s. banking and thrift organizations, ranked by the total assets of their depository subsidiaries, have increased their share of domestic banking and thrift assets from 29 percent to 48 percent. however, according to most studies, this ongoing consolidation of the u. s. banking system has not reduced overall competitiveness for consumer financial services. when consolidation occurs, it is not uncommon for the merger to result in de novo entry to take advantage of any inefficiencies or transition difficulties of the newly consolidated enterprise. over the past five years, for example, for every five bank mergers that have been approved, two de novo bank charters have been granted. even in the face of consolidation, competition is fought on the battlefield of the local market, where most households obtain the majority of their banking services. and, it is noteworthy that our measures of local market competition have remained quite stable over the past fifteen years. deregulation and consolidation have also cultivated the expansion of the financial services marketplace, as evidenced by the proliferation of many nonbank entities that provide the credit and transaction services that were once mainly the province of depository institutions. the impact of technology on financial services markets as has every segment of our economy, the financial services sector has been dramatically transformed by technology. technological advancements have significantly altered the delivery and processing of nearly every consumer financial transaction, from the most basic to the most complex. for example, information processing technology has enabled creditors to achieve significant efficiencies in collecting and assimilating the data necessary to evaluate risk and make corresponding decisions about credit pricing. with these advances in technology, lenders have taken advantage of credit - scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. the widespread adoption of these models has reduced the costs of evaluating the creditworthiness of borrowers, and in competitive markets cost reductions tend to be passed through to borrowers | . where once more - marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. these improvements have led to rapid growth in subprime mortgage lending ; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s. for some consumers, however, this reliance on technology has been disconcerting. credit - scoring models are complex algorithms designed to predict risk. consumer advocates have raised concerns about the transparency and completeness of the information fit to the algorithm, as well as the rigidity of the types of data used to render credit decisions. consumer advocates contend that the lack of flexibility in the models can result in the exclusion of some consumers, such as those with little or no credit history, or misrepresentation of the risk that they pose. to address these concerns, some firms have worked to customize credit - scoring systems to include new data and to revalue the weight of the variables employed. also, new organizations have emerged, developing new systems for collecting alternative data, such as rent payments and other recurring payments that will enable creditors to evaluate creditworthiness of consumers who lack experience with credit. improved access to credit for consumers, and especially these more - recent developments, has had significant benefits. unquestionably, innovation and deregulation have vastly expanded credit availability to virtually all income classes. access to credit has enabled families to purchase homes, deal with emergencies, and obtain goods and services. home ownership is at a record high, and the number of home mortgage loans to low - and moderate - income and minority families has risen rapidly over the past five years. credit cards and installment loans are also available to the vast majority of households. the more credit availability expands, however, the more important financial education becomes. in this increasingly competitive and complex financial services market, it is essential that consumers acquire the knowledge that will enable them to evaluate products and services from competing providers and determine which best meet their long - and short - term needs. like all learning, financial education is a process that should begin at an early age and continue throughout life. this cumulative process builds the skills necessary for making critical financial decisions that affect one's ability to attain the assets, such as education, property, and savings, that improve economic well - being. conclusion as we reflect on the evolution of consumer | 1 |
- productive assets, the strengthening of capital and the improvement of their reputation. thank you for your attention. 13 / 13 | to lessen losses in the credit portfolio due to their favourable effect on borrowers β repayment capacity associated with both the lower cost of credit, and higher income and lower unemployment tied to the macroeconomic impact of lower interest rates. these effects may be particularly important in countries like spain where the banking system started out with a high level of non - performing loans and where short - term or variable rate lending was prevalent, since this results in movements in market returns passing through rapidly to the costs of outstanding debt2. thus, part of the fall in the non - performing loans ratio in recent years can be explained by this effect. furthermore, declines in interest rates contribute to increasing the prices of financial and real assets. this effect is immediate for fixed - income securities, particularly long - term ones since prices are more sensitive to changes in yields. valuations of equities and real assets, such as housing, are also boosted by the fall in interest rates due to the effect on the discount factor, although the price of these other assets is influenced by other conditioning factors such as macroeconomic expectations. all the above entails capital gains for banks exposed to these financial and real assets, at the same time as it increases the value of loan collateral. this also favours an improvement in the credit quality of loans and, therefore, smaller losses in the credit portfolio. it is true, in any event, that these capital gains dry up once interest rates stop falling and remain at low levels. furthermore, there is also evidence that, since the ecb β s deposit see, banco de espana ( 2018 ) : annual report 2017, chapter 2, β the challenges facing the spanish banking sector β and banco de espana ( 2017 ) : annual report 2016, chapter 1, overview, box 1. 3. 10 / 13 facility rate has stood below zero, negative surprises in short - term interest rates have been accompanied by declines in european banks β stock prices. 3 given the endogenous nature of the monetary policy response to projected economic developments, this change in banks β stock prices due to monetary surprises may reflect, on one hand, the negative impact of less favourable projections for the future macroeconomic setting and, on the other, the market view on the direct negative effect of additional interest rate cuts on the future profitability of banks against the backdrop of protracted negative rates. 4 in recent years, spanish banks have partially cushioned the fall in net interest income by generating other income and, in particular, by increasing fee | 1 |
just five years ago. what struck me second, was the fact that sri lanka is today moving into the radar screen of global giants, which shows that we are being taken seriously. that, my dear friends, to my mind, is one of the best indications that sri lanka is gradually reaping the peace dividend after its 30 year conflict! seventh, sri lanka would need to show progress of its political stability on a sustained basis, over the next several years. as we all know, high norms of democracy have been maintained and peaceful conditions exist, in our country, compared to many other countries. however, a strong negative publicity has been drummed up by a certain segments of the overseas sri lankan diaspora, through which such groups have been able to portray sri lanka as a country with political and human rights deficiencies. unfortunately, the massive progress sri lanka has made in recent years with regular elections, terrorism and violence free conditions, rapid economic development, large scale investments, large numbers of newspapers, tv and radio stations publishing and beaming news almost every second without any censorship whatsoever, have not been given sufficient credit, internationally, as a result of the outside world being bombarded with the false claims by these anti - sri lanka forces. although the efforts of these inimical groups are gradually losing steam in the face of the sri lankan political structures being continuously strengthened, there is however a vital need for sri lanka as a country, and for all sri lankans as individuals, to work towards developing our external image on a continuous basis. in that context, we must constantly remind our overseas friends that sri lanka is a country that has a 2, 500 year history with strong political institutions and an educated, politically savvy population, and that the people of different castes, creeds, and ethnicity, interact lot better than in many other countries. by doing so, we could effectively challenge and deal with the build up of various false myths that may have the potential to threaten the political stability in our country over the next few years. if we are able to respond successfully, and convey this reality to the outside world in a comprehensive manner, we could put to rest, many of the unfair and false allegations that have been leveled against the country. my dear friends, what i have endeavoured to explain so far are the key ingredients that would need to be used in the recipe for growth and stability. however, as we all know, ingredients alone won β t provide us with a tasty, wholesome | those successes. let β s also step up for the future, and get ready to deliver growth and stability on a consistent basis. thank you. bis central bankers β speeches | 1 |
innovation. let me conclude here. every business cycle is unique. however, we may try to find patterns and take lessons from the past and from other countries. in summary, over the long run, business cycles tend to be more moderate and co - movement appears to be less strong than we would expect. most of this can be explained by the absence of international shocks to the economy. however, since economies have increasingly become integrated, the risks of disturbances spilling over to other countries seem to be greater than ever. on the other hand, as i have indicated, modern economies are becoming more resilient at the same time. this may be viewed as a positive effect of increased economic linkages. it is my opinion that this effect should be encouraged ; and i am convinced that the task of improving economic linkages is well dedicated to the amcham. looking at the current business cycle, i am convinced that the worst part is behind us now. most indicators point to a sustained recovery of the us and the world economy. as we emerge from this downturn it will become clear that the dutch economy has experienced a volatile business cycle and that strong linkages to the us economy can be a great advantage. | or β pillars β of the new capital accord. that also goes for the new european capital adequacy directives. pillar 3 recognises that market discipline has the potential to reinforce and support minimum capital standards ( pillar 1 ) and the supervisory review process ( pillar 2 ). this way, it helps to ensure that banks maintain appropriate levels of capital as a cushion against potential future losses arising from risk exposures. pillar 3 contains proposals for greater disclosure by banks, pertaining to three broad categories, the so - termed scope of application of the accord, a bank β s capital adequacy, and its risk exposures and assessments. for essential elements of the new capital accord, such as the use of an internal ratings based approach ( irb ), disclosures will even be required for supervisory recognition. this means that a supervisor is not supposed to recognize the use by a bank of these techniques, unless the bank has met the disclosure requirements. in this respect, in addition to pillar 1 with its irb, pillar 3 marks the transition to a fundamentally new approach in prudential supervision. as to the content of the information, pillar 3 aims to provide for a comprehensive set of consistent and comparable disclosures. it should, in other words, establish a common framework for the information to be made available by banks, and that would allow a meaningful comparative analysis by recipients of that information. comparability is greatly enhanced by the use of the risk weighting methodologies in the context of pillar 1 as a common yardstick for the purpose of public disclosure. at the same time, however, pillar 3 should not become overly prescriptive. that is why pillar 3 attaches great importance to qualitative disclosures. this will allow a specific bank to explain and elaborate the particular characteristics of its operations in plain language. an interesting dimension to the development of the pillar 3 disclosures is the relationship vis - a - vis the accounting standards, and vis - a - vis listing requirements promulgated by securities regulators. as i have said before, the costs of public disclosures by banks should be limited. therefore, banks may rely on disclosures under accounting or listing requirements insofar as these are materially equivalent to pillar 3 requirements. however, such requirements have a broader focus than the third pillar, which aims at banks capital adequacy. pillar 3, in other words, is a more specific interpretation of the general rules, as a reflection of its more precise objective. supervisors | 0.5 |
rasheed mohammed al maraj : the corporate governance code of the kingdom of bahrain β fundamentals and implementation address by his excellency rasheed mohammed al maraj, governor of the central bank of bahrain, at an event, organized by the international chamber of commerce, manama, 4 may 2009. * * * distinguished guests, ladies and gentlemen. as patron of this event, the central bank is proud to take part in today β s proceedings. my thanks go out to the organisers of this event, the international chamber of commerce, and also to the many sponsors who have made this event possible. today β s conference focuses on the features of good corporate governance and on developments relating to the proposed new corporate governance code for all companies in the kingdom of bahrain. this initiative by the ministry of industry and commerce is welcomed by the central bank and we will be working with the financial sector and listed companies on the implementation of the spirit and the letter of the new code upon its publication. in my opening comments, i will highlight what the cbb considers to be the key attributes of good corporate governance, and how we have encouraged licensees of the cbb and listed companies to implement a sound corporate governance environment. effective corporate governance begins with establishing a clear dynamic between three different bodies of persons : the shareholders ; the board ; and the management. in a perfect world, these three bodies would all recognise their interdependence and their responsibilities and act promptly, rationally and transparently in the best interests of the concerned company. however, events globally over the past decade indicate that we do not live in a perfect world, and so rules from regulators, company law and codes of practice are necessary to ensure that one set of stakeholders do not act in their own self - interest to the detriment of other stakeholders, or indeed to the detriment of the economy itself in the case of the largest companies. the central bank of bahrain has recognised that the conduct and health of the financial sector in particular has a far wider impact than just on shareholders β wealth. the health of the financial sector affects the reputation of the country, the functioning of the payments system and provides valuable employment in the domestic economy. therefore the cbb has implemented several far - reaching initiatives on corporate governance standards over the past five years or so to complement the requirements of the commercial companies law. these standards include : the disclosure standards for listed companies which were issued in december 2003 ; the guidelines for insiders, issued october 2004 | though we continued to operate for a time under different laws for banking, insurance and capital markets. in short, a single regulator in our experience has offered many benefits β but it is not an instant solution. to be successful, it requires sustained effort and focus over several years. five years on, we believe we have made significant progress in this respect, but there still remains more to do. thank you. | 0.5 |
is a shared responsibility, across the major regions of the world. several reasons have been cited as constraints to the process of adjustment. this include the relative lack of strength in domestic demand outside the us ; the large gap between saving and investment in major regions of the world ; and the fragmented structure of global capital intermediation that hinders surplus regions from financing productive investments within their region. it is important to recognise the important role that asia can have in contributing to rebalancing global growth and in so doing contribute towards global adjustment of the imbalances. in terms of economic growth, the region has consistently recorded performance that is, one - and - a - half times higher than the global average. on demographics, asia is home to more than half of the world's population, with a young and growing workforce, and expanding middle - class in a number of countries. robust domestic consumption and rising investment have therefore become important sources of growth. this has been supported by the rising income and increased productivity and the expansion of intra - regional trade. the increasing importance of intra - regional trade, which accounts for more than 50 % of asia's total trade, makes the region the next most integrated region after the european union in trade. this has positioned asia as the largest and fast - growing market in the world. in addition, the asian region has also embarked on measures to spur its economic openness by forging free trade agreements, which would contribute to increasing the capacity of the region and the potential of the region, in addition to improving prospects for contributing towards the rebalancing of global growth and the global adjustment process. combined with the region's traditionally high degree of economic openness with a total trade averaging 95 % of gdp in the region, it reflects asia's potential to be a self - sustaining and mutually reinforcing the region's growth. the greater degree of economic flexibility in the region in responding to shocks and the dynamic global conditions is a further feature that contributes towards strengthening the region's potential. while private consumption's contribution to domestic demand is becoming increasingly more significant in the region a renewed expansion in investment is also needed to create a more sustainable growth path. significant initiatives are already underway to increase the contribution of private investment and secure new areas of growth. these include improving the investment climate and reducing the cost of doing business. efforts would also continue to be on - going on the priorities in the region as countries have the potential to further expand the role of | . in this respect, the central bank will determine the interest rate policy to provide a sound environment for sustainable performance of the economy. macroeconomic policy would thus continue to stress growth in an environment of price stability. of importance, is to strengthen private sector - led growth. further efforts will therefore be undertaken to ensure that the economic and financial structures and systems are conducive for the building of a dynamic, resilient and flexible economy. the dynamics of growth and development in the region are reshaping our environment. effective chief executives and corporate leaders in this new environment need to develop accordingly taking into account the new requirements. in its programs, iclif has focused on these new dimensions of leadership development, particularly for the financial services sector. as a leadership development institution, iclif has also evolved over time by continuously reviewing the contents of its programs to match the needs of the rapidly changing environment. a review of the global leadership development program ( gldp ) has now been undertaken, based on the valuable suggestions and feedback from participants, faculty, facilitators and expert panel. refinements in the structure and content of the gldp are expected to be introduced in the subsequent sessions and will include, among other things, new areas such as geopolitical and economic trends, corporate entrepreneurship and innovation, diversity and inclusiveness, culture and corporate social responsibility. the us part of the summer program will also be changed. the change will bring participants closer to distinguished faculty from such renowned institutions as stanford, uc berkeley and ucla. let me now conclude my remarks. leadership is all about a vision for the future, setting the strategic direction for the organization and having the ability to translate the vision into results. this involves having the ability to promote the shared vision and energizing the organization to produce the results. as i have earlier mentioned to one of the groups of the gldp program " the quest for leadership excellence is a journey and not a destination. " when we talk about enhancing leadership capability, we are talking about leaders who are continuous learners, who strive for cutting edge excellence, leaders who have strong convictions and beliefs and yet having humility and recognizing the need to reinvent themselves and in doing so become dynamic leaders pushing the frontiers of excellence and having the courage to take on the new challenges. thank you. | 1 |
toward pre - pandemic levels. indeed, the labor force participation rate of women in their prime working years reached an all - time high in june. demand for labor has moderated as well. job openings remain high but are trending lower. payroll job growth has slowed significantly. total hours worked has been flat over the past six months, and the average workweek has declined to the lower end of its pre - pandemic range, reflecting a gradual normalization in labor market conditions ( figure 5 ). this rebalancing has eased wage pressures. wage growth across a range of measures continues to slow, albeit gradually ( figure 6 ). while nominal wage growth - 7must ultimately slow to a rate that is consistent with 2 percent inflation, what matters for households is real wage growth. even as nominal wage growth has slowed, real wage growth has been increasing as inflation has fallen. we expect this labor market rebalancing to continue. evidence that the tightness in the labor market is no longer easing could also call for a monetary policy response. uncertainty and risk management along the path forward two percent is and will remain our inflation target. we are committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to that level over time. it is challenging, of course, to know in real time when such a stance has been achieved. there are some challenges that are common to all tightening cycles. for example, real interest rates are now positive and well above mainstream estimates of the neutral policy rate. we see the current stance of policy as restrictive, putting downward pressure on economic activity, hiring, and inflation. but we cannot identify with certainty the neutral rate of interest, and thus there is always uncertainty about the precise level of monetary policy restraint. that assessment is further complicated by uncertainty about the duration of the lags with which monetary tightening affects economic activity and especially inflation. since the symposium a year ago, the committee has raised the policy rate by 300 basis points, including 100 basis points over the past seven months. and we have substantially reduced the size of our securities holdings. the wide range of estimates of these lags suggests that there may be significant further drag in the pipeline. beyond these traditional sources of policy uncertainty, the supply and demand dislocations unique to this cycle raise further complications through their effects on - 8inflation and labor market dynamics. for example, so far, job openings have declined substantially without increasing unemployment β a highly | emmanuel tumusiime - mutebile : providing affordable banking services in uganda speech by mr emmanuel tumusiime - mutebile, governor of the bank of uganda, at the official opening of orient bank limited, acacia mall branch, kampala, 3 april 2014. * * * the shareholders of orient bank limited ; members of the board of directors ; senior management and staff ; invited guests in your respective capacities ; ladies and gentlemen. it is an honour and pleasure for me to join you today at the official opening of orient bank β s acacia mall branch. let me begin by congratulating the shareholders, directors and senior management of orient bank for the commendable job they have done in implementing their branch expansion programme, thereby bringing banking services nearer to the people. during the past twenty years of operation in uganda, orient bank has expanded its service delivery channels and outlets. the branch being opened today here at the acacia mall brings the total number to twenty. ladies and gentlemen, this occasion not only marks success for orient bank in increasing its presence in the banking industry, but also lends support to the bank of uganda β s financial inclusion agenda, which aims to extend access to affordable financial services more widely among the population. extending access to financial services will only be possible on a large scale if banks can overcome the cost barriers which are a major obstacle to the wider provision of financial services. therefore, i would like take this opportunity to reiterate my view that banks in uganda must prioritise improving efficiency. operating costs as a share of total assets are too high. it will only be possible to provide more affordable financial services to ugandans when operating costs are brought down. one of the ways in which costs can be lowered is through the introduction of new technologies for delivering financial services, such as information technology. orient bank has been at the forefront of introducing innovative technologies and products to the ugandan banking market. it was the pioneer of the point of sale technology in uganda with its benefits of promoting a cashless economy. in addition, the bank remains the sole issuer of american express cards in uganda. i also understand that the bank will soon launch the β chip and pin β visa cards, an innovation that will enhance the security features of the bank β s existing visa card product. it is however, important to note that increased innovation comes with increased risks. i therefore urge orient bank to design robust risk management processes and internal controls to mitigate the risks inherent in technological advancement. turning | 0 |
policy, with potential second round effects on financial stability. if central banks in the short run shift their focus from the primary objective to supporting economic growth at any cost, it would indirectly create premises for long rung economic imbalances. the current polices pursued by both monetary and fiscal authorities should not be considered as a new normality. while the global economy is adjusting toward a new equilibrium, solid macro - prudential long run policies should replace current stimulating efforts. therefore the challenge for our economies in the long run is to address current problems and the inherited ones based on a new model of growth, based on : ( i ) higher savings and investments, aiming toward a contained consumption matched by domestic production ; ( ii ) persistent fdi inflows oriented toward tradable sectors ; ( iii ) regional cooperation. let me briefly share with you some of my thoughts on the importance of this last remark, namely regional cooperation. following arguments illustrate the benefits of cooperation, at several levels : β’ from a development point of view, increased cooperation and integration on a regional level creates a greater scope for economies of scale. this would increase incentives for local and foreign investors to undertake big investment project that would not be profitable otherwise. a related advantage would be increased specialization of our economies, leading to a higher economic performance. β’ on a policy level, coordinated macroeconomic policies, legal and prudential frameworks, would tend to improve the allocation of resources and to prevent beggar - thy - neighbor policies. this race to the bottom type of philosophy would not benefit the region as a whole. β’ from a strategic point of view, our region is in competition with several emerging regions on a global scale. it β s not sufficient any more to be the best guy in the village ; especially when there are an increasing number of villages on a global scale, with an ever increasing number of clever guys. β’ from a convergence point of view, the sharing of experiences would avoid costly errors, while coordinated policies and steps would make a stronger case for a faster eu integration. we should demonstrate that the region is fit to enter the club, by firstly adopting the rules of the club among ourselves. in a more technical and concrete approach, the efforts of the public authorities in our region to achieve a real and meaningful cooperation should consider the followings : first, the mentality of the societies in our region should change. it is noted that this region has a history full of conflicts and many other disputes. it is now up | to strengthen relations with the imf. in her efforts to enhance regional cooperation, the cbrt laid the foundations of the dialogue among central banks that paved the way for the establishment of the central banks governors β club of central asia, the black sea region and the balkan countries. the relations and cooperation of the cbrt in the international scene go well beyond our bilateral dialogue with your esteemed bank and cover also the financial level ( swap agreements signed with certain countries ), as well as the educational level ( the establishment of an international central banking research facility and regional training centre, the istanbul school of central banking ). bis central bankers β speeches i would like to thank the bundesbank for opening a representative office in istanbul, for signing the mou agreement and for all the support and assistance you have provided us in diverse fields and at various platforms. closing my remarks, i would like to welcome my friend and colleague, dr. andreas dombret, a member of the executive board of the deutsche bundesbank, and thank him for his tremendous efforts in bringing this project to life. now let us celebrate our achievements. thank you for your attention. bis central bankers β speeches | 0 |
the constraints. consequently, considerable flux in output and prices is common, imposing large losses on farmers and potentially imprisoning them in a circle of indebtedness with disturbing frequency. therefore, in the absence of coordinated and sustained efforts to put in place elements of a virtuous cycle of upliftment, loan waivers have periodically emerged as a quick fix to ease farmers β distress. 5. earlier, the union budget 2014 - 15 had put in place a scheme under which five lakh joint liability groups of β bhoomi heen kisan β ( landless farmers ) will be financed through the nabard in order to augment flow of credit to landless farmers cultivating land as tenant farmers, oral lessees or share croppers and small / marginal farmers as well as other poor individuals taking up farm activities, off - farm activities and non - farm activities. the experience of catalysing bank credit flows to agriculture and expanding the panoply of subventions begs the question : are we substituting credit for other policy interventions? indeed, this issue prompted, in 2014, rbi β s expert committee to revise and strengthen the monetary policy framework to recommend a revisit of the need for subventions on interest rates for lending to agriculture. 7. a brief history of farm loan waivers in india may be in order. the first major nationwide farm loan waiver was undertaken in 1990 and the cost to the national exchequer was around 10, 000 crores, which works out to 50, 557 crores at current prices using the gdp deflator. the second major waiver was under the agricultural debt waiver and debt relief scheme ( adwd ) of 2008 amounting to 52, 000 crores ( 0. 9 per cent of gdp ) or 81, 264 crores at current prices using the gdp deflator. unlike the 1990 scheme that aimed at providing blanket relief to all farmers up to a certain loan amount, the 2008 scheme waived debt for certain classes of cultivators1. in 2014, andhra pradesh and telangana announced farm loan waiver of 24, 000 crores and 17, 000 crores, respectively. beginning with tamil nadu in 2016, domino effects have spread in 2017 to several states and the total cost of loan waivers announced amounts to around 1, 30, 000 crores ( 0. 8 per cent of gdp ). i am sure that the proceedings today will dwell upon the details characterising each scheme. therefore, i will move | prolonged low global demand, and adverse feedback loops between the real economy and financial markets may engender the global economy fall into deflation. 12. the global risks of deflation are clearly much more pronounced than before, whose vicious and self - reinforcing dynamics β in the form of higher real interest rates, falling nominal gdp, and rising unemployment β are notoriously difficult to combat once they become deeprooted. ladies and gentlemen 13. notwithstanding headwinds from ( i ) the taper tantrum episode in 2013, ( ii ) the economic slowdown in china, ( iii ) the continued fall in commodity prices, ( iv ) the normalization of us interest rate policy, and ( v ) the increased volatility in global financial bis central bankers β speeches markets, the indonesian economy has thus far held up well, emerge with its economic standing intact, standing out among the fastest growing and stable emerging economies. 14. certainly, this has been made possible owing to mix of prudent and consistence monetary and fiscal policies, exchange rate flexibility β while managing to enact a comprehensive set of bold reforms, which mutually reinforce each other to bring in macroeconomic stability while nurturing stronger growth. 15. growth has continued at a solid pace and remains among the highest in emerging market. private consumption remains solid with domestic demand compensating for the slowdown in the external sector. 16. inflation is well contained at 3. 35 percent ( yoy ), which is within the target of 4Β±1 percent for the year. well - managed inflation expectations, lower exchange rate passthrough, and a small negative output gap, have all contributed to lowering core inflation. 17. indonesia is convincingly in an era of structurally lower inflation, in my view. this was evidently reflected from the trajectory of consumer price inflation ( cpi ) which have been converging towards core inflation. 18. the stability over growth strategy demonstrated in monetary policy tightening since mid - 2013, fuel subsidy reform, and greater exchange rate flexibility, have helped improve the external position. in 2015, the current account deficit falling to a healthy level at 2. 06 percent of gdp, from β 3. 00 percent of gdp in 2014. 19. furthermore, international reserves continued to be sufficient at us $ 105. 9 billion as of end - 2015, which is equivalent to 7. 45 months of imports and official debt repayments. ladies and gentlemen 20. going forward, indonesia β s economic outlook remains solid | 0 |
and balanced policy response that will contribute to a more sustainable growth path for our economy. in an effort to do justice to the topic i was asked to address today, i will try and assess how we got into this unpleasant juncture, and what policy can do about it. but let me first say a few words about monetary policy in major advanced economies and its effect on south africa, given just how important a swing factor this is for our policy considerations. carmen m. reinhart and kenneth s. rogoff examined the evolution of real per capita gdp around 100 systemic banking crises. they found that on average, it takes about eight years to reach the pre - crisis level of income ; the median is about 6Β½ years. see american economic review papers and proceedings, may 2014 ; recovery from financial crises : evidence from episodes * http : / / www. nber. org / papers / w19823. bis central bankers β speeches diverging policies global monetary policies we know that the onset of the global financial crisis saw a synchronised response by central banks across the world. there was a coordinated effort to loosen monetary policy to cushion the world economy against what would probably have been a devastating collapse. these accommodative policies have indeed succeeded in helping to protect against a protracted global recession, and have also underpinned a global economic recovery. however, the pace and extent of recovery has been uneven, which has resulted in diverging policies across the major developed economies. after a disappointing start to the year, the us economic performance has been better than expected in recent quarters. the weather - related contraction of the first quarter was followed by a strong rebound in growth in the second quarter, with the strong momentum maintained into the third quarter. the economy is estimated to have grown at a better - than expected 3, 9 per cent in the third quarter, with leading indicators such as the pmi pointing to strong growth in the final quarter of the year. the job market has also improved considerably, with the unemployment rate declining to 5, 8 per cent in september, the lowest level since june 2008. in line with this stronger than expected performance of the economy, the fed concluded its quantitative easing programme in october and this has raised expectations of a policy rate hike in mid - 2015. the pace and timing of normalisation of policy rates, as repeatedly stated by the fed, will largely depend on the economic and inflationary developments and the fed β s interpretation thereof. with a lot | of slack still remaining in the us labour market, one would expect the fed to be cautious to not impede the recovery by moving too soon and too aggressively. inflationary pressures are also expected to remain largely contained by a strong dollar and lower energy costs. the fed will therefore face a less difficult trade - off between above - target inflation and consolidating growth. as such, the base case appears to one of a gradual normalisation of the fed β s policy rate. the uk recovery also appears to be on track, with the economy growing 2, 8 per cent in the third quarter and the unemployment rate falling faster than expected, reaching 6 per cent at the end of the third quarter. although the bank of england has maintained its asset purchases at Β£375 billion and interest rates at 0. 5 per cent, sentiments are slowly shifting with some policymakers starting to vote for a policy rate hike. however, with the decline in the inflation rate to below the 2 per cent target, faltering growth in europe, and soured trading and financial relations with russia, a delay in policy normalisation appears likely. in contrast to the positive developments in the us and the uk, growth in the euro area and japan has stalled, with policymakers in these countries indicating their willingness to take strong remedial action to mitigate against a protracted recession and extremely low inflation. the outlook for the euro area has deteriorated over the year, with growth forecasts by the european commission having been revised downwards in november, from 1, 2 and 1, 7 percent to 0, 8 and 1, 1 per cent for 2014 and 2015 respectively. more worrying has been the shift of the weakness from the periphery to the core, notably france and germany. the euro zone is also battling with extremely low inflation, with cpi growing by a meagre 0, 4 per cent in october, uncomfortably close to deflation and far below the ecb β s target of close - tobut - below 2 per cent. the ecb has responded to these challenges by cutting its policy rate further in september and introducing a new stimulus plan2 involving the purchase of investment - grade asset backed securities issued by the non - financial private sector as well as covered bonds of the financial sector. and we have had strong indications from policy makers again during this week that should these measures prove to be insufficient, the the ecb expects that the purchases of asset - back securities and covered bonds under the new programme, together with the targeted | 1 |
##itical events, changes in the outlook on global economies, and policy changes in major economies. we also regularly check, in the financial system report, a β heat map β of financial activity indexes that helps us to gauge the macro conditions of bis central bankers β speeches financial activity by combining a host of indicators in both the financial and non - financial sectors ( chart 2 ). the indexes, with few parts in red, suggest that currently no signs of financial imbalances are observed. having said this, we will of course continue looking carefully for any signs of overheating in the financial markets. negative interest rates another development attracting attention in japan β s financial markets is seen in the negative interest rates of some financial products. the rates for treasury discount bills ( t - bills ) declined to negative territory in september and remained there for most of the time since then ( chart 3 ). the payment of negative interest on securities sounds counter - intuitive and thus may prompt concern that japan β s financial markets are suffering a serious malfunction. if we look into the details of each transaction, however, we can see plausible reasons why investors have accepted negative interest rates. let me briefly mention a few cases where investors would buy t - bills at negative interest rates. commercial banks have an incentive to hold a certain amount of liquid short - term assets for the purpose of liquidity and duration risk management. among various types of these assets, investors often prefer t - bills because they are not only eligible collateral for borrowing from the bank of japan but also most suitable as collateral pledged against other money market and derivative transactions. under the qqe, yields of liquid short - term assets have already approached zero across the board, and therefore even a small premium added to t - bills could easily push their rates below zero. foreign investors have also played an important role in driving yen rates into negative territory. since the summer of 2014, u. s. dollar funding rates implied in foreign exchange swaps have risen, as the net demand for dollars in the foreign exchange swap market has increased ( chart 3 ). this means that foreign investors with dollar cash liquidity can convert dollars into yen via a foreign exchange swap contract and borrow yen at a much cheaper rate. since yen money market rates are already at almost zero, the yen funding cost for these investors would most likely turn negative. they can take advantage of the negative funding cost by investing in t - bills even with negative rates. this investment strategy can still capture a reasonable | there is just enough market liquidity ( chart 5 ). all in all, these indicators appear to suggest that activity in the jgb market has not been affected significantly by the qqe. nonetheless, there are a number of reasons why we cannot be sanguine about the functioning of the jgb market. for instance, our market intelligence has found episodes suggesting signs of deterioration in the functioning of the jgb and related money markets that were not detected from statistical data. an example is the occasional difficulty in borrowing on - the - run jgb. besides, not a few participants point out that the jgb market functioning is undermined in the sense that the market has been overly focused on monetary policy as the factor driving prices instead of the outlook for the economy and inflation, which would otherwise be the fundamental determinant. this implies that a change in market expectations in the future course of monetary policy could exert a stronger impact on the markets. although this is not an issue of market liquidity per se, it is certainly a factor that we should take into consideration when observing market developments. against this background, the bank of japan has been engaged in intensive dialogue with a wide range of market participants to grasp the state of market functioning. as an effort along this line, we have just announced several initiatives to enhance this dialogue, including the introduction of a quarterly bond market survey of market participants β views on the functions of the bond market. we intend to publish the survey results. concluding remarks the pursuit of unconventional monetary actions, that are meant to be β powerful β as governor noyer suggests, would inevitably boost the central bank β s presence in the financial markets and create a resulting tradeoff between the intended policy consequences and the functioning of financial markets. to minimize the potential side effects on market functioning, the central bank should be committed to continuous dialogue with the market, so that it can share its views on its policy intention and its outlook for the economy and inflation, as well as accurately grasp participants β views on market developments. the bank of japan has been, and will continue to be, committed to these efforts. thank you very much for your kind attention. bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches | 1 |
permanent step - up in the cost of capital due to changes in attitudes towards risk among investors. these developments may also affect the rate of technological progress in the long run if, for example, they lessen the incentive to engage in innovative activities. and we cannot forget the risk of the observed increase in unemployment translating into a parallel increase in structural unemployment, an issue i will deal with later in my speech. therefore, structural reforms appear to be the only available tool to avert the risk of the crisis exerting more permanent effects on both the level of output and the growth rate of the economy. second, structural reforms cannot be seen in isolation from the other measures that are needed, in particular those stemming from the exit strategies, but rather as a necessary complement to them. as an example, the dramatic increase in fiscal deficits and government debt levels during the crisis, exacerbating fiscal sustainability concerns for a number of economies, would worsen if output losses were permanent and constrained government revenues and expenditures in the future. by the same token, growth - enhancing structural reforms may smooth acceptance of the fiscal adjustment or even reduce its magnitude if they prove to be effective. past experience shows that structural reforms are often adopted in times of economic crisis or prolonged episodes of slow or negative growth. this contrasts with the generalised view that it is easier to cope with these reforms, since their costs are generally less painful, and distributional effects less visible, when the economy is strong and income is growing rapidly. and the reasons for this cyclical pattern of structural reforms seem to be related to the fact that crises unmask weaknesses that were hidden by cyclical buoyancy, and these increase, at least partly, the social support for change. the labour market is clearly first among the structural reforms that are needed. for one thing, labour markets play a key role in the functioning of the economy, in particular as a mechanism for adjustment in the face of adverse shocks. and their functioning has implications for competitiveness and productivity, two variables crucial for the long - term growth of any economy and, in particular, for those countries participating in a monetary union, as is our case. likewise, there is sufficient evidence that labour market institutions play a key role as determinants of their sound functioning. in particular, we have evidence that labour markets have been pivotal in the response of the different economies to the current crisis. and they can play a central role in the persistence of the negative effects of the financial crisis | those savings to them, when they need them, on the terms agreed. in turn, credit institutions provide financing to customers, trusting that they will repay those funds on the terms agreed. likewise, customers conduct all their business with their banks because they trust them not to sell or reveal any information they have on them as customers. unfortunately, the bank crisis weakened the general public β s trust in credit institutions. some strategies followed by certain banks may have made them less customer - centric. i am thinking, for example, of the incentive schemes based, perhaps to excess, on growing business rather than incrementing customer loyalty. in addition, the lack of good practices in the selling of bank products and services has clearly played some part in this loss of trust. one of the most important future challenges we face is to restore and strengthen the industry β s reputation both with investors and customers. the first step to achieve this must be to make simplicity and accuracy a priority in all communications with customers. this includes aspects such as improving the language that is used in relations with customers, refining selling policies and promoting transparency. allow me, in conclusion, to expand on these points a little further. first, the use of language. the names and descriptions of bank products must not be misleading as to their return and risk characteristics, nor must they be used as misleading advertising tools. accordingly, terms that offer a false sense of security as to the return or interest that may be obtained must be avoided. the need to improve the use of language is even more pressing, bearing in mind that the dialogue between banks and their customers is not, shall we say, a dialogue between equals. in this respect, since 2008 both the banco de espana and the national securities market commission ( the cnmv ) have made great efforts with a view to improving financial knowledge among the general public through the financial education plan. the initiatives taken in this period, to cite just a couple, include the launch of the finance for all portal ( www. finanzasparatodos. com ) and the project to include financial education in the school syllabus. a second key aspect of this process is to improve selling practices. financial institutions have made advances in the service they offer and the resources they dedicate to the monitoring of regulatory compliance. but greater efforts are needed to ensure that bank customers β banks β main assets β are able to understand the terms of the transactions concerned ( clauses of agreements, the cost of services provided, etc. ). | 0.5 |
would be in a position today to issue long - term, fixed - rate, peso - denominated bonds at such narrow spreads over u. s. treasuries? fiscal policy is also important. governments must behave in a fiscally responsible manner. that doesn't mean that the books must be perfectly balanced each and every year. but it does mean that governments must maintain, and be committed to maintaining, a manageable debt - to - gdp ratio and avoid running up debt that will tie the hands of future governments. conclusion let me conclude by going back to where i started my remarks. i have spoken about how a liberalized, global trade and financial order is important for promoting economic growth and prosperity. and i have focused on the importance of a floating exchange rate regime, which is a key element in promoting good performance, both domestically and globally. for systemically important countries, we should be promoting floating rates supported by well - developed and well - functioning domestic financial markets. but it has to be acknowledged that it can take some time for emerging - market economies to put these well - developed markets in place. and along the way, some management of capital flows and a degree of intervention in foreign exchange markets may be needed, in these economies. these capital controls and foreign exchange interventions are awkward, and over time, they can lead to a lot of problems. so they must be eliminated as quickly as possible. but, to the extent that countries are making progress towards more flexible exchange rate regimes, those of us with well - developed markets already in place will have to have some tolerance for this awkwardness. and those of you in the aci will have to continue to trade in this somewhat awkward environment. in the meantime, i can say that we at the bank of canada will be doing all that we can to provide assistance and to persuade countries in transition to move as rapidly as possible, to facilitate the desired convergence. | tiff macklem : release of the monetary policy report opening statement by mr tiff macklem, governor of the bank of canada, at the press conference following the release of the monetary policy report, ottawa, ontario, 14 july 2021. * * * good morning. thank you for joining me to discuss today β s policy announcement and the bank β s monetary policy report ( mpr ). my message today is twofold β of increased confidence and of continued attention. a year ago, at the time of my first mpr as governor, the economy was in a very deep hole. we were just coming out of the first wave of the virus, more than two million canadians were unemployed, and inflation was well below our 1 to 3 percent target range. uncertainty was extremely high. vaccines were being developed, but nobody knew when they would be available or even if they would prove effective. since then, a lot has happened. we have endured two more waves of the virus, and this has held back recovery. but thanks to the resilience and ingenuity of canadian households and businesses, and exceptional fiscal and monetary policy support, the economy has continued to grow. it has been choppy and very uneven, and everyone has had to cope with a lot of uncertainty. but the economy has proven to be impressively resilient. and now highly effective vaccines have arrived. with cases falling, rapid progress on vaccinations and easing containment measures, the governing council is increasingly confident that growth will rebound strongly as the economy once again reopens, and this time growth will be more durable. second, as the unique circumstances created by the pandemic continue to evolve, there is continued need for careful attention to the dynamics of the recovery and inflation. globally, the economic outlook remains highly dependent on the course of the virus and new variants are a concern. in canada, we still have some way to go to a complete recovery, and the rebound in economic activity will proceed at different speeds across sectors. the process of reopening the economy won β t be entirely smooth. for example, we are experiencing supply bottlenecks for some goods and services as demand rebounds faster than supply can ramp back up. these unique circumstances of the pandemic are now helping to push inflation temporarily above our target band. as we reopen the economy, we expect to see some volatility, and we will continue to pay close attention to the progress of the recovery and to the evolution of | 0.5 |
to confirmation by the senate. once a full term has been served, no reappointment is possible. the average actual tenure of governors has been between five and six years over the last twenty - five years. however, the term of the chairman and the vice chairman of the board of governors is only four years and both can be reappointed for additional terms as chairman and vice chairman for as long as they remain on the board. such short and renewable terms reduce independence but facilitate accountability. in addition, they provide an important opportunity for the president to try to influence monetary policy decisions by pressures exerted on the chairman subsequent to appointment. to a lesser degree, appointment of governors and direct pressure on them are further avenues of political influence that have been employed, at least on occasion. the authors of the banking act of 1935, which established the fomc in its modern form, implemented the system of long overlapping terms for governors and shorter renewable terms for the chairman and vice chairman. it seems to me they made a conscious effort to balance independence and accountability. the short, renewable term for the chairman would enhance accountability and encourage a strong working relationship between the chairman and the executive and legislative branches. on the other hand, the long and effectively non - renewable terms for governors would protect the fundamental independence of monetary policy. so the federal reserve loses points in some indices of independence because of the short term of the chairman, but the resulting balance between independence and accountability has, in my view, contributed over the years to a successful relationship between the central bank and the rest of government. transparency and disclosure transparency and disclosure are also essential to accountability. transparency refers to being easily understood. with respect to monetary policy, it refers to the immediacy with which the public learns of policy decisions and the amount of information provided about the rationale for policy actions and the assessment of how possible future developments bear on policy. the legislature, for example, needs information about the policy actions and an understanding of the rationale for the policy if it is to be able to hold the central bank accountable. in addition, it is generally agreed that markets work better with more complete information, although some worry that a continuous flow of information on the leanings of members of the policy committee can result in excessive volatility in financial markets. the congress has, over time, made efforts to increase the transparency of the monetary policy process and widen the scope of disclosures of monetary policy decisions and of the discussions leading up to those decisions | . thus : ( nx = βΞ·e β Ξ± d β d β ) where Ξ· is the elasticity of net exports with respect to the exchange rate, and Ξ± is the elasticity of net exports to the differential between home and foreign absorption. the real exchange rate is expressed in percent deviation from the steady state. the exchange rate is determined according to an interest rate parity condition which implies that the exchange rate appreciates when domestic interest rates are higher - 14 than foreign interest rates, with elasticities ( Οc and Οu ) that can differ depending on whether interest rate movements are driven by conventional or unconventional policy : ( ) ( ) e = Οc rc β rc β + Οu ru β ru β. the model is closed by specifying the behavior of the monetary authority. we assume that the monetary authority can adjust either the interest rate associated with conventional policy ( rc ), or the interest rate linked to balance sheet actions ( ru ), or both, to affect output ( its goal variable ). the conventional feedback rule is thus : rc = Ξ³ c y, rc β = Ξ³ cβ y β, whereas the unconventional feedback rule is : ru = Ξ³ u y ru β = Ξ³ uβ y β. the system above contains 10 equations in 10 endogenous variables ( y, y *, d, d *, nx, e, rc, rc *, ru, ru * ), as well two shocks, u and u *, that can move gdp, its components, exchange rates, and interest rates. b. simulation results figures 1 and 2 show the results of simulating the model under alternative assumptions about the shocks and monetary policy reaction. in each case, the economy starts in steady state with all variables at zero and experiences a demand shock in period 1 that dies out with an autocorrelation Ο of 0. 95. all parameter values are reported in table 1. - 15 figure 1. home demand shock figure 1 illustrates the case of a favorable demand shock in the home country. the solid lines illustrate the case when home uses the short - term interest rate as its active policy tool, and keeps its balance sheet on hold, consistent with a desire to delay balance sheet normalization. the policy reaction is calibrated to be sufficiently aggressive that home gdp always remains at baseline ( see column 2 of table 1 ). the higher policy rate path ( that is, higher rc ) causes the long - term interest rate ( panel a ) to | 0.5 |
speeches channels β schools, community events, workplace talks, newspapers, tv, radio, and now increasingly the internet β to reach out in every way we can to as many singaporeans as possible. 12. we set up a new institute last year called the institute for financial literacy ( ifl ) which was set up jointly by moneysense and the singapore polytechnic. this institute has helped to bring financial education to working adults, who don β t have much time, but they can attend lunchtime talks and workshops free of charge at their workplace. to date, ifl had reached out to 12, 000 people. translating knowledge into action 13. what will be our focus for the next 10 years? first, we have to recognise that financial education is not just about knowledge, but also about inculcating the right values from young, and encouraging everyone to be pro - active rather than passive about their finances. at every income level and for every family, it really pays to prepare for the future. 14. many think that they don β t have enough time, or just say they are not interested, or that there β s too much to plan for because it β s too uncertain. but it β s precisely because life has uncertainties that we need to make plans for the future. we need contingency plans. 15. so we will focus, for the next ten years, on three areas. first, we must start earlier, with teenagers. forming the right attitudes towards spending and saving early in life goes a long way. 16. starting from next year, the ministry of education will introduce food and consumer education ( fce ) for all secondary one and two students. this is a way of teaching them life skills that they β ll find very helpful. a key objective is to inculcate basic financial literacy in our students, at a time when they are starting to think of ways of using money. moneysense is working closely with the moe and nie to equip teachers with the relevant skills and knowledge, so they can help the children with money management skills. this is the first objective, start early when they are teenagers. 17. second, we must deliver targeted financial education messages at key points in a person β s life, for instance, when couples intend to get married, to plan for wedding expenses, which can be very large if we are not careful ; and later, when they are buying a flat, how to make sure they can buy an affordable flat | raise productivity, both the implementation of product and labour market reforms and actions to improve the business environment for firms need to gain momentum in several countries. a swift and effective implementation of these reforms, in an environment of accommodative monetary policy, will not only lead to higher sustainable economic growth in the euro area but bis central bankers β speeches will also raise expectations of permanently higher incomes. therefore, it will encourage both households to expand consumption and firms to increase investment today, thus reinforcing the current cyclical economic recovery. as concerns fiscal developments, reflecting mainly the cyclical recovery and the low level of interest rates, the aggregate euro area general government deficit ratio is projected to decline gradually from 2. 1 % of gdp this year to 1. 5 % in 2017. the general government debt ratio is projected to decline gradually from 91. 5 % of gdp this year to 88. 4 % in 2017. fiscal policies should support the economic recovery while remaining in compliance with the stability and growth pact. full and consistent implementation of the pact is key for confidence in our fiscal framework. we are now at your disposal for questions. bis central bankers β speeches | 0 |
. labor cost has remained and will remain comparatively low before the process is completed. during this process, the choice of staying on farms or going to cities depends mainly on the comparative advantages and benefits of farming and working in cities. other policy related factors, however, are relatively insignificant. due to the equity ownership structure, employees only receive a small proportion of corporate profits, which have maintained at high levels. to solve this problem, the 17th party congress stated in its report that conditions would be created to enable more people to receive incomes from properties and investments. for the same reason, part of the stateowned common equity is transferred to the national social security fund when a company goes public. greater efforts are needed to enable the public to share the corporate profits. in china β s structural adjustments, the optimal choice is to expand household consumption, which will directly enhance the domestic demand and lower the savings rate. this is, however, easier said than done. while the current income distribution structure cannot be dramatically changed in the short term, the second - best choice is to maintain and expand investments, and channel investments to sectors and areas to achieve efficient but not wasteful allocations. this way, the residual savings, namely, total savings net of total investments ( savings surplus ), will not be so large, and will not have a major impact internationally. apparently, over - investment in industries leads to overcapacity. however, with urbanization still a long way to go, there is enormous investment potentials in the process. urbanization will prepare china for its demographic migration, consumption expansion and the development of the service sectors. after all, china β s urbanization will go on for many years to come. 4. analysis of several scenarios of rebalancing the global economy there can be a number of scenarios for rebalancing the global economy through adjustments, and the analyses and policy implications for different scenarios are different. a lot of discussions focus on the first and also the most desirable scenario. both the household savings rate and overall savings rate in the u. s. keeps going up, and chinese household consumption keeps rising, leading to a correction of the global imbalances. indeed, this is the most ideal scenario, but not easily realizable, because structural adjustments involve quite a lot difficult issues. furthermore, we cannot, based on the latest short - term data, jump to the conclusion that this problem can be easily solved. in the second scenario, u. s. household | zhou xiaochuan : anti - money laundering in china - the status quo and prospects speech by mr zhou xiaochuan, governor of the people β s bank of china, at the first meeting of the ministerial joint conference on aml, beijing, 27 august 2004. * * * approved by the state council, the people β s bank of china ( pbc ), as the leading ministry in the ministerial joint conference on anti - money laundering ( aml ), invites today the member ministries to review the current aml situation, to draw up the plan for the aml work in the next stage, to determine the working procedure for the ministerial joint conference on anti - money laundering ( aml ) and the responsibilities of the relevant ministries. i. the significance of aml money laundering is the practice of legitimizing the illegally obtained gains and proceeds through a series of transactions, transfers or conversions in order to evade legal punishments. money laundering helps criminals to evade legal punishments as well as puts a premium to the spawning of new crimes, distorts normal economic and financial orders, damages credibility of financial institutions and corrupts public morality. with the deepening integration of china β s economy into the world economy and new changes in social conflicts, strengthening aml is of great significance. first, sound aml work is an objective necessity for safeguarding china β s national interests and the fundamental interests of the masses. aml involves efforts in the diplomatic, economic, judiciary and security fields etc. the performance of aml is closely related to the public image of china β s government both at home and abroad, to the economic stability and to the social justice. a sound practice in aml also constitutes the concrete measure for safeguarding the order of china β s socialist market economy and the fundamental interests of the masses and for practicing the important thoughts of β three represents β. the work stands for an important move for honoring the commitments of the chinese government to the outside world and for creating the image of a responsible big country with respect to aml. it is also a necessary step for speeding up the opening of the financial industry and promoting the internationalization of the chinese banks. therefore, we shall, from the vantage point of β stressing political awareness β and based on the significance of safeguarding china β s economic and financial security, sharpen the awareness of the importance and urgency of aml, establish effective aml system, and bring aml onto the track of standardization and institutional arrangement. second | 0.5 |
the good work accomplished so far. i would also like to thank the t2s advisory group. in the next phase of the project, this group will retain its important function of ensuring that t2s delivers in line with market needs. the group has provided invaluable advice to the programme board and to the governing council over the past few years. the level of transparency on the t2s project through the advisory group has been β i believe β unprecedented. this has certainly been one of the key drivers of the project β s acceptance amongst csds, market participants and political authorities. finally, i wish to thank the high level group t2s as well as the t2s teams both at the ecb and the 4cb. their work is not always visible, but it is invaluable. indeed it is thanks to their work β backstage β that the construction of the t2s platform is well on track. the system is now over halfway to delivery point and the development and testing of the application are proceeding on a firm footing. on this basis, and with the signature of the t2s contracts, we now have the solid foundations to continue building t2s and to transform post - trading in europe, making it both more efficient and safer. we have taken a major step today towards making t2s happen. in years to come, we will see the eurosystem, participating csds, and market participants more widely working together to make this project a success. thank you very much. bis central bankers β speeches | union. these are the decisions made by the british population, we have nothing to say in that regard. but i think that it β s going to be quite negative in terms of economic performance for the uk. the rest of the members of the union will have to continue cooperating and continue integrating our economies. i think that in that aspect further integration is the correct answer. i repeat again, it β s quite unfortunate that the uk, such a big economy, leaves the union, but this decision is taken by the british people. we regret that decision. i would like to express that we have to continue cooperating with the uk and that i hope that we will have a divorce that will be orderly and that will let us continue operating with the uk. but now the decision has to be taken by the british parliament, so full respect for the decisions taken by the british population and by the british parliament. but i think that we will have to continue our integration process in the euro area. given the current political climate in europe, do you feel that moving towards closer integration is the right step because we see a lot of backlash at this moment both in nationalistic, populist and so on? undoubtedly we have seen more populism all over europe in recent years, but i think that the correct response is to take further steps in terms of integration. there is not an easy fix to the problems of europe. but i think that the euro indicates that there is a way forward and that we can overcome difficulties together and that the very nationalistic and domestic approaches are not enough in order to do that, but that it β s much better to do it together. and in that regard the euro is the main element of coherence and the main element of political integration and financial integration that we have in the eu. if we take one case in particular β that of italy β we see that there is this new government that is really pointing the finger against these technocratic institutions, including the ecb, and saying this is not the future, we cannot go on like this. they're the third largest euro zone member, so third most important. so what can you answer to that kind of political sentiment that indeed is rising? i do not want to comment on any particular country, but even if you look at italy, if you look at the polls, there is a very important majority of the italian people who support the euro. we have seen that the italian government β and i | 0.5 |
amando m tetangco, jr : moving the economy forward to a higher growth path speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the annual reception fo rthe banking community, central bank of the philippines, manila, 15 january 2008. * * * honorable justices of the supreme court, honorable members of the philippine congress, members of the cabinet, leaders of the philippine banking sector, representatives of our partner organizations, fellow workers in government, special guests good evening. on behalf of the members of the monetary board, i welcome all of you to our traditional annual reception for the banking community. ladies and gentlemen. as you have noticed, while we hold this event for the banking community, we do invite representatives from other sectors. this is in recognition of the important role the banking industry and these sectors play in moving our economy forward. while we decide and act independently of each other, at the end of the day, our policies, programs, and activities are bound to affect the others. in other words, no one acts in a vacuum ; we are interrelated. it is in this spirit that we bring you together within the storied and historic walls of our fort san antonio abad. and now, let me give you a brief overview of how our economy performed in 2007, our common report card in other words and how our future is shaping up, 2008 in particular. i am pleased to report that 2007 was indeed a remarkable year for the philippine economy, as it showed its resilience and ability to sustain its growth momentum, in the face of severe volatilities in global financial markets and record world oil prices. our economy, as measured by gdp, turned in its best performance in 30 years by expanding at a faster - than - expected rate of 7. 1 percent in the first three quarters last year. there are indications that this strong performance was carried through the fourth quarter last year, based on preliminary reports on agricultural output as well as the services sector which includes telecommunications and tourism. noteworthy is the fact that we achieved in 2007 β¦. the ideal convergence of high economic growth with low inflation, which at 2. 8 % is our lowest in 20 years. in turn, low inflation kept interest rates on a downtrend, led by the bellwether 91 - day t - bill rate which averaged 3. 4 % in 2007, the lowest level | consumer spending should also be supported by an improvement in labour market conditions. these considerations underpin our confidence in a continuation of the economic recovery, an expectation which is mirrored by available forecasts and projections. it is also in line with financial market developments over the past few weeks. obviously, any forward - looking assessment is subject to risks and uncertainties. on the external side, the adverse terms - of - trade effects of recent rises in oil and other commodity prices pose risks at shorter horizons, while the persistence of global imbalances implies some uncertainties over the medium term. on the domestic side, uncertainties surrounding fiscal policy and structural reforms in some euro area countries seem to have contributed to preventing a more vigorous improvement in consumer confidence. a continued commitment to and greater clarity about the content and timing of these crucial reforms, supported by a better understanding of their necessity and benefits for all citizens, would help to resolve this uncertainty and thereby mitigate the associated risks for the euro area economy. turning to price developments, annual hicp inflation rates will exhibit some short - term volatility over the coming months, as we already indicated on the occasion of previous meetings of the governing council. according to eurostat β s flash estimate, annual hicp inflation was 2. 0 % in april, after 1. 7 % in march. while no detailed information is available as yet, the recent rise in annual inflation rates is likely to mainly reflect a strong base effect in the energy component resulting from the marked decline of oil prices a year ago. moreover, recent oil price increases have exerted additional upward pressure. as these factors will also play a role in the next few months, inflation rates of 2 % or somewhat above are possible over the short term. despite these recent, less positive developments, over longer horizons we expect inflation rates to remain in line with price stability. in particular, wage developments should remain moderate. the latest data on wage growth in the fourth quarter of 2003 lend support to this view. our outlook for price developments is in line with available forecasts and projections. however, at the current juncture, the increase in commodity prices in general, and oil prices in particular, may pose an upside risk to price stability. it will therefore remain important to pay close attention to inflation expectations. moving on to the monetary analysis, annual m3 growth has moderated only slowly since the summer of 2003. while there is evidence of continued portfolio shifts out of m3 into longer - term assets, the pace of this adjustment | 0 |
cohort of elderly is likely to experience slower growth than one with a lower elderly share. nevertheless, future behavioral changes cannot be excluded β for example, individuals might decide to increase saving over their working - life in view of the projected increase in life expectancy. ageing societies are expected to face mounting health and pension spending pressures putting at risk public finances which, in turn, will further reduce future growth prospects. there are various policy options to address the ageing related future growth challenges. first and foremost, it is important to fully utilize the labour input by taking actions to increase the employment rate. a low employment rate implies that a significant part of the working age population is either unemployed or inactive ( outside the workforce ). for example in greece ( according to the 2015 ageing report ) the employment rate ( for the age group of 15 β 64 years old ) was 48. 7 % in 2013 on account of very high unemployment ( about 28 % for ages 15 β 64 ) and low labour force participation, in particular, for the age group 55 β 64 ( 42. 4 % ). therefore action should be taken to β’ first, address the very high unemployment because it can have severe long term repercussions, though the hysteresis effects, as it can induce people to drop out of the labour force. at the same time, long term unemployment leads to human capital erosion and a fall in potential growth β translating a cyclical problem into a structural one. bis central bankers β speeches β’ second, action should be taken to raise the currently low participation rate by females and older individuals. for example countries facing these challenges should adopt policies that discourage age and sex discrimination by employers, promote life - long learning and education, allow for more flexible work arrangements for older workers and women, and increase state - funded child care provisions. furthermore, policy makers should also consider increasing the statutory retirement age when this is low by international standards. alternatively, an already high statutory retirement age might have to be made binding by limiting the early retirement schemes. in addition, a life expectancy component could be build into the social security system. finally, migration policies might have to be reconsidered as a whole in europe in view of the future demographic pressures. besides the abovementioned policies aiming at better utilizing the labour input, additional policies should be put forward such as increasing infrastructure investment, facilitating business investment and adopting reforms that can permanently boost the level of potential output and its growth rate in the medium term. | long period of time with regard to the reinvestments, as we cannot exclude the possibility that we will reach our inflation objective earlier than expected or that there will be an increase in negative side effects from our expansionary monetary policy. is quantitative easing ( qe ) a tool the ecb could use again in the future, as some current and former governing council members have suggested? 1 / 2 bis central bankers'speeches in the context of a monetary union with many different sovereigns and no fiscal, genuine economic and political union, qe should not be part of the normal policy toolbox. it should be a tool of last resort, to be used only when there is a clear risk of deflation. with a long - lasting, very accommodative monetary policy, side effects and risks emerge. and while pursuing price stability is the main objective, we also have to keep in mind the costs β and not only the benefits β of our monetary policy measures. what danger does the row between rome and brussels over the italian budget present for the country β s banking system? as a banking supervisor it β s not our task to comment on political discussions or decisions with regard to the budgets and fiscal stances of individual countries. banks have to acknowledge changes and risks in the macroeconomic environment they operate in. and if these changes are relevant, we as supervisors adapt our assessment of banks β risk profiles, too. overall, the italian banking system has become more resilient and banks are better equipped to deal with uncertainties than they were before. what do you see as the top priority for banking supervision in the coming months and years, in italy and elsewhere? among other topics, there is still further work to do on non - performing loans. they will keep us busy for the coming years. the cleaning up of banks β balance sheets should be pushed through as quickly as possible. this is not specific to italy. all banks should do their utmost to improve their resilience in sunny times when the economic cycle is on the upside. not all banks have done all of the work we would like them to do. some are well under way, and some still need to do much more. some observers are disappointed that a male candidate β italy β s andrea enria β will take over as head of ecb banking supervision from daniele nouy next year, rather than irishwoman sharon donnery. how did you feel about the news? i hope that our ratio of women in central | 0 |
the market. competition will also tend to result in the failure of unproductive businesses and facilitate the entry and success of more innovative ones. in addition, more heavily - regulated firms may be less motivated to choose an efficient technology. in recent years, industries such as telecommunications, transportation, electricity and banking have undergone privatization, deregulation and increased competition in a number of countries. in many cases, these reforms were in fact prompted by technological change which reduced large fixed costs and thus the scope for natural monopolies. furthermore, in some of these industries, there is evidence that the move towards a more liberalized regulatory regime induced further innovation. a good example is the telecommunications industry. evidence on patents ( one measure of innovation ) and measures of productivity suggests that those countries that have extensively liberalized ( such as japan, the united kingdom, finland and the united states ) have experienced greater innovation and larger gains in efficiency. evidence from the telecommunications industry also suggests that the technological diffusion rate is faster under a more competitive regulatory regime. for instance, both growth in cellular phone usage and the penetration rate for internet hosts is much higher in more competitive market structures. this is not to suggest that regulation is necessarily a bad thing. regulations that protect intellectual property rights reward those with creative ideas and therefore can act to stimulate cost - reducing innovations. from a broader perspective, productivity growth is obviously not society β s only priority β worker health and safety, pollution control and other societal values are important as well. although it has been argued that regulations requiring mandated approaches to pollution reduction or worker safety tend to divert managerial energies from pursuing cost - reducing innovations, studies have shown that some regulatory changes can in fact enhance productivity by forcing a firm to develop new and more - efficient production techniques. for example, the cotton dust standard mandated by osha is claimed to have led to the adoption of new and more cost - effective technologies utilized by the textile industry. what i think this suggests is the need, as with so much in economics, to recognize trade - offs. we should recognize the broad range of society β s interests and continue to seek balance by striving for regulation that serves well - defined purposes with minimal burden. other institutional features other institutional features are also important to the climate for innovation. for instance, entrepreneurship is fostered by access of small firms to capital markets. a lack of breadth and depth of financial institutions and markets can inhibit the financing of innovative projects by small firms. again, the united states appears to have an | advantage in this regard relative to europe and japan. in particular, venture capital markets here are both more developed and more geared to financing higher - risk projects, mainly in technology - based sectors by start - ups with prospects of rapid growth. furthermore, the range of investors is wide and includes pension funds, insurance companies and even private individuals. in contrast, in europe, venture capital is geared towards more mainstream projects and banks dominate lending. in japan, a venture capitalist is typically a subsidiary of a large financial institution and invests mainly in established firms. conclusion obviously, the united states does not have a monopoly on technological advance. we should not be smug nor complacent because certainly the us experience will be adopted and adapted by other countries. although the united states arguably has led the way into the information technology revolution, there is evidence that others are following. scandinavia in particular appears to be embracing computer - based technology ; sweden has begun to market itself as europe β s β silicon valley. β adoption of new technologies in the united states may also have been spurred in recent years by the cyclical strength of the economy in combination with strong domestic and international competitive pressures. with new workers increasingly difficult to hire in a tight labor market, firms have an increased incentive to find new and more - efficient ways to use existing labor resources. i might add that the current low inflation environment also helps this process. in the presence of subdued inflation expectations, the first inclination of firms in the face of rising demand for their output, thus far at least, appears not to have been to raise prices but rather to find ways to expand output via more efficient means of production. it is clear that other countries, many of which are less far along in reaping the benefits associated with the revolution in information technology, have the potential to gain more over the period ahead. the extent to which they do realize these gains will depend on how successful they are in adapting to their unique circumstances policies that foster efficiency and competition in labor and product markets. i wish them well. | 1 |
systems. we are convinced that these seminars are a firm step forward in this direction. the aim of this webinar is to shed some light on how remittance flows during the health crisis have influenced latin america β s macroeconomic and financial stability. as you are well aware, the latin american economic situation has been particularly affected by the covid - 19 pandemic. along with the human cost in lives, the effects on poverty and income distribution have been very severe. the global economic recovery might also be delayed reaching the region, increasing the likelihood that the crisis may cause more persistent economic effects. despite this difficult situation, remittances have proven pandemic - proof1 and have behaved countercyclically in most of the region β s countries, assuming a more important role as a source of external financing. this subject is crucial to spain, since it is the second - ranked issuer country of remittances to latin america. some of the topics we will address today ( such as the growing importance of digital money remittances, the role of fiscal stimulus measures in the resilience of remittances and the function of the informal economy ) are key to understanding the behaviour of the flow of remittances in this crisis. undoubtedly, today β s event will allow us to better understand these developments and β i hope β 1 / 2 bis central bankers'speeches to draw some useful conclusions on how to tackle them from the central bank standpoint. thank you for your attention. remittances barely fell by 1. 6 % in 2020, compared with their 4. 8 % decline during the 2008 financial crisis. 2 / 2 bis central bankers'speeches | of unemployed and to improve workers'wages. the fact that spain is today more advanced than other european countries in many areas that i mentioned at the start of my speech should not let us forget that there are still some fields in which we can learn from others. it is precisely this attitude of having learnt from others, and made the consequent reforms, which largely explains the positive performance of the spanish economy in recent decades. in my opinion, the time has come to do the same ( to learn and to reform ) with labour market institutions which, as systematically stated by international organisations, are the major structural difference remaining between us and the more developed countries. we must acknowledge that the task is not an easy one. apart from convincing people about their necessity, something historians and economists can help do, the skills of many others will be needed to design and implement the reforms. one thorny issue is how to set some changes in motion immediately and, at the same time, be sensitive to what may be seen as an alteration of established rights. political acuity is crucial to resolve these problems, as indeed it is also to make the interests of the different groups of workers compatible with each other. but it should also reassure us to know that the reform toolbox is full of possibilities : calendars, compensation, incentives, etc. lawyers also have an important job to do, since the problem with all structural reforms is that they alter the status quo and, accordingly, it is essential to find legal formulae that circumvent the obstacles that may arise in their approval and implementation. the difficulties that may arise, not only when reforming but also in opening the debate, may lead some to ask why, without reforms and, in particular, without modifying our labour market institutions, spain won β t be able to grow as in the past. from what i β ve said already you can imagine my reply. it is possible that spain may be able to grow as in the past, but it is highly unlikely. and i say that it is possible solely because, following the general failure of most of the forecasts that have been made during the current crisis, we should all be more humble when postulating about the future. honestly, though, it is more difficult to imagine today how, without reforms, the spanish economy can perform as favourably in the future as it has done in the last few decades. moreover, what do we gain by refusing to learn from others about what can reduce the rate of unemployment | 0.5 |
the international monetary fund ( imf ) has been publishing, since 2017, a regular survey on macroprudential policy measures ( imf 2018 ), which can be a good starting point for empirical work. second, in order to assess the effects of financial education, it is sufficient to link education received by an individual to outcomes at the individual level. assessing the effects of financial stability policies, in contrast, requires linking interventions that affect decisions at the micro - level to aggregate outcomes. focusing on the big picture and on the question of how micro - incentives and decisions add up to aggregate behaviour is thus needed. a related question is how frictions and biases that affect micro - level decision making aggregate up and affect financial stability, and how these frictions can be identified early on. uninformed investors will always be present in markets. the question is how important they are, quantitatively, for market outcomes. vissing - jorgensen ( 2004 ) argues that direct evidence on investors β beliefs is needed in order to determine which aspects of behavioural finance models are relevant and thus which models provide reliable input into policy debates. in typical environments, however, information about investors β beliefs is not seite 13 von 27 deutsche bundesbank, directorate general communications wilhelm - epstein - strasse 14, 60431 frankfurt am main, germany, tel : + 49 ( 0 ) 69 9566 3511 or 3512, fax : + 49 ( 0 ) 69 9566 3077 presse @ bundesbank. de, www. bundesbank. de reproduction permitted only if source is stated. available, and the question arises how to develop robust policy implications in such environments of limited information. essentially, this boils down to the question of how the need for policy interventions and the effects of policies that have been implemented can be assessed. designing appropriate strategies for impact assessments, both ex ante and ex post, can be an important contribution of research. teaching economic and financial knowledge well - designed financial education programmes can improve financial knowledge that is relevant for day - to - day decision making. in parallel, efforts should be made to improve teaching financial stability and to integrate this into curricula of universities. this provides the necessary academic background for macroprudential policies and analytical work related to financial stability to both, policymakers and academics. the challenge is that teaching financial stability requires input from many fields including micro - and macroeconomics, public finance, theory of regulation, or even competition | growth in the u. s. in the up - run to the financial crisis. this price behaviour is consistent with search models in which a small fraction of overly optimistic agents push up house prices ( piazessi and schneider 2009 ). essentially, these theoretical models link distorted expectations to excessive asset price bubbles and excessive household debt. empirical studies using aggregate data support seite 6 von 27 deutsche bundesbank, directorate general communications wilhelm - epstein - strasse 14, 60431 frankfurt am main, germany, tel : + 49 ( 0 ) 69 9566 3511 or 3512, fax : + 49 ( 0 ) 69 9566 3077 presse @ bundesbank. de, www. bundesbank. de reproduction permitted only if source is stated. the mechanisms stressed by these models, in particular the link running from asset price bubbles to financial crises ( reinhart and rogoff 2008, 2009 ; brunnermeier 2009 ). moreover, early warning models also link asset price and credit bubbles to financial crises ( beutel, list, and von schweinitz 2018 ). also, several asset pricing anomalies can be explained by the fact that households typically do not participate in financial markets directly but rather operate through financial intermediaries ( he and krishnamurty 2018 ). hence, the relevant marginal investor is not the individual household but the intermediaries facing various constraints. financial literacy and expectations essentially, all ingredients of financial crises β balance sheet effects, runs, and network effects β can be linked to and are potentially aggravated by limited financial knowledge. identifying the exact channel running from distorted micro - economic decisions to aggregate outcomes is inherently more difficult. one key question is whether financial literacy has an impact on the degree of distortions in expectations. empirical evidence supports that individuals with better financial education have less distorted expectations. for example, typical households ( in the u. s. ) are excessively optimistic during booms and excessively pessimistic after busts ( adam, marcet, and beutel 2017 ). at the same time, better informed professional investors do not suffer from the same systematic biases ( beutel 2017 ). moreover, experience with investing in financial markets ( in years ) and personal experiences ( good or bad past returns ) have a strong impact on households β expectations ( malmendier and nagel 2011 ; vissing - jorgensen 2004 ). financial experience, in turn, is related to higher financial knowledge. | 1 |
services, capital and labour within the eac ; hence it has profound implications for financial services. in principle the common market should eventually allow banks headquartered in any one partner state the β right of establishment β in each of the other partner states and allow citizens of each partner state to purchase financial services from banks in the other partner states. precisely how the β right of establishment β will operate with respect to banking has yet to be decided. for the banking industry, a key question is whether all banks, including those headquartered within the eac, should only be allowed to take deposits in any individual partner state if they operate as a fully capitalised subsidiary in that state, rather than merely as a branch. i think that the recent experience in the european single market should caution us against permitting bank branching across borders. the creation of a common market should lead to more efficient financial services. i mentioned earlier that i believe that some consolidation in the ugandan banking sector will be necessary and beneficial. in particular larger banks will be better placed to take advantage of the expansion in the size of the market created by the common market and to reap economies of scale which can bring down the very high operating costs as a percentage of assets which afflict banks in uganda. lower operating costs will in turn help to reduce intermediation spreads which will benefit bank customers in the real sectors of the economy. to create an efficient common market in banking services it will be necessary to harmonise many aspects of bank regulations across all five partner states. this is necessary to create a level playing field for banks and to prevent regulatory arbitrage whereby banks aim to operate from the jurisdiction within the eac with the weakest regulations. i mentioned earlier that the bank of uganda will advise the minister of finance to raise the minimum paid up capital requirement for banks. the increase in part is motivated by the need to align our capital requirements with those of our partners in the eac. kenya will raise its minimum capital requirement to ksh 1 billion, which is nearly $ 13 million, by 2012. other aspects of bank regulations will also need to be harmonised, including permissible activities, restrictions on loan concentrations and liquidity requirements. conclusion i have covered a lot of ground in this talk so i shall refrain from detaining you for much longer. i would like to finish with the following conclusions. i am convinced that the banking industry faces exciting challenges in the years ahead. the prospects of sustained economic growth coupled with east african economic integration will offer banks | requirement which relates a regulatory definition of capital to risk weighted assets. at the global level, concerns have focussed on loopholes in the capital adequacy requirements : banks in western countries were able to β game the system β to reduce the amount of capital that they were required to hold, thereby driving up their leverage. we have not faced similar problems in uganda and i don β t think that radical changes in capital adequacy requirements are needed yet. we already impose a higher capital adequacy requirement β 12 percent of risk weighted assets β than the minimum of 8 percent stipulated in the basel accord and most banks in uganda currently operate with much more capital than the statutory minimum. we do, however, need to make two revisions to the capital adequacy requirements to cover risks which were not previously considered pertinent but which have become more so. first, we will shortly introduce a capital charge for market risk, which is necessary for full compliance with the basel i accord. secondly, we will eventually introduce a capital charge for operational risk, based on one of the methodologies in the basel ii accord. we require more a radical change to the minimum paid capital requirement for banks. the current statutory minimum of shs 4 billion, which was set six years ago, is far too low. it does not ensure that new entrants to the banking industry have sufficient capital to support their operations before they reach a scale where they can begin to generate profits. it has also fallen way below the minimum statutory levels imposed by our neighbours in east africa and elsewhere in africa. although the banking system as a whole in uganda is currently well capitalised, the evolution of the banking system over the long term is likely to intensify the risks to which banks are exposed. hence i believe that the changes i have just described will help to ensure that banks are better able to withstand shocks to their balance sheets. i think that the higher minimum paid up capital requirement will also stimulate a degree of consolidation in the banking industry in uganda, with fewer but larger commercial banks. i will return to this issue when i discuss the implications of the east african common market. the scope of allowable banking activities the question of whether commercial banks should be allowed to engage in β non bank β activities, and if so, what specific activities should be permitted, poses acute dilemmas for regulatory policy. in developing countries, the objective of promoting a diversification of what are often very narrow financial markets with very few non | 1 |
example, at around 4, 000 baht per month. while thai commercial banks charged interest on personal loans at the rate between 12 - 24 % p. a., foreign banks charged between 12 to 46 % per annum, and foreign - owned non - bank companies charged an even higher rate of 12 - 58 % per annum. charges by non - bank companies sometimes seem misleading as they split the monthly interest charge into two parts : one part called interest rate, and the remaining part called fee. but their fee calculations are done in the same way as interest rate charges. for example, one non - bank company charges an interest of 0. 99 % per month plus a service fee of 3. 98 % per month. many borrowers, who do not fully understand this financial technique, misunderstand that they have to pay a one - time fee of 3. 99 % and an interest rate of 0. 99 % each month, which seems quite reasonable. in reality, however, such a company charges an effective rate of up to 58 % per annum. only when they begin their debt payment, would they realize that out of a total loan of 10, 000 baht, and a monthly installment of 600 baht every month, they would need up to eight years to repay the aggregate amount of debt! ladies and gentlemen, the bank of thailand has also sought for the expansion of our regulatory framework to oversee the personal loan business. the ministry of finance has issued a notification giving authority to the bank of thailand on july 2005 to set the ceiling on interest rates at 28 % per annum. every enterprise now needs to register for a license and bring its ceiling rate down to no more than 28 % per annum. likewise, the bank of thailand has urged these licensed operators to clearly and transparently disclose the computation of their interest rate calculation in order to prevent confusion among consumers. currently, we are monitoring closely the situation of consumer loans. if any further problems arise, the bank of thailand will not hesitate to take appropriate action. ladies and gentlemen, the proliferation of credit card and personal loan businesses have provided greater opportunity for people to spend more on necessary items before they start to save. this way of life would do no harm if individuals exercised self - control on their spending and were able to evaluate their capability to meet the expense of each installment. however, the effect of this easier means of payment is more likely to stimulate people to buy at the wrong time. not surprisingly, the β save now, pay later | policy can take care of exchange rate as long as there is no conflict with inflation. and, we have no target level for the thai baht in mind. foreign exchange market is intervened when there is too much volatility in the market. the objective is to smooth the country β s adjustment during the transitional period. looking forward, the baht movement would depend largely on external developments which i have already discussed. moreover, there are also internal drivers : large surplus in current and capital accounts. the thai stock market remains one of the most popular destinations in emerging markets for foreign investors, given its relatively low p / e ratio. during the first 7 months of this year, foreign investors became net buy about 4 billion us dollar. such inflows together with foreign direct investments have also added pressure on the currency. ladies and gentlemen, i would like to turn to the third and final part of my talk today, which is thailand β s approach in coping with the risks and challenges posed by globalization. indeed, the challenges of globalization are constantly changing. to meet these challenges from without, it is critical that the thai economy build strength from within : by continuously improving the flexibility and efficiency of its firms, the resiliency of its households, and the competitiveness of its business environment. but beyond getting the fundamentals right and strengthening them, the thai economy needs a strategic policy package that builds a system that allows for constant self - correction β one that also let the economy regain its strength quickly after a severe negative shock. that system should be underpinned by a strong link to the world economy, which will encourage innovation and efficiency. specifically, i should underscore that this approach requires policy markers to focus on achieving three key objectives, namely managing volatilities especially those emanating from volatile global capital movements ; building resiliency in both real and financial sectors ; and fostering long - term productivity improvement. looking ahead, the pressing and practical challenges we face in the near term are three - fold and indeed they are also inter - related. they are β hot money β inflows and large inflows in general, pressure for rapid domestic currency appreciation, and finally, the potential loss of monetary autonomy in the sense of independent interest rate policy. being part of the fast growing asia, thailand and its neighbors have become attractive destinations for international investors β although the more powerful underlying reason may ironically be a medium - term flight from us dollar assets since 2002. with large capital inflow | 0.5 |
daniel mminele : recent major developments in global and domestic markets address by mr daniel mminele, deputy governor of the south african reserve bank, at the financial markets department β s annual cocktail function, pretoria, 24 june 2014. * * * good evening, it is a great pleasure for me to welcome you all to the financial markets department β s annual cocktail function. as has become tradition for this event, we would like to take stock of the major developments in global and domestic financial markets over the past year, before updating you on matters relating to the financial markets department and initiatives undertaken over the past year. tonight we will adopt a different approach, namely that i will cover the first section, and then hand over to leon myburgh, head of the financial markets department, to update you on departmental activities. given recent releases of the monetary policy review, the quarterly bulletin and speeches, i shall not comment in any detail on recent economic developments. re - pricing of risks in international and local financial markets those of you who were able to attend our function last year will recall that the assessment at the time was that of increasing confidence about the gradual β healing β of the global economy and financial system, and the reduction in β tail risks β that had unsettled markets for the previous two years. these improvements were at the time largely attributable to the drastic policy actions undertaken on an on - going basis by the world β s major central banks. yet at the same time, it was already becoming evident that there was a build - up of risks, and that the impact on financial markets of the timing, as well as the pace, of the eventual and unavoidable reversal of these extraordinary measures, could be substantial. looking back over the past twelve months, these factors became the dominant drivers of market movements, as was anticipated at the time. the gradual improvement in the major economies that was expected a year ago has continued, by and large, to materialise. global economic growth has picked up, albeit unevenly. the underlying strength of the recovery has been confirmed in the united states, the euro zone has emerged from recession, and there are indications that a prolonged period of deflation could be ending in japan. the extent of the slowdown in emerging market economies appears to have been one of the main surprise developments over the last year as emerging markets were not spared the negative consequences of global risk realignment while expectations of lesser liquidity provision by the us federal reserve led to | represents an important effort to help developing countries train their supervisory staff. the need for international cooperation extends beyond banking systems and bank supervisors, however, and must embrace the full range of regulated activities that large, complex financial institutions conduct. toward that end, authorities from around the world have established the joint forum, made up of representatives of agencies regulating banking, insurance, and securities activities. the financial stability forum, established by the g7 in 1999, is another effort to promote international financial stability through information exchange and cooperation in financial supervision. the forum regularly brings together national authorities responsible for financial stability in significant international financial centers - including both securities and banking supervisors international financial institutions, and representatives of international groups of supervisors and regulators. other groups exist and will, necessarily, be created to address issues of specific interest and may have short or long lives. the point is, it is important that we communicate and coordinate our activities, so that we understand each other β s responsibilities and oversight techniques. as international problems emerge - as they will - knowing our counterparts abroad and trusting their judgment could be essential to resolving problems in a timely and orderly way. conclusion the challenge of supervising global financial institutions is the challenge of the decade for supervisors. large banking organizations are likely to become increasingly complicated and wideranging, and the banking supervisory agencies will have to adjust to that. in my view, the adjustment will require increasing reliance on banks β own internal risk management, and especially on internal risk classification systems ; on regulatory capital linked to internal risk classifications ; on supervision that focuses on evaluation of, and supervisory feedback on, risk - management systems ; on market discipline ; and on increased cooperation among agencies. none of these steps will be easy. the good news is that we β ve started on all of these efforts, and that progress has already been made. | 0 |
/ 5 bis central bankers'speeches key ict service providers can best be supervised. such an evaluation must be based on the work of the ict security commission, which publishes its report in december 2018. distributed ledger technology distributed ledger technology ( dlt ) offers interesting opportunities. a shared decentralised digital asset register can enhance efficiency, as business ledgers no longer need to be reconciled, and can reduce counterparty risk. dlt solutions can also reduce operational risk as this technology does not rely on a central operator. dlt has many potential applications in the financial infrastructure, such as in the securities settlement system. the australian exchange asx is replacing the existing system for clearing and settling trades with a new dlt - based system. another example is cross - border payments ; several projects have been launched and the potential for improvement is considerable. a number of norwegian operators are exploring opportunities for using dlt - based solutions in norway β s infrastructure. central banks have also explored the use of dlt. the european central bank and the bank of japan have considered how secure delivery versus payment systems could be organised where the assets are stored in a decentralised accounting system. some central banks, such as the bank of canada, have evaluated and tested dlt for use in central bank settlement. at the same time, the use of dlt poses a number of challenges, including the immaturity of the technology and how to prevent unauthorised access to confidential information. new technology also makes new forms of money possible. the functions of money as a medium of exchange, a store of value and a unit of account are dependent on public confidence in the currency. most of our money is in the form of bank deposits or cash. so - called cryptocurrencies have attracted considerable attention in recent years. owing to their substantial day - to - day volatility and the interfaces with money laundering and other criminal activity, cryptocurrencies are unsuitable as a universal means of payment. on the other hand, cryptocurrencies are attractive as speculative assets. crypto - assets is therefore a better term than cryptocurrencies. central bank digital currencies another possibility is central bank digital currencies ( cbdc ). a cbdc is a digital form of central bank money made available to the general public. a number of central banks, including norges bank, are assessing whether introducing a cbdc would be advisable and, if so, in what form. for | infrastructure on cost - efficient common solutions, and that we together can safeguard the interests related to efficient payments, personal privacy and security. there are numerous challenges to be faced. the best course of action is for businesses to come together and agree on good common solutions. 5 / 5 bis central bankers'speeches | 1 |
open economies can be vulnerable to large capital movements when powerful instruments are deployed by large countries. a possible side - effect of balance sheet policy is that the private sector also takes longer to strengthen equity capital and reduce risk than it would otherwise have done. with the low price of capital, it costs little to postpone restructuring and put off debt repayment. finally, confidence in economic policy may be affected. the dividing line between monetary and fiscal policy seems to be more blurred. balance sheet policy may dampen the effects of market volatility on interest rates and give heavily indebted countries a breathing space and time to adjust. on the other hand, the measures may also reduce the incentive to carry out necessary fiscal tightening. in the euro area, different considerations are now being balanced in the new β outright monetary transactions β ( omt ) programme. under this programme, the european central bank ( ecb ) may only purchase bonds from countries that have entered into a loan agreement under the european financial stability facility ( efsf ) or the european stability mechanism ( esm ) β which in turn is conditional on a commitment to fiscal tightening. chart : corporate borrowing rates one reason for the ecb β s decision to establish the omt programme is the partial breakdown of the monetary policy transmission mechanism in the euro area economy. there are wide differences in interest rates facing banks and firms across europe. although the same key rates apply to all the euro area countries, average corporate borrowing rates differ widely from country to country. some of the variation is due to differences in credit risk across countries owing to very different economic situations. additional risk premiums may reflect fears that one or more countries might at some point have to replace the euro with a new local currency. ecb president mario draghi has referred to these as convertibility risk premiums. one of the objectives of the omt programme is to reduce this premium and restore the proper transmission of monetary policy. the omt programme can be regarded as an answer to the signs of financial market fragmentation in the euro area. differences in financial conditions across countries have become considerable and the willingness to provide loans across national borders has declined. the same picture is reflected in the so - called target2 balances. target2 is the central interbank settlement system in the euro area. in all countries, interbank payment settlement is carried out by the national central bank. one bank β s payment to another is settled by adjusting the two banks β deposits in the central bank. central bank | to make allowances for such circumstances ; otherwise they could have serious repercussions for the real economy. and our monetary policy framework provides scope for this. but no two situations are ever exactly the same. it is necessary to have a thorough analysis on which to base our standpoints and an explanation for our decisions. another reason to deviate from the policy rule is if inflation is judged to be influenced by temporary effects, i. e. effects that will diminish without any monetary policy intervention. that, for example, is why we often focus our discussion on und1x, the measure of underlying inflation that excludes the effects of indirect taxes and subsidies as well as interest rate changes. but it can also be a case of temporary supply shocks that are not expected to persist, such as the sharp rise in electricity prices at the turn of the year 2002 / 2003. for a number of years the confidence in monetary policy and economic policy in general has been high enough to allow such factors to be taken into account. but at the same time it places demands on our communication β that we are clear, for example, about when there is reason to extend the forecast horizon and why. it is also one of the reasons that we introduced some improvements to our decision - making material in our most recent inflation report, which we expect will help us explain and justify our actions more clearly. these included extending our forecast horizon somewhat in certain situations. so we do have room for a considerable measure of flexibility. and we have also made use of that over the years. on several occasions, e. g. 2001 and 2003 but also earlier, we made it clear that we had disregarded transitory effects that were affecting inflation. the riksbank has also referred to developments in asset prices, e. g. in 2000, but we did not believe at the time that it gave reason to allow policy to be affected to any great extent. recently, however, developments in property prices have had some, albeit limited, significance for our monetary policy decisions. the inflation target is thus our point of departure, and we normally apply a time horizon that reflects the lag with which monetary policy has an impact on inflation. but we are prepared to depart from this if we have good reason to. our ambition in such cases is to communicate the reasons clearly. why has inflation been so low? let me now go on to address the factors behind the current inflation rate. the gauge that the riksbank has chosen for | 0 |
β rather a long walk, i β m afraid β through these various points. less ink is spilled on the second question, concerning qt : should the mpc not include in its forecasts some identifiable and separate effects of asset sales on activity and inflation? having argued that the policy is transmitted to demand and inflation largely via asset prices my answer to this will be β no β. the committee has said that the size of the asset purchase facility ( apf ), the vehicle through which qe and qt are conducted ) will be reduced gradually and predictably and, to that end, announced last september the exact planned reduction of the apf over the following twelve months. as such, it β s reasonable to suppose that the impact of qt, even in prospect, is already captured in the prices of assets on which we condition our forecasts. to add something else would be to double - count the effect. macro models and the determination of demand as an undergraduate one of the books i had to read was a collection of essays about monetary economics by one of my lecturers, frank hahn. it begins with this rather provocative sentence : β the most serious challenge that the existence of money poses to the theorist is this : the best developed model of the economy cannot find room for it β. as a newcomer to the subject i found this a bit concerning ( not to say alarming ). if economics can β t even say why money exists how can it hope to explain what it does? reading on, one β s concern subsided a bit. hahn was, by training and inclination, a general equilibrium theorist. for him, as he explained in the very next sentence, β the best developed model of the economy β was the highly stylised description developed by the great economic theorists ken arrow and gerard debreu. for all its sophistication, the arrow - debreu model is one in which, by assumption, trade is entirely costless. in this perfect economy there β s a market and a price for the exchange of any two goods or services β including those for future delivery β without the need for a medium of exchange or any sort of costly financial architecture. so it β s not a huge surprise that, having ruled out at the start the conditions that might require it, this model should β have no place β for money. what hahn β s bit of rhetoric does suggest is that you need some sort of financial friction β some departure from the platonic realm of | , it would reduce the size its size by Β£80bn over the following year. readers who β ve come this far will be glad to hear that this section will be pretty brief because i β ve actually gone through the main points already. there are two. first, because the impact of qe has been variable i don β t think it would be right to pretend there β s some fixed, unchanging effect on the economy β to translate, for example, a given quantity of asset purchases ( or sales ) into some notional equivalent in terms of bank rate. it β s partly because of this, and the fact that we can only be less sure of its impact than that of conventional policy, that the mpc views bank rate is its β primary β policy instrument. by design, the committee did not embark on qt until the official interest rate reached a certain threshold β a level from which ( were the need to arise ) it could then be cut. it also said that, rather than responding to economic conditions β that is the task of the β primary β instrument β the path of the apf would be β gradual and predictable β. second, and because of this, it β s reasonable to suppose that this path is already reflected in the asset prices on which the mpc conditions its forecast. i β ve tried to argue today that the effects of qe and qt are transmitted predominantly via their impact on bond yields. the same goes for the expected path of the apf over the future : only surprises in qt decisions have an impact on these prices. so as long as there are no surprises β as long as the mpc always announces in advance its intentions, and the evolution of the balance sheet really is β predictable β β then the effects of qt will already be embodied in the yield curve. to add something else would be to double - count those effects. summary and conclusion no monetary policymaker should ignore information that β s relevant for future inflation. that includes the monetary aggregates. but like most economic data they need interpretation. certainly the very strongest claims β that qe inevitably leads to rapid growth of commercial bank deposits ( m4 ), on a par with that in the central bank β s balance sheet ; and that this, in turn, inevitably leads to excessive inflation β are not well supported by the evidence. broad money grew more than twice as rapidly in the first fifteen years of inflation targeting ( when there was no qe ) than in the | 1 |
?, national bank of romania, macroeconomic modelling and forecasting department, bucharest university of economic studies ; basten, c. ( 2006 ) : business cycle synchronisation in the euro area : developments, determinants and implications, working paper series, research notes 22, deutsche bank research ; stremmel, h. ( 2015 ) : capturing the financial cycle in europe, working paper series, no. 1811 / june 2015, european central bank ; sybille, l. ( 2012 ) : has the euro changed business cycle synchronization? evidence from the core and the periphery, ifo working paper no. 122 ( www. cesifogroup. de ) ; gouveia, s. and correia, l. ( * * * ) : some facts about business cycles synchronisation across the euro area countries : the case of small countries, centre for transdisciplinary development studies ( cetrad ), department of economics, sociology and management ( desg ), university of tras - os - montes and alto douro ( utad ), portugal. bis central bankers β speeches brought cycles together, although a few efficient and credible shock absorbers were devised at the eve of the euro. further on, there is some evidence on the increasing correlation between real cycles and financial cycles across different groups of eu member states, as provided by meller and metiu ( 2015 ) 5. such a pattern emerges regardless of different sources and well - documented differences in frequencies and amplitudes between real and financial cycles. moreover, researchers from the bank for international settlements have shown that the correlation between real and financial cycles gets stronger over time as the duration and amplitude of financial cycles increases. the main explanation for the increasing correlation between the real and financial cycle is the so - called β unfinished recession β phenomenon, according to which globalization and a more activist monetary policy, which fails to take into account the state of the financial cycle, eventually cause a bigger recession down the road 6. we are left with two more interesting features of cyclical ( co ) movements. the degree to which real and financial cycles converge across groups of member states is neither constant, nor does it increase in linear fashion over time. all the previously described processes might deliver the periods of high synchronisation, followed by rapidly collapsing convergence. finally, the ( in ) famous duality between the core and the peripheral countries emerges as a theme here as well, as country groups | is expected to average 4. 6 % in 2023, which is higher than foreseen in the december projections. subsequently, it is projected to come down to 2. 5 % in 2024 and 2. 2 % in 2025, as the upward pressures from past supply shocks and the reopening of the economy fade out and as tighter monetary policy increasingly dampens demand. as inflation is projected to remain too high for too long, the governing council last week decided to increase the three key ecb interest rates by 50 basis points, in line with our determination to ensure the timely return of inflation to our 2 % medium - term target. the elevated level of uncertainty reinforces the importance of a data - dependent approach to our policy rate decisions, which will be determined by our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission. the key ecb interest rates remain our primary tool for setting the monetary policy stance. 2 / 3 bis - central bankers'speeches the reduction of the asset purchase programme ( app ) portfolio β the second topic for today's hearing β is part of our monetary policy normalisation. as of the beginning of this month, the app portfolio has been declining at a measured and predictable pace of β¬15 billion per month on average and will continue to do so until the end of june 2023. the subsequent pace will be determined over time and the governing council will regularly reassess the pace to ensure it remains consistent with the overall monetary policy strategy and stance, to preserve market functioning and to maintain firm control over short - term money market conditions. conclusion let me now conclude. with war in europe and high inflation requiring immediate action, policymakers may be inclined to divert their attention from long - term challenges β but we must all strive to keep up our efforts to address the existential crisis of climate change. for us at the ecb, this means continuing to make progress on our climate roadmap. 2 this week we will publish the first climate - related financial disclosures of the eurosystem's corporate sector assets held for monetary policy purposes, and of the ecb's own funds and the staff pension fund. we will be joined in the coming weeks by all eurosystem central banks, which will disclose climate information on their own eurodenominated non - monetary policy portfolios. besides helping us be more transparent about our climate impact, these disclosures | 0 |
). see also thoyts ( 2010 ). clayton ( 1971 ). see also, bernstein ( 1996 ). bis central bankers β speeches the practice of bottomry flourished due to the proximity of another group of great traders β the phoenicians, who adapted the basic concept to support trade expansion on the greek coastline during the 10th and 9th centuries b. c., and to the increasing domination in the aegean sea after 800 b. c. of greek traders who needed indemnity against their cargo. hop westward across the mediterranean sea to ancient rome, and citizens were paying subscriptions to so - called β burial societies β to cover the cost of expenses associated with their death β a kind of latter - day funeral insurance. this activity evolved such that by the second century a. d. it became common practice instead to pay the relatives of the deceased person a lump sum ( the funeraticium ), provided their subscription was not in arrears and the deceased had not committed suicide 3. despite not being labelled as such, this arrangement seems in some way similar to a modern - day life insurance policy. and yet back then, perhaps unsurprisingly, the subscriptions paid by members were not subject to any protections or oversight β indeed, when a burial society did run out of money, it was commonplace simply to issue a notice to convey the demise of the society and the fact that funeral expenses would no longer be met. there is also evidence that soldiers in the roman army were paid a lump sum at retirement, despite the fact that contributions were not made throughout the soldier β s lifetime. by medieval times, the church had become one of the largest employers and had started occasionally to issue pensions to clergymen. one such example involved nicholas thorne, a former abbot of st augustine β s monastery, who was living in difficult circumstances. thorne had voluntarily retired, apparently stricken by a guilty conscience after he acquired some documentation on behalf of the abbey through bribery at the court of rome. the scandal led him to retire to an ordinary monastery in yorkshire, but when his old comrades heard of his infirmity and weakness, they awarded him an ex gratia pension of 10 marks a year 4. it seems unlikely that the church extended such gestures on a regular basis, but from this point onwards we can see evidence of pension provision via employers ( the church and king ), particularly for notable individuals in society where reliance on charity alone would not suffice. such examples are not | commit underwriters to prison if they failed to meet their obligations 7. in 1575, the privy council ordered the lord mayor to compile some rules since no body of law existed to determine the resolution of insurance disputes. around the same time, queen elizabeth granted a monopoly on the writing of assurance policies to richard candeler, who led the newly - created office of assurances. the office introduced a system of fees β with the office receiving a fixed percentage per Β£100 insured 8 β for the production of physical written policies. both through the creation of the office and court of assurances, and the receipt of customs duties from insurers, the privy council in the 16th century β as approved by the monarch β cemented the role of the state in exercising a judicial function and creating an environment of policy registration and anti - fraud conducive to commerce. so, as i see it, this first phase of engagement between the british state and the insurance sector was effectively a trade : dispute resolution services were provided by the state, and insurers contributed some revenue to it in return. indeed, in the early stages this revenue went directly to candeler himself. despite the tight state controls around who could write insurance, the nature of risks being underwritten was granted little oversight β so much so that, for many, the practice of insurance became synonymous with gambling in the 18th century. perhaps β and i say this with some trepidation here at lloyd β s β some of the most egregious examples of such behaviour were evident in the marine market. by this point, london had emerged as a centre of excellence in marine risks, due partly to its strategic location on famous shipping routes. marine insurance had become a necessity for trade β without protection, a bad storm could overturn the entire fortunes of merchants. but a lack of safeguards paved the way for abuse. one particularly spectacular example involved john mcdougall, a glaswegian merchant, who arranged to have a ship called friends ( whose cargo was valued at Β£1000 ) deliberately shipwrecked off the coast of denmark β but not before insuring his own stake in the voyage in five separate policies for Β£3, 475 and insuring the ship and other goods for Β£1, 660 in a further three policies. in total, he obtained eight policies on the same risk β spreading the deceit between unsuspecting underwriters across glasgow, dundee, hull and london. in doing so, | 1 |
perhaps the most cogent explanations are grounded either in legal restrictions ( including capital controls and lack of property rights ) and information asymmetries between home and host countries ( gehrig ( 1993 ) ). globalisation is likely to have eroded both of these market frictions somewhat over the past decade, in particular among emerging markets. that is consistent with the evidence in table 1. predicting the future course of these ( legal and information ) factors is far from easy. but one plausible instrument for financial diversification is economic development. cross - country evidence suggests so. chart 8 plots a cross - section of measured equity home bias in 58 countries against levels of gdp per capita in those countries in 2005. the correlation is strong and significant : gdp per capita accounts for almost 60 % of the cross - sectional variation in home bias. as a ready - reckoner, every $ 10, 000 per capita rise in gdp is associated with a fall in home bias of around 0. 1. 4 for example, o β neill ( 2011 ). this cross - sectional relationship was also used to counter - factually predict time - series patterns of home bias in a number of g20 countries. gdp per capita was a reasonable predictor of historical movements in home bias, in particular among advanced economies. bis central bankers β speeches using economic development as an instrument for portfolio diversification, gdp per capita projections can be used to simulate the possible future course of home bias. futurology of this kind of course comes with large caveats and confidence intervals. given the simplicity of the model, it is a thought - experiment rather than a forecast. and underlying that experiment is an assumption that advanced countries continue to grow and diversify their equity portfolios, but at a slower rate than catch - up emerging market economies. table 2 shows the evolution of equity home bias at decadal intervals out to 2050 for the g20 in this thought - experiment. some clear points emerge : all g20 countries see a reduction in home bias. the un - weighted g20 average home bias index falls by 0. 33 between 2010 and 2050. that is roughly the same rate of descent as over the past 10 years or so. among a number of advanced countries, home bias has been significantly eroded by 2050, in some cases perhaps implausibly so. for example, in the us home bias falls from 0. 51 to 0. 09. emerging market home bias remains in many cases significant even by the end of the | the resilience of the financial system ; and to support the uk β s transition to a carbon - neutral economy. carney, m ( june 2018 ) β new economy, new finance, new bank β speech given at mansion house. all speeches are available online at www. bankofengland. co. uk / news / speeches first, to enable the digital economy the very nature of commerce is changing. last year, one fifth of all sales in the uk were online. 3 next year, it will be one quarter. over the past decade, the proportion of total payments made in cash has declined from two thirds to one quarter. 4 the digital economy is more inclusive, offering easier and more cost effective routes to market for firms both large and small, and greater access for consumers both near and far. this new economy is placing new demands on finance. consumers and businesses increasingly expect transactions to be settled in real time, checkout to become an historical anomaly, and payments across borders to be indistinguishable from those across the street. while there have been some notable successes, the uk system has a way to go before it meets these expectations. thus far, most innovation has happened around payment initiation β the method used to instruct a payment β such as credit or debit card, banking app or mobile wallet. there have also been some advances in the networks β or rails β that underpin some of these apps. for example, the faster payment system ( fps ) launched a decade ago has made payments quicker ( within two hours ) and more cost effective by encouraging direct bank - to - bank transfers. while mobile app paym uses fps to facilitate direct bank - to - bank payments between individuals via text, it requires both the sender and recipient to be signed up to the third party service. but few are. 5 and fps is not yet used for in - store or online purchases as the infrastructure required at the point of sale does not reliably exist in the uk. 6 in these regards, the uk is still a long way behind countries such as sweden, the netherlands and india where users can make direct, free and real time bank - to - bank payments in stores and online with a text or a scan of a qr code. 7 uk card payments are convenient and they are now the most popular means of payment, but they can cost between 0. 5 % and 2 % of the total transaction value, and it can take three days | 0.5 |
such as m2 and social financing. they have been replaced by qualitative descriptions such as " being basically aligned with nominal economic growth ". the monetary and credit growth as needed by the real economy is also changing with high - quality economic development and structural transformation. the changes in the growth rates of monetary and credit aggregates essentially reflect the structural changes in china's economy and the associated supply - side structural changes in china's financial sector. when we look at aggregates from a mathematical perspective, the growth rate is the ratio of the current increase to the total existing amount, with the former being the numerator and the latter the denominator. currently, as the outstanding amount of social financing in china has exceeded rmb390 trillion and m2 stands at over rmb300 trillion, china's macro financial aggregates are huge. however, we should be aware that many of the existing loans are being used with low efficiency, mobilizing such loans is essentially as significant to economic growth as issuing new loans. in terms of the changes in the credit structure, of the outstanding loans totaling almost rmb250 trillion, real estate loans and local financing vehicle loans account for a large share, which is declining rather than expanding. only after having offset the decline, can the increase in other loans be reflected. as a result, it is quite difficult to maintain an overall credit growth of over 10 percent as seen in the past. the measurement of money supply should also be improved constantly to adapt to the changing situation. china's statistical coverage for m1 was set 30 years ago. with the facilitation of financial services and the rapid development of financial markets and financial innovations such as mobile payment, major changes have taken place to the range of financial products that meet the statistical definition of money supply, particularly that of m1, entailing dynamic improvements to the statistical coverage of 4 / 7 bis - central bankers'speeches money supply. judging by the functions of money, we should work on incorporating in m1 statistics personal demand deposits and some highly liquid financial products, which can be even used to make direct payments, so as to better present a true picture of money supply. we can also continue to refine intermediate variables for monetary policy, and gradually weaken our focus on quantitative targets. when the growth of money and credit has pivoted from supply constraints to demand constraints, it obviously runs against the law of economic performance if the emphasis remains on quantitative growth, or even " the obsession | the hong kong monetary authority, of the apec compendium of sound practices to facilitate the development of domestic bond markets. this comprised a comprehensive list of recommendations covering topics such as government involvement in the market, level playing fields, consistent tax policies, sound regulation, clarity of responsibilities, transparency, robustness and efficiency of market systems, and so on. crucial though these considerations may be for the foundation of sound markets, they are, by and large, just the basic tenets. even when they have all been observed or put into practice, there is no certainty that active debt markets will emerge. in other words, whilst these may be a set of more or less necessary conditions for market development, they are unlikely to prove sufficient. however good the infrastructure may be, it is the issuers, investors and financial intermediaries which eventually determine whether there is a active market or not. here in hong kong the debt market has grown significantly in the recent past, and the increase in issues by non - financial corporates has been encouraging. but we cannot escape the fact that we are still a relatively small market and that, despite the increases in primary issuance, secondary activity remains subdued. β so β, people ask me, β what is the hong kong monetary authority going to do about it? β in fact i am not particularly comfortable with the implied presumption that we should be the first port of call when any problems or deficiencies are identified. thus, while i should like to take this opportunity to explain what we are in fact doing or intending to do, i want also to indicate what, in my view, we cannot or should not do. we are involved in the working group established by the securities and futures commission to review hong kong β s laws and regulations relating to offers of securities. over the years, several of the procedures have become outdated or have failed adequately to accommodate market innovations. in some instances they are an obstacle to bond market development. there are some complex legal and administrative issues here, which will take time to address. the next step in the process is likely to be the issuance by the sfc of a consultative paper. another area which we are looking at is taxation. we acknowledge that there are serious anomalies in the current arrangements for taxing interest income in hong kong but, given the uniqueness of hong kong β s overall tax structure, and the conflicting aims of retaining international competitiveness on the one hand and preserving fiscal revenue on the other, | 0 |
the complex structures of some derivative instruments and investment conduits make it almost impossible to determine who is exposed to whom, and to what extent. the current turmoil and illiquidity in the major financial markets is largely attributable to this uncertainty and lack of trust. emerging markets, in particular, are vulnerable to the contagion effect, which is regularly illustrated. this has affected south africa on a number of occasions during the past year and contributed to volatility in domestic financial markets. in times where risk aversion increases and investors pull out of riskier assets, the rand tends to be in the basket of currencies that suffers the most. this can be related to some extent to the liquid nature of the rand market. nevertheless, despite the risks and complexities associated with financial globalisation, there are also clear benefits. speaking from a south african perspective, the central bank β s inflation targeting framework has been well supported by the benign global inflation outlook over recent years, as well as by conditions in global financial markets that led to increased foreign capital inflows to emerging markets. the combination of global liquidity, combined with favourable conditions in the domestic economy, caused demand for south african equities by non - residents to increase at an exceptional pace, recording net purchases of r33 billion in 2004, r50 billion in 2005, r74 billion in 2006 and a record r66 billion in the year to 20 september 2007. in the bond market, activity has been a little more volatile, with nonresidents purchasing a net r365 million in 2004, selling a net r10, 7 billion in 2005 and purchasing a net r34 billion in 2006. partly supported by these activities, but also in line with global trends, the jse β s all - share index recorded a succession of record highs, while domestic bonds hardly interrupted their five - year rally, despite a cumulative increase of 300 basis points in the reserve bank β s repo rate since june 2006. to date, the significant foreign portfolio inflows, combined with a favourable outlook for the domestic economy, have enabled the country to finance a relatively large current account deficit, which, in turn, was to a large extent driven by investment expenditure and infrastructural developments β hopefully efforts from which the country would benefit in years to come. capital inflows have also enabled the south african reserve bank to increase official reserves to a much healthier level, contributing to a series | on reshaping the sarb's management, in the hope that the upper echelons of the central bank would be 50 % black by 2005. 1 / 4 bis - central bankers'speeches this would be easier said than done and tito publicly decried the institution's struggle to retain black talent. but his work ultimately did pay off. by the end of his second term, 60 % of sarb employees were black. today this stands at over 84 % and 63 % of the sarb's senior leadership is black and female. tito's time at the sarb was very much an extension of his broader ambition for south africa's economy β a sense of purpose that was nurtured over many years and which he poured into his policy work. on a number of occasions i have spoken of the loss of tito's beautiful policy brain. he has left a deep void in our personal lives, and the country as a whole. but we must take comfort in the fact that his legacy is felt across so many aspects of our economy, and more recently, in the kitchen. at the sarb, tito fought fiercely to keep inflation from ravaging workers'wages and the spending power of pensioners and the unemployed. he did so by championing inflation targeting, which the sarb adopted a year into his tenure as governor. this policy has ensured that double - digit inflation prints are relegated to history. early in his first term, tito also negotiated a memorandum of understanding ( mou ) between the sarb and national treasury, then led by trevor manuel as finance minister. this mou entrenched the coordination of macroeconomic policy and has remained in place to this day β outlasting the tenures of these two titans of policy. tito's work as governor extended beyond south africa's borders. when he assumed the role, he, like other central bankers at the time, was concerned about the effects of globalisation, which had left emerging markets vulnerable to financial turmoil. 2 to maximise the benefits of building multilateral institutions, tito sought to create greater economic integration within the south african development community ( sadc ) and to insulate the region's central banks against political interference. he was a staunch proponent of central bank independence, even before it was written into south africa's constitution. he created greater central bank transparency and accountability, establishing the monetary policy committee ( mpc ) and the monetary policy forums to enhance public engagement and accountability. | 0.5 |
recent bank failures will likely be an analysis of and recommendation for changes in supervision. how do we prioritize these issues for improving risk - based supervision? how do we revise those priorities when underlying economic conditions evolve or banks begin to engage in new activities that present new risks? we will need to be sure that whatever approach we adopt, we devote sufficient supervisory attention to the areas of highest risk, while not hindering innovation. as i β ve briefly discussed today, we need to have a supervisory system that focuses appropriate attention on the traditional risks that are inherent to the business of banking : credit, liquidity, concentration, and interest rate risk. historically, supervision has been an effective tool to address these traditional risks. supervisors can make sure that banks are working to mitigate such risks with effective risk management and liquidity planning. as we consider changes to our framework, we need to understand potential unintended consequences and be mindful that we do not inhibit innovation so that banks remain competitive and well positioned to effectively serve the needs of their customers. - 7it will continue to be a challenge to ensure the appropriate focus on traditional banking risks while encouraging innovation. but it can be accomplished if we approach it from the need for transparency, transparency by banks about their innovation activities and agenda, and transparency by regulators regarding supervisory expectations and emerging risks. transparency can help us promote these dual objectives, maintaining a focus on traditional risks, while enabling banks to innovate in a safe and sound manner, with a clear understanding of our expectations. at the same time, failure to adopt a transparent approach can lead to adverse consequences for consumers, businesses, and communities by limiting banking products and services and pushing activities outside of the regulated banking system. we need to preserve regulatory support for innovation conducted safely and soundly consistent with applicable laws, including consumer protection. promoting bank readiness voices calling for broad, fundamental reforms of the u. s. banking system appear to advocate a shift away from tailoring and risk - based supervision. the view that we extend the reach of overly complex and outsized regulatory requirements to banks that are smaller and less complex ignores some likely results β doing so will lead to bank consolidation, and will potentially push banking activities outside of the regulated banking system. this could also lead to the elimination of all but the largest too - big - to - fail banks who would then be insulated from other competition. this is surely not the outcome that supporters of the 2008 financials crisis reforms were seeking. it is also | activities will continue through implementing the european regulatory framework applicable to the credit institutions with a focus on the consistent implementation of the technical standards and regulations, the guidelines of the european banking authority and the recommendations of the european systemic risk board. priorities : β’ carrying on the practice of uninterrupted supervisory cycle by means of ongoing off - site control 1 / 2 bis central bankers'speeches and on - site inspections ; β’ the supervisory review and assessment of banks based on the approach developed in alignment with the ecb internal guidelines and the guidelines issues by the european banking authority. the purpose of the supervisory review and assessment is to strengthen the link between the dynamics of risks within the system, a bank β s risk profile, its own funds, its liquid assets and risk management systems and internal control environment, which would serve as the basis for reaching an overall assessment of the viability of each credit institution individually ; β’ continuing the policy of conservative macro - prudential supervision aiming at accumulation and maintenance of capital buffers during the economic upturn. the objective is upholding the stability of the banking system, including by preventing or reducing the systemic risks involved in the activities of credit institutions and identifying and limiting the emergence of macroeconomic factors that would threaten the stability of the banking system. 2 / 2 bis central bankers'speeches | 0 |
burkhard balz : central bank digital currencies β the acceptance and adoption challenge keynote speech ( virtual ) by mr burkhard balz, member of the executive board of the deutsche bundesbank, at the virtual european payments conference, β key trends in the european payments landscape β, 4 may 2022. * * * 1 introduction ladies and gentlemen, thank you for your warm welcome and thank you for giving me the opportunity to deliver the keynote speech for the panel on central bank digital currencies ( cbdc ) at this year β s european payments conference. i can remember quite vividly last year β s european payments conference. it was a time of positive outlooks. almost one year later at this year β s conference, i am again speaking to you in a virtual, digital format. at the same time with the ongoing russian war on ukraine, the geopolitical as well as economic prospects have radically changed and worsened compared to last year. we have come together today, however, to discuss trends in european payments, with regard to cbdc and a digital euro in particular. at least in this field we see some rather positive prospects : a potential digital euro would offer a huge array of opportunities. and, whilst it also comes with considerable challenges for central banks as well as the financial industry, there are promising avenues which could be pursued in order to mitigate the associated risks. in my speech, i will shed some light on the challenges ahead and lay the groundwork for the subsequent panel discussion. 2 cbdc initiatives worldwide central banks worldwide are evaluating the opportunities and challenges associated with the introduction of a central bank digital currency. the status of the initiatives on cbdc varies, however : few countries have already launched a cbdc, with the nigerian e - naira as the latest example. 1 other central banks are in the pilot stage and preparing a possible full launch. the chinese ecny ( e - yuan ) certainly is the most prominent example here. 2 with the aim of strengthening the position of the cny in a digital future as well as making electronic payments more resilient, china most recently carried out field tests during the olympic winter games in beijing. by the end of 2021, 140 million respective digital wallets had already been issued according to people β s bank of china representatives, although it remains unclear, how many of these are used regularly. 3 by integrating the e - yuan as a payment option into wechat β the dominating digital payment service in china | be made available to the public as a complement to cash, we would have to think the consequences through very carefully. there are various challenges to be addressed and i will name some of the key aspects : central banks and supervisors have to address the associated risks to financial stability and monetary policy. one important aspect to consider is the role that banks and other payment service providers play as intermediaries in the financial system. when discussing different design options for a cbdc, the effects on the balance sheets of commercial banks as well as the central banks need our full attention. an outflow of deposits from the banking sector must be avoided, as well as sudden, uncontrolled shifts of bank deposits to central banks β balance sheets. possible countermeasures could be, for example, maximum amounts or graduated interest rates, which could also result in negative interest rates above a certain level. but it should also be taken into account that acceptance of a cbdc could suffer if parameters were set without keeping an eye on the user experience. a cbdc expecting to gain widespread adoption has to be sufficiently scalable and secure. cybersecurity risks are one key aspect in this context. in order to ensure broad acceptance, we will have to make a cbdc accessible to all groups of society, without barriers, but in a secure way. in this respect, central banks face a balancing act between two opposite key risks : first, being too ambitious could lead to a crowding out of private payment solutions and a potential 2 / 5 bis central bankers'speeches disintermediation of the banking sector. second, creating an unattractive product would result in non - acceptance by consumers and enterprises. therefore, central banks aim to strike the balance : the level of adoption of a cbdc should neither be too high nor too low β an β acceptance and adoption challenge β. lastly, the effective prevention of money laundering and terrorist financing is on our list of challenges ahead. in the digital euro project, the eurosystem is moving forward swiftly but thoroughly to address these challenges. 4 the digital euro project in july 2021, the ecb governing council decided to set up a formal project on a digital euro. in the eurosystem, projects generally start with an β investigation phase β. experts from the ecb and the national central banks have been working together since october 2021 in an investigation phase that will last 24 months. at this stage, the focus lies on aspects such as : possible use cases involving consumers, | 1 |
early 1990s. the rate of bank failures has accelerated and appears likely to remain elevated for some time. while most banks remain sound, appropriately capitalized, and profitable, this can be difficult to remember in the midst of strained banking conditions and weekly bank failures. the coordinated efforts and initiatives of the federal reserve, the u. s. treasury department, and other government agencies have contributed to the progress we have achieved in stabilizing the financial markets and the banking system. i think it is important to note that most of these efforts were directed at the system as a whole and were made available to banks of all sizes. for example, in september 2008, when a prominent money market fund β broke the buck β ( that is, its net asset value fell below one dollar ), the treasury department initiated a temporary guarantee program to avert a run on other money market mutual funds. then, in response to bankers β concerns about the adverse impact that unlimited guarantees for money market funds would have on bank deposits, the treasury adjusted the guarantee to cover only balances in place on the date the guarantee was issued. that is, funds that were already in the money market mutual fund accounts were guaranteed so they would not run out, but no guarantee was offered for new investments that might cause runs out of depository institutions and into the funds. a few weeks later, the deposit insurance limit was temporarily increased to $ 250, 000, an increase that had long been sought by community banks. in addition, under the temporary liquidity guarantee program ( tlgp ), the federal deposit insurance corporation ( fdic ) made available unlimited insurance for demand deposits. later the program was modified to also cover interest on lawyers trust accounts ( ioltas ) and low - interest negotiable order of withdrawal ( now ) accounts. these initiatives proved tremendously beneficial to community banks and their small business customers during the crisis and have been instrumental in returning some measure of stability to deposit markets. other efforts to calm markets were also designed to directly assist banks of all sizes. for example, more than three - fourths of the companies that received funds from the troubled asset relief program ( tarp ) capital purchase program were, in fact, community banks. in addition, the debt guarantee program put in place by the fdic under the tlgp has also been available to community banks, helping to support market confidence. and the federal reserve β s discount window lending as well as the term auction facility, which offered discount window funding through | , suggesting that investors continue to have a favorable outlook for corporate credit quality. despite some recent turbulence, owing in part to geopolitical events, stock prices have logged robust gains over the past 3 - 1 / 2 years, and broad equity indices have now retraced most of the ground lost between 2000 and 2002. some of the improvement in the financial condition of businesses is due to substantial efficiency gains by firms. moreover, the resulting robust gains in labor productivity have been well ahead of compensation growth and have dramatically boosted corporate profits. indeed, profits as a share of sector product - in essence profit margins - jumped to more than 14 percent in the first quarter, the highest level in decades. the improvement in the financial conditions also reflects fundamental changes in firms β balance sheets. in particular, firms have boosted their liquidity by extending debt maturities, replacing shorter - term debt with longer - term debt ; at the same time, they have reduced total leverage. many firms retired debt using proceeds from equity offerings, asset sales, or mounting profits. as a result, from 2002 to 2004, nonfinancial corporate debt grew at an annual rate of about 2 percent, its slowest pace since the early 1990s. one of the most striking financial developments since 2001 has been the rapid increase in corporate holdings of cash and short - term securities. since the end of 2001, the ratio of cash holdings to assets i should note that i am expressing my own opinions, which are not necessarily those of my colleagues on the board of governors of the federal reserve or on the federal open market committee. nellie liang and steve sharpe, of the board β s staff, contributed to these remarks. has risen sharply ( see exhibit ). 2 this increase is even more pronounced when ( on a consolidated basis ) cash is measured relative to investment, defined as the sum of capital spending and research and development ( r & d ) spending during the preceding twelve months. the ratio of cash to investment has averaged about 60 percent during the past few decades. generally, it is higher in recession periods, consistent with a strong precautionary savings motive by firms that face costly external financing ( almeida, campello, and weisbach, 2004 ). and, in 2001, the ratio of cash to investment was already somewhat elevated. but the ratio then soared to more than 150 percent by year - end 2004, as investment fell far short of cash flow from operations and net financing. this juxtaposition is unusual when the economy is | 0.5 |
jose manuel gonzalez - paramo : liquidity, funding and solvency β policy responses and lessons speech by mr jose manuel gonzalez - paramo, member of the executive board of the european central bank, at the universidad de alcala de henares, madrid, 16 january 2009. * 1. * * introduction ladies and gentlemen, it is a great pleasure for me to participate in this conference of universidad alcala de henares, together with so many distinguished speakers, and share with you some considerations about the responses of the eurosystem and other public authorities to the financial market crisis as well as on some of the lessons that we have drawn. i am very grateful to the organisers β foro de economia del centro de politicas publicas uah and, in particular, its director rodrigo rato β for giving me the opportunity to address you today. after one year and a half from the start of the turmoil, the international financial system continues to undergo a period of severe adjustment. the global money and credit markets are still impaired by the effect of high uncertainty about the solidity of financial and banking institutions and their ability to withstand the consequences of both the vulnerabilities at the root of the current crisis ( such as the exposures to the us sub - prime mortgage market ) and new shocks stemming from the ongoing slowdown in economic activity. indeed, the deterioration in credit supply conditions, together with falling asset prices, exceptionally high uncertainty and declining confidence, has fed back into economic activity, leading to a severe worsening of the outlook for economic growth in both developed and emerging countries. of particular concern for central banks is the persistence of tensions in global money markets, where market liquidity has come under severe stress and term interest rate spreads remain at levels that β though significantly lower than three months ago β are nevertheless elevated by historical standards. other important segments of the global financial system, such as the markets for equities, bonds and commodities, have also entered a period of considerable turbulence and stress. in my intervention today, i will focus on what the ecb has done from the beginning of the financial market turmoil to contribute to the smooth functioning of the euro area money markets and to mitigate funding shortages of euro area banks. 2. the financial market turmoil and policy responses from the eurosystem the turmoil over the last year and a half has hung on our economies like a dark cloud, prompting central banks and other public authorities to undertake measures that have in some cases been | if the speed is no longer in line with the driver β s capability and external conditions. using this analogy, how does the current situation in the global financial markets and swiss banking sector compare? as already mentioned, the overall impression at the moment is that we are driving quite fast. unlike on the motorway, however, there are three reasons why it is difficult to judge if the speed is too high or if the market participants would be able to slow down in time were conditions to deteriorate. firstly, it is not clear just how fast the car is going, or rather, how much risk is being entered into. this not only applies to the less regulated players in the financial system, such as hedge funds, but also to a certain extent to banks. for instance, the rating agency moody β s came to the conclusion in a report 1 published last year that banks generally do not disclose their risks sufficiently. in our financial stability report, we also point out that it would be beneficial if swiss banks were to provide more data in this regard. by providing more comprehensive data, banks would be helping investors and authorities to better assess the risks banks take. banks should, for example, publish more results from their stress tests. similar to crash tests, stress tests examine how severely the bank would be affected by a major crisis. secondly, it is difficult to assess how the traffic would react in poor weather conditions. even though the braking distance is relatively short on a dry surface, this is by no means a guarantee that the car will react in the same way on a wet or even icy road. a number of instruments currently in use in the financial system have not yet had to prove their worth in extreme stress situations. it is therefore not clear whether the risks for these new and complex products have been adequately assessed. these products are typically not assessed in a central market, but by using complex models. in other words, the analysis is not a mark - to - market one, but a mark - to - model one. the reliability of the mark - to - model approach, however, relies heavily on assumptions and on the availability of reliable data. data on tail events ( events that occur rarely, but have major repercussions ) would be particularly beneficial for the calibration of models. there is, however, by definition hardly any data on such events. this begs the question as to whether the dangers associated with tail events are being correctly assessed using the available models, or whether model risks pose a | 0 |
culture of ethical conduct and values. 28. i wish you all success in this important new phase of our corporate governance journey. joseph barr, β from the boardroom : the role of the professional director β, harvard business review, may - june 1976. 5. bis central bankers β speeches | culture that places values above profits. publicly listed companies are increasingly at risk of becoming slaves to the pressures of quarterly earnings. in a brutally competitive environment, this short - termism promotes not only excessive risk - taking but a variety of sharp practices, exploitative sales, and even fraudulent transactions. little wonder that public trust in corporations has diminished in many jurisdictions. 23. boards and senior management have a critical role in promoting a culture rooted in strong ethical frameworks. they must make clear that serving the customer β s interest, dealing fairly with suppliers and counterparties, following the laws of the land, and not placing the larger society at risk are essential for maximising long - term shareholder value. 24. directors and senior managers set the tone for what is acceptable behaviour and what is not. the questions they ask β as well as the questions they do not β send strong signals throughout the corporation. let us ask ourselves : if a particular division in a company is making huge profits, what does the board and senior management do? congratulate them and raise the targets? or ask probing questions about how much risk is being taken, whether there has been fair dealing, and whether all stakeholders have been served? 25. restoring ethical conduct is particularly relevant for the financial industry. following the crisis, the industry has fallen into disrepute, especially in the west. recent revelations arising from the libor scandal β and this is not unique to london β suggest that the lessons have not been learnt. if we allow this culture of cynical greed to take root, it will undermine the public trust that is so critical to not just the growth but the viability of financial institutions. the leadership of financial institutions β boards and senior management β owe a special duty of care to ensure that finance is trustworthy, socially redeeming, and economically purposeful. they must send a clear, unadulterated message, down to the last person in their organisation : β if it is not right, don β t do it. if it is not true, don β t say it. β 26. this is an area that mas intends to engage the boards and senior management of financial institutions on. conclusion 27. we are making good progress in our corporate governance journey. we are now entering a new phase, and must go beyond rule reforms to create the conditions for good governance to flourish β developing a conducive ecosystem for market discipline, building up the competencies of our board directors, and instilling a | 1 |
and concentrating risks instead. the list goes on. each of these plays a role but if we are to identify a common factor across these various causes it is this : that finance has become detached from economic realities. as we look to develop our financial system, we have to bear in mind that the basic role of finance is to allocate scarce capital to its most productive use. we earn a return only if the capital is deployed to eventually produce goods and services that are valued by the market. when the nexus between the mobilization of capital and the productive use of capital is broken, the returns cannot be sustained β the bubble must eventually burst, with painful consequences. in this crisis, both conventional and islamic financial markets have been affected, but the restrictions on the use of leverage and speculation has put islamic finance in a better stead. in the coming years, as the shariah principles of using capital to build productive capacity gain wider recognition, islamic finance will assume a more prominent role. estimates of global islamic finance assets today range from us $ 700 billion to us $ 1 trillion and one consultancy firm estimates this could potentially grow to us $ 1. 6 trillion by 2012. 4 countries in asia are using islamic finance to fund urban development and public infrastructure projects to meet the growing demands of their populations. the adb estimates that asian countries would need more than us $ 8 trillion of infrastructure investment between kawai and wignaraja, β the asian " noodle bowl " : is it serious for business? β asian development bank institute working paper series no. 136, april 2009. oliver wyman, β the next chapter in islamic finance - higher rewards but higher risks β, april 2009. 2010 and 2020. 5 international financial institutions such as the islamic development bank are active in funding worthwhile investment projects. the global sukuk market remains a relatively new asset class with much room to grow out. in 2007, asian currency - denominated sukuk outstanding grew by almost 50 % but the market contracted by only 1. 5 % to us $ 64. 3 billion at end - 2008. 6 around us $ 1. 3 billion in sovereign sukuk issuance will come from malaysia, indonesia and singapore in the first half of 2009, and more private sector issuers are expected to tap the sukuk market and to attract new investors and clients. in asset management, an industry report 7 estimates the number of high net worth individuals and their financial wealth in asia combined to be about the same | continued to improve in quality, and central bank numbers have continued to swell. cross - country studies have found that the quality of these institutions and infrastructures is often key to driving growth. 32 in what is perhaps the most comprehensive study of historical experience, daron acemoglu and james robinson have taken the institutional argument one step further. for them, the lack of good institutions is the defining reason β why nations fail β. 33 you do not need to go that far to think they have really mattered historically for living standards. the final ingredient in the growth recipe is intellectual capital, for some the source of the industrial revolution, hargreaves, arkwright, watt and all. yet it would be wrong to think innovation somehow began in the 18th century. from the windmill in the 12th century, the mechanical clock in the 13th, the cannon in the 14th, the printing press in the 15th, the postal service in the 16th and the telescope and microscope in the 17th, the innovation escalator was in service well before the industrial revolution, albeit stepped and sticky. 34 moreover, empirical evidence suggests a high degree of history - dependence, or hysteresis, in technology transfer. patterns of technology adoption in 1500 ad are a remarkably good predictor of growth in 1800 ad. 35 this suggests the technological seeds of the industrial revolution were sown well before hargreaves, arkwright and watt arrived on the scene. innovation is more earthly endeavour than heavenly intervention. taken together, this suggests a much broader and richer set of foundations for growth. the seeds of the industrial revolution were sown much earlier, and scattered more widely, than a neo - classical account would suggest. and sociological transformation was at least as important as technological transformation in catalysing the lift - off in growth. patience as a virtue even if you accept this multi - faceted explanation of growth β part sociological, part technological β why did societies suddenly begin accumulating capital at particular points in history? what prompted that initial investment in skills, co - operation, institutions, infrastructure? one answer may lie inside our own heads. for those technological and sociological trends may, in turn, have caused a re - wiring of our brains. underlying all investment decisions are what economists call β rates of time preference β β and what non - economists call patience : the willingness to defer gratification today for the benefit of tomorrow, to save rather than spend, stick rather than twist. one simple, economy - wide, | 0 |
that we have to keep our reputation as institutions with national responsibility, holding as our priority the long - term economic interests of the people and of the state. hence, the fundamental logic of the so very important ( and very strictly adhered to throughout the eu ) principle of national central bank independence and the need to provide independent analyses and information to the general public. in this sense, we, at the bnb, just as we have done so far, will always support an economic policy in bulgaria that does not threaten long - term economic interests at the cost of achieving quick economic effects β such as the policy of continuing structural reforms, enhancing the efficiency of institutions and improving the general environment for doing business in this country. the bnb traditionally supports conservative fiscal policy owing to which bulgaria today demonstrates excellent fiscal indicators and given the stable banking system we have reasons to expect that our new issue of euro - denominated bulgarian global bonds will be well received. we would also welcome efforts at speeding up privatization and active concessioning β inasmuch as they would not only strengthen our country β s fiscal position, but would also improve the long - term competitiveness of the bulgarian economy. we, however, cannot be indifferent to any ungrounded economic experiments whatsoever. at the same time, the range of working solutions for bulgaria β s economic prosperity must also take into account the analysis of the comparative advantages of the bulgarian economy in a global context. in fact, it is exactly the current crisis that has highlighted and provided empirical evidence of the resilience of bulgaria β s economy. allow me to recall that before the crisis many argued that the currency board in bulgaria was restraining the economy β s flexibility and that the high current account deficit ( above 1 / 4 of gdp in 2007 ) was a dreadful β imbalance β that could in no way be funded in the event of capital flight from the country. to the surprise of many institutions and experts, a great part of them of proven experience and repute, bnb β s gross international foreign exchange reserves increased from bgn 24. 9 billion as at the end of 2008 to bgn 26. 1 billion at the end of 2011. presently the lev is more than 150 % covered with bnb β s international foreign exchange reserves of the highest quality ( not even taking into account the government β s deposit ). in short, for fifteen years now businesses and citizens have benefited from the predictability and stability resulting from the fixed exchange bis central bankers β speeches rate and the | today β s forum is another proof of this. a year ago, again before the audience of a scientific conference organized by vuzf university, i expressed my purely professional dissatisfaction with the fact that we rarely hear the prudent voice of the bulgarian academia. while the world has been analyzing and discoursing for years on the causes, manifestations, and lessons learned from the global crisis, our academic community rarely expresses any views on these issues and seems to be still encapsulated in its own circle, engaged in its internal management or even day - to - day problems. therefore i am glad now to admit that in this also vuzf university is an exception. i have been following with interest the public appearances of your rector, vice rector, and other professors and academics of your university. vuzf university representatives have often bis central bankers β speeches come up with authoritative public comments on topical economic subjects of great public significance. today i congratulate vuzf university for outpacing β the older β universities of economics by organizing this timely discussion. the announced topic β β global and regional challenges to the economy and the financial system : do we have working solutions? β β speaks for itself and is an eloquent testimony to the importance of today β s forum. because external environment is of special significance for the dynamics of such an open economy as that of bulgaria. it is a known fact that the original causes of the global financial and subsequently economic crisis did not stem from our region or from europe β s emerging markets. still, we should in no way take comfort in the external origin of the crisis because no matter what the origins of the crisis might be, we, here in bulgaria, must deal with its consequences. this is the right place to stress that the bnb is aware of its huge responsibility for the financial stability of this country and consistently works in fulfilment of the functions and tasks assigned to it by law. in its work, the central bank collaborates with many other international and national institutions, and whenever a need arises, it steps into the role of a constructive opponent. because, as i have stressed on various occasions, it should not surprise us, nor should we show intolerance to the fact that the political institutions in the democratic countries are very sensitive especially with regard to quick achievements within the context of the electoral cycle. whereas the tasks of central banks go beyond the horizon of the next parliamentary or presidential elections. we are guided by the understanding | 1 |
, jumped substantially as a result of this automatic stabilizer effect. this time last year we knew there would be an element of this type β though the scale of the increase was not anticipated because the rise in unemployment has been much larger than was expected before the global downturn kicked - in. in the background, though, if we are to get back to that millennial share of spending in gnp, there have to be other cutbacks reversing the expansion of the mid - 2000s. that of course is where the report of the mccarthy group comes in. but there is something else new, namely the sharp fall in consumer prices since last year. this has raised the value of real transfer payments and other contractual amounts fixed in nominal terms and worsens the budget deficit, while giving an uncovenanted bonus to some. we have never seen price falls on such a scale. the illusion that money cannot gain in value is something that must be seriously addressed if the budget is to be brought back into line, especially because of its tendency to result in higher real wages, thereby threatening employment. i β m sorry to touch on such a sensitive issue, but i think we need to be quite unambiguous about this. in previous times, whenever real wages moved as far ahead of our trading partners as they have since 2000 ( abstracting from a gradual trend in differential average productivity in ireland and abroad ) an inevitable sequence followed. sooner or later unemployment rose, as producers were forced by lack of profitability to shrink or close. but then, the real value of wages was eventually eroded by inflation and depreciation. in the euro zone the second, corrective step, is not going to happen. it is crucially important to recognise that the old automatic stabilizer of real wages β depreciation of the exchange rate β has been put out of action ( and for good reason ). there β s no point in getting distracted in this discussion by pointing out inequities in the current structure of wages and salaries or remuneration generally : attempts to fix such inequities and anomalies do not need to get in the way of ensuring that the average real wage structure does not move out of line with that of the indirect competitors for workers in ireland, namely workers abroad. in this context, the trend in irish wage competitiveness over the years is worrying. if average wages in ireland do not get back reasonably close to where they were relative to competitors earlier in this | ##s are published, there may also be a comment, phrased in general terms, on how the bank views market expectations. so far, only a few central banks have taken the step of publishing their own forecasts for their policy rates. arguments for and against own forecasts for the repo rate there are currently discussions, both in academic research and in central bank circles, as to whether it is appropriate for central banks to publish their own forecasts for the policy rate. in a moment, i shall describe some advantages and disadvantages of such an approach. at the same time, one must remember that there are a number of advantages and disadvantages to all of the approaches i mentioned earlier, and these must be weighed against one another. when we changed over from keeping the repo rate constant in our forecasting work to basing the forecasts on market expectations, we had made the assessment that the advantages of this system outweighed the disadvantages, compared with using a constant repo rate assumption. the assumption of a constant repo rate worked well in as far as it made communication simple, which i believe was particularly important when establishing the new monetary policy regime and building up credibility for the inflation target. at the same time, it was of course usually an unrealistic assumption that made it difficult for us to make good forecasts. this applied in particular in cases where there were expectations of substantial repo rate adjustments. normally, changes in the repo rate are required to guide inflation towards the target. if we had kept to this assumption for the interest rate, these difficulties would have been particularly prominent when we changed over to making forecasts in a slightly longer time perspective. of course, the assumption of a constant repo rate also made it difficult to compare our forecasts with those of other forecasters and to evaluate our monetary policy. but, perhaps even more importantly, it gave no clear guidance as to how we viewed interest rate developments in the long term. the general public β s and the markets β expectations of the future interest path are at least as important for the way monetary policy influences the economy as the expectations around the decision on the current interest rate. we left most of these problems behind us when we began making forecasts based on market expectations, as reflected in the so - called implied forward rates. this was because market expectations in most cases provide a much more realistic forecast for the future development of the repo rate. the changeover from a constant repo rate to | 0 |
the excessive deficit procedure ( edp ) attached to the treaty states that member states shall ensure that national procedures in the budgetary area enable them to meet their obligations. it would therefore be in the spirit of the treaty to have eu countries commit themselves to establishing these kinds of bodies. independent forecasts would avoid having unreliable deficit figures before elections, only to β discover β the real state of accounts after the vote β such as has been the case in portugal, france, germany, and hungary and most spectacularly in hungary and greece. happily, there have been some improvements in some member states since the pact was reformed in march 2005. if they had a similar role to the congressional budget office in the us, the bodies would ensure a reliable and unbiased β reality check β in times of fiscal profligacy. at best, the advisory bodies would create a continuous national dialogue with warnings and recommendations to politicians that would boost transparency and put long - term fiscal goals at the heart of the debate β a reinforced version of the process that has helped denmark, finland and sweden to improve fiscal soundness. the experience of central banks is that transparency and goals help form expectations and behaviour, enlisting the public in the struggle for macroeconomic soundness. after a while, the discipline that initially seemed practically unattainable becomes almost natural. | ##cy requirement for banks by the amount currently being discussed. if one wants to influence household indebtedness, changes in the tax relief would have greater potential to directly affect households β incentives. uncertain what effect the mortgage cap has there is also some support for the mortgage cap having an effect on the loan appetite from the preliminary evaluation made by finansinspektionen after the introduction of its mortgage cap in october 2010. 20 the mortgage cap is not a cap in the total sense, but it means that a person who wants to borrow a large amount must take a larger share of unsecured loans, which usually have a higher interest rate than first loans and moreover have to be amortised at a faster rate. of course, not all households are affected by changes in the mortgage cap. say that the mortgage cap is reduced from 85 to 75 per cent. and say that the standard households are affected by this and must therefore take on a larger share of unsecured loans at an interest rate of 6 per cent and moreover pay off the unsecured loan over 10 years. this would entail increased interest expenditure corresponding to between 0. 4 and 1 per cent of disposable income, and amortisation corresponding to between 2. 8 and 7 percent of disposable income. the total increase in expenditure in this example thus corresponds to between 3. 2 and 8 per cent of disposable income. this is comparable with how much household expenditure would increase if the mortgage rate instead increased by just over 1. 9 percentage points. amortisation as a form of saving many of you will know that regulations of this type have often been circumvented in various ways. one way for the banks to make the mortgage cap less binding for their customers and enable them to take on more loans, for instance, is not to require amortisation on first loans. when it comes to amortisation culture, we in sweden differ quite substantially from what seems to be common in many other countries. in sweden, around 40 per cent do not amortise at all. of those who do, a good 40 per cent do it in such a way that it will take 50 years or more before they are free of debt. let us imagine that our households β which we assumed did not amortise at all to begin with β are forced to amortise their loans over a period of 50 years. if the households began to amortise in this way | 0.5 |
with non - g10 supervisors. it is envisioned that the revised accord will be implemented in 2004. the role of a sound and stable macroeconomic environment a sound and stable macroeconomic environment is also crucial for financial stability, and more generally for promoting sustainable growth. the converse - - macroeconomic overheating - - raises the likelihood of an eventual crisis, first by promoting excessive, and eventually unsustainable, external and internal borrowing. the next step inevitably is the correction to the real economy, interest rates and / or the exchange rate, that can sharply worsen asset quality and expose the accumulated weaknesses in the financial system. role of central banks in promoting stability and growth a central bank β s most important role in achieving stable, long - term growth involves promoting price stability. achieving long - run price stability is a difficult and continuous challenge, as it requires constant efforts first to detect, and then to correct the building up of internal and external imbalances. moreover, because of time lags in policy effectiveness, authorities often have to take action based only on partial evidence, well before adverse symptoms are fully evident. the principal reward for forward - looking policy is that changes in policy, and the associated stresses they engender, are generally smaller and more easily assimilated by markets. the effectiveness of monetary policy naturally brings us to the question of monetary and exchange rate regimes. a great deal has been said in various forums about the choice of monetary and exchange rate regimes. i believe it is crucial that there be consistency between a country β s choice of currency regime and its other policies. there is no " right " regime that applies to all cases and all points in time. experience has shown that no currency arrangement can compensate indefinitely for imperfections elsewhere in an economy, such as weaknesses in financial supervision, an excessively loose fiscal stance, or inflexible wages and prices. furthermore, no exchange rate regime can offer full insulation from cross - market spillovers, particularly where the free movement of capital is allowed. nevertheless, certain policy combinations can make things far more dangerous. fixed, but adjustable, regimes look to be particularly fraught with perils when combined with shortcomings elsewhere, not the least of which are the severe after - effects that always seem to follow their forced abandonment. as you are aware, much of the emerging world has moved toward floating rates in recent years. for thailand and the other countries that have made the change in east asia, it would appear that the new | lowest levels they have been in well over a decade. household net worth, expressed as a percent of disposable income, has increased back to its average of the previous decade, reflecting rising equity and home prices and declining liabilities. banks are beginning to ease credit standards somewhat after a prolonged period of tightness. as a result, we are now experiencing a fairly typical cyclical recovery of consumer spending on durable goods. for example, light - weight motor vehicles sold at a seasonally - adjusted annual rate of 15. 3 million in may, not far from the 16. 1 million sales in 2007. similarly, after five years in which housing production was well below what is consistent with underlying demographic trends, it now appears that we have worked off the excess supply of housing built up during the boom years of the last decade. housing starts and sales are now on a clear upward trend, and a widely followed national home price index is up around bis central bankers β speeches 12 percent over the twelve months ending in april. 1 indeed, anecdotal reports suggest that this higher - than - expected increase in home prices is due to a lack of homes for sale. unfortunately, the improvements in consumer spending on durable goods and housing are not yet showing through in the overall gdp growth rate due to the significant headwinds that we continue to face. first, federal fiscal policy has recently become quite contractionary. estimates from the congressional budget office ( cbo ) indicate that this fiscal restraint is on the order of 1. 75 percentage points of potential gdp this year. in the period since 1960, there have been only two previous episodes of fiscal contraction of this order of magnitude β 1969 and 1987 β both of which occurred when the economy was on a more solid footing than it is today. second, the euro area is experiencing a protracted recession and growth in many of the largest emerging economies has slowed. this has resulted in a very sharp slowing of u. s. exports, with an associated slowing in production and employment growth in the u. s. manufacturing sector. thus, i continue to see the economy as being in a tug - of - war between fiscal drag and underlying fundamental improvement, with a great deal of uncertainty over which force will prevail in the near - term. this tug - of - war is clearly seen in the monthly employment data. over april and may, the average monthly gain in employment in the private service - providing sector has been well maintained at 175, 000. in | 0.5 |
less effective, and as an instrument the interest rate is more blunt. a concluding remark when at some future date you hear that someone has told the bank of israel to imitate the actions of the fed β of course, only when it reduces the interest rate β i suggest you recall the saying : israel is not america. it is no empty phrase, at least as regards interest - rate policy. a lot needs to be done here before we resemble america, and we are talking here also about improving the welfare of the consumer β whether individuals or businesses β and this is definitely up to us. | stated, there are problems and challenges, but despite the fact that we can β t solve all of them quickly, i am certain that we will deal with the challenges and succeed in solving the problems. in response to questions from the audience : apartment buyers who want to take out mortgage loans must take into account that the interest rate today is very low, and that when it rises, their monthly payments will rise as well. the bank of israel is limiting the leverage rate because when the time comes when the buyers can β t meet their mortgage payments, that β s when the problems start. these limitations mainly affect investors, and have less of an effect on those purchasing their first apartment. i like to quote the book, this time is different : during good time, everyone thinks the situation is good, prices are going up, and we know how to deal with problems. but in recent years, we have seen how this type of thinking led to the most serious economic crisis in many years. we will not let such a thing happen in israel. i frequently hear the argument that β the bank of israel is more interested in the stability of the banks than in the customers β. we maintain bank stability in order to protect the public and the customers. we have a responsibility to the public, and we have a duty to prevent the things that we see happening in other countries. the change made in measuring unemployment data was done in order to bring the method of measurement in line with the manner accepted in the oecd. in terms of the foreign minister β s position, i again quote what a professor who taught me for many years told me : β the biggest mistake university graduates like you make is that they accept offers that haven β t been made to them. β bis central bankers β speeches | 0.5 |
. this increase in transparency should help commentators and financial markets alike to assess the actions of the mpc and to predict its future decisions. as i have said on other occasions, the aim of the mpc is to pursue economic stability, not to spring surprises on an unsuspecting world. surprises may be good for newspapers, but not for most other businesses. so what were the issues facing the mpc two weeks ago? remember that the aim of the mpc is to hit an inflation target of 22. sometimes inflation will be above the target, sometimes below. but over a run of years the outturn should be as close to 22 as possible. it is central to our remit that deviations of inflation from the target are regarded symmetrically. inflation can be too low as well as too high. for over thirty years, central banks have not, until recently, had many opportunities to show that they understand this. i can assure you that the mpc does. when circumstances change, as they have over the past few months, then so will our policy. the recent turbulence in international financial markets brings a new set of problems and risks, over and above those that resulted from the asian crisis which started in the second half of last year. it is important to distinguish between the crisis of the so - called β tiger β economies in asia, which, although clearly impacting on world trade, was indeed largely restricted to asia, and the more recent financial contagion which has afflicted almost all emerging markets and affected the financial system of the industrialised world. there are three aspects of the world economy which are relevant to our own position. first, private capital flows to emerging markets have in many cases come to an abrupt halt. that will have consequences for trade balances and activity in both emerging markets and industrialised countries. second, falls in equity prices around the world have reduced household wealth. and third, the sudden increase in risk aversion in financial markets is changing the balance sheets of financial institutions and some fear that this may lead to a credit crunch. the reduction in capital flows to emerging markets started over a year ago when concerns about the foreign currency exposures of a number of countries led to withdrawals of funds and a liquidity crisis in asia. that liquidity problem was compounded by macroeconomic and structural problems which varied from country to country. but the net effect was that capital flows to emerging markets in asia fell from over $ 110 bn in 1996 to only | β drag β : slack in the economy, a weaker relationship between slack and wages and lower levels of inflation expectations. these explanations are not mutually exclusive. higher levels of slack, or a weaker relationship between slack and wages, could lower inflation expectations β for example, if demand is weak today, people may expect lower inflation tomorrow. and lower wage and inflation expectations could themselves depress demand β for example, by raising levels of real interest rates. nonetheless, it is worth considering these explanations in turn. ( a ) slack and the phillips curve the short - term relationship between unemployment or the output gap and wage growth or inflation β the phillips curve β is one of the most intensively studied in macro - economics. 4 despite that, empirical estimates of the phillips curve have tended to be poorly - identified. that may reflect the effects of structural and behavioural shifts, which have the potential to alter historically - estimated phillips curve relationships. for example, changes in the credibility of the monetary policy regime can cause inflation and wage expectations to alter, causing the phillips curve to shift around over time for a given level of slack. and changes in the competitive structure of labour and product markets can influence the impact of slack on wage and price pressures, causing the phillips curve to change slope over time. see the governor β s open letter to the chancellor ( bank of england, 2015b ). bank of england ( 2015b ). google scholar lists more than 3000 citations for phillips β original article ( phillips ( 1958 ) ). bis central bankers β speeches chart 10 plots the historical relationship between wage growth and unemployment in the uk over the period since 1856. although noisy, it suggests a negative relationship between the two, with an average slope of just under Β½. in others words, a 1 percentage point increase in the unemployment rate has, on average in the past, lowered wage growth by around half a percentage point. a somewhat clearer window on this long - run phillips curve relationship is provided by looking at distinct monetary regimes : exchange rate targeting regimes under the gold and dollar standards ( 1856 β 1970 ) ; discretionary monetary policy regimes without central bank independence ( 1970 β 1997 ) ; and inflation - targeting regimes with independently - set monetary policies ( 1997 onwards ). chart 11 plots the phillips curve relationship over these windows. the introduction of discretionary monetary policy regimes, without independence, caused an outward shift in the phillips curve and a shift up in wage and inflation expectations. that is consistent with a loss of monetary credibility. since 1997, however | 0.5 |
another program that has no real purpose. measurable impact should be realised in the disposable income of the citizens of our respective countries. an increase in disposable income can lead to increased savings, consumption and investments. this should have a positive effect on our economies. when we realise this impact, it would then have a flow on effect in our region. microfinance and financial inclusion are really still in their β early β days in our countries. the time from intervention to realising the full impact is yet to materialise on a wide scale, however, it is important to ensure that the benefits filter through. having indicators linking the various phases to the ultimate benefits of individual disposable income and country income, is important and must be put in place. in fiji we have only just started to document financial inclusion indicators to cover access and usage, but our goal must be to link the indicators to show the effects or impact on individual income and country income as a result of financial inclusion. progress in fiji ladies and gentlemen, i know there will be a special case study session on financial inclusion in fiji on thursday, where our recent experiences will be discussed in detail by the chairpersons of the three national taskforce working groups. however, it will be remiss of me if i did not at least give you a flavour of some of the important milestones in our journey so far. in november 2009, following a meeting of all stakeholders when we agreed to establish the national financial inclusion taskforce, we had set ourselves a quantifiable target of reaching 150, 000 unbanked fijians by the year 2014. at the time we felt this represented roughly a half of our underserved population and i am happy to say that we have now reached 93 percent of the initial target. but this has not been our only focus over the past three and a half years. in collaboration with our stakeholders some of our other achievements and initiatives include : bis central bankers β speeches β’ getting the involvement of all stakeholders ( ours is a model of team work with all wanting to participate ) ; β’ the establishment of a national financial inclusion strategy ; β’ the completion of national financial competency surveys ; β’ the development and establishment of a national financial literacy strategy ; β’ the holding of financial inclusion expositions to create awareness in remote parts of the country ( we have completed 10 to date ) ; β’ the establishment of a set of financial inclusion indicators to measure access and usage ; β’ established policies around consumer | are generally low, we do not have many resources nor do we have the large population mass ( papua new guinea would be an exception of course ). all our problems require us, as pacific islanders, to be innovative thinkers and to think beyond the traditional and conventional norms of doing things in order to succeed. embracing technological innovation is important for this advancement. in fiji we have embraced the importance of adopting technological innovation to help us deliver financial services to the unbanked. we have noted an increase around the country in the number of bank agents, atms and the eftpos machines and whilst not all machine access points allow cash - in functions, the introduction of in - store or agent banking by commercial banks is beginning to see an increase in cash - in and cash - out points. undp www. undp. org / content / undp / en /... / pacific - islands - financial - services. bis central bankers β speeches in 2007 there were an average of 7 atms per 1, 000kmΒ² in fiji and this had increased to 12 by 2012. similarly, there were an average of 72 eftpos machines per 1, 000kmΒ² in 2007 and this had increased to 208 in 2012. the introduction of mobile network operators into the financial services and products space, through e - money transfers and bill payments, have further increased the outreach of financial inclusion. embracing technology has enabled us to increase delivery channels to reach our people. affordability given our similar problems in small island economies and the limited resources, the services provided will only be meaningfully utilised, and our efforts successful, if these services are affordable to the unbanked. all accessibility will be useless if our people are not in a position to pay for these services. the use of technology has brought about cost effectiveness in the delivery of these financial services. what does enhancing impact mean? ladies and gentlemen, let me now turn to the β impact β aspect of our theme. this is very important and i am glad that this is in the theme of this forum because it emphasises the fundamental reasons why we are doing what we are doing in this area. all the financial inclusion interventions we are embarking on must translate into a measureable outcome that impacts and enhances the lives of our people. all our strategies and policies must, in the end, have a measurable impact on our own individual countries and our region. if this is not our ultimate aim, then all we are undertaking is just | 1 |
system has elements of both. prudential supervision of insurance firms is carried out directly by a government ministry, which is unambiguously government regulation. banking supervision is carried out by the bank of england. constitutionally, this is not β government β regulation, but rather regulation by a public body which is authorised by specific act of parliament. certainly no one describes what we do as self - regulation, even though the bank of england is a bank. on the investment side, the picture is more complicated. the government has delegated its powers to the securities and investments board. the sib β s governing board includes people who are active in financial services, but they are appointed by the treasury and the bank of england ( indeed i am one of them ) and are required to act in the public interest. again, this does not look like self - regulation. however, the various front - line regulators are called, in the act itself, β self regulating organisations β ( sros ). their boards include a high proportion of active practitioners, elected by the industry to represent its views. practitioners are also heavily involved in policy discussions, rule - making and enforcement functions. but, like the sib, the sros operate indirectly under statute, and have a duty to regulate in the public interest. we therefore have no self - regulation in the strict sense, rather a variety of statutory and statute - backed bodies with practitioner involvement, each with different relationships with the industry and with government. effective regulation needs the input of all participants in the market if it is to offer appropriate protection without stifling innovation. regulators can benefit greatly from effective practitioner input but to retain the confidence of the investing public they must persuade them that regulation puts their interests, and not those of the firms and their shareholders, first. the system we now have is undoubtedly capable of achieving an appropriate balance between market sensitivity and consumer confidence ; it has, in many respects, worked well. but it has been stress - tested in a number of difficult episodes : the maxwell affair, the private pension mis - selling saga, the collapse of bcci, barings bank and sumitomo. these episodes have taught us something about the strengths and weaknesses of our system, just as the s & l crisis and the daiwa new york problem have done in the us. furthermore, markets themselves have moved on. the financial landscape of today is almost unrecognisable from the one which informed legislators β views in the early 1980s, before | here in london. given our position as a major international financial centre the stability of the system could be impacted by any significant storms from elsewhere. perhaps i can say a few words about what this means to us at the bank of england. responsibility for the overall stability of the financial system as a whole means we undertake activities ranging from behavioural research to oversight of payment and settlement systems ; from involvement in standard setting to implementing infrastructural change. to do this efficiently means, as our governor mervyn king recently reminded us, that we have to see the wood for the trees. the challenge is where you draw the line. this entails a prioritisation process to decide on the extent and degree of potential threats - and also a β sunset β approach where we subject each area of work to regular review to assess progress and continued relevance. there are a number of, interconnected, areas of work. these focus both on β hard infrastructure β, including payment and settlement systems, and on β soft infrastructure β ; standard - setting in areas like accounting, audit, prudential and legal standards. we also analyse key developments in the international arena, for example in relation to threats of failure of emerging market economies and response to this. 12. public policy response - institutional as to the second area - the institutional response - there are both national as well as international dimensions. on a national basis, countries increasingly recognise the distinction between supervision ( looking at the individual institutions and markets ) and the systemic factors involving concentrations, interrelationships and behaviour in relation to the system as a whole. each is an essential element in the provision of financial stability oversight. in relation to supervision, in some jurisdictions - including the uk, japan and germany - all the supervisory functions are carried out within one institution. in others they are handled by different agencies. certain countries have combined questions of the systemic issues with those of prudential oversight, and then put the investor and consumer protection aspects of regulation into separate agencies [ the β twin peaks β approach adopted in australia and france ]. yet others still survive with a multiplicity of agencies. the us is a case in point - and it is worth noting that, despite all its complexities and conflicts, the health of the us financial sector as well as its economy do not appear to have suffered unduly, despite episodes like the savings and loan crisis. however, the broad trend is to combine investor protection and consumer protection for banking securities and insurance, and | 0.5 |
john c williams : ten years gone remarks by mr john c williams, president and chief executive officer of the federal reserve bank of new york, at the 10th annual us treasury market conference, federal reserve bank of new york, new york city, 26 september 2024. * * * as prepared for delivery introduction welcome, everyone. thank you for joining us. and a special thank you to those who make today's event so powerful : the distinguished speakers, panelists, and event organizers. we have a packed agenda on a variety of important topics, and i look forward to hearing about the progress we've made and priorities for the future. ten years gone today marks our tenth annual u. s. treasury market conference, and a decade of partnership between our agencies. these conferences have proven to be a valuable forum to share insights and perspectives on the evolution of the treasury market, identify challenges and risks to smooth market functioning, and, most importantly, discuss ways to enhance its resilience and effectiveness in both good times and bad times. the new york fed is proud to host this conference each year. it leverages - sorry, i realize that leverage is not a popular word in this crowd - it draws upon our strength as a convener of market participants, academics, policymakers, and central bankers. today, i'll take a look at how our interagency collaboration has strengthened our understanding of treasury market resiliency and that of adjacent markets. and i'll talk about the importance of continuing this work over the next decade and beyond. i will also share some news about our ongoing commitment to ensuring that our financial system continues to stand on a strong foundation of sound reference rates. now, let me give the standard fed disclaimer that the views i express today are mine alone and do not necessarily reflect those of the federal open market committee ( fomc ) or others in the federal reserve system. stairway to the annual conference let's think back to the middle of october 2014, when u. s. treasury yields plunged and then quickly rebounded, an episode later named the " flash rally. " this episode was an impetus for the drafting of a joint staff report that ultimately led to the inaugural u. s. treasury market conference in 2015. 1 that conference first brought together what is now known as the " joint member agencies " to discuss the evolving structure of the treasury market. that meeting focused on potential operational risks, regulatory requirements, and repo market considerations. | β balance sheet leverage ( i. e. total assets / common equity ) for the malaysian banking system of about 15 times ( vs. global average of about 20 to 30 times ). banks had strengthened institutional set - up and capacity post asian financial crisis through : more robust risk management standards and practices. stronger corporate governance structure. smooth implementation of the standardised approach of basel ii β s capital adequacy framework. balanced and diversified business portfolios. enhanced financial infrastructure post asian financial crisis through : enhanced depth and size of bond and sukuk market ( about 107 % of gdp ). strengthened financial safety nets ( e. g. establishment of malaysian deposit insurance scheme ) / danajamin / cdrc / sdrs. strengthened regulatory and supervisory approach ( e. g. gradual move towards principles based regulations, adopting of risk based supervision ). legislative reforms ( e. g. introduction of the central banking act to articulate the financial stability mandate ; amendments to the companies act to codify directors β duties ). enhanced role by the training institute too develop talent and leaders of tomorrow ( iclif, inceif, aif ). | 0 |
our interpretations of the latest data and the implications of those interpretations for the outlook for economic activity, labor market conditions, and inflation. conclusion in summary, the u. s. economy has continued to recover from the effects of the financial crisis and deep recession, though at a pace that has been disappointingly slow. the recovery does appear to have picked up steam in some sectors, most notably in housing, likely reflecting the easing of some of the headwinds that had been holding back the pace of the recovery in earlier years. however, federal fiscal policy remains an important source of restraint. in light of these factors, most members of the fomc project a modest improvement in the pace of the recovery this year and next, and, accordingly, a modest decline in the unemployment rate. the federal reserve will continue to conduct monetary policy so as to promote a stronger economic recovery in the context of price stability. bis central bankers β speeches | sarah bloom raskin : prospects for a stronger recovery speech by ms sarah bloom raskin, member of the board of governors of the federal reserve system, at the society of government economists and the national economists club, washington dc, 16 may 2013. * * * thank you. i am very pleased to be here among an audience of professional economists, which is certainly preferable to appearing before an audience of unprofessional economists. i like your kind! your talents are needed now more than ever as we try to put the tools of the economic profession to work for the common good. it's easy to be an economist who looks back on crises and crashes and tries to explain why they happened, but much harder to be an economist whose efforts manage to help stop them from happening in the first place. economic policymaking, at its best, reflects a continuous struggle to make sure that data and explanations of such data are consistent with real experience. if we're to engage in this struggle honestly, it's no easy task. it involves understanding not just the reliability and signal in various data, but also questioning whether the data accords with our understanding of actual experience. so, to get this right requires many different perspectives, not just on the data but on the underlying realities the data are trying to capture. government economists understand that non - economists bring something valuable to the table in policymaking β a grounded perspective in what is happening in the economy. with that said, what is really happening now in the american economy? what do the economic data we see at the federal reserve currently show, and how do we think these data line up with the economic realities of most american households and businesses? in my remarks today i will offer my assessment of recent economic developments and the economic outlook, and i will discuss the actions that the federal reserve has been taking, in light of its view of developments and the outlook, to support the economic recovery. before i begin, i should note that the views that i will be presenting are my own and not necessarily those of my colleagues on the federal open market committee ( fomc ) or the board of governors. recent economic and financial developments for the past three and a half years the u. s. economy has been in a recovery β albeit a very weak one β from a severe financial crisis and the deepest recession of the post - world war ii period. the unemployment rate, which reached a high of 10 percent in the fall of 2009, has since come | 1 |
subir gokarn : interview with business standard interview with dr subir gokarn, deputy governor of the reserve bank of india, conducted by the business standard, mumbai, 1 february 2010. * * * friday β s was the first monetary policy that reserve bank of india deputy governor subir gokarn has been involved with directly, and the experience has been rewarding. β the rigour of the process was a revelation, β one of the youngest deputy governors that the central bank has had says. in his first interview to a newspaper after taking charge two months earlier, gokarn, 50, explains the rationale for the measures. edited excerpts : the rbi governor compared himself with abhimanyu in the mahabharata. how difficult is the situation? the context for that is that it was very easy to do what was done in october 2008 onwards. once the severity of the crisis was recognised, a lot of actions were taken in a very short period of time which completely changed the balance of the policy stance. obviously, there is a need to correct it now and to take it to normalcy. so, when you start moving towards that, even if it is a correct thing to do, it can be potentially disruptive. returning from the situation, the sequence, and pacing the activity is going to be critical. going forward, that β s really the challenge. rbi expects the government to do quite a few things. the policy statement also makes a lot of assumptions. what happens if these are not met? the commitment made in the last budget was that the fiscal deficit as a percentage of gdp will be 5. 5 per cent in 2010 β 11. there is no basis for us to assume that it will be anything different. so, our estimate of the funding requirement in order to support the government borrowing programme, as well as the growing demand for credit from the private sector, has been factored into our decision while increasing the cash reserve ratio by 75 basis points. the policies we make today are because of what we believe the macroeconomic environment will be over the next few months. so, we have to assume certain things on growth, inflation, liquidity, fiscal deficit, market borrowings and capital inflows. in that assessment, we have to allow, and have indeed done so, for some cushion if some of these assumptions go wrong. capital flows are a worry. have you factored in the possibility of intervening in the market and using instruments to | , this suggests a narrow set of drivers and there are risks inherent in that. we do not overplay the risks, but we cannot ignore these either. it is quite likely that our stance would have been different if we had much greater comfort in the broadbasing of the recovery. rbi has made money more expensive without hiking rates. was the central bank a bit too hawkish? the objective ( of the 75 basis point crr hike ) was to extract excess liquidity from the system. that β s because we are looking at a situation where food inflation is clearly a problem. as the recovery gains momentum, which is what we expect, the risks of food inflation spilling over into more generalised inflationary pressures increase. our approach to mitigating that risk is by anchoring inflationary expectations, to which excess liquidity contributes. when we looked at an increase of 50 basis points as the possible starting point, we felt it would not be enough. we felt that a 75 - basis point hike would provide a better balance between anchoring inflationary expectations and sustaining the momentum of the recovery. the goal was certainly not to surprise the market. what is rbi β s assessment on credit flow? if the overall liquidity for the last two months is still around rs 100, 000 β 110, 000 crore, then the credit growth that banks have been talking about is not there. the projection for credit growth is a function of a number of things. some sectors are doing better than the others, but overall demand for credit is still relatively sluggish. corporates are using alternate sources of funding and internal accruals. so, when growth picks up, as we expect in 2010 β 11, it will have some impact on credit growth. we will have some indication of the borrowing schedule after the budget and we will ensure the liquidity scenario does not become destabilising for growth. you have talked about real estate prices. how big is the threat to the banking system and was there some talk of putting some checks on lending? we don β t have a view on what real estate prices should be. the concern is driven by the degree of exposure the financial sector has to the sector and whether that exposure is a source of risk that could destabilise the system. if we feel the exposure is becoming threatening, we will take measures. we don β t want to do anything directly to real estate. we don β t want to tell banks not to lend to real estate, | 1 |
. β public goods β is the name ascribed to these facilities or services in economics textbooks, and global public goods are those needed for the global economy to function properly. so, what are the global public goods that support the functioning of the global financial system? one obvious but only partial answer is the appropriate regulation and supervision of cross - border financial activities. the great financial crisis has demonstrated that there were many shortcomings in this area, and the international community has taken steps to correct them. good regulation and supervision are important, but by themselves are not sufficient. the soundness of individual financial institutions is one building block of financial stability. in this sense, the international public good supporting global financial padoa - schioppa, tommaso, " markets and government before, during, and after the 2007 β 20xx crisis, " the per jacobsson lecture in basel, switzerland, june 27, 2010. bis central bankers β speeches markets is not provided solely by regulators and supervisors. various agents, including but not limited to central banks, ministries, and regulatory boards, work together to realize a stable international financial environment through conducting prudent monetary policy, performing effective regulation of financial actors, and promoting robust market infrastructures. by looking at international financial stability as a public good, we can apply a well - established microeconomic analytical framework to it. a public good is a good that is both non - rivalrous and non - excludable : that is, one β s use of a public good does not reduce the availability to others and one cannot effectively prevent the use by others. consequently, two important features of public goods are that they will not be provided if left solely to the market, and that they tend to be consumed excessively when they are provided at all. the latter insight allows us to interpret the great financial crisis as being the consequence of overconsumption of a public good β namely, international financial stability. financial institutions took stability for granted and shouldered excessive risks. this exaggerated the impact when the risks were manifested ; markets could not regain stability by themselves and had to wait for interventions by the public sector, including the coordinated provision of liquidity by central banks. ii. providing global governance in a globalized world in a world where globalization is deepening, and where national financial systems are becoming more interconnected, financial stability must increasingly be achieved at the global level. to make this happen, good governance at the global level is essential. fortunately, nobody is against strengthening | for businesses are likely to support business fixed investment through a decline in capital costs and stronger - than - expected cash flows. furthermore, reflecting past restraints on firms β investment attitude, existing equipment has aged and thus potential demand for maintenance and replacement is likely to be strengthened. if the level of economic activity further elevates and the improvement in corporate profits continues, such potential demand becomes more likely to surface cyclically. overseas economies next, i will turn to the outlook for overseas economies. as mentioned earlier, with regard to the outlook for japan β s economy, while domestic demand is likely to maintain firmness, external demand is expected to increase, albeit moderately. this is based on the assumption that overseas economies are expected to pick up gradually as financial markets remain generally stable. in its world economic outlook released last month, the international monetary fund ( imf ) projects that the world economy will gradually see an acceleration in its pace of growth from 2. 9 percent in 2013 to 3. 6 percent in 2014, and to 4. 0 percent in 2015 ( chart 7 ). looking at respective regions, the u. s. economy has been recovering moderately on the back of firm private demand under accommodative financial conditions, despite the fiscal drag. the economy is expected to gradually see an acceleration in its pace of recovery, as accommodative financial conditions will be maintained and the fiscal drag will gradually fade. nevertheless, as uncertainty regarding the fiscal problem remains, such as the federal debt ceiling issue, future developments warrant attention. the european economy, which had been receding slowly, has finally bottomed out, and there has recently been movement toward a pick - up. households β and firms β sentiment are improving as financial markets have remained stable. in addition, changes in the stance of fiscal austerity have been made to some extent and the fiscal drag has weakened somewhat. exports, especially in germany, are bottoming out. although it is necessary to pay attention to the consequence of the european debt problem, as it has not yet been fundamentally resolved, the european economy is expected to gradually pick up on the back of the aforementioned developments. the chinese economy is likely to maintain stable growth at around the current pace, as the government, while progressing with reforms in structural problems such as excess production capacity and excess debt in the manufacturing sector, is expected to carry out various policy measures to underpin economic activity in the event it weakens during the process. meanwhile, growth in other emerging and commodity - | 0.5 |
funding and the rapid credit expansion took place against very limited equity capital in the corporate sector. the global financial crisis exposed these balance sheet vulnerabilities. the onset of the crisis caused a sudden stop in external financing, and countries in the region were caught in a vicious cycle of reduced credit availability, deleveraging, rising non - performing loans, and a cutback in corporate investment and output. much of the region is still suffering from the fallout of the global crisis. in a large number of countries, economic recovery remains feeble and bank credit is still contracting. for these set of countries, reviving credit growth is considered essential to achieving a strong and durable output expansion. however, the task is complex. boosting credit growth without addressing the large sectoral and aggregate imbalances in the economy that had built up during the credit boom years can be risky. matters may become worse if additional credit availability enables enterprises to postpone balance sheet adjustment. in the wake of a balance sheet recession, the allocation of credit matters more bis central bankers β speeches than its aggregate amount. it is important that good borrowers rather than the bad ones are the main beneficiaries of credit growth. it is not surprising that much of the cesee region is experiencing a slow so - called credit - less recovery. balance sheet recessions are typically not very responsive to traditional demand management measures. this is because the monetary policy transmission channel is impaired by the weak balance sheets of banks and the corporate sector. as long as asset quality is poor and capital is inadequate, banks will tend to restrict overall credit supply. liquidity may not be a binding constraint in such a situation. as has been argued by some analysts in the context of an unexpectedly low take up in the recent first auction of liquidity under the ecb β s tltro programme, the profitability of borrowing very cheaply for the central bank to lend to the private sector ( especially smes ) is not guaranteed if nonperforming loans are high and banks would need to discount high expected default rates and if lending to smes implies high risk weights and, consequently, capital charge. credit demand also is weak in a balance sheet recession. bank lending surveys in the region indicate that credit demand has decreased since the onset of the global crisis. an important factor weighing down credit demand is the corporate debt overhang. the easing of monetary conditions will not necessarily induce higher borrowing while highly indebted companies are focused on deleveraging. thus, | - area sovereign debt crisis of 2010 β 13 ), many italian firms have introduced organizational changes that have enhanced their efficiency, making them more competitive on international markets. the restructuring process has been more intensive in the export sector and, as a result, domestic firms have been gaining 2 / 6 bis central bankers'speeches market shares in many countries. it is a process that must continue and be extended to the rest of the economy, supported by appropriate public policies. in recent years various measures have been introduced to support high - tech investments and innovative start - ups. in order to be effective, industrial policy needs stable and appropriate fiscal incentives, while the regulatory framework must be aligned with international best practices. the italian economy has many strengths that can help support these recent positive developments : private sector net wealth is high by international standards, the debt - to - income ratio of italian families is low, exports remain strong and the current account of the balance of payments is in surplus β it has been this way for many years now, so much so that the net foreign asset position is balanced. a reduction in the risk premium on italian public sector bonds is another crucial objective : at the beginning of this week the yield differential with respect to 10 - year german bonds was over 270 basis points, more than twice the level prevailing in early 2018, before the latest general elections. the premia on credit default swaps suggest that the yield differential has risen as a result of the increase in both credit risk and the risk of redenomination of bonds in a different currency. the high public debt - to - gdp ratio exposes italy to the volatility of financial markets, with the annual amount of bonds to be refinanced currently standing at around β¬400 billion. the average residual maturity of the public debt is above 7 years ; therefore, the initial impact of higher interest rates on servicing costs is small but, if the increase in rates persists, it would inevitably weigh on expenditure. reducing the differential between the interest burden on public debt and the nominal rate of growth of gdp β which is positive in italy, compared with negative values in most advanced countries and throughout europe, including in greece β while maintaining an adequate primary surplus, is therefore of vital importance. the transmission of higher rates from government bonds to the cost of loans for households and firms has been limited so far, thanks to banks β ample liquidity and improved balance sheets. but signs of tension are beginning to emerge. according to our surveys, credit conditions tightened | 0 |
response to the covid - 19 crisis, in particular the use of additional monetary policy ( amp ) tools like large scale asset purchases ( lsap ) resulted in a significant increase in system liquidity in new zealand and in other comparable jurisdictions around the world ( figure 3 ). in new zealand, this necessitated a change to our monetary policy implementation framework, as explained in my speech to this conference last year and further outlined in a recently published bulletin. unclassified unclassified figure 3 : exchange settlement balances 4 individual settlement account ( esas ) holders can influence their own settlement cash balance, but the level of liquidity in the system is ultimately controlled by the rbnz. it is also subject to influence from the borrowing, revenue raising, and spending activity of central government. as amp tools continue to unwind over the next few years, we can expect the scl to decline. ultimately this will require more active management of the scl by the rbnz to ensure that there is sufficient system liquidity, as was the usual practice pre - pandemic. the return to a sufficient liquidity environment from an abundant liquidity environment is one that several central banks around the world are contemplating. there are some different approaches being considered around how system liquidity is best managed close to the β sufficient β level5. to that end we have commenced an internal liquidity management framework review which will consider the future management of system liquidity. as i discussed in my speech last year, we expect the β floor β system of monetary policy implementation to remain robust under different levels of settlement cash. but there is more to be learned about where the sufficient level of settlement cash is and how it changes over time. our liquidity management framework review will also consider how we manage system liquidity in a crisis. the review will address questions such as : do we have the right toolkit of facilities and operations and how do we calibrate these to best effect? the first part of our liquidity management framework review will focus specifically on the deployment of rbnz tools and facilities that had the objective of quelling market dysfunction in the covid - 19 crisis. whilst the lsap programme was a tool of monetary policy, it was also very important in restoring market functioning. other tools were also deployed alongside lsap at the peak of market dysfunction in 2020, including our bond market liquidity support ( bmls ) scheme and the term auction facility ( taf ). in addition to looking at | stanley fischer : the economic outlook speech by mr stanley fischer, vice chair of the board of governors of the federal reserve system, at the 17th jacques polak annual research conference, sponsored by the international monetary fund, washington dc, 4 november 2016. * * * with today β s data in the news, i will first say a few words about labor market conditions before moving on to discuss the economic outlook and monetary policy. 1 the labor market has, by and large, had a pretty good year. including this morning β s release for october, payrolls have increased an average of 181, 000 per month this year, a slower pace than last year but enough to keep the unemployment rate flat at about 5 percent. the unchanged unemployment rate reflects a positive, though perhaps transitory, development β mainly a pickup in labor force participation. the rise in participation may reflect the effects of the modest pickup in wages we are now seeing, with the rate of increase in the employment cost index having risen from an annual rate of about 2 percent last year to 2 - 1 / 4 percent so far this year. over the course of the past two years, a variety of negative shocks have affected the u. s. economy, but employment has resumed robust growth after each temporary slowdown : this recovery has been and continues to be powerful in terms of one of our two main targets β employment β and it is my view that the labor market is close to full employment. it is nonetheless interesting to ask what level of payroll gains would maintain an unemployment rate of roughly 5 percent. unsurprisingly, the level of payroll gains consistent with an unchanged unemployment rate is highly dependent on developments in labor force participation. if labor force participation was to remain flat, job gains in the range of 125, 000 to 175, 000 would likely be needed to prevent unemployment from creeping up. however, if labor force participation was to decline, as might be expected given demographic trends, the neutral rate of payroll gains would be lower. if we assumed a downward trend in participation of about 0. 3 percentage point per year, in line with estimates of the likely drag from demographics, job gains in the range of 65, 000 to 115, 000 would likely be sufficient to maintain full employment. last week we received some encouraging news on output growth. after a slow first half, real gross domestic product ( gdp ) increased almost 3 percent in the third quarter. however, the details were a little less exciting than the headline number. household spending growth | 0 |
muhammad bin ibrahim : sukuk as a viable fund - raising and investment instrument opening remarks by mr muhammad bin ibrahim, deputy governor of the central bank of malaysia, at the hkma - bnm joint conference on islamic finance, hong kong, 14 april 2014. * * * much has been talked about the global financial crisis that had brought about unparalleled financial miseries, economic calamities and social grievances. while the focus has been on financial reforms and economic remedies, the thought on the minds of governments and regulators is how to create a more sustainable global financial landscape. emphasis on ethics is key to this approach. greater involvement in ethical - related business has made its strides in contributing towards the overall strength of the global financial system. ethical investment itself has gained international recognition in recent years. estimated to be worth more than usd13 trillion, the ethical investment market now represents over a fifth of total assets managed globally. pension funds, sovereign wealth funds and institutional investors are leading the way. europe, the united states of america and canada make up 96 % of the share of this market. in asia, the market is still relatively small β at less than usd100 billion. as ethical investment catches on in asia, so too has investment in sukuk. sharing a close affinity, they optimise financial returns while maintaining social good and upholding strong governance. it is my pleasure to be here today at this joint conference on islamic finance, organised by the hong kong monetary authority and bank negara malaysia. this inaugural conference is set to mark a significant step to enhance collaboration and deepen financial linkages in islamic finance between malaysia and hong kong. the theme β sukuk as a viable fundraising and investment instrument β is most apt, given that the ethical - based fixed income instrument has increasingly gained recognition by the global financial community as an attractive source of funding for real sectors and long - term development. adoption of best practices for sukuk issuance the growth of the global sukuk market has been very promising. it reached a stock value of usd268 billion at the end of 2013 and since 2000 has grown at a cumulative average rate of 50 % per annum. the creation of a sukuk market in hong kong is a timely initiative as it has the potential to further spearhead its foray into islamic finance. sukuk, as a new asset class, is ideal for portfolio diversification and is increasingly well - accepted all over the world. from | about one thing β we cannot achieve financial stability through regulation alone. government regulation sets a framework for the market, but all market participants have to behave responsibility within those confines. to paraphrase the roman philosopher seneca, decency may forbid what the law does not β and we cannot stress this principle often enough. at the moment, there is reason to doubt whether all of our citizens truly believe that banks are capable of the kind of decency we need to see. the many unforgivable market manipulation scandals of recent years have further undermined public trust in the willingness of banks to behave responsibly. and that is a dire situation to be in, as bank business is largely based on trust. to lose that is to risk losing everything. so this trust urgently needs to be restored. stricter regulation can help in this process, but the banks themselves must also do their part to remedy the situation. they have to show that they are prepared to make changes that go above and beyond what the law requires. they must show that they are capable of pushing through the necessary change of culture in the banking industry. it will be crucial for banks to behave in a manner which reflects what they really are : service providers for the real economy. financial transactions are not an end in themselves. if we can instil this idea in people β s minds, we β ll be able to take the final key step in our quest for greater stability. thank you very much. bis central bankers β speeches | 0 |
appears that progress is being made in reforming the financial system, but as of now it remains a point of vulnerability and an obstacle to a rapid opening of the capital account and flexibilization of the exchange rate. china faces the problem of a rapidly ageing population. while this will be a problem from the viewpoint of fiscal transfer programs ( which however are on a proportionately much smaller scale than in richer countries ), the processes of urbanization and industrialization can continue by drawing on the massive rural population. environmental issues will have to be dealt with, and it is clear from the trends in global commodity prices that china may well face continuing adverse terms of trade changes as well as rising domestic resource costs. income disparities in china, between the coast and inland provinces, between the cities and the countryside, between rich and poor, have been growing rapidly, and are receiving increasing attention from the government. these, combined with the breakdown of the social safety net of earlier times, produce social and political tensions that could threaten the continuation of the growth process. and political pressures associated with the desire for democratization, which tends to rise as income levels increase, constitute another source of tension. however, its impact on the growth rate of the dollar value of chinese gdp would be smaller. china β s high saving rate has been attributed in part to the absence of a convincing social safety net, and to uncertainty about future economic growth. in addition, high growing economies have generally been high savers, a feature which the late franco modigliani used to assert was fully consistent with the life cycle hypothesis. the chinese economy suffers from one disadvantage that the other asian miracle economies did not : it is already very large. this raises the question of whether it can continue to rely on exports to power its growth β for the capacity of the rest of the world to absorb chinese exports must be determined by the global growth rate. 12 the answer is that china probably cannot continue to rely on export - led growth, and therefore that the switch to domestic demand led growth, which has been talked about for some time, is essential if growth is to continue in the 7 - 10 percent per annum range. is china vulnerable to a 1990s style asian financial crisis? there are some negative symptoms. the first is a share of investment in gdp that according to the official data exceeds 40 percent. this cannot be efficient, it must be part of the process of generating bad loans, and is reminiscent of pre - crisis investment rates in some | prospect is inhibited by the strained relations between india and pakistan. the dynamics of a south asian economic bloc built around india would be different from those of east asia because, unlike in the case of china, there is no japan β no advanced industrial economy β in the neighborhood. v. the rise of asia : economic implications the rise of asia, especially the rise of east asia and of india, is already reshaping the world economy. concerns over globalization that have become so prominent a part of the economic debate in europe and also in the united states, focus on the impact on the wages of less skilled workers in the west of the hundreds of millions of chinese and also indian workers who are entering the global labor force. one often hears the view that β china has a comparative advantage in everything β, an argument that every economist can demolish, but doing so does not diminish the anxiety level. part of the anxiety must derive from the discomforts of the adjustment process forced by the dynamism of asia ; and part must derive from the fact that the wages of unskilled workers in the west may be adversely affected by such competition. policy can deal with these consequences, through adjustment aid, and through education, but unless that is done, the negative fallout from this competition will likely continue. the last time i heard this degree of anxiety was in asia during the asian crisis, when many of china β s neighbors expressed the same concerns. then i used to ask people whether they would prefer to have a prosperous or a poor neighbor. most opted for the prosperous neighbor, though i often had the sense that they might prefer that their neighbor progress at a more measured pace. by now most of the developing countries and most of china β s neighbors can count the gains from china β s ( and india β s ) booming growth. china β s voracious appetite for raw materials, which has produced a boom in commodity prices, has helped many developing countries, as well as commodity rich industrial countries like australia. china β s investments in africa β where indian companies have also long been active β have lately received media attention. china and india β s energy needs have helped push oil and other energy prices to their highest sustained levels, and have contributed to the prosperity of energy producers in the middle east, in russia and central asia, and also in africa where there are now many oil exporters. china β s and india β s energy needs have driven their oil companies into the international arena, competing | 1 |
the market digesting its contents, there have been rises in the volatility of government bond yields. the bank has been having close dialogue more than ever with market participants and taking firm action, including an adjustment of the β parameters β of the jgb purchase operations. yesterday, the bank released the outline of the outright purchases of jgbs for the time being. specifically, it decided to increase the frequency of jgb purchases. while the amount to be purchased was left at approximately 7 + trillion yen per month in principle, it also decided to conduct such purchases in a flexible manner by taking account of market conditions in order to ensure that the effects of monetary policy permeate the economy. the bank expects that these measures will lead to the stable formation of long - term interest rates by suppressing excessive rise in interest rates and heightened volatility. bis central bankers β speeches ii. outlook for economic activity and prices and the importance of expectations let me next explain how the bank considers economic activity and prices will develop under quantitative and qualitative monetary easing. i will explain in line with the baseline scenario of the β outlook for economic activity and prices β released by the bank at end - april. first, the real economy. japan β s economy has started picking up. as for the outlook, japan β s economy is expected to return to the moderate recovery path around the middle of the year. on the back of that, domestic demand is expected to remain resilient and growth rates of overseas economies will gradually pick up. thereafter, the economy will be influenced by a last minute surge in demand and its reversal decline at two scheduled consumption tax hikes. despite that, with a virtuous cycle of production, income, and spending expected to be maintained, the economy is likely to continue growing above the potential growth rate of around 0. 5 percent as a trend. let me quote specific figures from the median of the policy board members β forecasts. the growth rate is projected to be 2. 9 percent for fiscal 2013, 1. 4 percent for fiscal 2014, and 1. 6 percent for fiscal 2015. on such growth rate projection, the output gap, which illustrates aggregate supply and demand balance, will gradually turn positive from the current level of about negative 2 percent. it will further widen to about 2 percent in the latter half of the projection period up to fiscal 2015. as for prices, the year - on - year rate of change in the consumer price index ( for all items excluding | fresh food ) has been negative. based on the economic projection i have just mentioned, it is expected to be on an uptrend. main factors behind that are an improvement in aggregate supply and demand balance and a rise in the expected rate of inflation. it is likely to reach the β price stability target β of about 2 percent through the latter half of the projection period up to fiscal 2015. specifically, the median of policy board members β forecasts was 0. 7 percent for fiscal 2013, 1. 4 percent for fiscal 2014, and 1. 9 percent for fiscal 2015. the bank β s clear commitment to achieving the price stability target and quantitative and qualitative monetary easing that underpins the commitment are expected to lead to a rise in prices through three routes. first, an improvement in aggregate supply and demand balance. when growth beyond the potential growth rate is achieved, aggregate supply and demand balance will improve and the positive output gap will widen. second, a rise in the medium - to long - term expected rate of inflation. the expected rate of inflation will be on an uptrend under quantitative and qualitative monetary easing and will gradually converge on the price stability target of about 2 percent. third, an increase in import prices. foreign exchange rate developments will put upward pressure on those prices for the time being. and on the assumption that international commodity prices will be on a moderate uptrend in tandem with the growth of the global economy, import prices are likely to continue rising. of the three, the important key to achieving the price stability target under the current policy is the second route, namely, to raise the medium - to long - term expected rate of inflation. let me explain the reason by using the so - called phillips curve, which shows the relationship between aggregate supply and demand balance and the inflation rate. as mentioned, when growth beyond the potential growth rate is achieved, the positive output gap widens. as the gap widens, the inflation rate will rise along the positive slope of the phillips curve. as deflation has continued for nearly 15 years, the phillips curve itself has shifted downward. and its slope has become moderate, due partly to a decline in firms β pricing power amid globalization. given such shape of the current phillips curve, the 2 percent price stability target cannot be achieved only by achieving a 2 percent positive output gap. one reason for the difference in the outlook for prices between the bank and private institutions might be that many private institutions have based their outlook on the | 1 |
going forward, enterprises will probably adjust the workforce to lower output growth and reduce the use of overtime. after a long period of high housing investment and rising prices, activity in the housing market is now slowing. tighter credit conditions are amplifying the fall in house prices. even though there are variations across regions, the trend in house prices is the same β from a more moderate rise at the beginning 2007 to a clear decline at the beginning of 2008. norges bank β s lending survey for the third quarter shows that banks are tightening credit standards for households. banks announced further tightening ahead. owing to growing turmoil and liquidity shortages in financial markets, banks have raised their requirements with regard to collateral and borrowers β debt - servicing capacity. growth in household credit has slowed in recent months. house price developments affect building starts, which have decreased in the past year. the decline is sharpest for residential building starts. in october, enterprises in norges bank β s regional network indicated a very low level of housing starts in the period ahead. order reserves for commercial buildings and holiday homes are high, however. commercial construction is largely financed by loans, and may therefore be affected by changes in interest rate and credit conditions. enterprises in norges bank β s regional network report that commercial building starts have declined in recent months. household saving has picked up. household income accounts show that the savings ratio excluding share dividends has risen, but is still very low and negative. household borrowing requirements have also decreased somewhat. ( household net lending has picked up slightly. ) the financial market crisis has led to higher borrowing costs for banks and has kept bank lending rates at a higher level than developments in the key rate would imply. households probably need to build up financial buffers and reduce debt, which will in turn weigh down on growth in private consumption ahead. growth in spending on goods stalled last autumn. there has been a considerable drop in car sales in particular. norges bank β s regional network also reports a decline in demand for goods related to moving home, such as white and brown goods and refurbishing equipment. growth in consumption is expected to be very low for a period ahead, but growth in private consumption may pick up again towards the end of next year. growth in mainland investment has been strong in recent years, but is now moderating. according to the national accounts, corporate investment was still on the rise in the first half of the year, but there was a considerable decline in housing investment. falling housing | while the life insurance industry's capitalization remains strong, the use of reinsurance merits continued monitoring. with that said, let me turn to monetary policy. considerations for monetary policy so what factors will i consider in the coming weeks as i contemplate the appropriate stance of monetary policy going forward? over the next few weeks, we will receive a considerable amount of data on economic activity for april and may, including the employment report for may and a report on may cpi inflation. monetary policy should be forward - looking. it should be conducted so that longer - term inflation expectations are well anchored around our inflation target of 2 percent. monetary policy should also be data dependent to allow for continuous learning about the underlying structure of the economy as new data arrive. these principles of monetary policymaking are always valuable, especially so when the level of uncertainty is high, as it is now. i am guided by the dual mandate assigned to the federal reserve by the u. s. congress : price stability and maximum employment. on the one hand, inflation is too high, and we have not yet made sufficient progress on reducing it. on the other hand, gdp has slowed considerably this year, and even though the effect has been muted in the labor market so far, demand clearly has begun to feel the effects of interest rates that are 5 percentage points higher than they were a little over a year ago. history shows that monetary policy works with long and variable lags, and that a year is not a long enough period for demand to feel the full effect of higher interest rates. another factor weighing on my thinking is the uncertainty about tighter lending standards that i mentioned earlier. i intend to consider all these factors in the coming weeks as i contemplate the appropriate stance of monetary policy going forward. thank you. 3 / 3 bis - central bankers'speeches | 0 |
mark w olson : loan quality and how it reflects the overall economy remarks by mr mark w olson, member of the board of governors of the us federal reserve system, at the government affairs conference of the credit union national association, washington, dc, 28 february 2005. * * * thank you for inviting me to speak here today. let me begin by congratulating all of you who take time away from your responsibilities in your respective institutions to participate in this government affairs conference. i am sure that some of your colleagues back home think you are on a junket, and there are elements of your trip to washington, d. c., that are a welcome respite from your day - to - day activities. nonetheless, you are taking time away from professional responsibilities and families to participate in this important event, and your efforts are both commendable and valuable. my talk today will address the sometimes complex interactions between business cycles in the economy at large and financial institutions like banks and credit unions. on the whole, these continue to be favorable times for the financial services providers, whether commercial banks or credit unions. returns, which continue to be attractive, have been driven recently more by loan volume than margins. household income has grown nicely while unemployment has remained low, and, together with low mortgage interest rates, these factors have contributed to appreciation in home values. a great number of households have used this historic opportunity to refinance their mortgages and reduce their debt service costs. many have sought the tax advantages of home equity loans as an alternative to credit cards or other consumer debt. and, despite the publicity accorded to several big mergers, smaller institutions - including credit unions and community banks - have fared quite well in this environment. risk - management strategies and processes of course need to adapt to these changing conditions. growth in mortgage loans and mortgage - backed securities requires lenders to monitor and manage the significant and sometimes complex interest rate risk profiles associated with such exposures, especially as market interest rates have risen over the past several months. compliance, too, has received more attention from both bankers and regulators. historically, however, credit risk has been the most affected by changes in the economic cycle. fortunately for financial institutions with a retail business focus, this time the growth opportunities have come in products that we don't usually associate with large potential credit losses, namely, conforming or jumbo mortgages and home equity lines of credit. our past experience, however, suggests limits as to how much | we should rely on historic experience for analyzing today's management challenge. with continuing innovation in loan products and heightened competitive pressures, risk profiles will not be identical to those of earlier cycles, and it would be unwise to rely too heavily on these past patterns without careful analysis and management. financial institutions and financial regulators rightly spend a fair amount of time and energy monitoring economic conditions as they seek to better understand the growth opportunities that exist and the outlook for the quality of the loans being made. let's turn that around for a moment and ask the question : what can indicators of asset quality at financial institutions tell us about where we are in the business cycle? the question is an interesting and timely one, given that many in the industry believe that credit quality is about as good as it can get. at the federal reserve, we've recently looked at measures of asset quality - problem assets, chargeoffs, and provisions for loan losses - and related them to the economic cycle, measured as growth in real gross domestic product. the usual way to look at cyclical indicators is to line up the high points and low points - or " peaks " and " troughs " in the specialized language of business cycle analysts - and see how they compare with each other. it is usually helpful to screen out normal seasonal variations, so that one ends up with a cycle that unfolds smoothly over several years. let me refer now to the exhibit we prepared for you. it contains two charts that compare changes in gdp with aggregate problem - asset ratios for commercial banks and credit unions respectively. upper chart shows quarterly data for commercial banks ( the blue line ) since 1990. the lower chart shows delinquency rates for all credit unions ( the blue line ). this chart uses a semiannual frequency because that was the regulatory filing frequency for many credit unions through much of this period. the first conclusion we can drawn from the data is that asset quality is a lagging indicator of what is happening in the economy at large. this idea has intuitive appeal and is probably consistent with your business experience. in a nutshell, when economic conditions deteriorate, the ability of many borrowers to service their debt erodes in turn, along with their cash flow. more generally, we know that a recession is a period in which economic activity declines. speaking broadly, a recession begins when gdp starts declining, and it ends when gdp stops declining. the end of a recession is usually termed the low point or " trough | 1 |
##ized to refinance when mortgage rates decline below the rate on their current loan. in contrast, most market participants expect longer - term interest rates, including primary mortgage rates, to rise over policy normalization, and that therefore mortgage refinancing activity will be modest. as a result, most expect mortgage principal repayments to run below the level of the redemption cap set by the fomc. projections for these repayments, drawn from the july 2017 update to our annual report that i discussed earlier, are shown in lefthand side of panel 3. 6 / 15 bis central bankers'speeches the benefit of the cap, even though it is unlikely to bind, is that it limits the amount of variation in the pace at which securities, and particularly mortgages, will flow back into private hands. recall that the left - hand figure in panel 3 is based on rising interest rates over an ongoing economic expansion. for comparison, the right - hand figure in panel 3 shows the projected mbs principal repayments for a scenario in which interest rates come in two percentage points below market participants β expectations. in this scenario, the cap operates to constrain the flow of securities into the market. while such a lower - rate outcome is not a central expectation, it is certainly possible. by providing market participants some certainty that the pace of balance sheet decline will be gradual across economic scenarios, this plan should help mitigate the risk of unexpectedly sharp shifts in asset prices, liquidity, or market functioning should markets begin to put greater weight on lower interest rate scenarios. indeed, by promoting greater confidence in the stability and liquidity of the treasury and agency mbs markets across economic outcomes, the fomc β s plan should result in lower risk and liquidity premia on these assets relative to normalization plans that do not promote such confidence. the importance of predictability is underscored when one considers that in recent years, adverse economic shocks have generally been associated with sharp falls in longer - term interest rates. such declines would tend to bring about faster mbs repayments and, if the outflow from the federal reserve β s portfolio were not constrained by a cap, an unforeseen tightening effect on financial conditions, amplifying the adverse shock. prepared for the unexpected while i am confident that the fomc β s plan will work well, there β s always the risk that events unfold differently than expected. in my view, we best prepare for the unexpected in two ways : | for business. of course, this uncertainty remains after the initial capital has been raised, shareholders identified, and a management team is ready to begin work. these delays present unique challenges for de novo founders, including incurrence of more start - up expenses, difficulty recruiting and retaining qualified management to obtain approval, and challenges in raising additional start - up capital investment. in my view, the absence of de novo bank formation over the long run will create a void in the banking system, a void that could contribute to a decline in the availability of reliable and fairly priced credit, the absence of financial services in underserved markets, and the continued shift of banking activities outside the banking system. bank mergers and acquisitions another pressing area of concern is the rapidly shifting approach to bank mergers and acquisitions ( m & a ) by some prudential regulators. 4 m & a transactions allow banks to evolve and thrive in our dynamic banking system and can promote the long - term health and viability of banks. m & a also ensures that banks have a meaningful path to transitioning bank ownership. the absence of a viable m & a framework increases the potential for additional risks, including limited opportunities for succession planning, especially in smaller or rural communities, and zombie banks that continue to exist but have no competitive viability or exit strategy. the impact of a more restrictive m & a framework affects institutions of all sizes, including larger institutions that are vying to compete with the very largest global systemically important banks. they may choose to pursue m & a to remain competitive with larger peers who can achieve growth organically through sheer scale. m & a is an important part of a healthy banking system. so when considering changes to the framework, i think we need to first identify the problem that needs to be solved and then ask whether any proposed solution is fair, transparent, and consistent with applicable statutes - and, critically, whether the proposed solution has the potential to damage the long - term viability of the banking system. are there identified shortcomings in the current process or standards, and are the proposed reforms targeted and effective to address these shortcomings? one argument i have heard about the m & a regulatory approval process is that the lack of application denials demonstrates that regulators are failing to meaningfully review and pressure - 4 / 7 bis - central bankers'speeches test proposals and have effectively become a rubber stamp. i think this argument lacks a strong foundation. there is ample evidence that undermines this argument, including the resource | 0 |
as well as by a negative contribution from inventory investment. although private domestic final demand appears to have slowed somewhat in the fourth quarter, it has continued to advance. household spending has been supported by steady job gains and solid growth in real disposable income β aided in part by the declines in oil prices. one area of particular strength has been purchases of cars and light trucks ; sales of these vehicles in 2015, reached their highest level ever. in the drilling and mining sector, lower oil prices have caused companies to slash jobs and sharply cut capital outlays, but in most other sectors, business investment rose over the second half of last year. and homebuilding activity has continued to move up, on balance, although the level of new construction remains well below the longer - run levels implied by demographic trends. financial conditions in the united states have recently become less supportive of growth, with declines in broad measures of equity prices, higher borrowing rates for riskier borrowers, and a further appreciation of the dollar. these developments, if they prove persistent, could weigh on the outlook for economic activity and the labor market, although declines in longerterm interest rates and oil prices provide some offset. still, ongoing employment gains and faster wage growth should support the growth of real incomes and therefore consumer bis central bankers β speeches spending, and global economic growth should pick up over time, supported by highly accommodative monetary policies abroad. against this backdrop, the committee expects that with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in coming years and that labor market indicators will continue to strengthen. as is always the case, the economic outlook is uncertain. foreign economic developments, in particular, pose risks to u. s. economic growth. most notably, although recent economic indicators do not suggest a sharp slowdown in chinese growth, declines in the foreign exchange value of the renminbi have intensified uncertainty about china β s exchange rate policy and the prospects for its economy. this uncertainty led to increased volatility in global financial markets and, against the background of persistent weakness abroad, exacerbated concerns about the outlook for global growth. these growth concerns, along with strong supply conditions and high inventories, contributed to the recent fall in the prices of oil and other commodities. in turn, low commodity prices could trigger financial stresses in commodity - exporting economies, particularly in vulnerable emerging market economies, and for commodity - producing firms in many countries. should any of these | satisfied and decided to raise the target range for the federal funds rate 1 / 4 percentage point, to between 1 / 4 and 1 / 2 percent. bis central bankers β speeches this increase marked the end of a seven - year period during which the federal funds rate was held near zero. the committee did not adjust the target range in january. the decision in december to raise the federal funds rate reflected the committee β s assessment that, even after a modest reduction in policy accommodation, economic activity would continue to expand at a moderate pace and labor market indicators would continue to strengthen. although inflation was running below the committee β s longer - run objective, the fomc judged that much of the softness in inflation was attributable to transitory factors that are likely to abate over time, and that diminishing slack in labor and product markets would help move inflation toward 2 percent. in addition, the committee recognized that it takes time for monetary policy actions to affect economic conditions. if the fomc delayed the start of policy normalization for too long, it might have to tighten policy relatively abruptly in the future to keep the economy from overheating and inflation from significantly overshooting its objective. such an abrupt tightening could increase the risk of pushing the economy into recession. it is important to note that even after this increase, the stance of monetary policy remains accommodative. the fomc anticipates that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate. in addition, the committee expects that the federal funds rate is likely to remain, for some time, below the levels that are expected to prevail in the longer run. this expectation is consistent with the view that the neutral nominal federal funds rate β defined as the value of the federal funds rate that would be neither expansionary nor contractionary if the economy was operating near potential β is currently low by historical standards and is likely to rise only gradually over time. the low level of the neutral federal funds rate may be partially attributable to a range of persistent economic headwinds β such as limited access to credit for some borrowers, weak growth abroad, and a significant appreciation of the dollar β that have weighed on aggregate demand. of course, monetary policy is by no means on a preset course. the actual path of the federal funds rate will depend on what incoming data tell us about the economic outlook, and we will regularly reassess what level | 1 |
muhammad al - jasser : β assessment β project of small and medium size enterprises opening speech by his excellency dr muhammad al - jasser, governor of the saudi arabian monetary agency ( sama ), at the inauguration ceremony of the β assessment β project of small and medium size enterprises, saudi company for credit information ( simah ), riyadh, 8 october 2011. * * * your excellencies and dear audience, i am pleased to participate with you in celebrating the launching of the β assessment β project of small and medium enterprises. first, i would like to express my thanks and appreciation to the colleagues at the saudi company for credit information ( simah ) for the development of this important project, which i hope will be provided with all necessary means of support by all entities concerned for its success. dear brothers and sisters, the national economy consists of a large and integral variety of public and private institutions that use available human and material resources to produce continuous flows of goods and services to meet the domestic community β s needs and a part of the external demand. of course, domestic enterprises differ in size based on various criteria, the most important of which are : the number of workers, the amount of capital, sales and others. one of the misconceptions is that large enterprises are the main impetus of economic activity. this belief has arisen from the good news repeatedly published about those institutions in various mass media. however, the actual reality emphasizes that small and medium size enterprises play an important role in the economic activity in both the developed and developing countries, through their absorptive capacity in employing the workforce of the different levels of training and education. a study by the riyadh economic forum on β the saudi business sector and meeting the economic challenges β showed that the average number of workers in the saudi private sector stood at 8. 4 workers per one single institution, and, consequently, 90 percent of the institutions in the kingdom is considered within the scope of small and medium size enterprises. small and medium size enterprises are considered the best efficient and effective tool for accelerating economic and social development, especially in remote areas with the least opportunities for development. they also provide a fertile field for training workers and developing their skills. to this end, governments have paid great attention to such enterprises and established the basic regulatory framework needed for their growth and development, particularly after having proved their ability to reduce pressure on the government sector in providing job opportunities and training. governments also helped big enterprises in the marketing | exports showed a significant rise. real exports rose again in october. real imports, on the other hand, have remained virtually unchanged on average. as a result, the real trade surplus has been increasing with some fluctuations. reflecting these developments in exports and imports, the nominal current - account surplus has also been expanding significantly since april 1997. industrial production has recently been somewhat weak. production in the third quarter 1997 remained virtually unchanged on the whole. this is because production has been cut back mainly in the industries with excessive inventories, such as consumer durables and construction - related goods, although production of electrical machinery continued to increase, reflecting steady exports. production in october and november is expected to decrease as a result of inventory adjustment pressures. with respect to labor market conditions, the unemployment rate has remained at a high level, and the ratio of job offers to job applications has recently eased somewhat. growth in overtime working hours and nominal wages has slowed slightly reflecting weak production. however, year - to - year employment growth has been moderate but steady. thus, employment and income conditions continue to improve moderately on the whole, but the pace of recovery has slowed somewhat. prices remained stable on the whole, excluding the effect of the consumption tax hike. domestic wholesale prices ( adjusted for seasonal electricity rates ) have declined to some extent as domestic demand and supply conditions started to ease, particularly in construction - related goods. the year - to - year declines in corporate service prices on the whole have been narrowing further owing to the improvement in supply and demand conditions, particularly for real estate rents and information services, although leasing charges continue declining. consumer prices ( nationwide, excluding perishables ) rose year to year in september, reflecting the temporary factor ; i. e., a rise in medical charges which resulted from medical insurance reform. excluding this, however, consumer prices have remained stable at a level slightly above that of the previous year. monetary aggregates, measured in terms of year - to - year growth of m2 + cds average outstanding, declined somewhat in october to 2. 7 per cent. regarding money market rates, the overnight call rate ( uncollateralized ) has moved at a level slightly below the official discount rate. the 3 - month cd rate has stayed at around 0. 50 - 0. 55 per cent. against the background of uncertainties about future economic growth, the long - term government bond yield had been declining since the end of may and reached the record low of 1. 5 - 1. 6 per | 0 |
thomas jordan : global economic outlook and economic developments in switzerland introductory remarks by mr thomas jordan, chairman of the governing board of the swiss national bank, at the media news conference of the swiss national bank, berne, 12 december 2013. * * * ladies and gentlemen welcome to the swiss national bank β s news conference. i would like to begin today by explaining the snb β s monetary policy decision before moving on to present our assessment of the economic situation and monetary conditions. my colleague, jean - pierre danthine, will then talk to you about developments in connection with financial stability and banknotes. finally, my colleague, fritz zurbrugg, will look at the current situation on the financial markets, as well as at the management of our currency reserves and interest rate benchmark reforms. as always, we will conclude with a question and answer session. i will now start with our monetary policy decision. as you will have no doubt expected, the snb is maintaining its minimum exchange rate of chf 1. 20 per euro. the swiss franc is still high. with the three - month libor already practically at zero, the minimum exchange rate continues to be the right tool for ensuring appropriate monetary conditions in switzerland. if the swiss franc were to appreciate, this would have significant consequences for the swiss economy. on the one hand, an appreciation would lead to a further decline in import prices and a renewed threat of deflation. in this regard, we should bear in mind that inflation in the last two years has been predominantly negative. on the other hand, with an ongoing unfavourable international environment and a strong swiss franc, the situation for our economy remains challenging. should it become necessary, we will therefore enforce the minimum exchange rate by buying foreign currency in unlimited quantities. and, if required, we will also take further measures. in addition, we are leaving the target range for the three - month libor at 0. 0 β 0. 25 %. the snb bases its monetary policy decision on a conditional inflation forecast, which assumes an unchanged three - month libor of 0. 0 % over the next three years. you will find the relevant chart in your media kit. compared to september, our forecast has been adjusted downwards slightly. reasons for this are the unexpectedly low rates of inflation for october and november, which serve as a lower departure point for the forecast, as well as the decline in inflation in the euro area and the slight fall in the oil | price, which both help to dampen the inflation outlook. for 2013, we still anticipate inflation of β 0. 2 %. for 2014 and 2015, the inflation forecast is down in each case by 0. 1 percentage points and is now at 0. 2 % and 0. 6 % respectively. consequently, no inflation risks can be identified for switzerland in the foreseeable future. global economic outlook the snb β s inflation forecast is embedded in a global economic scenario. i would therefore like to begin with our assessment of the global economy. global economic recovery continued as expected in recent months, with the main drivers being the us, the uk and china. in the euro area, by contrast, growth lacked momentum and inflation slowed considerably more than expected. in many emerging economies, too, economic activity was rather sluggish. the outlook for the global economy has not changed significantly since the september monetary policy assessment. our forecasts suggest that growth will pick up gradually in the bis central bankers β speeches coming quarters. further recovery is likely to be underpinned by a number of factors, including stable international financial markets, a less restrictive fiscal policy and a very expansionary monetary policy in the major advanced economies. europe, however, will continue to experience below - average growth, with banks β restrained lending policies and ongoing uncertainty hampering investment activity. in addition, the high level of unemployment in this region will also hold back private consumption. uncertainty about the continued recovery of the global economy remains high overall. in many advanced economies, room for manoeuvre in economic policy is being constrained by the fact that interest rates are already very low and government indebtedness is high, making the global economy especially prone to shocks. we expect that the euro area will overcome the crisis in the medium term. however, the forthcoming assessment of banks β balance sheets could cause some ripples. furthermore, exiting from unconventional monetary policy measures is as yet uncharted territory. spikes on international financial markets therefore cannot be ruled out during the process of normalising monetary policy in the major currency areas. swiss economic outlook i will now look at economic developments in switzerland. the economy continued to develop favourably in the third quarter. annualised real gdp was up by slightly more than 2 %. unlike the previous quarter, goods exports grew substantially. domestic demand, however, lost some momentum. on the output side, manufacturing in particular recorded positive growth, having previously fallen for three successive quarters. construction continues to be | 1 |
) and by corporate strategies. in this regard, the role of the so - called national innovation system should be stressed, i. e. the network of public and private sector institutions and the interaction mechanisms behind the production, use, diffusion, absorption and exploitation of new knowledge and technologies by a company or group of companies. empirical evidence shows that r & d expenditure, the level and type of education and the articulation between the educational and professional training subsystems are responsible for the position of countries within the international division of labour and, in particular, for the specialisation pattern ( intersectoral specialisation, or as an alternative, intrasectoral vertical specialisation ). on the one hand, the articulation between the three subsystems ( research, education and professional training ) should be enhanced. on the other hand, the articulation between the national innovation system and corporate needs, in particular in the tradable goods sector, should also be improved. finally, i would like to point out the critical importance of maintaining and strengthening the stability of the financial system. this system plays a fundamental role in the functioning of the portuguese economy and, in particular, in an efficient allocation of internal and external resources, channelling them to the sectors and economic agents with funding needs. the portuguese banking system is solid. it was not exposed to the sub - prime crisis or to the speculative bubble in the real estate sector. own funds are adequate given the current level of balance sheet risk : the tier 1 capital ratio stood at 9 % in 2010 and the core tier 1 capital ratio at 8. 2 %. obviously, the banking system suffered from the impact of the international crisis and the decline in growth. as expected, between 2007 and 2010, the total ratio of non - performing loans increased from 1. 5 % to 3. 3 % and the return on equity decreased from 14. 63 % in 2007, to 7. 37 % in 2010, after having dropped to 3. 44 % in 2008. however, the portuguese financial system shows some specificities that should be addressed. first, as a reflection of the above - mentioned imbalance between domestic savings and domestic borrowing requirements β resulting from the development model of the portuguese economy in the past few years β the transformation ratio of deposits into loans stands at 1. 44 for the portuguese financial system as a whole. due to this fact, there is a significant dependence on external financing. this explains the reason why the portuguese banking system became heavily exposed to | also argued that β [ t ] his requires that the national supervisors and parliaments should receive the necessary information to understand the risks national depositors are exposed to from these branches and the possible impacts on the financing of their economies. this may require developing specific reporting instruments and processes for the local authorities to continue to be able to appropriately supervise local activities and thus contribute to supervisory decisions taken at the ssm level that may impact their jurisdiction. β, eurofi ( 2019 ), programme of the eurofi high level seminar in bucharest, 3 - 5 april. viii as evidenced by the high - level working group chair report on the strengthening of the banking union, including edis ( op. cit. ) : β broad agreement exists on the need for a harmonisation of necessary parts of bank insolvency law, including with regard to cross - border groups and the ranking of creditors, while the toolbox for resolution might need to be expanded. β ix this report is expected to feed into the review of the single resolution mechanism, european commission ( 2019 ), β report from the commission to the european parliament and the council on the application and review of directive 2014 / 59 / eu ( bank recovery and resolution directive ) and regulation 806 / 2014 ( single resolution mechanism regulation ) β, available at http : / / ec. europa. eu / transparency / regdoc / rep / 1 / 2019 / en / com - 2019 - 213 - f1 - en - main - part - 1. pdf, and european parliament ( 2019 ), briefing for the purposes of the public hearing with elke konig, chair of the single resolution board on 2 april 2019. the european parliament econ committee has also commissioned an external study on β lessons from the united states for banking resolution in the banking union β to be published in spring 2019. x state aid sa. 50640 ( 2018 / n ) β italy β liquidation scheme for small banks, available at http : / / ec. europa. eu / competition / state _ aid / cases / 274069 / 274069 _ 1989761 _ 107 _ 2. pdf. xi judgment in joined cases t - 98 / 16, italy v commission, t - 196 / 16, banca popolare di bari scpa v commission, and t - 198 / 16 fondo interbancario di tutela dei depositi v commission. xii the dgs directive also recognises that dgs funds may be used | 0.5 |
this are mainly twofold. first, sound financial sectors are key to delivering β stable money β. weak financial systems tend to blur the monetary transmission mechanism and the capacity of monetary policy to influence inflation and growth outcomes, putting the maintenance of price stability and the credibility of the central bank at risk. second, financial sector reform is needed because it ensures that structural reforms, particularly in the goods and labour markets, become fully effective. indeed, despite recent structural reforms and positive growth, the catching - up of per capita income with the euro area has remained limited, and in many countries output growth remains below potential. efficiently functioning financial markets are an important precondition for an efficient allocation of capital, thereby contributing to an economy's growth potential. in many ways, the prospect of eu accession has been instrumental in triggering reform in accession countries, and structural reforms have advanced far enough in these economies to achieve macroeconomic stability. however, there is much that remains to be done. i am confident that the policy - makers in the region will β hear and listen β and remain committed to continuing along the path of reform on which they have already embarked. ladies and gentlemen, i believe that, with respect to the enlargement of the eu and, later on, the accession of these countries to the euro area, the next few years will be crucial. i will take part in at least most of this process as an observer and no longer as an actor. however, i will continue to watch with great interest how the european union and, in particular, the european system of central banks ( escb ) continues to manage this momentous process. i should like to conclude by again thanking imadec university for the honour it has bestowed upon me. i regard this honorary doctorate as a reward not only for myself, but also for all those - and klaus liebscher is one of them - who have contributed to a stability - oriented macroeconomic framework. thank you for your attention. | countries. at the beginning of the transition to a market economy, poor tax collection and governments'limited access to financial markets led to substantial monetisation of public deficits. however, from the mid - 1990s onwards, fiscal policy has focused on macroeconomic stability. therefore, a key lesson from the accession countries'experience is that responsible fiscal policy has been a crucial element in achieving and maintaining macroeconomic stability. looking ahead, the best contribution that fiscal policies can make to sustainable noninflationary growth is by pressing ahead with fiscal consolidation, as is necessary to ensure the flexibility needed to deal with potential domestic and / or external economic shocks in the medium term. regrettably, fiscal developments have worsened recently in a few accession countries, reflecting ongoing restructuring programmes and higher expenditures related to the adoption of eu standards, but also the lack of a realistic medium - term fiscal strategy. in addition, structural deficits have become rather large and public debt ratios have started to increase, limiting the room for manoeuvre of automatic stabilisers. overall, the need for further fiscal consolidation seems overwhelming, as fiscal slippages could put under pressure and even endanger the macroeconomic stabilisation achieved thus far. finally, let me turn briefly to the third component of, or perhaps better complement to, stability - oriented policies in accession countries that i will be addressing today : the implementation of further structural reforms. stability - oriented policies can best be supported by structural reforms, as they enhance the flexibility of the economy to adjust to necessary changes and cope with potential shocks. moreover, structural reforms are also key determinants of the medium - term growth potential. in the case of the accession countries, structural reforms are even more important because they are necessary to complete the full adjustment of the accession countries'economies toward well - functioning market economies, including the setting - up of appropriate institutions and the adoption of international best practices in a number of areas. completing this agenda is a challenge for the accession countries, particularly because of the sheer magnitude of pending reforms. moreover, structural changes may complicate the conduct of monetary policy, as structural reforms may cause structural breaks that complicate the pursuit of credible disinflationary policies. also, the calendar for further price liberalisation, which has an impact on inflationary developments, is often set by each government and is thus difficult for a central bank to predict. from an ecb perspective, financial sector reform is also of the utmost importance. the reasons for | 1 |
milano hub β results of 2021 call for proposals speech by alessandra perrazzelli deputy governor of the bank of italy 28 february 2022 welcome everyone. i am very pleased to be here today to present the results of milano hub β s inaugural 2021 call for proposals on artificial intelligence and to announce the names of the 10 projects that - after a rigorous review process - will participate in the bank of italy β s innovation centre. how did we get here? we received 40 projects submitted by 62 different operators : financial intermediaries, start - ups, service providers, universities, industry associations, research centres, consulting firms and law firms ( slide 1 ). the call was answered by young start - ups ( less than two years old ) and by italian and foreign banking, finance, insurance and commercial groups, including some listed companies. universities also feature prominently : 22 per cent of the projects submitted hail at least in part from the world of academia. the response to the call for proposals has been very positive. it has served as a further source of stimulation for the bank of italy in helping the financial system to face the challenges posed by the technological innovation process. the results of the call only go to show that innovation knows no boundaries, drawing together participants from across the financial ecosystem, regardless of size. this is also confirmed by the discussions we have had with the market through our other two innovation incubators : the fintech channel and the regulatory sandbox. in 11 cases, the applications were submitted jointly by two or more applicants, often from different economic sectors ( slide 2 ). these are projects that require the input of a variety of professionals, or that involve operators with traditional business models turning to fintech companies or specialized service providers for their know - how to improve processes and to adapt products. breaking it down geographically ( slide 3 ), 66 per cent of the projects come from the north of italy, 18 per cent from the centre, and 11 per cent from the south and the islands ; the remaining 5 per cent were submitted by foreign applicants. our interaction with these operators has shown that, while the distribution is uneven, nonetheless throughout the country there are plenty of even small entities with a significant wealth of knowledge and high - quality human capital that we should be tapping into increasingly. the projects submitted ( slide 4 ) stand out for their high quality and variety. this fully reflects the dynamism and complexity of the artificial intelligence sector, which is undergoing a period of strong expansion throughout the world. | , let alone central bankers, care about it? the short response is : because they belong to mankind. another one, is that there cannot be macroeconomic, price or financial stability on a dead planet. but let me be a bit more specific. you probably already know that central banks and supervisors created a network in 2017 to β contribute to the development of environment and climate risk management in the financial sector β. the ngfs ( network for greening the financial system ), created by 8 members, now counts with 121 members in addition to 19 observers, and the banque de france proudly hosts its secretariat. xiv in march, the ngfs acknowledged that biodiversity loss and nature loss are also a source of macroeconomic and financial instability. xv this statement followed some groundbreaking work conducted by researchers from ngfs members along with the inspire research networkxvi, as well as other research conducted by researchers at a few central banks including the dutch page 5 sur 12 central bankxvii ( dnb ), the banque de france, as well as the central banks of malaysia and brazil jointly with the world bankxviii. at the banque de france, we published a study called β a β silent spring β for the financial system? β, xix which explored the dependencies and impacts of the french financial system on biodiversity. xx importantly, the study was interdisciplinary and involved several researchers and experts from various institutions. xxi as i will discuss later, i believe that this interdisciplinary approach is essential to address the challenges of the anthropocene. these different studies enable us to understand that nature - related financial risks can be split between physical and transition risks, much like climate - related financial risks. physical risks stem from the dependency of economic activities on ecosystem services and their vulnerability in the case of disruption. for instance, the loss of pollination could affect agricultural output and lead to food shortages or higher consumer prices, while new pandemics could disrupt entire value chains. transition risks result from the negative impacts of some economic activities on biodiversity, which makes them vulnerable to transition policies. for instance, it is hoped that the cop15 that will take place in december in montreal will lead to an international agreement to protect 30 % of land and sea areas by 2030. regional and national policies are also expected : the eu green deal contains several goals related to biodiversity, such as the need to increase organic farming practices from 9 % to 25 % cultivated areas. all these policies could have profound implications for different | 0 |
alan greenspan : stock options and related matters remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, at the 2002 financial markets conference of the federal reserve bank of atlanta, sea island, georgia ( via satellite ), 3 may 2002. * * * i asked jack guynn and bob eisenbeis what issues you would like me to address this morning. they suggested that events associated with the failure of enron have refocused attention on a number of accounting issues. in an economy as large, diverse, and complex as ours, sound corporate governance - - including the accurate measurement of corporate performance - - is essential if our nation's resources are to be directed to their most efficient uses. there can be little doubt that, on the whole, both, as employed in the united states in recent decades, have been of very high quality. we simply could not have achieved our level of economic performance if capital were allocated on the basis of grossly inaccurate information. but the very complexity and dynamism of our system requires that we constantly evaluate the tools employed for measuring corporate performance to ensure that they adapt appropriately to the evolving financial and economic environment. in that regard, the increasing use of stock option grants to employees has raised new challenges for our accounting system. such options are important to the venture capital industry, and many in high - tech industries have counselled against making any changes to current practices. they argue that the use of options is an exceptionally valuable compensation mechanism ; that recognizing an expense associated with these grants would reduce the use of options, harming high - tech companies ; that the effect of options on fully diluted earnings per share is already recognized ; and that we cannot measure the costs of options with sufficient accuracy to justify their recognition on financial statements. these are important concerns. this morning, i would like to address them and other related issues. the seemingly narrow accounting matter of option expensing is, in fact, critically important for the accurate representation of corporate performance. and accurate accounting, in turn, is central to the functioning of free - market capitalism - - the system that has brought such a high level of prosperity to our country. capitalism expands wealth primarily through creative destruction - - the process by which the cash flow from obsolescent, low - return capital is invested in high - return, cutting - edge technologies. but for that process to function, markets need reliable data to gauge the return on assets. measures of profitability | , however, can only be approximate. although most pretax profits reflect cash receipts less cash costs, a significant part of profits results from changes in the valuation of items on the balance sheet. the values of almost all assets are based on their ability to produce future income. but an appropriate assessment of asset value depends critically on a forecast of forthcoming events, which by their nature are uncertain. a bank, for example, books interest paid on a loan as current revenue. however, if the borrower subsequently defaults, that presumed interest payment would, in retrospect, be seen as a partial return of principal and not as income. we seek to cope with this uncertainty by constructing loan - loss reserves, but the adequacy of those reserves is also subject to a forecast. similarly, depreciation charges against income, based on book values, are very crude approximations of the decline in the economic value of physical plant and equipment. the actual decline will not be known until the asset is retired or changes ownership. another example is the projection of future investment returns on defined - benefit pension plans, which markedly affects corporate pension contributions and, hence, pre - tax profits. thus, how one chooses to evaluate the future income potential of the balance sheet has a significant effect on current reported earnings. on topics such as nonfinancial corporate governance and accounting, which are not in the federal reserve board's jurisdiction, i am obviously speaking for myself. the estimation of earnings is difficult enough without introducing biases into the calculation. i fear that the failure to expense stock option grants has introduced a significant distortion in reported earnings - and one that has grown with the increasing prevalence of this form of compensation. as i noted at the outset, some view the current treatment of option grants as having been a major aid in raising capital to finance the rapid exploitation of advanced technologies. while the vital contribution of new technology to the growth of our economy is evident to all, not all new ideas create value on net. not all new ideas should be financed. in recent years, substantial capital arguably was wasted on a number of enterprises whose prospects appeared more promising than they turned out to be. this waste is an inevitable byproduct of the risk - taking that generates the growth in our economy. however, the amount of waste becomes unnecessarily large when the earnings reports that help investors allocate investment are inaccurate. stock - option grants, properly constructed, can be highly effective in aligning | 1 |
, and delinquencies on commercial mortgage - backed securities have reversed the modest increase that occurred from 2000 to 2003. the latest information on property prices hints at some moderation in price increases in the first quarter from the rapid price appreciation of last year. but, as in the housing market, commercial real estate prices are continuing to rise in the aggregate. recent supervisory guidance relating to real estate lending the federal reserve will continue to monitor developments in the residential and commercial real estate markets very closely. in addition to scrutinizing the effect of these developments on the economy, we are also, in our role as bank supervisors, monitoring banks'mortgage lending practices. last year, the federal bank regulatory agencies issued draft guidance on both residential and commercial mortgage lending. the agencies have received many comments on the proposed guidance, including comments from your association, which we will consider as we discuss what steps to take next. i will address the guidance on residential mortgage lending first. nontraditional mortgage products over the past few years, the agencies have observed an increase in the number of residential mortgage loans that allow borrowers to defer repayment of principal and, sometimes, interest. these loans, often referred to as nontraditional mortgage loans, include interest - only ( io ) mortgage loans, for which the borrower pays no loan principal for the first few years of the loan, and payment - option adjustable - rate mortgages ( option arms ), for which the borrower has flexible payment options - and which could result in negative amortization. ios and option arms are estimated to have accounted for almost one - third of all u. s. mortgage originations in 2005, compared with fewer than 10 percent in 2003. despite their recent growth, however, it is estimated that these products still account for less than 20 percent of aggregate domestic mortgages outstanding of nearly $ 9 trillion. although the credit quality of residential mortgages generally remains strong, the federal reserve and the other banking supervisors are concerned that banks'current risk - management techniques may not fully address the level of risk inherent in nontraditional mortgages, a risk that would be heightened by a downturn in the housing market. mortgages with some of the characteristics of nontraditional mortgage products have been available for many years ; however, they have historically been offered to higher - income borrowers. more recently, nontraditional mortgages have been offered to a wider spectrum of consumers, including subprime borrowers, who may be less suited | current level. therefore, banks should not be surprised by the emphasis in the proposed cre guidance on concentrations and the importance of portfolio risk management. historically, cre has been a highly volatile asset class. in the past, problems in cre, even at wellmanaged banks, have generally come at times when the broader market was encountering difficulties. in an effort to generate cash flow, borrowers and bankers with properties in distress may disrupt their local real estate market by cutting rents or offering leasehold improvements and other incentives to attract or keep tenants. these actions can have a negative effect on the entire local real estate market, including good projects. in most years, cre credit losses are relatively low compared with many other types of bank loans. but in times of stress, the loss rate can jump considerably higher. because cre losses tend to be greater during times of stress, bankers must focus more intently on their risk appetite as their cre concentration grows. bankers must consider how much capital will be placed at risk if the cre portfolio hits a stress period and compare that loss exposure with the relative returns of cre lending. in other words, bankers need to practice risk management. while banks'underwriting standards are generally stronger than they were in the 1980s and 1990s, the agencies are proposing the guidance now to reinforce sound portfolio - management principles that a bank should have in place when pursuing a commercial real estate lending strategy. a bank should be monitoring performance both on an individual - loan basis as well as on a collective basis for loans collateralized by similar property types or in the same markets. some institutions'strategic - and capital - planning processes may not adequately acknowledge the risks from their cre concentrations. cre lending in recent years has occurred under fairly benign credit conditions, but those conditions are unlikely to continue indefinitely. the ability of banks with significant concentrations to weather difficult market conditions will depend heavily on their riskmanagement processes and their level of capitalization. from a risk - management and capital perspective, institutions should generally focus on the emerging conditions in their real estate markets and on the potential cumulative impact on their portfolios if conditions deteriorate ; they should also take other measures to help identify cre vulnerabilities. of course, these measures should vary according to the size of the organization and the level of the concentration. all of these steps are key elements of a sound strategy to manage concentrations. while supervisors continue to underscore the importance of having robust risk - management practices for | 1 |
these initiatives for the takaful industry to achieve sustainable success and unleash the potential gains of the islamic finance in malaysia and abroad. allow me to share some significant developments that may shape the future direction of the takaful industry moving forward. firstly, as the prudential framework evolves towards a predominantly principle - based and riskbased regulatory approach, there will be a greater emphasis on risk management, corporate governance and transparency so as to maintain investor confidence and public trust. commensurate with the diversity and complexity of takaful operational framework, products and services, the continuous upgrading of risk management practices, with improvements in governance standards and enhancements of information management systems will be critical. under this environment, it is envisaged that takaful operators, individually or collectively, will play a bigger role in enhancing risk management practices, developing market conduct standards, fostering fair market practices and improving financial literacy among consumers. this will be even more important with the implementation of the risk - based regulatory regime, whereby the responsibility for the implementation of sound risk management and market conduct governance, as well as assessment of risks and management of the financial condition of a takaful operator, will rest increasingly with the board of directors and senior management of the takaful operators. moving forward, a differentiated regulatory approach will increasingly be adopted, where companies that exhibit strong corporate governance and risk management practices will be given greater regulatory flexibility and may enjoy greater capital savings. secondly, it is vital to have in place an efficient and cost - effective delivery channel for the takaful business, strategically aligned to fulfil the participants'reasonable expectation. bancatakaful strikes as an attractive value proposition that enables takaful operators to tap into banking institutions'large customer base and attract the existing clientele of the latter to have access to integrated financial service offerings in the most cost effective manner. strategic alliance in the bancatakaful arrangement has indeed shown a significant improvement in the takaful contributions over the past few years. this is evident with the significant three - fold increase in contributions of the product marketed through bancatakaful in 2005 which accounted for 20. 4 % of total contributions. bancatakaful has contributed considerably to the increased penetration in the family takaful business, especially for single contribution takaful plans. we envisage significant inroads in the penetration rate of bancatakaful in future years in line with the positive trend shown by the conventional counterparts, where | the bancassurance captured 45. 3 % of the new life insurance business premiums generated in 2005. through efficient cost structures of bancatakaful and with the entry of joint - venture takaful operators involving banks and savings institution with extensive nationwide branch network, the takaful industry should maximize the potential of this alternative distribution channel. finally, on the global front, islamic finance has made significant inroads and has achieved growing global recognition. another significant milestone in the progress of islamic banking and finance as recently announced by bank negara malaysia is the initiative to enhance the position of malaysia as an international islamic financial centre ( mifc ). with the vibrant domestic islamic financial industry that has become an integral component of the financial system, malaysia is now well positioned to be an international centre of origination and issuance of islamic financial instruments, fund and wealth management, islamic financial activities in international currencies and takaful and retakaful businesses. as at year 2005, the total gross contributions from takaful business outside malaysia recorded an insignificant proportion of the total contributions of the industry. the relatively low participation of takaful operators in international business, is however set to change with the recently announced mifc initiatives, to allow qualified local and foreign financial institutions to conduct the full range of islamic banking and takaful businesses in foreign currencies. it was also announced in the recent budget that attractive tax packages in terms of 10 year tax holiday are given to all takaful operators on their international currencies takaful business. in addition, mifc accords greater operational flexibility for the islamic financial institutions to conduct islamic financial services in foreign currencies from anywhere in malaysia. to ensure effective delivery system under mifc initiatives, the mifc executive committee, with bank negara malaysia as secretariat, has been set up to provide directions and drive implementation of policies and strategies to foster effectiveness and efficiency of the mifc. well capitalised and reputable financial institutions that possess sound track record are encouraged to set up international takaful operation in malaysia to conduct out - out takaful and retakaful businesses. the malaysian takaful operators should seize the opportunity to venture into out - out takaful business establishing an international currency business unit to offer takaful business in international currencies. ladies and gentlemen, in tandem with the rapid changes and expansion of the islamic financial sector, it is vital for us to have a strong, continuous support in talent management and | 1 |
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