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percent per year. in some sense, going back to 2007 is a little misleading, because the fomc did not adopt its 2 percent inflation target until january 2012. however, even since that decision, pce inflation has been running lower than 2 percent. so, whether we look over the past six years or over the past two years, inflation has been running too low to be consistent with price stability. the good news is that the fomc does expect inflation to turn back toward 2 percent. however, that return to 2 percent could take a long time. for example, the minutes from the april fomc meeting reveal that the federal reserve board staff outlook is for inflation to remain below 2 percent over the next few years. in a similar vein, earlier this year, the congressional budget office ( cbo ) predicted that inflation will not reach 2 percent until 2018 – more than 10 years after the beginning of the great recession. this subdued inflation forecast may be surprising to some of you. after all, as you look at the chart, you can see that pce inflation has risen relatively rapidly over the past three months and is now 1. 8 percent – very close to the fomc ’ s target. but the chart also clearly shows that many large fluctuations in pce inflation end up being purely transitory. to formulate an bis central bankers ’ speeches accurate forecast for inflation, we need to look through these transitory fluctuations, no matter how large they might be – and that ’ s not always easy. of course, my forecast is only a forecast. i am extremely confident that the actual path of inflation over the next four years will turn out to be higher or lower than what i currently expect it to be! what you should take away, though, is that i currently see the probability of inflation ’ s averaging more than 2 percent over the next four years as being considerably lower than the probability of inflation ’ s averaging less than 2 percent over the next four years. and that ’ s why i conclude my discussion of inflation by saying that the fomc is undershooting its price stability goal. low inflation : why it matters i ’ ve told you that inflation has been, is and will be too low relative to the fomc ’ s target of 2 percent. but why should you care that inflation is too low? isn ’ t it a good thing when goods and services aren ’ t as expensive to buy? there are two answers to this – very good | ’ m sure that many of you have questions about that journey. the answers to all of your questions – and probably more – are on a new website that the fed has created at federalreservehistory. org. i encourage you to visit this site to learn more about the people, places and events that have shaped federal reserve history. i won ’ t say too much more about fed history – perhaps to the relief of some of you! – but i do want to address one of the things that i think has changed the most over the federal reserve ’ s history : our communication with the public. a hundred years ago, congress created a system that was designed specifically so that the residents of main street would have a voice in monetary policy. technology has changed a lot since 1914 – i ’ m told that they didn ’ t even have smartphones back then – and so the ways that we gather information from main street have changed. but this fact - finding is still an important part of the making of monetary policy. indeed, earlier today, i met with fargo business leaders to gather exactly this kind of information. communication is a two - way street, however. during the past century, the federal reserve ’ s communications to the public about its monetary policy actions have also evolved greatly. the pace of change was especially rapid in the past eight years under chairman bernanke ’ s leadership. during that time, the federal reserve specified an explicit target for inflation, began holding regular press conferences and greatly expanded its use of forward guidance – that is, its communications about the likely future evolution of policy. so, as the federal bis central bankers ’ speeches reserve system plans for its second century, i would say that the importance of two - way communication is a key lesson from the system ’ s first century. in order for the fed to continue to be effective, it needs to communicate its policy decisions transparently to the public. conversely, it also needs the public ’ s input into how those policies are affecting them. events like the one today, and my meeting with business leaders earlier today, are a key part of fostering that two - way communication. with that background in mind, let me turn back to the federal open market committee and the making of monetary policy. i mentioned that the fomc meets eight times per year. at those meetings, we decide on the level of monetary stimulus for the economy. i won ’ t get into too many details of what that term “ monetary stimulus ” | 0.5 |
reflections on monetary policy in the euro area at the current juncture address by the deputy governor of the bank of italy luigi federico signorini bank of italy workshop on “ unconventional monetary policy : effectiveness and risks ” rome, 21 october 2016 it is a pleasure to welcome you to the banca d ’ italia for this one - day workshop on ‘ unconventional monetary policy : effectiveness and risks ’. i understand that you have a full agenda, with nine dense and thought - provoking papers packed into a single day. i will keep my remarks very brief. your discussions today are sure to be policy - relevant and timely. the governing council of the ecb has repeatedly asserted, most recently yesterday, that the asset purchase programme ( app ) will continue at the current pace of purchases until at least march 2017, or possibly beyond if necessary, and in any case until the governing council sees a sustained adjustment in the path of inflation consistent with its target. properly measuring the effects of the app is therefore a priority for the euro area monetary policymakers. the eurosystem ’ s expanded app has been in place for almost two years, exerting clear and sizeable downward pressure on government bond and other financial asset yields ; these, in turn, have had favourable effects on private sector financing conditions. monetary policy on its own cannot produce growth. it can, however, create favourable conditions for a cyclical upturn ; it may facilitate the adoption of other measures, such as structural reforms, by limiting the negative short - run impact that is sometime associated with them. as a joint outcome of the app and the other extraordinarily expansionary measures recently adopted by the eurosystem, the cost of bank loans is now historically low and, even more importantly, the dispersion of lending rates across countries is once again close to the levels prevailing in the pre - crisis period. this helps to preserve the integrity of the monetary union. still, almost ten years after the onset of the financial crisis and five years after the start of the sovereign debt crisis, the slack in the euro - area economy persists. a number of questions are being raised on the functioning of the expansionary measures recently adopted by the eurosystem. how does the transmission mechanism work when the economy is at the lower bound of the interest rates? might the working of those measures be impaired after some time? what are the interactions with other developments, such as commodity prices, financial regulation, legacy assets in banking, and conditions in the world | banca d ’ italia. | 1 |
improvement and customization. we are closely monitoring recent events where risks in the system have crystallized and many crypto investors have suffered losses. despite significant investor losses, the crypto financial system does not yet appear to be so large or so interconnected with the traditional financial system as to pose a systemic risk. so this is the right time to ensure that like risks are subject to like regulatory outcomes and like disclosure so as to help investors distinguish between genuine, responsible innovation and the false allure of seemingly easy returns that obscures significant risk. this is the right time to establish which crypto activities are permissible for regulated entities and under what constraints so that spillovers to the core financial system remain well contained. insights from recent turbulence several important insights have emerged from the recent turbulence in the cryptofinance ecosystem. first, volatility in financial markets has provided important information about crypto ’ s performance as an asset class. it was already clear that crypto - assets are volatile, and we continue to see wild swings in crypto - asset values. the price of bitcoin has dropped by as much as 75 percent from its all - time high over the past seven months, and it has declined almost 60 percent in the three months from april through june. most other prominent crypto - assets have experienced even steeper declines over the same period. contrary to claims that crypto - assets are a hedge to inflation or an uncorrelated asset class, crypto - assets have plummeted in value and have - 3proven to be highly correlated with riskier equities and with risk appetite more generally. 2 second, the terra crash reminds us how quickly an asset that purports to maintain a stable value relative to fiat currency can become subject to a run. the collapse of terra and the previous failures of several other unbacked algorithmic stablecoins are reminiscent of classic runs throughout history. new technology and financial engineering cannot by themselves convert risky assets into safe ones. third, crypto platforms are highly vulnerable to deleveraging, fire sales, and contagion — risks that are well known from traditional finance — as illustrated by the freeze on withdrawals at some crypto lending platforms and exchanges and the bankruptcy of a prominent crypto hedge fund. some retail investors have found their accounts frozen and suffered large losses. large crypto players that used leverage to boost returns are scrambling to monetize their holdings, missing margin calls, and facing possible insol | delivered at " building a financial structure for a more stable and equitable economy, " the 22nd annual hyman p. minsky conference on the state of the u. s. and world economies, sponsored by the levy economics institute of bard college, held in new york, april 17 – 19. see national employment law project ( 2012 ), “ the low - wage recovery and growing inequality ( pdf ), ” data brief, report ( new york : nelp, august ). bis central bankers ’ speeches government were reported to have dropped at an annual rate of more than 8 percent in the first quarter of this year, following an even larger drop in the fourth quarter of last year. these cuts in federal spending are likely to be an important influence on the near - term prospects for economic growth, and i will say more about this issue in a moment. in contrast to the federal government, the budget outlook for state and local government continues to improve, and the drag on economic activity from this sector's cutbacks in spending has diminished considerably. reflecting some of these mixed influences, as i already noted, real gdp has been rising at a very modest rate, and the labor market has shown similarly modest gains over the past year, with the unemployment rate coming down about 1 / 2 percentage point. to more fully understand the experience of the 11. 7 million americans who can't find work, we look to broader measures of labor underutilization, which take into account job seekers who have stopped looking for work because they have become discouraged, and people working part time but who would prefer to work full time. recently, these numbers seem to be coming down. the gains in payroll employment over this period have been about in line with the decline in the unemployment rate, although, as is typical, the pace of job gains has been somewhat erratic in recent months. since the beginning of the year, the increases in payroll employment have averaged 196, 000 per month, a little above the 183, 000 average monthly gains observed during 2012. other indicators from the labor market have also shown some improvement recently. initial claims for unemployment insurance have declined since last summer, and the number of job openings appears to be increasing. i hope these indicators mean we are turning the corner on some of the painful costs associated with being unemployed or underemployed in america. turning to inflation, recent data show that price pressures have remained subdued. both total and core inflation were only about 1 percent over the 12 months ending | 0.5 |
crisis in emerging market economies, the collapse in oil and commodity prices, and the consequences of the uk referendum. and healthier banks have provided the necessary supply of credit to maintain the pace of the recovery. the easing in credit supply conditions has been visible in both lending rates and lending volumes. since mid - 2014, bank lending rates have fallen by almost 100 basis points for both euro area households and corporates. small and medium - sized enterprises have benefitted from even larger declines. lending volumes, in turn, have posted positive growth rates for households since end - 2014, and for non - financial corporations since the last quarter of 2015, following multi - year declines. and financing conditions have improved in capital markets too, which has been followed by a pick - up in corporate bond issuance. this credit reversal has in turn supported a second benign characteristic of the recovery : the fact that it has become increasingly driven by domestic sources of growth. domestic demand has now replaced foreign demand as the main driver of growth. over the past two years, domestic demand has on average added more than a percentage point to gdp growth, supported by very accommodative financing conditions. by contrast, net exports, which were a key growth engine for most of the crisis period, have barely contributed to gdp growth since end - 2013 as the global environment has deteriorated. this shift in the composition of growth is important, from an inflation perspective, since it makes the recovery in the euro area less vulnerable to external shocks. indeed, domestic strength has helped insulate the euro area against recent global weakness, which otherwise would have dragged the recovery off track – and with it, the expected pick - up in the path of inflation. the domestic picture is also contributing to a third encouraging development : the strong rebound in employment. this has been driven by a striking reconnection between gdp and employment growth in recent years. 1 the temporary post - lehman rebound in 2010 – 11 was essentially a jobless recovery. the current recovery, however, has reduced the unemployment rate from more 2 / 4 bis central bankers'speeches than 12 % in 2013 to 10 % today. and, besides lower unemployment, the overall labour force has expanded as well in recent years, reflecting increasing labour participation rates. 2 a faster return to full employment – or what economists call the “ non - accelerating inflation rate of unemployment ” – is clearly supportive of price stability, since it heralds a tighter labour market and stronger wage pressures. and while those pressures might be somewhat | the euro area and in austria. hahn, f. r., holzl, w., kwapil, c. ( 2016 ) : the credit channel and the role of monetary policy before, during and after the global financial crisis – a micro data approach to the analysis of bank - firm relationships. wifo. eidenberger j., schmitz s. w., steiner, k. ( 2014 ) : the priorities of deleveraging in the euro area and austria and its implications for cesee. oenb financial stability report 27. july 2014. https : / / www. oenb. at / publikationen / finanzmarkt / finanzmarktstabilitaetsbericht. html seite 4 von 5 the decrease in total assets was driven by reductions in interbank assets and external assets, while funding for governments and for the real economy have increased since the outbreak of the crisis. these results go in line with an important point the oecd always makes : capital levels have increased since the crises without leading to a credit crunch. let me comment on this from a financial stability perspective. this deleveraging development is to be welcomed, as reduced leverage decreases both the potential for risks and the degree of financial interconnectedness and thus mitigates systemic risks and strengthens financial stability. hence, deleveraging takes place without constraining private sector loans. this empirical evidence is also supported by a topical eba survey, the eba risk assessment questionnaire 2016. and i quote : “ results from the risk assessment questionnaire confirm that banks plan to continue moving towards their predominantly traditional lending role in the financial sector. ” 8 further you can take out of this survey that banks will endeavor to increase lending volumes to the corporate sector, in particular smes, and to households, including both residential mortgage and consumer credit loans. the strategic goal of european banks is the further increase of corporate and household loans. to sum up, monetary policy and financial stability are complementary. a better understanding of how banks work and how they are steered ( namely via dynamic balance sheet optimization ) helps not only to implement effective micro - and macroprudential regulation but also better targeted monetary policy. banks and their environment have dramatically changed over the last years. banks are not the same as before the crisis. hence, it is essential that models and analytical tools are frequently adapted to fit the current environment. and the conclusions regarding one of | 0 |
27. 11. 2020 opening address of the 19th conference – club de gestion de riesgos de espana margarita delgado deputy governor introduction many thanks to the risk management club for their kind invitation to open this annual conference. we are now into its nineteenth edition that, inevitably, will focus on the new challenges in the aftermath of covid - 19. the title of this conference refers to the “ new world ” that will be awaiting us after overcoming the crisis caused by the pandemic. needless to say, we all wish that this happens as soon as possible. it may seem a little excessive to talk of a “ new world ” after the pandemic, but i believe to some extent it will be. we should remember that crises are periods of change, in which what is established is called into question. each crisis is certainly different from previous ones. or rather it should be different, at least if we supervisors, regulators and banks learn from the past and avoid making the same mistakes. in any event, it seems we have now been hearing the word “ crisis ” more than ever for over a decade. until relatively recently, when we referred to “ the crisis ” we had the global financial crisis in mind. now, sadly, we must clarify which crisis we are talking about. it could be said that the society we live in may be the result of how we have tackled and resolved each of the crises we have faced. with effort and sacrifice our society has overcome problematic situations, some not so distant in time. and the pandemic will certainly be no exception. as in other previous crises, it is vital that we should be able to draw lessons allowing us to improve those aspects that have fallen short, that have not worked as foreseen or that need to be strengthened. naturally, this need to draw lessons applies to banking regulation, but also to health, social insurance and economic aspects that have evidenced shortcomings. as you know, the banking supervisory and regulatory frameworks were overhauled to include the lessons we learned from the previous financial crisis. while unrelated, we could say that the situation caused by covid is the first test for this global reform and, almost inevitably, we will be assessing the functioning of the different components of the new framework after facing this global, exogenous, severe and totally unexpected shock. let me begin with a very swift reference to the supervisory framework. i believe we will all agree that the launch of the single supervisory mechanism ( ss | of the merger at caixabank. fourth, the cost - to - income ratio13 worsened slightly in 2021, affected by the extraordinary restructuring costs recorded at several significant banks, although it remains lower ( better ) than that of the european peers. in recent years the spanish banking industry ’ s operating capacity has converged towards average european values, against a backdrop of branch closures and staff reductions in the main european countries. thus, at december 2020, the number of branches per 100, 000 inhabitants in spain was 47, a figure similar to that of the french banking system and close to that of the italian one, 14 although spain ’ s population density is lower. between 2008 and 2020 the number of branches was cut by more than 50 %, while staff reductions, albeit lower, were also significant ( close to 40 % ). in both cases, these are the second highest cuts among the main european countries. 15 branch closures have been comparatively higher in urban areas with higher population growth. 16 the cost - to - income ratio is defined as the ratio of operating expenses to gross income, such that higher ( lower ) values denote lower ( higher ) efficiency. in 2008, there were 100 branches per 100, 000 inhabitants in spain, compared with around 60 in france and italy ( data as at december 2020, which are the latest data available with comparable ecb information for the different european countries ). second only to the netherlands. in spain branch closures have affected municipalities of all sizes, albeit with slightly more cuts in larger ones ( around 56 % since 2008 for municipalities with more than 50, 000 inhabitants ) and fewer in smaller ones ( around 40 % for those with fewer than 5, 000 inhabitants ). the smaller municipalities are the only ones where the population declined in this period, in keeping with the demographic decline in spain ’ s rural areas in recent decades. fifth, as regards the cost of bank funding, in the money markets secured interest rates stand at historically low levels. but wholesale market funding costs have risen, on expectations of a less accommodative monetary policy and the uncertainty prompted by the crisis in ukraine. indeed, expectations of interest rate rises have fed through to wholesale market interest rates on long - term bank debt ( a measure of funding costs ) more robustly than to the overnight index swap ( ois ) rate. 17 thus, banks ’ credit risk spread has widened. there were mixed developments in the cost of new issuances in 2021 across instrument types and issuers | 0.5 |
price changes or from changes in indirect taxation. and when we look forward to the end of the year, it seems pretty clear that much of the sharp increase in inflation which is now expected by most commentators will be the direct result of such factors, and should as a result be ignored by the reserve bank in setting monetary policy. partly because we expressly don ’ t react to certain kinds of price changes, actual inflation can often be expected to fluctuate over quite a wide range - certainly over the full 0 to 3 per cent range, and occasionally outside that range. and we set interest rates with the objective of keeping inflation somewhere near the middle of the target range in one to two years ’ time precisely because we know that in practice there will be all sorts of unexpected shocks and developments, ranging from asian crises to changes in cigarette taxes, which will move prices both up and down, away from that mid - point. we improve our chances of having inflation remain within the target range most of the time by constantly aiming to keep inflation near the mid - point of the range in the medium - term. but we recognise that there will be all kinds of developments which will result in somewhat different outcomes, and indeed should result in somewhat different outcomes. but it is crucially important to stress that the reserve bank can ignore the impact of these one - off “ shocks ” to the inflation rate only if we new zealanders do not use them as an excuse to start a more generalised and enduring increase in the inflation rate. if a doctor, in reviewing his or her fees, says “ well, the cpi went up by 3 per cent, so i had better put up my fees by 3 per cent also ”, then we have a problem. if a producer of widgets sees that the cpi has increased by 3 per cent, and automatically puts his prices up too, then we have a problem. if local authorities see a 3 per cent increase in the cpi as adequate justification for them to increase rates and fees by that amount, then we have a problem. and if wages and salaries are automatically increased by 3 per cent to compensate for the increase in the cpi, then we have a problem. the reality is that, when the international price of oil goes up - to use the current example - we new zealanders become poorer, and it is utterly futile to suppose that we can compensate ourselves for that fact by giving ourselves higher incomes. to the extent that some new zealanders succeed in winning such compensation, | it has been harder than we might have wished to stimulate consumption. " the reserve bank and the treasury now have a work programme focused on whether there are ways to reduce the likelihood of finding our economy out of sync again ; or on handling it differently if we do. " what is clear is that in a globalised world most of the government's economic policies, including fiscal, industry and immigration policies, are all constrained by other countries'policies and by international pressures on them. with financial markets so interconnected, any small country's domestic monetary policy also now needs to be seen in an international setting. " nevertheless, there is no question that we can run an independent monetary policy. we have control of our ship. if global winds are not behind us or our economy is out of sync with influential economies, then our progress becomes more difficult, and things can get uncomfortable. we may have to modify our chosen course. " but with major economies now raising their interest rates, global conditions are becoming aligned to containing inflation. in these conditions, new zealand monetary policy is increasingly effective. indeed in some respects we are in a more comfortable position than some other countries, having already raised interest rates. " in the meantime, we are starting to see some other countries, especially small open commodity economies, realising this too as they start to face the same pressures. they have been following the new zealand experience with interest. " | 0.5 |
sabine mauderer : walking the talk - transition plans as catalysts for the net - zero transition speech by dr sabine mauderer, member of the executive board of the deutsche bundesbank, at the 9th green finance forum " changing or pretending – between ambition and reality ", euro finance week, frankfurt am main, 14 november 2023. * * * check against delivery 1 looking back and moving forward ladies and gentlemen, who here still remembers the 1970s? probably not too many of you. let us wind back the clock fifty years. what can we see? first, we see a war in the middle east and surging energy prices. second, as a result, we see decision - makers debating measures to reduce energy costs and to increase energy efficiency. think about the car - free sundays in germany, for instance. third, we see a global economy facing weak growth and high inflation. fifty years later, we are in a different setting but it might be helpful to take into account some of the lessons learned back then. the horrific attacks by hamas on israel on 7 october have sparked a new escalation of violence in the middle east. the conflict is adding to economic uncertainty at a time when the global economy " is limping along " 1 – to use the words of the imf – and inflation has not yet been completely defeated. in particular, the flare - up of violence poses renewed risks to energy prices. this comes just a year and a half after russia's invasion of ukraine sent global energy prices soaring. these events, like those of 1973, highlight just how vulnerable western economies are to swings in energy markets because of their heavy dependence on fossil fuels. there are two important levers we can use to reduce this vulnerability. first, we ought to increase energy efficiency – so we can get more bang for our watts. second, we need to ramp up our use of renewable energy to lower the carbon intensity of the energy we consume. experience gained fifty years ago offers valuable lessons. back then, german companies faced strong economic headwinds, too. amid these challenges, they proved their innovative strength and their ability to adapt their business models to the changing conditions. high energy prices prompted substantial efficiency improvements and research into alternatives to fossil fuels. 1 / 4 bis - central bankers'speeches of course, history is not repeating itself – there are important differences between the 1970s and now. today, german firms and other european corporates have understood that they need to wean themselves off | attach to an interest rate change of 25 base points at the next governing council meeting. it should be clear, however, that this probability is critically dependent on the assumption of a fixed interest rate spread between the expected onemonth rate and the deduced expected minimum bid rate. a one base point change in the assumed spread would lead to a change in the probability of a 25 base point hike by 4 base points. given the current money market distortions, however, considerable fluctuations in the spread between the one - month rate and the minimum bid rate cannot be ruled out. one reason could be tensions on the swap market owing to a decline in market participants ’ willingness or ability to take risks. our assessment of financial markets ’ uncertainty regarding their interest rate forecast could also be distorted by the current financial market turmoil because of variations in the risk premia contained in the three - month money market interest rates : in order to estimate market participants'uncertainty regarding their interest rate forecast, we derive the risk - neutral density from options on the three - month euribor future. the more certain market participants are about their point forecast on the three - month euribor, the smaller the standard deviation of the estimates should be. we therefore usually interpret a change in the expected three - month euribor distribution as indicating a change in financial markets ’ expectation of eurosystem policy rates. however, currently we cannot rule out the possibility that the financial market turbulence has caused volatility in the risk premium which is currently contained in the interest rate for unsecuritised three - month - money ( euribor ). in order to obtain an answer to the question of what factors are driving an expected change, we continuously analyse the development of the euribor - forward three - month eonia swap spreads. that is the difference between an implied three - month interest rate derived from euribor rates and one derived from eonia swaps. in general, this spread provides information on liquidity premiums for different maturities in the money market. financial market expectations of a steady decline in money market uncertainty would imply not only an ongoing drop in liquidity premiums but also lower premiums for time periods further in the future compared to less distant time spans. 5. 2. 2 financial - market - based expectations on important economic indicators in addition to this money - market analysis, we monitor the development of capital marketoriented measures of risk premia. assuming freedom from arbitrage in capital markets, | 0.5 |
##ed by continued strong growth expected of china, india and the middle east, which would help to mitigate the impact of the softer g3 economies. indeed, inflation has emerged as a bigger concern in asia, particularly among the faster growing economies i have just mentioned, including vietnam. thus, governments and central banks in the region not only have to deal with slower growth prospects, but also guard against rising inflationary pressures arising from strong domestic monetary expansion as well as higher commodity prices. high commodity prices would shape manufacturing decisions and define future trade flows. higher shipping costs from fuel hikes have eroded the wage advantage of low cost producers such as china and vietnam especially in inexpensive items that have high freight cost relative to final sale price. for instance, it has become cheaper to manufacture steel in the us, instead of importing them from china where steelmakers have to transport iron ore from brazil and australia to the mills, and then ship the manufactured steel to the us. china has also recently agreed to pay close to 100 % more for its iron ore. the costs are likely to be passed on to steel buyers and this could fuel inflation. rising commodity prices have also increased the prominence of commodities in the financial markets. commodity markets have in fact, become more financial market like. traditionally, financial activity in commodity markets focused on exploiting arbitrage opportunities, with investors hedging their production or consumption in the futures market. the entry of new market players such as banks and hedge funds, with their different risk appetite and investment horizon, has given rise to varied trading strategies. they have also given birth to a wider variety of financial instruments in the likes of index and exchange traded funds, as well as structured commodity products. these new players also demand the sophistication that they are used to in financial markets. as a result, commodity markets have moved towards electronic trading, high speed communication links and greater efficiency in trade processing. there is also an increasing need for infrastructure such as commodity exchanges and clearing facilities to facilitate trading. while market development is generally welcomed, the risks have to be managed. as commodities become the flavour of the day, market participants should ensure that they understand the risks as they participate more actively in the markets. in their eagerness to ride the commodities wave, banks and other intermediaries should put in place appropriate risk management systems and processes, ensure they have adequate resources including qualified staff, and uphold proper market conduct. investors too, should carefully evaluate complex structures as they seek attractive returns. | have been set up recently. it is our intention to place the reports of the groups on money market, government securities market and forex market in the public domain soon. hence, the subject of the sixth annual conference is both well - timed and significant for us. to justify my presence here, let me take this opportunity to mention some of the recent developments which should be kept in view in the deliberations of the conference. first, under the provisions of the fiscal responsibility and budget management act, 2003, the reserve bank will not be participating, in the normal circumstances, in the primary market for the government securities from the start of 2006 - 07. the technical group that i referred to is currently working on the operational, technological and institutional aspects of this. hence, the market perspectives on the implications of this development can best be articulated in the conference today. second, the twelfth finance commission has made certain recommendations which would mean that the state governments would approach the market instead of obtaining loans from the government of india. several operational and other issues will have to be addressed in the management of the borrowing programme of the state governments, in future. we are convening a conference of the state finance secretaries on 8th april 2005, which will be addressed by dr. c. rangarajan, chairman, economic advisory council to the prime minister and the former chairman, twelfth finance commission, to discuss these issues. the road map that this conference would indicate in this regard will be helpful for our discussions and further policy formulation in regard to debt - papers of the state governments. third, the central government budget has proposed a special purpose vehicle ( spv ) for raising resources for investment in infrastructure. the issuance of debt - paper with relatively longer maturity, outside the government of india ’ s normal borrowing programme, is yet another recent dimension added to the debt - market developments in the country. finally, several legislative changes on the anvil provide new opportunities for further development of fixed income markets. for example, the long awaited government securities bill is at an advanced stage of processing. the finance minister, in his budget speech, announced the intention of the government to bring about amendments to the rbi act and the banking regulation act and the amendments relating to statutory pre - emptions could have implications for fixed income markets. in this context, it is useful to recognise that the stake of the rbi in the fixed income and derivatives market arises on account of several reasons. first, rbi as a monetary authority is most concerned with | 0 |
, malaysia, maldives, marshall islands, micronesia, mongolia, myanmar, nepal, palau, papua new guinea, philippines, samoa, solomon islands, sri lanka, thailand, timor - leste, tonga, tuvalu, vanuatu, and vietnam. emerging and developing europe. – albania, bosnia and herzegovina, bulgaria, croatia, hungary, kosovo, lithuania, fyr macedonia, montenegro, poland, romania, serbia, and turkey. latin america & caribbean. – antigua and barbuda, argentina, the bahamas, barbados, belize, bolivia, brazil, chile, colombia, costa rica, dominica, dominican republic, ecuador, el salvador, grenada, guatemala, guyana, haiti, honduras, jamaica, mexico, nicaragua, panama, paraguay, peru, st. kitts and nevis, st. lucia, st. vincent and the grenadines, suriname, trinidad and tobago, uruguay, and venezuela. middle east & north africa. – afghanistan, algeria, bahrain, djibouti, egypt, iran, iraq, jordan, kuwait, lebanon, libya, mauritania, morocco, oman, pakistan, qatar, saudi arabia, sudan, syria, tunisia, united arab emirates, and yemen. sub - saharan africa. – countries in the continent that lie south of the sahara desert ( such as south africa ). therefore, for most emes it has been appropriate to throw some “ gravel under the wheels ” via international reserve accumulation to mitigate some of the negative externalities that could take place as a result of the sharp real exchange rate appreciation. even the contained appreciation has had real effects, starting with a deterioration of the trade balance, and going all the way to substantially handicapping some sectors in a variety of countries, such as manufacturing in brazil. we have several other recent examples in this regard. another important reason to accumulate reserves in the face of qe is that it might avoid financial instability in the future. as qe will be temporary, countries should prepare themselves for the reversals of capital, and one way to do so is by accumulating reserves and by building other backstops ( figure 7 ). in addition, rapid capital inflows could be used in bis central bankers ’ speeches the recipient economy in such a way that asset price bubbles or rich valuations could result ; this is of particular concern if such flows are intermediated by the banking system of the recipient country and they lead to a real estate bubble, which, as we | : central bank of mexico using information from bloomberg. the accumulation of international reserves by emes is a phenomenon interesting to analyze in detail. almost two years ago, as he delivered the 12th stavros niarchos foundation lecture, fred bergsten2 said that “ the transmission of all monetary policy occurs to some extent through the exchange markets ”. he is absolutely right. given the sheer size of quantitative easing in the united states, coupled with the one implemented so far in japan, it is not surprising that emes domestic currencies suffered sharp appreciations in response. this is the main reason that some analysts and policymakers have labeled qe as “ competitive easing ”. in a way, the aggressive accumulation of international reserves by emes all the way to late 2013 ( figure 6 ) is at least partially the other side of the coin to “ competitive easing ”. as a matter of fact we might as well call it “ competitive reserve accumulation ”. in most of the cases, i would agree with this practice, given the blunt distorting effects that qe had on emes. the size of capital flows to this subset of countries was much larger per unit of time than the capacity of such countries to absorb them without suffering substantial distortions. see bergsten, fred. ( 2013 ). “ currency wars, the economy of the united states and reforms of the international monetary system ”. 12th stavros niarchos foundation lecture. peterson institute for international economics. bis central bankers ’ speeches figure 6 international reserves billions of dollars emerging and developing asia sub - saharan africa emerging and developing europe advanced economies commonwealth of independent states latin america & the caribbean middle east, north africa 14, 000 12, 000 10, 000 8, 000 6, 000 4, 000 2, 000 2014 q1 2013 q1 2012 q1 2011 q1 2010 q1 2009 q1 2008 q1 2007 q1 2006 q1 source : elaborated by banco de mexico using information from international financial statistics database. international monetary fund ( imf ). * advanced economies. – canada, germany, france, italy, spain, japan, united states & united kingdom. commonwealth of independent states. – armenia, azerbaijan, belarus, georgia, kazakhstan, kyrgyzstan, moldova, russia, tajikistan, turkmenistan, uzbekistan & ukraine. emerging and developing asia. – bangladesh, bhutan, brunei darussalam, cambodia, china, fiji, india, indonesia, kiribati, lao p. d. r. | 1 |
family - run firms in different ways, amongst which i would highlight the development and provision of the “ family holding ” concept, as the legal expression of a centralised management model of the holdings of members of a single family. always taking on an optional and supplementary nature, this legal concept would be especially effective if provided with a simple statutory and tax regime that was stable and easily accessible. in order to understand the dynamics of the corporate sector fully and promote it with maximum effectiveness, aggregated information will never be enough. it is indispensable to know the microeconomic and sociocultural mechanisms that, on the ground, determine economic agents ’ decisions and how they interact with the environment and public policies. only then will it be possible to understand, for example, the reasons for death rates among firms in their third and fourth years of life ; the positive and negative impact of the business environment on a firm, or the management model a certain entrepreneur chooses for their business. 2 / 3 bis central bankers'speeches this is where the central balance - sheet database reveals its worth, not only for the answers it provides, but also for the questions it enables. based on information like that which will be presented today, it should certainly be possible to find socioeconomic and multidisciplinary lines of research for fieldwork, leading to the micro - and macroeconomic data that we see in our tables and charts. let me therefore finish by inviting you to get to know the information that banco de portugal is providing today, and searching it for answers and the questions that will lead us to an ever - more dynamic corporate sector. thank you very much. keep up the good work. 3 / 3 bis central bankers'speeches | of the second half of the 1990s were used to finance higher current public spending. following the introduction of the euro, interest rates stabilised as they had broadly converged to the best performers and tax revenue fell as a result of decelerating activity in the early 2000s, causing a sharp deterioration in the public accounts. large and persistent current account deficits translated into a sharp deterioration of the portuguese economy ’ s international investment position, which also went from being close to net zero in the mid - 1990s to almost – 90 % of gdp in 2007. the behaviour of gross external debt over the same period – growing from around 60 % to 195 % of gdp – is even more striking. 1 / 3 bis central bankers'speeches this rising external indebtedness was largely intermediated by the portuguese banking system. banks raised ( mostly short - term ) funds in the international financial markets and converted these into ( long - term ) loans to the private sector. the banking sector ’ s loan - to - deposit ratio increased from nearly 89 % in 1998 to around 156 % in 2007. the public sector also resorted to foreign finance extensively. 2. 2008 – 2010 – global crisis tackled through fiscal expansion disregarding accumulated imbalances these imbalances made the portuguese economy extremely vulnerable to the international financial crisis and its contagion effects. when the crisis hit, a highly expansionary fiscal policy was pursued, disregarding the existing imbalances and the lack of fiscal space. in 2010, the public budget deficit was above 11 % of gdp and gross public debt was around 96 % of gdp – of which, more than half was external debt. with potential output growing very slowly, rising external indebtedness fuelled investors ’ doubts about the country ’ s ability to service its debt. as a result, domestic banks and the government found it increasingly difficult to obtain external financing : banks had to turn to the eurosystem, whereas public debt was increasingly placed in domestic banks. a perfect doom loop embrace. investors ’ concerns eventually led the country to be shut out of the international financial markets in the first half of 2011, after the 10 - year yields had nearly doubled in the previous year. this led to a request for official financing under a financial assistance programme negotiated with the european union and the international monetary fund. 3. 2011 onwards – macroeconomic rebalancing and financial deleveraging : notable progress, but no room for complacency notable progress was achieved with the implementation of the financial | 0.5 |
( or global value chains ) a few years ago. likewise, the latest report of the working group iii of the ipcc ( dedicated to climate mitigation ) contains a chapter ( # 5 ) that places great emphasis on the need for sufficiency and behavioral changes, and it discusses the literature exploring how we could thrive as societies and individuals without depending so much on gdp growth. professor dasgupta also invites us not only to acknowledge that gdp growth will be limited at some point even if you are a techno - optimist, but also to think about new approaches to economic value and social well - being that do not rely on gdp. all this begs us, and especially the young scholars present today, to ask what will be essential in 5 to 10 years from now. in addition to this need to promote new approaches, it is urgent to act. page 10 sur 12 we cannot afford to lose time or to wait until we have elaborated “ perfect ” tools. we need to seek how transformative changes can be implemented as soon as possible and if needed, develop and revise our scenarios, metrics, approaches. the responsibility to revert nature loss falls first and foremost with governments, and no central bank – above all in a democracy - can replace them. but we can accompany the movement and even lead some parts of the transition : - we can do our best to incorporate climate and biodiversity dimensions within our non - monetary portfolios ( the equity components of our own funds and pension liabilities portfolios ). this is what we have started to do at the banque de france. xxvii - we can also push for innovative approaches to integrate nature - related concerns within our monetary operations, as the ecb has started to do for climate change, looking in particular at its collateral assessment. - we can also promote new nature - related stress testing exercises ( including both climate and biodiversity shocks ) for banks and financial institutions and for global financial stability ; and improve our knowledge, as we have started to do with our ngfs task force and as we are doing with this conference. regulators can also facilitate the work of central bankers. for example, the european union has been at the forefront of the reflections around the question of what is material for investors. we consider that financial institutions and non - financial corporations are not only vulnerable to environmental risks ( dependent ) but also contribute to environmental degradation through their actions ( they have an impact ). in line with this concept, the article 29 of the | , 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 “ contribute to the development of environment and climate risk management in the financial sector ”. 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 “ a “ silent spring ” for the financial system? ”, 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 | 1 |
of financing : we should not rely solely on green bonds. we also need more green loans, and more green financing in general, accessible to individuals, smes and start - ups. mobilising this capital raises also some qualitative challenges. an orderly scaling up of green finance requires keeping markets away from green washing practices. the emergence of a new ecosystem of financial “ good products ”, such as green, social, impact or sustainable development goals ( sdg ) bonds would appear to be great news. but we should be cautious not to create a confusing diversity of definitions that could undermine the reputation of green markets and impede progress. an eu - wide standard based on high level common principles regarding the management of the funds and impact assessments, articulated with a common green taxonomy is critical to protect market integrity. it would certainly make sense to build, notably on the two most widespread standards : the green bond principles ( gbp ) and the climate bond initiative ( cbi ). page 5 sur 6 2 / central banks must also send out the right signal and lead by example in their investment and disclosure policies. we at the banque de france have adopted in march this year a charter on responsible investment for the management of our own funds and our pension portfolios : this means allocating them to socially and environmentally responsible investment funds. with respect to disclosure, we are going to disclose in march 2019 the climate - risk exposures of our own funds and pension portfolios. we are also working to adopt in the near future a tcfd - like reporting which would fit the specificities of central banks. regarding the role of monetary policy, some voices have been calling for a “ green quantitative easing ”. but monetary policy has to be broad based and remain neutral to ensure proper functioning through its transmission channels ; it cannot be targeted towards achieving specific social or sectoral impacts. however, this does not preclude the eurosystem from buying green assets when they fall in the remits of the eligibility criteria of its purchase programmes. for instance, the ecb currently holds around eur 79 billion viii of eligible green universe bonds from both the public and the private sector, which is already significant. it does not mean though that monetary policy should ignore the question of climate change. within our price stability mandate, i really believe further analytical work is needed to better understand the medium to long - term impact of climate change on intermediate monetary policy objectives and ultimately on our monetary policy strategy. to this end, | 2013 ( section 48 ) ( lending to small and medium size enterprises ) regulations 2015. available here. 6 see sme market report 2018. available here. 7 see footnote ( vii ) page 1. 8 see footnote ( vii ) page 1. 9 see footnote ( vii ) page 18. figure 29. 10 see footnote ( vii ) page 2. figure 1. 11 see footnote ( vii ) page 2. figure 2. the wholesale, retail trade and repairs sectors includes businesses such as cash and carry wholesalers, all retail shops and also includes car sales. 12 see department of finance sme credit – demand survey october 2017 – march 2018 page 1. available here. 13 see footnote ( xiii ) page 59. 14 see strategic bank corporation of ireland, 2018 progress update. available here. 15 the credit union act, 1997 ( ‘ the 1997 act ’ ) and the credit union act 1997 ( regulatory requirements ) regulations 2016 ( ‘ 2016 regulations ’ ) set out the services that a credit union may provide to its members and the investments that a credit union may undertake with members ’ funds taking account of the overriding requirement not to put members savings at undue risk. 3 / 3 bis central bankers'speeches | 0 |
was that there was a lack of financial resources. it was not until mid 1990s the practice of provisioning was overhauled. however, generally speaking, the proportion and scale of provisioning are insufficient, implying that commercial banks are not financially strong enough to write off all of the bad loans. as a result, only a small portion of the bad loans was written off and overtime, large amount of npls has been accumulated. in order to prevent this from happening again after the reforms, commercial banks should build up loan reserves based on stricter accounting rules and loan classification standards and be given discretion to write off losses in a timely manner. directly relating to loan provisioning is the reform of relevant tax polices, which involves tradeoffs between the state interests and the sound development of the banking sector. banks in china are levied not only the corporate income tax but also the unique business tax. if provisions are included in the taxable income, commercial banks are subject to heavier tax burden and their ability to absorb npls is weakened. 4. markets to trade risk products and non - performing assets should be developed. just as mr. schwab has talked about a while ago, in order to help identify risks in bank assets, price and transfer risks through normal transactions, we need to develop a market where risk products can be traded. in a typical market for risk products, the products traded are mainly cds ( credit default swap ) and cdo ( collateralized debt obligation ). through buying and selling risk products, the probability of default is priced and traded. if such risk products are absent or a market where such products can be traded is absent, it would be difficult for the banks to efficiently identify risks and estimate the potential scale and value of loss if defaults materialize. in such circumstances, the commercial banks cannot sell the risks they want to part with in managing their balance sheets. meanwhile, institutions that have financial resources and are willing to bear higher risks so as to receive higher returns, would find it difficult to buy such risk products. in this regard, a risk product market is required to facilitate commercial banks managing their risks. similarly, for the npls already accumulated by the commercial banks, a market to trade npls needs to be established to facilitate disposal of npls according to the market rules. after the asian financial crisis, four asset management companies were set up in china in 1999 to dispose of the npls removed from the books of four state - owned commercial banks. foreign investors and | ##ly obvious – previously, the financial markets appeared to assume that, should individual euro - area countries experience financial difficulties, the european community would bail them out, even though the eu treaty prohibits mutual liability. as a result, doubts as to the soundness of individual governments led to doubts regarding the euro area as a whole. it is therefore extremely important that, in the future, it is possible for over - indebted states to default. for one thing, this would significantly limit the extent of future crises ; for another, it would reduce the likelihood of the european community of states having to intervene. until then, however, we still need to overcome a few obstacles. one major obstacle is the strong nexus between banks and sovereigns. it means that insolvent banks can pose a threat to the solvency of entire governments, and vice versa. banks are not required to back bonds issued by european governments or other oecd countries with capital, and can hold unlimited quantities of them on their books. in theory, a bank ’ s business could therefore consist entirely of bonds issued by a single state. this rule creates a troubling risk concentration. to sever this unhealthy link, we need to make just one simple change. in future, banks must back the government bonds they purchase with sufficient capital. in short, the existing rules need to be improved to ensure that both creditors and borrowers consider the risks more carefully when lending or borrowing. however, this reform won ’ t be enough on its own to resolve the euro area ’ s underlying problems. another starting point for reform would therefore be to intensify the coordination and integration of economic policy within the euro area. without an integrated economic policy, it is difficult for the economies in a currency union to converge. implementing deficit ceilings for government debt is another area in which progress needs to be 2 / 4 bis central bankers'speeches made. all member states should adhere to these ceilings – in no way should they be seen merely as recommendations. the onus here is clearly on politicians. central banks can apply pressure, at most. 4. where is europe heading? now, there will be some who say that these reform proposals sound too ambitious given the current state of europe. but there are signs that the eu is indeed both willing and able to reform and that, overall, it is making progress. i would therefore like to bring three points to your attention. first, it goes without saying that you can think long and hard | 0 |
but also in the region and beyond. reserve bank of fiji today i thought of sharing some of my personal experiences with siwa. i first met siwa at the central monetary authority in dominion house in late 1980 when he took over from mr. tomkins as general manager after his return from the imf. he was the first local at the position. so naturally there was a lot of interest on how a local was going to perform in one of the last key national positions to be localized in fiji. very quickly, siwa dispelled any concerns on his ability to lead the central monetary authority. siwa became the first governor of the reserve bank of fiji when the transition occurred in 1984. we honor siwa for his humility, caring and down to earth qualities. but in my assessment, underneath all that was a firm and strong leader. for us that worked under him, we came face to face with his strong leadership qualities in our work. while he mixed easily amongst us, he applied the rules very strictly. i remember the strike that i led when i was a trade union representative at the bank in 1983. at the end of the two week strike, while the union did not get all that we wanted, everyone acknowledged that the resolution was a fair one and was made possible by siwa ’ s compassion and goodwill to the workers. during this rather difficult negotiation and tension, siwa was very calm as he always was in any kind of situation. i could clearly witness the clarity of his thinking and his strong belief in fairness and consistency. siwa was our boss and also our father. i recall one day when he called me into his office. i had applied for a loan for my first car, a small honda civic. you know, siwa adopted a slow drawl when he told people off. when you heard that drawl you knew you were in trouble. in that telling off voice he said “ savenaca, why are you buying a car when you don ’ t have a house. you should buy a house first when you are still young. ” this signified the caring personality that siwa had for everyone. he was strict but ever concerned about our welfare! by the way i got the loan but with the condition that i buy a house within five years which i did. siwa rose in the public limelight as the governor of the reserve bank, a position that he held for 7 years. at that time, the reserve bank was a new | ##1 / q2. farm income grew 10. 7 % / 16. 4 % in q1 / q2 • unemployment / underemployment = 0. 5 mill / 2. 4 mill ( q2 / 22 ) vs. 0. 4 mill / 2. 5 mill pre - covid ( q4 / 19 ) • tourist numbers = 3. 2 mill ytd, 8. 5 / 21 mill for 22 / 23 vs. 40 mill pre - covid b. the recovery should also be resilient to potential slowdown in world economic growth given that the initial pick up this year is mostly driven by domestic demand while growth momentum next year mostly reflects the continued rebound in tourists from abroad, which tend not to be sensitive to global economic activity. bilateral inbound tourist flows in the past are relatively resilient to home economic conditions. this reflected the fact that there is a lot of pent - up demand and thailand is a cost - effective value for money destination. 2. balance of risk has tilted towards inflation headline inflation is expected to peak in q3 / 22 and gradually return to target range next year, but what ’ s concerning is that core inflation is increasing. a. headline inflation is uncomfortably high and above the target range. it has been around 7. 6 % in june and july, the highest in 14 years. the rise of headline inflation has been supply - side driven and largely concentrated in food and energy - related categories. there has not been any sign of demandside pressure unlike in the us and uk. however, the risks are titled to the upside given possibilities of broader and faster cost pass - through and rising demand pressures as the economy gains strength. b. core inflation has continued increasing for 4 consecutive months mainly due to faster cost passthrough such as from raw foods to prepared food prices. this is a sign or an indication that inflation engine might get fully started. if the mpc does not take any action, there is then a danger of moving from a low inflation regime to a high inflation regime. given that core inflation tends to be more persistent, we need to be watchful of any further sustained pickup in momentum. 3. financial stability remains sound overall but there remain pockets of vulnerability. a. financial institutions remain sound with robust capital positions and high liquidity, while npl ratios remain low. b. debt serviceability of households and businesses has improved in line with the economic recovery and with support from financial measures implemented since | 0 |
stephen s poloz : release of the monetary policy report opening statement by mr stephen s poloz, governor of the bank of canada, at the press conference following the release of the monetary policy report, ottawa, ontario, 20 january 2016. * * * good morning, and thank you for coming today. let me begin as usual with a few remarks around the issues that were most important to the governing council ’ s deliberations. at the global level, 2015 was a little disappointing as the world dealt with diverging economic prospects and shifting terms of trade, but we expect gradual strengthening to resume in 2016. there has been considerable attention paid to recent developments in china, and this has added to volatility in global financial and commodity markets. however, it was governing council ’ s judgment that china will remain on its transition to a more balanced and sustainable growth path, from around 7 per cent annual growth to around 6 per cent. volatility in equity markets is, of course, not always a reflection of weak economic fundamentals. nevertheless, the global equity - market correction may inject a further measure of caution into business decision making. our global outlook remains positive, albeit cautiously so. governing council believes that the u. s. economy remains solid – the fourth quarter of 2015 was soft, but we believe this to be largely temporary for reasons we discuss in the monetary policy report ( mpr ). solid fundamentals, including strong employment gains, high consumer confidence and very strong investment outside the energy sector should see u. s. growth return to close to 2 1 / 2 per cent this year. not coincidentally, the canadian economy appears to have stalled in the fourth quarter. there were some temporary factors at work for us, too, but the main issue was slower exports to the u. s. we expect growth to pick up to 1 per cent in the first quarter, along with the u. s., and then to move back above 2 per cent for the remainder of the year. our new annual growth forecast for 2016 is 1. 4 per cent ; however, much of the downward revision in that figure is because of the weakness we saw in the final quarter of last year. on a fourthquarter - over - fourth - quarter basis, growth for 2016 is projected to be a more solid 1. 9 per cent. in its deliberations, governing council focused mainly on the implications of lower prices for oil and other commodities for canada and for monetary policy. this shock is | economy as it approaches its capacity to produce and reduce the amount of monetary stimulus in place in a timely and measured manner. we want to ensure that inflation stays close to the target so that, over the medium term, our economy can continue to grow at full capacity. what do we mean by " timely and measured "? " timely " relates to the fact that there is always a lag between our policy actions and their effect on the economy. we must be timely and forward - looking because our actions take a year to 18 months to have their full effect on output, and 18 months to 2 years to have their full effect on inflation. " measured " relates to the judgments that we will make as we approach full capacity. if the economic data going forward tell us that we are taking up excess capacity more quickly than expected, we would have to reduce monetary stimulus more quickly. but if the data suggest that the return to full capacity is going more slowly than we thought, we would then need to move more slowly. allow me to close by using the familiar car analogy. over the past year we put our foot on the gas to help us get up the hill of economic difficulties. the prudent thing now, as we return to more normal driving conditions, is to ease off on the gas — ease off, not slam on the brakes — to make sure that we continue our journey along the highway at a safe cruising speed. it is in line with this that we moved, on 16 april, to raise the target for the overnight interest rate by 25 basis points. | 0.5 |
economy. on a similar note, domestic household debt decreased to 79 % in 2022q2 from 131 % in 2015q1. despite this significant reduction, the domestic non - financial private debt ratio is still relatively high compared with an average of 140 % for the euro area. both households and non - financial corporations'debt exhibit a passive deleveraging behaviour, given that their decline is mainly driven by increases in nominal gdp, known as a denominator effect. today, in an economic environment of high inflation, high interest rates and weakened growth prospects, the risks for a deterioration in asset quality leading to even higher private debt levels and a higher crowding out effect are considered to be on the upside. in fact, the high private debt of 236 % in cyprus relative to the euro area average of 4 / 5 bis - central bankers'speeches 140 % and the european commission's threshold of 133 %, combined with the high percentage of loans in cyprus with floating interest rate, makes them particularly sensitive to the higher interest rate era that we are entering. at the current juncture, the prudent cbc supervisory debt - service - to - income ratio ( dsti ) tool, defined as a household's total monthly debt payments divided by its monthly net disposable income that is in place in cyprus, is expected to somewhat mitigate the negative impact of higher lending rates. nevertheless, extra vigilance and concerted action is required at all levels to address these debt risks and minimise any crowding out effects. let me conclude. debt, both private and public, is essential for any economy as it is one of the main sources to finance vital growth components, such as investment and consumption. excessively high debt however, both public and private, has a negative impact on a country's growth rate. in most cases, the impact becomes more pronounced as debt accumulates and may also lead to financial stability issues. even though many efforts have been made in recent years by international and national regulatory bodies to implement a more sound financial architecture and to strengthen financial system regulation and oversight, new vulnerabilities, such as the pandemic crisis and the war in ukraine, have increased the risks of rising private and public debt. nevertheless, crises create opportunities for fixing policies and addressing structural issues. policy makers have an opportunity to enact all the necessary reforms in order to lay the foundations of a more stable and prosperous future in the presence of today's overlapping crises. 5 | incomes and helping to tackle rising levels of debt. three specific examples of government structural reforms include the following : first : the implementation of measures that improve business conditions, promote better allocation of resources, and strengthen market competition are essential policy actions to boost productivity and hence gdp growth. in the area of product markets, a more competitive and business - friendly environment increases incentives of firms to innovate, and invest, in human and physical capital. a relevant example includes the transposition of the eu services directive, aiming at lifting restrictions on cross - border providers and removing limits to competition. unfortunately, the latest periodic assessment by the commission of the legal and administrative barriers of the eu, which was conducted in april 2021, points to an overall slow speed of barrier removal over 2006 to 2017. second : labour market reforms, such as the implementation of active labour market policies, could minimise labour shortages and labour mismatches, potentially helping to contain both private and public debt. wage rigidities in europe have been identified in the past to be important impediments to market clearing and have been linked to high and persistent unemployment. typically, high unemployment rates are related to bad debt, that is non performing loans. therefore, such labour market reforms can help with containing the level of private and public debt by increasing household incomes via enhanced job creation owing to better matching of job seekers with vacancies. third : an acceleration of fiscal policy reforms such as the enactment of a fiscal responsibility and budgets systems law, so as to ensure medium and long term fiscal sustainability. these stipulate a medium - term orientation as regards budget formulation and provide for binding expenditure ceilings. for example, the annual growth rate in total public expenditure must not exceed the growth rate of potential gdp, unless corrective measures on the revenue side are introduced to compensate the higher growth rate of expenditure. in this respect, such policy frameworks can directly tackle the level of public debt by promoting lower public deficits. i will not leave out the banking sector reforms : having effective foreclosure and insolvency frameworks and actively and efficiently managing non performing loans should be encouraged in order to tackle elevated risks related to high levels of private debt. however, the adoption of an improved insolvency framework will not be in a position to achieve its full potential if its application is impaired by inefficiencies in the judicial system. 3 / 5 bis - central bankers'speeches let me now give some remarks on the situation in cyprus. | 1 |
especially in the 1970s and 1980s when the economy collapsed. the industry hung on and survived during the economic turmoil of those years and then rose, phoenix like, to recover in the 1990s. with the same spirit of enterprise, hard work and cooperation we can help to ensure that the next half century is one of prosperity, sustainable growth and structural transformation for the ugandan economy. thank you very much for listening. bis central bankers ’ speeches | appear to be in the interest of higher employment. unemployment in the euro area is largely structural in origin. implementing a monetary policy stance which is more lax than is justified by the monetary, financial and economic conditions will not solve this problem. instead it will exacerbate it over the medium term, as inflation distorts investment and savings decisions, raises the risk premium in long - term interest rates and undermines the allocative efficiency of the price mechanism. only effective structural policies that improve the flexibility and efficiency of labour and goods markets can reduce unemployment in a successful and lasting manner. i appreciate that such reforms are not always easy, not least because the benefits which they yield occur mainly in the medium to long term. however, they are essential. in those euro area member states that have taken up the challenge of structural reform, unemployment has fallen significantly. other euro area member states are called upon to follow these examples : structural reform throughout the euro area is fundamental to the success of monetary union and to improving europe ’ s economic performance. in this respect, we may also be able to learn something by looking at the reasons behind strong employment growth and low unemployment in some of the member states of the european union and in the united states, in particular regarding the flexibility of labour markets and incentives to create and accept new jobs. monetary policy decisions and the outlook for price stability since the start of this year the governing council has taken the following main monetary policy decisions. in december 1998 the governing council of the ecb announced that the level of interest on the main refinancing operation would be 3 %. since then, the governing council has kept this rate unchanged, as it has judged that doing so was serving best the maintenance of price stability. the 12 - month growth rate of the broad monetary aggregate m3 increased to 5. 7 % in january 1999 from 4. 5 % in december 1998. this increase is mainly due to rapidly growing overnight deposits, which account for around one - third of m3. the three - month moving average of m3 ( for the period from november 1998 to january 1999 ) increased to 4. 9 %, that is, slightly above the announced reference value of 4½ % per annum. in view of the uncertainty relating to special factors pertaining to the changeover to the stage three environment and the introduction of the euro, the governing council does not view the recent acceleration in m3 as a signal of future inflationary pressures. however, monetary developments need to be monitored closely in the coming | 0 |
by foreign - funded financial institutions in shanghai. 5. we will support the establishment of a cross - region platform for financial cooperation in the yangtze river delta region, enhance the connectivity of financial infrastructure, and promote the integration of financial businesses across the region. 6. we will support the development of the “ g60 science and technology innovation corridor ” driven by the building of shanghai into a science and technology innovation center, promote the application of shanghai ’ s financial opening - up innovative policies to the corridor, and improve financial services for sci - tech innovation enterprises. 7. we will support the shanghai commercial paper exchange expanding in the yangtze river delta region the use of commercial papers for accounts receivables, and launching the pilot program of expanding the “ discount connect ” business to wider regions. 8. we will support the pilot program in shanghai lifting the foreign ownership cap in securities firms and fund management companies, and expanding the business scope for foreign - funded financial institutions. we pledge full support for the development of the star market. 9. we will further enhance the functions of the pbc shanghai head office. third, the core of shanghai international financial center development is to make shanghai the global center of rmb - denominated financial asset allocation and risk management. during the visit to shanghai in 2018, general secretary xi jinping noted that shanghai should strive to strengthen its capacity of allocating global resources in an effort to comprehensively enhance the influence and competitiveness of shanghai among cities in the world. vice premier liu he stressed in his speech just now that shanghai international financial center development should serve the overall picture of national strategy and national economic development, promote belt and road initiative and accelerate the economic integration in the yangtze river delta. based on my working experience, i think shanghai is bound to be an international financial center based on rmb - denominated assets. therefore, efforts will be focused on developing the 2 / 4 bis central bankers'speeches following “ five centers ” to further accelerate the development of shanghai into an international financial center based on rmb - denonminated asset management and financial market. 1. developing shanghai into a center of rmb - denominated financial asset allocation. with rmbdenominated assets incorporated into msci index, bloomberg barclay global aggregate index and other major equity and bond indexes widely used across the world, global asset managers, passive and index - oriented ones in particular, will increase allocation of rmb - denominated equity and bond assets. up to | instead, i believe we should describe how we will respond to the data ; that is, we should describe a reaction function. i frequently consider such reaction functions as i think about policy. these are typically taylor - like rules, named for stanford university economist john see charles i plosser, “ the benefits of systematic monetary policy, ” speech given to the national association for business economics, washington economic policy conference, washington, d. c. ( march 3, 2008 ). finn e kydland and edward c prescott, “ rules rather than discretion : the inconsistency of optimal plans, ” journal of political economy, 85 ( june 1977 ), pp. 473 – 491. bis central bankers ’ speeches taylor who first proposed them in the early 1990s. these policy rules typically call for the targeted funds rate to respond to deviations of inflation from some desired goal and to deviations of output from some measure of potential – sometimes referred to as economic “ slack ” or the “ gap. ” sometimes such gaps are translated into deviations from full employment. such robust rules recognize that data are measured imprecisely and are subject to revision. moreover, they have been shown to perform well in a variety of models and conditions. i believe these robust rules can be useful guideposts for policymakers and the public in assessing the stance of monetary policy and its expected path. communicating about such guideposts would enhance transparency and help make policy more systematic. however, i don ’ t believe that we need to follow rules mechanically. judgment will always be required. yet, policymakers and the public should be very cautious when they call for policy rates to deviate in significant ways from these guideposts. making such judgments should require careful analysis, and the justification for deviating from the guidelines should be clearly communicated to the markets and to the public. thus, policymakers will still be able to exercise discretion, but using rules as guideposts will enhance transparency and effective communication. improving transparency this leads me to my third important principle for monetary policy – communicating in a clear and transparent way. in recent speeches, i have proposed that the fomc could improve communication and transparency by publishing a more comprehensive monetary policy report on a regular basis, perhaps quarterly. 3 this report could incorporate a discussion of such robust systematic rules i referred to a moment ago in its description of the underlying policy framework. the rules could serve as a benchmark for the current stance of policy and the expected path of | 0 |
janet l yellen : the importance of asset building for low and middle income households speech ( via prerecorded video ) by ms janet l yellen, chair of the board of governors of the federal reserve system, at the 2014 assets learning conference of the corporation for enterprise development, washington dc, 18 september 2014. * * * thank you for this opportunity to show my support for the work all of you do on assetbuilding, and to say a few words on this vitally important topic. the financial crisis and the great recession demonstrated, in a dramatic and unmistakable manner, how extraordinarily vulnerable are the large share of american families with very few assets to fall back on. we have come far from the worst moments of the crisis, and the economy continues to improve. but the effects of the recession are still being felt by many families, particularly those that had very little in savings and other assets beforehand. to help make this point, i ’ d like to cite a few numbers from the federal reserve ’ s 2013 survey of consumer finances, published earlier this month. the survey is conducted every three years and this new edition provides one of the first good looks at how families in different economic circumstances have fared in the recovery. for lower - income families, what we find is sobering. the median net worth reported by the bottom fifth of households by income was only $ 6, 400 in 2013. among this group, representing about 25 million american households, many families had no wealth or had negative net worth. the next fifth of households by income had median net worth of just $ 27, 900. these numbers represent declines from 2010. one reason is that income has continued to fall for these families. another likely reason for this decline in net worth is the lingering effects of the housing crisis. home equity accounts for the lion ’ s share of wealth for most families and many of these families have not yet recovered the wealth they lost in the housing crisis. the housing market is improving and housing will remain an important channel for asset building for lower and middle income families. but one of the lessons of the crisis, which will not be news to many of you, is the importance of diversification and especially of possessing savings and other liquid financial assets to fall back in times of economic distress. yet for lower and middle income families, financial assets, including 401 ( k ) plans and pensions, are still a very small share of their assets. according to the 2013 survey, the bottom half of families | by income held only 8 percent of all financial assets held by households. a larger lesson from the financial crisis, of course, is how important it is to promote assetbuilding, including saving for a rainy day, as protection from the ups and downs of the economy. i surely hope that our nation will not face another crisis anytime soon as severe as the one we recently experienced. but for many lower - income families without assets, the definition of a financial crisis is a month or two without a paycheck, or the advent of a sudden illness or some other unexpected expense. families with assets to draw on are able to deal with these developments as bumps in the road. families without these assets can end up, very suddenly, off the road. according to the board ’ s recent survey of household economics and decisionmaking, an unexpected expense of just $ 400 would prompt the majority of households to borrow money, sell something, or simply not pay at all. the federal reserve ’ s mission is to promote a healthy economy and strong financial system, and that is why we have promoted and will continue to promote asset - building. one way we do this is through the community development programs at each of our 12 reserve banks, and through the federal reserve board ’ s division of consumer and community affairs in bis central bankers ’ speeches washington. as a research institution, and a convener of stakeholders involved in community development, i believe the fed can help you in carrying out your mission, to encourage families to take the small steps that over time can lead to the accumulation of considerable assets. thank you for the chance to be a small part of this conference, and for your commitment to a cause that i strongly support. bis central bankers ’ speeches | 1 |
to long term. turning to wage developments, it is notable that government recurrent expenditure included a 3 percent salary increase for the public service, which, as a matter of practice, guided parastatal and private sector wage adjustments. thus, in 2016, wages increased, generally, by 5. 2 percent, therefore, with a modest impact on demand and inflation. on credit developments, growth in commercial bank credit fell from 7. 1 percent in 2015 to 6. 2 percent in 2016 in the context of subdued economic activity and restrained growth in personal incomes, which influenced both the demand and supply side. the bank also recognises challenges in the transmission of the prevailing policy rates to lower lending interest rates. the challenges relate partly to structural issues, such as uncertainty about sustainability of funding sources and associated balance sheet restructuring as well as tighter lending criteria by banks. against this background, the annual expansion in lending to households fell from 12. 8 percent to 7. 6 percent and included lower growth for personal loans and mortgages. in contrast, growth in business credit increased to 4. 2 percent, from a contraction of 0. 3 percent in 2015, but with varying performance across sectors. overall, the moderate increase in bank lending supports economic activity and it is broadly consistent with growth of nominal gdp. monetary policy implementation in 2016 honourable minister and esteemed guests : monetary policy was predominantly accommodative in advanced economies, with low levels of interest rates ; in some instances, interest rates are negative, while liquidity support to the financial sector was maintained. in this regard, notable developments include the reduction of interest rates in the united kingdom aimed at mitigating the adverse impact of the decision to leave the european union ( brexit ) and the second increase in interest rates in the united states of america since 2008, given progress in attaining full employment and price stability. for emerging market economies, the direction of policy changes was mixed, invariably reflecting differing macroeconomic circumstances. closer to home, the south african reserve bank increased the policy rate by 75 basis points to 7 percent during 2016 in order to anchor inflation expectations around the country ’ s target range of 3 – 6 percent. domestic monetary policy implementation for its part, the bank continues to conduct monetary policy through a forecast - based policy framework that informs the appropriate response to deviations of inflation from the desired objective range. the analysis also involves assessment of divergence of actual output ( gdp ) from potential output ( technically known as the “ output gap ” ), which | now mention some of the important elements of the evolution of the monetary policy framework, over the past two decades. first, is the clarity and definition of the inflation objective performance and horizon. identification second, of the development medium - term of supporting infrastructure and internal capacity to operate the forecasting and policy analysis system that guides monetary policy decisions. third, the bank formalised the institutional arrangements, in the form of a monetary policy committee whose regular meetings are followed by a press release, as well as publication of the annual monetary policy statement and mid - term review. in addition, changes in the exchange rate policy framework also helped enhance the effectiveness of monetary policy. in particular, the adoption of the crawling band exchange rate framework since 2005 and, later, public disclosure of the weights of the constituent currencies in the pula basket as well as the rate of crawl, has supported the bank ’ s focus on the inflation objective. this transparency in the management of the exchange rate helps to anchor policy credibility and predictability and, therefore, informs expectations and economic decisions. as the bank continues to focus on refining and making improvements, it has been the intention to enhance transparency and interaction with the market, as circumstances would be propitious, with a view to further buttressing policy transmission and credibility. in this regard, the bank will, henceforth, pre3 announce the dates for the monetary policy committee ( mpc ) meetings for the ensuing half year ; and, convene a media briefing following each meeting of the mpc to announce the policy decision. i hasten to add, distinguished guests, that these initiatives are premised on availability, and should be a catalyst for development, of an appropriate market infrastructure and expertise, such as informed and robust market analysis and strong financial journalism, as well as organised debt and credit markets. honourable minister, ladies and gentlemen, my message today also addresses three other areas. first, i will briefly examine global trends that have influenced inflation in botswana ; second, i will highlight the conduct of monetary policy, both internationally and here at home ; and, finally, i will provide the medium - term inflation outlook and, consequently, the likely policy stance. external economic developments looking back, it is estimated that global output growth was 3. 1 percent in 2016, compared to 3. 2 percent in 2015, and weaker than the projection of 3. 4 percent early in the year. the lower growth rate resulted from subdued economic activity in both advanced and emerging market economies, while | 1 |
##e, british columbia. that act, 128 years ago today, concluded the construction of the railway system upon which canada was built. we are very lucky to have the last spike with us here today. well, sort of the last spike. every spike has a story. in actual fact, there were three spikes. the first was damaged when it was hammered in, so it was removed and turned into jewellery. the second “ last ” spike was removed shortly after it was driven in to make sure that no souvenir hunters grabbed it. it was eventually transformed into a carving knife. the spike we have here today truly is the “ last ” spike, in that it ’ s the one that has lasted. it was supposed to be driven in by the governor general of the time, lord lansdowne. an unforeseen glitch that canadians throughout history can relate to – a snowstorm – prevented lord lansdowne from attending the ceremony, so he mounted the spike and sent it to sir william van horne, the cpr executive who led the project. but to tell us more about canada ’ s railway, i would like to ask marc laliberte, president and ceo of via rail, to come to the podium. bis central bankers ’ speeches | government - this is the political and supreme body of the zone, with the overall responsibility for the achievement of the objectives of the wamz ; ( ii ) the convergence council of ministers and central bank governors - the supervisory authority of the wamz and its institutions ; ( iii ) the technical committee which works in collaboration with wami, to facilitate the integration process ; ( iv ) the west african central bank ( wacb ), when established, would be the common central bank of the zone, while the existing national central banks will be national branches of the wacb ; and ( v ) wamz stabilization and cooperation fund ( scf ) to provide financial assistance to member states that may experience temporary disequilibria in their balance of payments. convergence criteria under the wamz the convergence criteria for the west african monetary zone focus on achieving inflation rate of 5 per cent by 2003 ; fiscal deficit gdp ratio of 4 per cent by 2002 ; limiting of deficit financing by the central bank to 10 percent and maintaining sufficient level of gross official foreign exchange reserves of at least 6 months of imports by 2003. the agreement establishing the zone stipulates that the convergence criteria be achieved and sustained within a given time frame. however, there have been slippages and inconsistencies in the performances of member countries regarding attainment of the stipulated targets. while some countries of the zone were negatively affected by civil conflicts, the situation was compounded by severe terms to trade experienced by many countries in the last few years. a major militating factor was expansionary fiscal policies which tended to weaken relatively tight monetary policies pursued by the sub - region ’ s central banks. the poor state of infrastructure was also unconducive to investments and economic growth. the poor country performances relative to the stipulated targets necessitated the extension of the period for meeting the convergence criteria, before the establishment of the common central bank, from january 2003 to june 2005. progress / prospects of actualizing the single currency objective of the wamz the authorities of the wamz have programmed several actions to be taken to strengthen macroeconomic convergence and stability. the wami, in collaboration with experts from member countries and the technical committee, has been taking concrete steps and providing some viable solutions to various technical issues involved in the arrangement. a forum for ministers of finance of member countries of the zone was established in 2002 to be discussing how best to address the problem of fiscal dominance in a co - ordinated manner that would reduce fiscal | 0 |
customer demand for convenience, speed and efficiency. new technical solutions have even further nurtured these developments. given the prevalence of smartphones and other mobile devices, today ’ s customers are used to doing things on the spot. they want to make payments instantly, anytime, and anywhere, and expect them to be as readily available as instant messages, instant videos or instagram. the epc ’ s creation of the sct inst scheme came in response to these users ’ expectations. and instant clearing and settlement infrastructures have already been established, most notably tips. but, in the long run, simply being reachable for incoming payments initiated by other banks ’ customers will not be enough. i am convinced that banks need to offer even more innovative and efficient solutions for their customers and i would advise them to embrace the instant payments space as an opportunity to remain relevant players in the payments business. one area in which solutions have already emerged is payments between individuals, or so - called person - to - person payments. but we also need solutions encompassing payments at merchants, at the point - of - interaction ( poi ), both physical and virtual. in fact, some end - user solutions for instant payments at the point of interaction are already emerging across europe. but they tend to be limited geographically, meaning that each solution is only usable in one or a few ( neighbouring ) countries. this certainly 2 / 4 bis central bankers'speeches does not point to an integrated european payments market. in addition, in many instances, such regional solutions are not interoperable with each other. for example, although many solutions use qr codes that consumers can scan with their mobile devices, they have not implemented a common standard for these codes. so, there is a clear need for standardisation to enable european consumers to pay eu - wide using interoperable solutions. in this context, the erpb set up a working group to analyse in detail the barriers to the pan - european reach of point - of - interaction solutions. it will report back on the outcome of this work by november 2019. i hope to obtain useful input from this work. because if we do not achieve interoperability among national and regional solutions, as difficult as it may be, we run a serious risk of fragmentation of the european market. let me explain why i am concerned about the risk of increasing fragmentation through national point - of - interaction instant payment solutions. at the moment, users who want to pay effortlessly at european level have | - pillar approach to policy - making. but note the difference between a monetary pillar and a genuine “ lean - against - the - wind ” attitude, as was advocated by the early participants in the debate that i was mentioning before. it was discussed in a recent ecb paper. 7 it is not asset prices per se that a central bank should incorporate in its policy framework. after all, the equilibrium value of assets – particularly real assets, such as claims on companies and houses – is difficult to compute and is certainly state - contingent. so, there is little merit in an unconditional monetary policy response to asset price changes. the policy response should be conditional. and the critical condition that a central bank should ascertain before judging if an asset price trend is policy - relevant is whether the market trend is causing – and / or is being fed by – a concomitant monetary imbalance. a market bubble that progresses in symbiosis with a credit bubble, and which then spills over into excess money creation, is certainly a policy - relevant event. being alert to the monetary imbalance means for a central bank being better able to discriminate between benign and less - benign phenomena in financial markets. this being said, monetary policy needs support in its ex ante action to resist the formation and build - up of toxic financial imbalances. there is a clear need for a corresponding policy framework to foster financial stability ; we need to understand how it interacts with monetary policy in order to minimise frictions between the two and exploit possible synergies. 2. macro - prudential policies and monetary policy decisions the goals of macro - prudential policies can be broadly defined as preserving financial stability by reducing the pro - cyclicality of the financial sector, and improving its resilience to adverse shocks. however, even though the goals are clear in theory, the means to reach them are still open to discussion. monetary policy has been at the centre of the debate in economics for almost a century, and there is now a high level of consensus about its goals, its tools, and how to gauge its effectiveness. however, the macro - prudential framework is still fuzzy, and being developed with the benefit of hindsight after the crisis that started in 2007 with the bursting of the subprime bubble. i will describe briefly the main tools that are being developed, dividing them into those that address pro - cyclicality and those that attempt to improve resilience | 0.5 |
ravi menon : asia's digital transformation remarks by mr ravi menon, managing director of the monetary authority of singapore, at the gic institutional investors roundtable, singapore, 31 october 2018. * * * ladies and gentlemen, good morning. i thank gic for the invitation and am pleased to meet all of you. why fintech? about three - and - a - half years ago, the monetary authority of singapore ( mas ) made a momentous decision - to promote an innovative and dynamic financial sector by working with the industry to harness the power of technology. we saw that technology was transforming the way people live their lives, the way companies deliver products and services, and the way cities work and connect. meanwhile, the financial industry globally was facing the headwinds of slower economic growth, tighter regulation, and keen competition from non - financial technology players. technology presented an opportunity to inject new dynamism and new growth in financial services. it was an opportunity to increase efficiency in an industry that had some of the most archaic practices around – just think of interbank payments and settlements. it was an opportunity to manage risks better : financial institutions were pouring ever more resources into compliance and risk management – and still getting into trouble. most of all, it was an opportunity to improve people ’ s lives to bring financial services to the unbanked and uninsured in asia ; to help a growing middle class plan its finances more holistically and efficiently ; to help enterprises raise money, make payments, and tap new markets. in short : to maintain its position as one of the top financial centres in the world, singapore must embrace fintech – harnessing its benefits, managing its risks. thus began singapore ’ s fintech journey. and by fintech, i mean two things : encourage and support financial institutions to experiment and harness technology ; and promote non - financial fintech players to provide competition and inject innovation so that the ecosystem as a whole benefits. mas takes an even - handed approach, allowing competition between financial institutions and non - financial fintech players as well as facilitating collaboration among them. and of course, doing all this with a keen eye on managing the risks associated with technology – safeguarding financial stability and maintaining public confidence. mas and the financial industry are not doing this in a vacuum, but within the larger context of singapore ’ s smart nation agenda – to build a digital economy and society for higher productivity and more gracious living. asia ’ s digital transformation 1 / 4 | bis central bankers'speeches singapore ’ s smart nation drive is itself playing out against the backdrop of a dynamic asia on the cusp of a digital revolution. asia remains the fastest growing region in the world, with the asean - 4 economies 1 expected to grow at 4. 7 % p. a. over the next 10 years, china at 5. 7 %, and india at 6. 5 %. growing affluence, rapid urbanisation, and expanding education, are propelling strong demand for modern services like travel, shopping, and financial services. yet large segments of asia ’ s population have no access to banking and payments services, insurance cover, or investment opportunities. according to the world bank, 170 million people in the ten member states of asean with mobile phones remain unbanked. some 53 million people still receive agriculture payments in cash. financial technology or fintech is making significant headway in bringing these under - served markets into the formal financial economy. example : digital financial transactions have increased by 30 % in thailand from 2014 to 2017. the fintech revolution in southeast asia is being driven by three forces. first, there is a thriving fintech start - up scene in asean. these start - ups are building large digital businesses and changing the face of financial services while doing so. take for example wing in cambodia, wave money in myanmar, momo in vietnam, and matchmove in singapore. they have quickly scaled by providing unbanked individuals with the means to store value and transact digitally. and by extending their services to smes, these fintech firms are facilitating the digitalisation of entire supply chains. second, the advent of pervasive e - commerce platforms has provided an asian model for financial inclusion. these platforms rapidly develop a consumer base and offer a broad stack of services, expanding into areas such as payments and credit. e - commerce platforms are among the best - funded asean businesses. grab, go - jek, carousell, and lazada have together raised nearly us $ 6 billion in 2018. according to a study by google and temasek, e - commerce is projected to grow explosively in asean, from us $ 5. 5 billion in 2015 to us $ 88 billion in 2025. third, traditional financial institutions in asia have embarked on a digitalisation journey, enabled by core technologies such as cloud computing. almost every major financial institution has an active innovation agenda to strengthen its business by harnessing technology. in just the last three | 1 |
bite, and it must have financial stability under control. we experienced this during the leadup to the financial collapse, as the central bank had no power to act. an unfortunate thing happened in 1998, when the banking supervision function was carved out of the central bank, right around the time the two state - owned banks were being privatised. at the time, the central bank ’ s senior management objected vociferously to this bifurcation, as i mentioned in my speech at last year ’ s annual meeting. if there is any single factor that foreign experts have identified as the main cause of the 2008 collapse, it is the fact that responsibility for and supervision of the financial system were spread across a large number of ministries and institutions, with the result that no single party had an all - encompassing overview, no single party was actually accountable, no single party had adequate power, and no single party had enough muscle to intervene in the course of events. but now, iceland ’ s financial supervision and other central bank activities have joined forces again after a separation of 22 years, and the merger has been a successful one. now we have a single institution that is responsible for financial stability and has all of the necessary information on the financial system and developments in systemic risk within it. the future of monetary policy lies in the expansion of the policy toolbox and the coordination of monetary, macroprudential, and supervisory policy instruments within a single institution. here lie the opportunities for iceland ’ s tiny currency area. the central bank will also need to use its balance sheet – such as by intervening in the foreign exchange market – to ensure effective monetary policy transmission and ward off potential financial side effects. we have been successful in this regard. i would also like to stress that the application of the bank ’ s policy instruments and powers is in the hands of three committees comprising internal and external members. each of the committees has clearly defined objectives, as well as policy instruments to achieve them. they take independent decisions that they must account for publicly. this arrangement ensures both transparency and distribution of power. in 2021, the central bank took the step of capping loan - to - value ratios on residential mortgages at 80 %. it also capped debt service - to - income ratios at 35 %. we are now seeing signs that these measures have begun to make an impact. by wielding its policy instruments, the central bank can dampen demand for real estate, prevent speculative activity, and keep households from taking excessive risk. | but there is also a shortage of residential property in the capital area, and real disposable incomes have risen steeply. this will naturally contribute to house price inflation. iceland has plenty of land at its disposal, and if we use it sensibly, we will not need to wait too long for the market to rebalance. honoured guests : last may, the central bank of iceland was the first western central bank to raise interest rates after the steep rate cuts early in the pandemic. the bank ’ s policy interest rate is now 2. 75 %, where it was pre - covid, and has therefore risen by 2 percentage points in the past twelve months. there is no doubt that these rate hikes were unavoidable, and it will probably be necessary to raise rates further so that we can bring inflation into line. the central bank is concerned for households ’ wellbeing – it cannot allow inflation to become entrenched once again. the sooner and the more decisively we take action, the less costly it will be to maintain the stability that will benefit us all. in spite of all the powers the central bank has been granted, it cannot ensure stability unless others work towards the same goal – not least the labour market. otherwise, we run the risk of being sucked back into the all - too - familiar maelstrom of spiralling wages and prices, to the detriment of all. it would be even worse if that spiral were reflected in demands that policy rate hikes be matched with pay rises. the fact is that the central bank is responsible for ensuring a stable price level, and for safeguarding the value of the wages negotiated in labour market agreements. yes, comprehensive wage agreements are actually written on the back of the central bank governor, because it is the bank ’ s role to make sure that those wage agreements are economically viable. it is as clear as day that we icelanders cannot expect to use wage rises as a response to imported inflation, which is inescapable, stemming as it does from pandemic and war, from disease prevention measures and economic sanctions, and from rising commodity prices and the disruption of multinational production chains. we have to accept it as we do any other misfortune. otherwise, we will find ourselves back in the 1970s. i do not mean by this that icelandic wage - earners must make sacrifices. no, i certainly do not want icelanders to have to sacrifice ; i want them to have | 1 |
as, urban and rural women and men, senior citizens, defence personnel and even school children. let me illustrate with a communication initiative that rbi has undertaken two years ago. the ombudsman scheme for banks was revised recently and hence, the objective was to inform the widest section of our population. a press release might not have fully served the purpose. so, a decision was taken to issue an advertisement in print media – for which the content was indeed common but the languages differed. it was interesting to note that while the 15 leading hindi newspapers with a larger circulation at 8. 1 million and a far larger readership at 87. 0 million helped us reach an audience that was almost five times larger than what we could have reached if we had advertised in leading english newspapers which are 17 and have a combined circulation of 6. 3 million and readership of 17. 9 million. in fact, in india, 54 leading non - english newspapers have a circulation of 21. 4 million and a readership of 197. 2 million. given this experience of ours, we made the rbi website available apart from in english and hindi, which are official languages of the union government, in 11 other national languages spoken by a large section of the population. further, the rbi last year launched a financial literacy project to educate the common person who is generally not financially literate. the project aims at imparting information and knowledge about banking, finance, and central banking to the common person in her ’ or his own language. the material published under this project is, therefore, also made available in 11 major indian languages apart from english and hindi through a multi - lingual website. these illustrations fully endorse what professor blinder has said in his paper “ in the end, central banks derive their democratic legitimacy and hence their cherished independence from the consent of the general public ” select issues relevant to emes let me attempt a few generalizations on the subject, keeping in view the eme perspectives. first, it is not very clear whether the empirical research on the subject referred in professor blinder ’ s paper has adequately covered emes. for example, bric countries ( brazil, russia, india and china ), south africa, indonesia, saudi arabia etc., are emerging as significant players in the global economy. are their experiences different from those researched so far? second, the government happens to be a significant player in many emes, especially in the financial sector. in the circumstances, should communication | bank of japan lowered the policy rate to 0. 25 percent in september 1998, reaching a situation in which the conventional monetary policy tool of setting the policy interest rate had been almost exhausted. in the jargon, japan ’ s economy was facing the “ zero lower bound on nominal interest rates. ” however, economic activity and prices did not improve. in this situation, the bank decided to embark on various unconventional monetary policy measures ( chart 4 ). i believe many of you have heard expressions such as “ zero interest rate policy, ” “ quantitative easing, ” “ credit easing, ” and “ forward guidance. ” these are names of unconventional monetary policy measures introduced by central banks in the united states and europe after the global financial crisis. in fact, most of these policy measures were originally implemented in one form or another by the bank of japan ahead of other central banks in response to the 15 years of deflation since the latter half of the 1990s. because of time constraints, i will skip discussing the specifics of the respective policies ; but examining the policy responses taken prior to qqe highlights the following two points. first, the past policies have contributed to preventing japan ’ s economy from falling into a deflationary spiral of continuing rapid economic deterioration and considerable price declines, by containing systemic disruption of the financial system and underpinning the economy. with financial institutions burdened with massive nonperforming loans, the financial system was under considerable stress. however, large - scale liquidity provision by the bank had the effect of dispelling financial institutions ’ anxiety about liquidity, and, as a result, prevented a severe credit contraction. one of the important lessons we have learned the hard way thus concerns how liquidity provision by central banks through their lender of last resort function can contribute to maintaining the stability of the financial system. i have shared this lesson from japan ’ s experience with the central banking community, and it has been incorporated in the responses of the major economies to the 2008 global financial crisis. from immediately after the collapse of lehman brothers, central banks in the major economies provided large amounts of liquidity. in addition, they took coordinated action in providing u. s. dollar funds - supplying operations. in my view, the past policies by the bank of japan contributed not only to maintaining the stability of the financial systems, but also to underpinning the economy by providing accommodative financial conditions. in fact, japan ’ s long - term interest rates remained at a low | 0 |
to assist that committee in its further development of internationally recognised accounting principles. it is therefore also in the interests of the banking supervisors for the joint project of iasc and iosco to reach a successful conclusion. whether the last core standard ( on financial instruments ) can actually be approved or not at the moment is not so important in my opinion. what is important is that the other partner, iosco, is subsequently able to fulfil its part of the agreement. as national financial markets in an open global environment can no longer be protected by national rules alone, it is in the interest of all of us that international accounting standards are applied worldwide, especially in the emerging countries as well. iosco can make a substantial contribution towards this goal by ensuring that the worldwide acceptance of iasc standards is a precondition for stock exchange listing. the imf and world bank, which, incidentally, have also recommended that the core principles of the basle committee be used worldwide, are focusing during their country inspections on whether and to what extent internationally recognised principles are being implemented and observed in the various countries. the basle committee itself supports national supervisors in the implementation of its principles. v calls for greater transparency in the markets have also been made by the g - 7 finance ministers and central bank governors for some time now. the call of october 30, 1998 to iasc to submit proposals for a complete range of accounting standards in the spring of 1999 implies a strengthening and international recognition of iasc as well as a great responsibility and commitment on the part of this body. the international organisations responsible for supervising securities trading, insurance and the banks are being called upon to put these standards to the test. only the international acceptance of these standards can make sense in the end. at all events, the basle committee will do all it can on the banking supervisory side to contribute to this end. vi from germany ’ s point of view, it is particularly gratifying to see that the latest core standard within the iasc - iosco project is being approved during a german accounting standards committee forum. a natural person as young as the gasc would not be able to talk yet. the commitment of the g - 7 finance ministers and central bank governors to apply the recognised principles in their respective countries will necessitate some adjustments in germany, too, which will give rise to interesting discussions and make particular demands on our fledgling gasc. i am thinking here of the introduction of current value accounting for the trading portfolios of | mr meister remarks on the role of credit institutions against the background of banking supervision speech by mr edgar meister, a member of the directorate of the deutsche bundesbank, to the gasc forum on international harmonisation in frankfurt on 16 / 12 / 98. i iasc ( the international accounting standards committee ) and iosco ( the international organization of securities commissions ) have undertaken to develop internationally applicable accountancy principles and to accept them worldwide as a precondition for cross - border stock exchange listing of securities. this plan has aroused considerable interest among central banks and banking supervisors. a theoretical distinction can be made between a national and an international perspective. in practice, however, both are interlinked. in an age of global interdependency of goods and financial markets, it is no longer meaningful to lay down national rules autonomously. the asia crisis has once again highlighted - and has done so dramatically that crises in one area of the world can spread like wildfire and adversely affect financial markets in other regions, however remote. that event has stepped up the debate on how the international financial markets can be made more stable. among the buzzwords we hear in this context are intensify banking supervision and enhance transparency. there is no disputing the fact that one of the major preconditions for a stable financial market is an effective system of banking supervision - in addition to sound economic and fiscal policies. if banking supervision is to be effective, however, the preparation and publishing of accounts are of major importance. as the member of the bundesbank board responsible for banking supervision, i would like to focus my remarks on the role of the credit institutions. ii banking supervisors depend on institutions fulfilling their reporting requirements and deriving the requisite capital adequacy on the basis of reliable accounts. accounting functions such as the provision of internal information, documentation, ascertainment of profits and losses and informing the market are also useful for banking supervision. it will therefore come as no surprise if i emphasise the advantages of a prudent determination of profit in the banking field with the aim of capital maintenance. that does not necessarily imply undisclosed reserves, which impair the informativeness of the annual accounts. however, the historical cost principle and the principle of the lower cost or market should be retained in the case of banks, at all events where the objective is to ascertain the profit eligible for distribution. furthermore, thought must be given to the capital adequa | 1 |
set up within the existing rbi infrastructure. the reserve bank, being a statutory corporation, can do only those activities which are permitted by the reserve bank of india act, 1934 or other legislations. in addition to its core central banking functions, the reserve bank also performs certain promotional functions. however, this promotional activity is limited to ‘ financial institution ’ only 10. since no financing activity is contemplated for the proposed pcr, it might be difficult to label pcr as a ‘ financial institution ’. this takes it out of the purview of a promotion under the reserve bank of india act, 1934. another option is to promote an organization for a matter incidental to the functions of the reserve bank 11 – as part of the reserve bank of india act, 1934 or banking regulation act, 1949 or any other enactment. collection of information, including credit information, from its regulated entities is an important aspect of the regulatory and supervisory functions of the reserve bank. one can find many provisions in different enactments which enable the reserve bank to collect such information. if the scope of collection of information for pcr can be deemed to be reasonably incidental to the expressly permitted activities of the reserve bank, a subsidiary or a department for the purpose of setting up and hosting the pcr would be justified. otherwise, the reserve bank of india act, 1934 can be suitably amended conferring the reserve bank powers to conduct the business of pcr. such a specific conferment of power, with clear enumeration of the functions of pcr, would remove the limitations of incidental powers mentioned above. 2. confidentiality constraints : an important issue in connection with the setting up of pcr is the overriding of confidentiality provisions in many enactments, which directly or indirectly bar sharing of information, including credit information, except in manner specifically permitted. as the pcr will have to get information from different sources, the inability of the sources to share such information can be a constraint. to this end, the pcr will have a consent - based architecture. the notice and choice framework to secure an individual ’ s consent is fundamental to data processing practices in a digital economy. it is based on the act of an individual providing consent for certain actions pertaining to his / her data. it is essential that users provide consent to an entity sharing data ( the data provider ) before they share data with an entity requesting access ( the data consumer ). the consent based architecture of the pcr will strengthen privacy | , businesses and even markets ; this has also brought a sea change in bankers ’ attitude towards risk and clearly marked the boundary between retail and wholesale banking. banks have also been investing and recruiting heavily in compliance to meet new regulatory requirements. 14. another offshoot of the stricter enforcement of regulations, is the increasing business and growth of non - banking financial institutions, the shadow banks that are not subjected to the same degree of intense regulation ; they are offering competing services to bank clients, establishing specific funds or offering private equity. 15. thus you will all readily agree that these three trends have clearly redefined banking and banks. banking and banks – redefinition 16. i also said these emerging trends are endangering banks ’ existence. am i echoing bill gates? 17. from the time the concept of money was understood, the concepts of lending and borrowing came into existence. but the concept of banking wasn ’ t there. however, the organized way of lending and borrowing happened when the prototypes of modern banks were established some 700 years ago. banks undertook another service i. e. the remittance service. thus, what the banks did viz., borrowing, lending and remittances, came to be known as banking. banking is what a bank does. or banks are those who do banking. our banking regulation act says so. 18. the mega trends that we discussed have redefined banking and banks. actually it is not redefinition, but de - definition. banking is no longer what a bank does ; it is also what a non - bank does. banks are no longer those entities who do banking exclusively ; now others, the non - banks also do banking. 19. chunking of banking is the norm ; and for undertaking each of these chunks, there are some specialist entities who undertake only those chunks. payment service providers, bis central bankers ’ speeches p2p services, p2b services, ( sme financing ), consumer retail financing, disintermediation, crowd funding, open ended mutual funds, money market mutual funds, deposit alternatives, trade financing, invoice financing, bill discounters, bill collectors, credit referrals, account aggregators, interest free products, syndicators, investment bankers, mfis, co - ops, hfcs and credit raters are some of the entities who chipped away chunk after chunk of banking. is there an element of banking that remains the exclusive privilege of banks? sadly | 0.5 |
picking up, with most measures now running around 3 percent on an annual basis. and, for the past couple of years, wage gains have been notably faster for lower - income workers. 2aggregate wage gains are broadly in line with productivity growth and our 2 percent inflation objective, and they are consistent with a labor market that is operating in the vicinity of full employment. they are not, at present, a source of upward, cost - push pressure on price inflation. with regard to labor supply, we have had a pickup in labor force participation among prime - age workers ( those 25 to 54 years old ) that is, at least for now, boosting the supply side of the economy. the participation rate of prime - age workers has risen about 1 - 1 / 2 percentage points over the past few years. and participation in the job market may still have some further room to rise, as the prime - age participation rate is still a couple of percentage points below the levels that prevailed in the late 1990s, when the labor market was last this strong. price stability, of course, is the other leg of our dual mandate, and pce ( personal consumption expenditures ) inflation over the past 12 months has been running close to our 2 percent objective. that said, and notwithstanding strong economic growth and a low unemployment rate, 1 / 5 bis central bankers'speeches inflation has surprised to the downside recently, and it is not yet clear that inflation has moved back to 2 percent on a sustainable basis. because expectations of future inflation are such an important determinant of actual inflation, central banks are as much in the business of anchoring inflation expectations as they are of managing actual inflation. longer - run inflation expectations, based on straight readings of inflation compensation from tips ( treasury inflation - protected securities ), have drifted downward, although, when adjusted for term premiums and liquidity, they remain near 2 percent. the university of michigan surveys of consumers'measure of expected inflation over the next 5 to 10 years has been broadly stable but has edged down over the past few years and is now at the very lower end of the range that has prevailed historically. inflation expectations of professional forecasters have remained stable and consistent with our 2 percent objective. at each future fomc meeting, as i consider what, if any, adjustment to our policy stance is warranted to achieve and sustain our dual - mandate objectives, i will closely monitor the incoming data on inflation expectations as well as actual inflation, among the | broad range of real and financial indicators that i consult. to me, it is important that any future policy decisions we may consider in 2019 be consistent with both pillars of our dual mandate. i will also be monitoring closely the incoming data on labor supply and productivity. 3 not only has aggregate demand growth been robust, but so, too, has been the growth in realized aggregate supply. over the first three quarters of 2018, hours worked in the nonfarm business sector were up 2. 0 percent ( at an annual rate ), and productivity was up 1. 8 percent. realized productivity growth over the past eight quarters has averaged 1. 3 percent, which is up from the 0. 7 percent average recorded between 2011 and 2016. strong growth supported by supply - side gains in hours worked and productivity is not inflationary, as the experience of 2018 confirms. with labor supply and productivity growth in 2018 having surprised on the upside, some mean reversion in 2019 is not unreasonable to forecast. but right now, that is just a forecast, and if the positive developments on the supply side of the economy continue in 2019, they would need to be factored into the inflation outlook and thus the appropriate settings for monetary policy. as i have indicated previously, i believe we may have seen the bottom on the productivity slowdown, but how much of the recent welcome uptick in productivity growth can be sustained or extended is hard to judge at this point. it will depend in part on how much business investment spending adds to the stock of capital in the economy. we saw a welcome pickup in investment in the first half of last year, but growth of capital spending slowed notably in the third quarter and the manufacturing indexes from the institute for supply management have softened, though other data are consistent with a rebound in business spending in the fourth quarter. if a pickup in the growth of investment spending was realized and sustained, it would be expected to contribute to future productivity growth. the december decision and the outlook for monetary policy in 2019 with a robust labor market and inflation running close to our 2 percent inflation objective, the committee decided at its december meeting to raise the target range for the federal funds rate to 2 - 1 / 4 to 2 - 1 / 2 percent. 4 that said, growth and growth prospects in other economies around the world have moderated somewhat in recent months, and overall financial conditions have tightened materially. these recent developments in the global economy and financial markets represent crosswinds to the u. s. | 1 |
ll have in the governing council but it ’ s clear that the deflation risk is now off the table and that is also being acknowledged by financial markets, by money market rates and even at the longer end of the curve. term premium has increased substantially since september and part of it is related to the deflation risk being now clearly off the table from the market ’ s standpoint. if you do not remove that reference to lower rates, do you not risk losing credibility? one important consideration is to keep our forward guidance in line with facts. we don ’ t want to let a gap emerge between our forward guidance and our own expectation based on facts. the credibility of our forward guidance depends on it being adjusted to reflect facts. do you think such a gap is starting to open up now? no, i don ’ t think so. it ’ s an ongoing discussion. in the last meeting, the governing council has reassessed its perception of the balance of economic risk. different governing council members were coming from different places and there had been public statements. the governing council converged on the unanimous view that risks are still tilted to the downside but they are rebalancing and that ’ s a reflection of the continuous reassessment of risk by the governing council. a view has emerged that when it comes to normalising policy it ’ s better to be slightly late than too early? i don ’ t see that argument as being very convincing when it comes to communication. the communication of the governing council has to remain in line with facts and an evolving reality. there ’ s always the temptation of gradualism in monetary policy. too much gradualism in monetary policy bears the risk of larger market adjustments when the decision is eventually taken. that ’ s the way i would see it. what do you mean by gradualism? it ’ s the risk that our communication deviates from economic reality, which could cause a more forceful market adjustment down the road. i don ’ t see much merit in this. in particular, because that ’ s sometime the argument, we should certainly not put too much weight on political timelines 2 / 6 bis central bankers'speeches – elections and the like. we do monetary policy based on facts, not political outcomes. some measures of market volatility at multi - year lows : is the market being complacent and how does that affect your judgment? what are the banana skins on the road ahead? market complacency is a | risk management conditions. 5 / 6 bis central bankers'speeches monday will be the day for political decisions. i don ’ t see a discussion starting in the governing council on pspp inclusion before all the steps are taken on the european side and the imf side, that is, before decisions are taken in the esm board of governors and imf executive board. do you need the imf on board or just need an up or down decision? we ’ ll take our decision independently and we don ’ t formally need the imf to be on board but it would clearly give us comfort if the imf was on board in terms of the credibility of the debt measures. what may be the impact of the french elections economic growth? there is less uncertainty, which is good in the short term. is it a game changer for growth in the short term? i ’ m not sure. the french recovery was already quite robust before the election. but it does change the longer term outlook because it increases the chance of reforms that could turn the cyclical recovery into a structural recovery, first at the level of france and then at the level of the euro area as a whole. 6 / 6 bis central bankers'speeches | 1 |
depression of the 1930s, to the great recession of 2007 – 2009 and today ’ s climate of political uncertainty. popular narratives can drive economic developments. for example, when people hear stories of declining prices and then postpone their purchases : talking about deflation feeds deflation. but the relationship is more than just one way : actual events play some role in the development of popular narratives. overall, popular narratives act as potent multiplier of economic shocks – the “ animal spirits ” of keynes. today ’ s information and communication technologies have opened up a vast field of research into the role of narratives as determinants of economic developments. these technologies have also greatly accelerated the diffusion of narratives in our societies ; it is surprising how easily fake news can flourish nowadays. this is a serious matter. the outcome of the uk referendum can be partly attributed to the decades - long development and spread of negative popular narratives about european integration. more generally, the events i mentioned earlier are the culmination of a broader antiestablishment and anti - globalisation narrative that has gained more traction in advanced economies. as narratives often are key determinants of economic and political outcomes, it is important to be wary of them. 3 / 7 bis central bankers'speeches the stabilising role of institutions institutions contribute to stability, especially in times of uncertainty, and help anchor expectations. in times of political gridlock, effective institutions are vital since they can deliver their mandates decisively and outside of the push - and - pull of the political process. this in turn foreshortens the crisis and the self - fulfilling cycle of weak economic performance and gloom - and - doom narratives. for example, while bank failures are always possible, the existence of appropriate institutions can mitigate their impact. a sound supervisory framework, for instance, makes failures less likely, while resolution plans contribute to seamless unwinding of failed institutions. this is also true of shocks exogenous to the economy. in the case of natural disasters such as earthquakes, 8 building standards – properly enforced – can reduce deaths, and disaster recovery plans can help after the event. the move over recent decades to grant independence to central banks owes much to the problem of time consistency. when monetary policy was under the control of governments, there was always an incentive to “ cheat ” and deliver higher than expected inflation to temporarily increase output. the existence of this incentive, and the inability of governments to credibly commit to the right policy, gave rise to de | although monetary policy frameworks oriented towards the medium term could probably not have completely prevented the current crisis, i am convinced that they would have helped to make it less disruptive. see kydland f. and e. prescott ( 1977 ), “ rules rather than discretion : the inconsistency of optimal plans ”, journal of political economy, 85, pp. 473 – 492 ; and barro r. and d. gordon ( 1983 ), “ rules, discretion and reputation in a model of monetary policy ”. journal of monetary economics, 12, pp. 101 – 121. see for instance blanchard o., dell ’ ariccia g. and p. mauro ( 2010 ), “ rethinking macroeconomic policy ”, imf staff position note, no 10 / 03. see rajan r. ( 2005 ), “ the greenspan era : lessons for the future, ” speech delivered at the federal reserve bank of kansas city symposium on “ rethinking stabilisation policy, ” jackson hole, wyoming. bis central bankers ’ speeches typically, policies of short - term demand management rely heavily on inflation forecasts and output gap measures. experience, especially prior to the crisis, has revealed the risks of constructing policy on indicators and variables which are not sufficiently robust. let me take the output gap as an example. as the literature has clearly shown, the empirical proxies used to capture the output gap are subject to constant revisions. 6 policy - makers who base their decisions mainly on such assessments of the cyclical position can be led very much astray. for instance, the great inflation of the 1970s occurred, to a large extent, due to measurement errors in the real - time estimates of the output gap combined with an overreaction to output gap measures when assessing the state of the economy. 7 arguably, the same can be said of the low interest rates implemented for a prolonged period in the middle of the previous decade. 8 monetary policies aimed at fine - tuning short - term objectives also run a serious risk of inducing too much policy forbearance for too long. exiting an extraordinary accommodative mode too late can sow the seeds of future imbalances. as the economy recovers from an exceptionally deep recession, real time output gap estimates and estimates of structural unemployment or the non - accelerating inflation rate of unemployment ( nairu ) are particularly uncertain. potential output is likely to have fallen for a variety of reasons. this | 0.5 |
de espana has recently joined inexda, a network of central banks whose aim is to exchange experiences in the management of granular data in order to facilitate their use by external researchers. also, we must strive to have other public institutions join us in this initiative. although the spanish public sector currently provides samples of administrative data regarding, among others, tax returns and social security records, there is ample room for improvement in this area. see arellano, m. ( 2018 ), “ el acceso a los microdatos administrativos publicos : la nueva frontera de la investigacion economica y social ”, presentation at xviii aula de verano ortega y gasset, uimp, santander, 20 - 21 agosto 2018, http : / / www. cemfi. es / ~ arellano / arellanopresentacion - uimp - 2018. pdf in this respect, enlarging the number of available datasets, enabling access to the universe of observations and allowing for the merger of different databases are measures that would, for sure, deepen our understanding of the spanish economy and help design better public policies. in this connection, the experience of the nordic countries is a success story, and could be used to guide our efforts in the future. let me conclude. tax and transfer systems around the world face significant challenges to provide inclusive growth and fund the public policies that the population demands. meetings such as this conference provide an excellent opportunity to enhance our understanding of these fascinating issues and to strengthen the links between central bankers and academics. allow me to recall in this regard the figure of sir james mirrlees, who groundbreaking has recently academic passed contributions away. his and deep involvement in public policy design provide an outstanding example of intellectual achievement and commitment to improving the society. he rightly gave his name to the influential mirrlees review, which has become an essential guideline for policymakers involved in tax design. i would like to convey my sympathy to our colleagues of the ifs, who had the opportunity to work in close collaboration with him, and to the academic community in general for this loss. finally, let me express my gratitude to the organisers for making this conference possible and to all of you for attending. i wish you a very productive meeting and a pleasant stay in madrid. thank you very much for your attention. | fernando restoy : challenges for the spanish banking sector closing address by mr fernando restoy, deputy governor of the bank of spain, at the xxi meeting of the financial sector, organised by abc, deloitte and sociedad de tasacion, madrid, 1 april 2014. * * * good morning. thank you, paco, for your kind words. it ’ s a great pleasure for me to be with you this year for the closure of the 21st edition of the financial sector meeting organised by abc, deloitte and sociedad de tasacion, in which the banco de espana has traditionally taken part. the conference has had a very full day, in which the country ’ s main financial institutions have had their say. allow me to bring some thoughts to the discussion on the main challenges for the banking sector ahead of the changes in the regulatory and supervisory framework and, most particularly, ahead of the banking union. 1. introduction looking back, i believe such significant structural transformations as those currently sweeping the banking industry are almost unprecedented. at present, the banking sector must face a host of highly relevant changes on various fronts. changes in prudential regulations, arising from the adoption of the new basel iii requirements, whose implementation has yet to be completed ; possible rule changes that restrict banks ’ business model ( the so - called structural measures ) ; far - reaching changes in the regulations governing the resolution of weak institutions and changes also in supervisory practices, with the foreseeable increase in capital requirements derived from stress tests, the development and deepening of pillar 2, and the inclusion of macroprudential considerations, among other factors. in europe, in particular, the reforms take on a special dimension following the start - up of a new unified regime for the prevention, management and coverage of banking crises. following the approval last year of the regulation setting up the single supervisory mechanism, preparations for which are – as i shall later mention – well under way, the political agreement reached last week on the single resolution mechanism allows us to envisage the start - up of an effective banking union in europe. it is difficult to overstate the importance of the steps taken here, in light both of their scope and their speed. the combination of unified supervision, with the adoption of common rules of conduct for vulnerable institutions, the creation of the european resolution agency, with significant executive capacity, and the establishment of pan - european bank riskmutualisation mechanisms all mark a huge step forward for the | 0.5 |
favored politically. going forward, i view that there is a need for international institution that oversees all finance - related conducts to ensure strict compliance of rule, implementation of ethical codes and avoid double standard across nations. lastly, continuous and collective reforms are vital. crisis is a recurring phenomenon and no lessons from previous crisis will ever fully prevent the next one. but through the process of reform after each crisis, the market grows and becomes more efficient. crises provide a window or “ political feasibility ” to undertake needed structural changes that international labor organization ( ilo ). bis central bankers ’ speeches may be hard to sell to the public in normal circumstances, so one should not waste a good crisis. i am pleased to see numerous improvements in key areas of finance and supervision such as the use of macroprudential measures to complement traditional monetary policy tools. it is also more acceptable to require banks to provision in good times against losses in bad times, for after all most bad loans are made in good times. in addition to structural reforms, change in “ mindset ” is probably the most important. in order to keep up with the dynamic global environment, we may need to challenge and correct some of our old beliefs. let me name a few – 1 ) sovereign is no longer risk - free, 2 ) we are taught to value economies of scale but are now confronted with the too - big - to - exist problem and 3 ) banks should no longer be only international in life but also in death as crises are more and more systemic given the growing interconnectedness. spillover and contagion were witnessed in 1997 where the turbulence spread from thailand to south east asia and to russia, china and brazil, as it was a decade later in 2007 where the crisis widened from us and eu to the rest of the world. imagine the pace of the spread of crisis in the next 10 years in 2017 – where crises would grow in size and speed beyond the management capacity of a single nation, real collective action is called for. most importantly, we have to be forward - looking and well prepared. as crises are prone to occur more frequently with larger spillover, reform must be continued during normal times. it is imperative that the public is on board and support the reform effort to raise the competitiveness of the country, and minimize vulnerabilities or imbalances that may be triggered by external factors through no fault of their own. ladies and gentlemen, let me conclude by offering an observation that in 2002, five years | after 1997 crisis, asian economies had fully recovered, in particular, thailand was able to repay the imf package some two years ahead of the schedule. today, four years after the lehman crisis, more work remains ahead of us. at this critical juncture, it might come down to policy action, which entails clarity, commitment and credibility, to progress onwards. indeed, there are always benefits from looking back to the do ’ s and don ’ ts in the rear mirror but it is of greater importance to be looking forward in the windshield. as such, for asia and other non - crisis country, in this era of growing uncertainties, complacency is a luxury we can ill afford. thank you. bis central bankers ’ speeches | 1 |
firms and determining how those differences are related to subsequent performance. finally, we provide feedback to the institutions involved and often share the insights gained with other institutions not in the study. horizontal reviews can involve major commitments of time and resources, but they help both managers of financial institutions and supervisors by revealing the range of practice in the industry and by providing useful information about the strengths and weaknesses of alternative approaches. when focused on large, internationally active organizations, as was the case with the ssg report, these reviews can offer insights that bear not only on the safety and soundness of individual companies but also on the maintenance of overall financial stability. although the ssg report covered a group of the largest banking and securities firms, based on our own supervisory experience at the federal reserve, i believe the lessons of that report have relevance for financial organizations of all sizes and scope. in reviewing these lessons, i will concentrate on four categories of risk - management practices : risk identification and measurement, valuation practices, liquidity risk management, and senior management oversight. risk identification and measurement for risks to be successfully managed, they must first be identified and measured. recent events have revealed significant deficiencies in these areas. notable examples are the underestimation by many firms of the credit risk of subprime mortgages and certain tranches of structured products. other firms did not fully consider the linkages between credit risk and market risk, leading to mismeasurement of their overall exposure. firms differed in their susceptibility to these problems ; however, some were more disciplined in their approaches to identifying and measuring risks and thereby gained a better understanding of the risks of some complex securities, particularly in highly stressed environments. this fuller appreciation of the risks involved led these firms to limit their purchases of such securities or to provide additional capital and liquidity backstops. the ssg report notes that some institutions took an excessively narrow perspective on risk with insufficient appreciation of the need for a range of risk measures, including both quantitative and qualitative metrics. for example, some firms placed too much emphasis on the mechanical application of value - at - risk or similar model - based indicators. sophisticated quantitative tools and models play an important role in good risk management, and they will continue to do so. but no model, regardless of sophistication, can capture all of the risks that an institution might face. those institutions faring better during the recent turmoil generally placed relatively more emphasis on validation, independent review, and other controls | jwala rambarran : the changing face of supervision feature address by mr jwala rambarran, governor of the central bank of trinidad and tobago, at the caribbean group of banking supervisors xxxii annual conference, port of spain, 5 june 2014. * * * good morning, to all our friends from the caribbean and beyond, i extend a warm welcome to trinidad and tobago. for the next two days, you will be discussing, “ the changing face of supervision ”. to us, it ’ s a catchy theme, but just say this to the man on the street here in port of spain, in kingston, or even in castries, and they will see little connection to their lives. but if their bank crashed next week and they can ’ t access their life savings, the man in the street would immediately demand an explanation. fingers would naturally point towards government who would rightfully say “ talk to central bank, it ’ s their job ”. the “ who ” is to blame would be of little comfort to the man in the street who has lost his money. however, someone must be called upon to account for the bank failure and, of course, that “ someone ” will be us, the central bankers. if i sound like i ’ m talking from experience, well, you all know that i am. following the collapse of clico, our largest insurance company, we at the central bank of trinidad and tobago, have been listening to these sentiments repeatedly over the last five years, and we know many of you in this room have also had to deal with the contagion effects of the clico crisis which sent shockwaves throughout the caribbean. so, i therefore want to give you three messages, as we begin this conference on the changing face of supervision. 1. first, let ’ s consider clico and its contagion as an early warning for us in the caribbean region. let ’ s look at it as a warm up for something even bigger, as the risks to the regional financial system are ominously gathering in the distance... this leads to my second message. 2. our protection against those gathering storms is changes in the approach to supervision … and finally my third message. 3. the changing face of supervision is each one of you in this room. i ’ m going to start with my third message first – you – the face of supervision, as each of you represents the change that needs to occur in supervision. as supervisors | 0 |
maintaining the integrity of the eu single market. i wanted to open this up to everyone in the audience because it ’ s rare to get an opportunity to speak to him directly, so philip is here. if you have a question, please raise your hand. we ’ ll get the mics to you. do let me know. otherwise, i have plenty of questions to go on with. we ’ ll come back at some point to check in and see if the folks here do want to ask you a question. but it brings back a question of the number of risks. i know that there are risks within europe of banks and banking profitability. there are trade wars. brexit is one of those risks. when you look at the eurozone overall, if this was a pyramid, what are you going to put at the top of your worry list for 2020 and the next decade that is to come? there are a lot of medium - term challenges. there ’ s a medium - term challenge for the world economy ; as a very important part of the world economy – most importantly, china – is 2 / 5 bis central bankers'speeches undergoing its own transition, undergoing a transition towards being focused on the domestic economy, focused on boosting consumption and services, then that transition has a mirror image. because, of course, europe benefited so much for many years from being able to be the supplier of capital goods, the supplier of so much to the chinese economy. that ’ s an obvious structural transformation. another one is the climate change agenda : how is the world going to move along in terms of the carbon transition? then also, and connected to those points : in terms of the mix of activity in the european economy, one thing the ecb has been highlighting is that, essentially, at this point after a very difficult period of rebuilding public finances, in terms of the support that could be provided by fiscal policy to a more balanced european economy, that this requires a big conversation among fiscal policymakers and, by extension, among the electorates about the role of fiscal policy in the european economy. it has been said quite a bit by a number of central bank governors and within the ecb, there ’ s a limitation to what monetary policy can accomplish when you have slowing growth. what would you say are those limitations? because at some point, qe has to end. is there a plan for that? that ’ s not going to go on indefinitely, is it? let me | exchange problems and the currency board will be unable to protect the country from those shocks. indeed, it could become one of the victims of those shocks as politicians look for scapegoats to explain the country ’ s economic problems to the people. foreign investment is increasing. in 1999 for example, direct foreign investment was 50 % higher than in 1998 and though we do not yet have figures for 2000, i am sure it has risen strongly again. but while this growth rate sounds spectacular, it is from a very low base. direct foreign investment into bh in 1999 is estimated to have been km 170 million. the current account deficit for that year was km 1. 4 billion. so private foreign investment financed just 12 % of the current account deficit in that year. bh needs to be increasing private foreign investment by around 200 % a year over the next two years rather than 50 % a year if the current economic growth rates are to be sustainable when the official aid flows slow down. this target is possible. the arrival here of foreign banks from austria and croatia shows that there is increased interest from foreign investors. but the climate for private investment in bh is still far from supportive. this applies to local investment as well as foreign investment. there are still problems in the legal system, which is incomplete, the licensing and regulatory systems, which are far too bureaucratic, intrusive and multi - level, and in the financial system, which is still relatively weak. improving the environment for private investment, both local and foreign, is the key economic issue facing this country. it is this that will determine whether bh has a sustainable economy – and whether it is a country in which good students like yourselves should stay to be a part of its future. the banking sector as i said in the last section, a weak financial sector is one of the factors that hampers private investment in bh. the good news is that this gloomy picture finally began to change in 2000. i will mention just a few of the highlights. · first, the payments system underwent fundamental reform. the old state - owned centralised system that had a monopoly was closed. it has been replaced with a modern european - type system with two clearing houses, a rtgs one and a giro one, owned and operated by the central bank and payments are being conducted by the commercial banks. the suppliers we used had put similar systems into place in nine other european countries. but it was done more quickly in bh than anywhere | 0 |
on an assessment of the risks facing borrowers, the financial position of the banking sector as well as recent stress - testing of the system, is that the banking system is well placed to withstand the impact of any major adverse developments in the short to medium term. this central expectation does not preclude the possibility of adverse developments, which should they materialise, would have serious financial consequences for banks. stress - testing exercises a round of stress testing was launched earlier this year by the bank with the 11 domestic retail credit institutions, whereby each institution was required to assess its vulnerability to hypothetical shock scenarios. these include a major fall in foreign direct investment, a negative world trade shock, exchange - rate appreciation of differing magnitudes, interest - rate increases, and house price falls. at the same time, there was a separate overall assessment by the central bank of the banks ’ vulnerability to various risks. the results of both stress - testing exercises, notwithstanding some important caveats, suggest that the banking sector ’ s shock absorption capacity is strong. house prices and private sector indebtedness i would like to comment a little more on two vulnerabilities of the financial system. residential house prices following the publication of last year ’ s report a reacceleration emerged in annual house price increases. in more recent months, however, there have been tentative signs of a re - emergence, from both housing indicators and anecdotal evidence, of some easing of price pressures. if these signs were to be confirmed and to continue into 2007, the vulnerability posed by house prices would be reduced somewhat. accordingly, the recent indications that the momentum in the rate of increase in house prices may be easing is a welcome development which we would like to see continue. while a soft landing in the residential property market still seems to be the most likely outcome, the run - up in residential property prices until recently has been unwelcome for two reasons. first, it is not obvious that this was driven by fundamental factors. house prices would have enjoyed some support from continuing strong demographics and higher income growth, but increasing interest rates and continuing high levels of housing supply were acting to counteract this. there is an interesting new research study contained in this report which explores the role of interest rates and disposable income in determining house prices. while, as with all such estimations the results are not necessarily definitive, the study suggests that these variables largely accounted for increases in house prices over the sample period 1980 to 2005. | however, the study points to some possible overvaluation emerging towards the end of this period. i referred to this possibility at the time of our annual report in july. consequently the latest information on price developments is to be welcomed. we would be concerned if this trend is not confirmed in the months ahead and if prices were to reaccelerate once again. i should stress, however, that even if there is some overvaluation, this should not necessarily mean that house prices would fall ; the most likely way that the overvaluation would be corrected is via a period of low and stable house price inflation while the economy continues to grow. bearing this in mind, a soft landing for house prices is the most likely outcome. secondly, the strong increases in house prices, along with increasing interest rates, is contributing to a deterioration in affordability in the residential market. this is of concern for two reasons. first, a deterioration in affordability could increase the risk of an abrupt correction in house prices, should the risks i referred to earlier materialise. second, it may create an environment where there is pressure for some liberalisation of lending standards. private - sector indebtedness at present, total private sector debt has reached €300bn, equivalent to approximately 205 per cent of gnp ( 174 per cent of gdp ) ; this is very high both absolutely and in comparative terms and will be higher by the end of the year. historical experience from a number of countries suggests that high indebtedness may increase the vulnerability of the economy to shocks. the rate of debt accumulation has remained strong and virtually all categories of bank debt are increasing at rapid rates. these developments are inextricably linked to developments in the property market. if the signs of easing in house price increases were to be confirmed and to continue into 2007, along with confirmation of the apparent leveling off in housing output, the rate of increase in credit growth should reduce. it would be necessary to see a sizeable reduction in the current very high level of housing output before the increase in the rate of indebtedness returns to more sustainable levels. furthermore, conditions in the labour market are critical to borrowers ’ continuing ability to service these debts. it is noteworthy therefore that labour market conditions have been very favourable over the last number of years, with the economy operating at effectively full - employment, and the prospects for the immediate future seem favourable. ireland ’ s private - sector debt to gnp ratio is already high | 1 |
. the financial centre of frankfurt is actually a bit of a male bastion. if you look out of the window here, in the towers – deutsche bank, commerzbank – the men have the final say. but in banking supervision there are an astonishingly large number of women. for example, daniele nouy, the new chief bank supervisor, elke konig, the president of the federal financial supervisory authority ( bafin ), and, of course, you yourself. are women better at keeping an eye on banks? yes, well, i would say it ’ s a tough job, and that ’ s something to which we are suited. so, would the financial crisis not have happened with women charge? lautenschlager : that ’ s a tough question. i don ’ t like thinking in such boxes. there are men who are risk - takers and there are women who are risk - takers, and there are also much less risky business activities that both men and women pursue. so, please, don ’ t think in terms of pigeon holes. however, you once said you could imagine that, with the start of the new banking supervision, there could also be a new european supervisory culture? yes. bis central bankers ’ speeches what are we to understand by that? that that is what i would like to hope. that is what i expect. and we have been working towards it for months. so, what ’ s new about this culture? well, this supervisory culture will at last bring together the experience, the knowledge, of 19 different supervisory authorities – in fact it ’ s actually 28 when you consider that we currently have 28 countries represented among our staff. it will at last incorporate the lessons of the crisis. it will ensure that, through a fusion of these different traditions, we create better supervision using the best practices that we will devise from these different supervisory cultures. and this supervisory culture will most certainly be able to assert itself. it will be in direct contact with the credit institutions, very close to the bank, challenging the bank in its valuations and detecting risks at an early stage, and then also taking action. it will not simply collect and evaluate information, but will also go on to do something. so, how well prepared are the large european banks for this supervision? we hear that deutsche bank has already obtained a lot of capital and so on. what would you say? are they well prepared? well, the capital has more to | do with whether one is prepared for the health check. in that regard, i would say that some have done their homework. since july 2013, more than €140 billion has been added in additional capital or by reducing business etc. that is quite a sum. but supervision is not just this health check. instead, it concerns the fact that, as a bank, i would have to adjust to a new supervisor. what supervisory culture does it have? how tough is it? how seriously does it take certain things? how quickly will it actually want to see deficiencies corrected etc? and that is what the banks are preparing themselves for. and, finally, it also concerns the fact that banks are now going to have to do everything in english and not in german. while we ’ re discussing the health check – this time it ’ s a bit different than in the past. you are first conducting an inspection of the banks ’ balance sheets. why? well, the stress tests which we have seen so far were applied to the valuations made by the banks themselves for their operations, that is to say for the individual contracts, for the individual transactions. i would put a question mark over whether those valuations were occasionally a bit too positive, whether, ultimately, the starting position to which the stress was applied – assuming more or less that an economic crisis was developing and looking at how the value of these transactions developed – was too positive. therefore, this time, we have looked at the most significant, most risky transactions of the banks and gained an impression of the valuation standards. we have also valued individual transactions ourselves in order to see where we might have to reduce the valuation of individual transactions and then apply stress to this reduced value. will banks fail? i cannot tell you that yet. we are right in the middle of the quality assurance. and, i ’ m afraid, much as i really like deutschlandfunk, i have no insider knowledge for you. but there is a study which says that, of the 130 banks, there are nine or ten that probably won ’ t manage it? well, of course, the studies don ’ t have our insights. and i am not going to pass them on. but, speaking generally, without mentioning individual banks or figures, how good are the german banks? i ’ m not going to tell you that either. you can ask me as many times as you like. we will announce the results in the second half of october this year, and | 1 |
ewart s williams : a brief overview of developments in trinidad and tobago opening remarks by mr ewart s williams, governor of the central bank of trinidad and tobago, at the launch of intercommercial trust & merchant bank limited, port of spain, 16 february 2006. * * * i am delighted to be here to share in the celebration of what i believe is the rebirth of the intercommercial trust and merchant bank limited ( itmbl ). let me extend my sincere congratulations to the board, management and staff of intercommercial bank limited and its trust and merchant bank. the rebranding of the intercommercial trust and merchant bank and all that goes with it – its standalone status ; a new, restructured entity ; its new location, situated in port of spain, in the middle of the financial centre, as it were – all of this carries enormous significance. it sends the message that ibl is now a full - fledged national financial institution which, with the support of its strategic partners, is willing to take on competitors both locally and regionally. ladies and gentlemen, this significant event is taking place at a most important juncture in our country ’ s economic and financial ( history ). in 2005, trinidad and tobago registered its twelfth consecutive year of robust economic growth ; with inflation still basically in check ; with a very strong balance of payments and with unemployment at perhaps at its lowest point ever. while much of this success can be traced to our oil fortunes, it also has to do with several years of sound economic policies, of which the liberalization of the financial sector was a significant part. this re - launch of intercommercial trust and merchant bank is taking place at a time when we are seeing the full benefits of financial sector liberalization. this is being reflected in the proliferation of a diversified range of financial institutions and the exponential growth in the financial asset base. with the structural changes now ongoing in the financial sector, trinidad and tobago has become a major source of regional financing, while our home - based financial institutions have expanded their presence through the caricom region. despite the rapid pace of expansion, the banking system has remained robust, as evidenced by all the main macro - prudential indicators. the data shows, for example, that : ( i ) the banks are more than adequately capitalized, with their capital adequacy ratio averaging close to 20 percent, far exceeding the statutory 8 percent minimum ; ( ii ) non - | rather it is a free informal alternative to going to court. over the next several months the ombudsman ’ s office will intensify its education and outreach programs through direct contact with the public and through its new website. i would like to invite the financial sector to join us in educating the public on financial matters. let me once again thank you for joining us at this ground breaking event. i have full confidence that all parties present here today will ensure the success of the operations of the office of the financial servicesombudsman which will redound to the benefit of our society as a whole. | 0.5 |
certified auditor ’ s copy of the accounts along with the operations report of the bank for the seven months period ending 31 july 2016. • previously when the government ’ s financial year was the calendar year, the rbf ’ s annual report would be submitted to the minister by march 31 each year. last year was the first time that the audited accounts and operations report were presented for the period 1 january 2016 to 31 july 2016. both the accounts and report only cover the first seven months of the 2016 financial year as the last five months ( august to december 2015 ) are accounted for in the bank ’ s 2015 annual report. 3. key outcomes • the objective of central banks is not to maximise profit. its key role is to support economic growth by ensuring that there is price stability, external stability and financial system stability. i will shortly highlight the key outcomes in relation to these three kpis. financial performance • before i elaborate on the three stability objectives, please allow me to quickly highlight our financial performance for the seven month period ending 31 july 2016. • the rbf made a profit of $ 13. 9 million for the seven month period. however, the total amount transferred to government was $ 16. 9 million as it included $ 3. 0 million of the revaluation reserve account ( rra ). • this is in accordance with sections 8 ( 3 ) and 34 of the rbf act which states that one fifth of the rra is to be transferred to the government along with our profits. • this compares with a transfer of $ 32. 2 million to government for the twelve month period ended 31 december 2015. • it may not be appropriate to compare the bank ’ s financial performance in 2016 with 2015 as the periods covered are not the same i. e. seven months in 2016 against 12 months in 2015. • the total profit and revaluation reserve transferred to government in the past five years totalled $ 160. 0 million. price stability • all central banks have the same mandate to ensure that inflation is low and stable. this is no different even for small central banks like us. • as you are well aware, fiji was hit by tropical cyclone ( tc ) winston in february 2016. consequently, the supply of fresh fruits and vegetables and for some of us, the supply of our favourite national drink, kava, was affected. consequently, inflation rose to 5. 5 percent at the end of july 2016 from 1. 6 percent at the end of december 2015. | savenaca narube : telecommunications ’ key role in the fijian economy opening address by mr savenaca narube, governor of the reserve bank of fiji, at the launch of transtel ’ s new product “ yehdo ”, at the university of the south pacific ’ s oceania centre, suva, 4 june 2008. * * * the board of transtel mr. radrodro tabualevu, chief executive officer management and staff distinguished guests ladies and gentlemen introductory comments i thank mr. tabualevu for his invitation to be here this evening to launch transtel ’ s ’ new product. a big yehdo to everyone. i wish to congratulate the company for this new initiative. it is very encouraging to see companies take on new initiatives during such challenging times. i commend transtel for their innovation and confidence. we must push forward. business must go on. i am pleased that such innovation is alive in a critical sector like telecommunications. this sector plays a key catalytic role in the economy. it determines the efficient flow of information across the country and to the rest of the world. and we all know that information is power. business cannot survive without an efficient transfer of this information. development of the telecommunication sector i have been closely associated with the telecommunications sector in fiji for some time. during the last ten years, i have seen significant developments. it really began with the establishment of amalgamated telecommunications limited or ath in 1998 – exactly ten years ago – which partially privatized the ownership of telecom fiji i fully subscribe to the ath slogan which says that “ telecommunications has never been in better hands ”. then came the breaking up of telecom fiji into its major business streams which was really a push for better efficiency, productivity and customer focus. i believe that this has worked well for telecom fiji. then the southern cross fiber optic submarine cable came on stream which opened up the capacity to communicate with the rest of the world. the commerce commission pitched in by lowering charges. of course this year, fiji took another giant leap forward when we deregulated the industry. i believe that we should acknowledge the development of our telecommunication sector. we, of course, still have a lot to do. but with a deregulated environment, we can be guaranteed that the motivation and incentive to fulfill customer ’ s demands will be stronger than ever before. meeting customer demands this is really what we are celebrating today – meeting the demands of the customers with | 0.5 |
have seen price falls. developments in the sydney market remain concerning, but in the end we did not see these trends as overwhelming a case for a further easing in monetary policy that was made on more general grounds. i note that, on the regulatory front, apra has announced its supervisory approach to managing the potential risks posed by the rise in lending to investors in housing. this involves more intense scrutiny of investor loan portfolios growing at over 10 per cent per bis central bankers ’ speeches year, with the possibility, ultimately, of additional capital being required if apra deems it necessary. apra has also reiterated its expectations for other elements of lending standards such as interest rate buffers and floors. and asic has begun a review of interest - only lending in the context of consumer protection legislation. the bank welcomes these steps and will keep working with other regulators in these areas. the board is also very conscious of the possibility that monetary policy ’ s power to summon up additional growth in demand could, at these levels of interest rates, be less than it was in the past. a decade ago, when there was, it seems, an underlying latent desire among households to borrow and spend, it was perhaps easier for a reduction in interest rates to spark additional demand in the economy. today, such a channel may be less effective. nonetheless we do not think that monetary policy has reached the point where it has no ability at all to give additional support to demand. our judgement is that it still has some ability to assist the transition the economy is making, and we regarded it as appropriate to provide that support. the forecasts published last week in the statement on monetary policy assume a lower path for interest rates and a lower exchange rate than both earlier forecasts and the ones the board responded to at the february meeting. these are assumptions rather than forecasts or commitments to a course of action. it is worth noting that, despite concerns at various times about whether the exchange rate would adjust appropriately to our changing circumstances, it has been doing so over the period since we last met with the committee. against the us dollar it has fallen by around 17 per cent since our last hearing. the us dollar itself has been rising against all currencies, of course, so much of this movement is an american story rather than an australian one. against a basket of relevant currencies the australian dollar has fallen by less, but the decline is still about 11 per cent since august. further adjustment is probably going to | occur. one other development since our last meeting with the committee was the final report of the financial system inquiry. this was quite a wide - ranging report and there is now a further period of consultation. i simply note that the inquiry did not find major problems in the financial system, but did make recommendations about capital, to enhance the resilience of the banking system, and about loss - absorbency more broadly in the context of resolution. these will be mostly in the province of apra to consider. the inquiry also made some observations about payments matters, generally supporting the steps the payments system board has taken since its inception in 1998, and pointing to some areas where further steps may be appropriate. the payments system board will be considering these matters at its meeting next week. we now await your questions. bis central bankers ’ speeches | 1 |
. under the current setup, when bank solvency is put into question, the looming restructuring implies a heavy financial burden for the sovereign, which increases doubt over the creditworthiness of this particular state. according to eurostat data, public interventions in support of financial institutions, such as direct recapitalizations, overall fiscal support measures and the nationalization of banks, are reflected in a cumulative 5 % - of - gdp increase in the national debt of euro area countries until 2013. however, this link between weak sovereigns and weak banks works both ways. as sovereign bonds account for a large share of bank assets, doubts about sovereign creditworthiness directly translate to a reevaluation of banks ’ assets, and consequently to doubts about the solvency of these banks. in the future, the srm will ensure that the costs of bank failure are borne first and foremost by the private sector, with sovereigns providing funds only in exceptional circumstances. the srm structure is explicitly based on the principle that any losses are to be borne by shareholders and creditors and that any public assistance should only be transitory and be recouped by means of ex post levies on the banking sector. by improving private risksharing, the banking union will importantly sever the link between financial system instability and resulting threats to fiscal sustainability of individual euro area countries, especially smaller ones. the high risk premiums some banks faced in refinancing markets meant that they did not benefit from the low interest - rate environment provided for by the accommodative monetary policy stance of the ecb. consequently, they were not in a position to pass on these favorable interest rates to their customers. therefore, in some countries, the low interest rates and unconventional measures did not feed through to the customer level. decoupling the correlation between the cost of funding of euro area banks and that of their respective sovereigns will remove an impediment to the proper functioning of monetary policy transmission and will ease the fragmentation of banking markets. in a number of euro area countries under stress, not only had interest rates for loans remained elevated, but also volumes of bank loans had contracted during the crisis. when this contraction had been due to tighter credit standards as a result of banks ’ impaired access to market funding, breaking this link should benefit the private sector, and especially the corporate sector, in these countries. in austria, loan developments had been less worrisome, and the corporate sector has not so far suffered from credit constraints | sector might cause important and risky business activities to be shifted into less regulated areas such as shadow banking entities. competitive distortions could also arise from a failure to establish a genuine single rule book and from the discretion that national authorities maintain regarding, for example, the implementation of macroprudential tools. notable national differences in supervision might therefore remain in place ; in other words, the playing field would then not be completely level. on the other hand, it may be argued that there should be scope for some degree of differentiation below the euro area level. after all, different cultures and languages will continue to exist within the euro area. in the same vein, the question remains if the new supervisory system is apt to address national problems properly. for instance, there will still be national or local financial cycles, as has been the case for business cycles to this day. as small banks will remain within the remit of national supervisory authorities, there will in any case be the need for a two - tier supervisory regime. banking union will not only affect relationships among the various players within the euro area, but also relationships with players outside the euro area. the fact that banking union currently only covers the euro area may give rise to competitive concerns. to be sure, all eu countries can be expected to benefit indirectly from banking union via a more stable financial system in the participating countries. but let me stress here that it would be in the interest of all if as many countries as possible decided to join. banks domiciled in countries that opt to join will enjoy the reputational gains from being subject to the same supervisory standards as their euro area peers, which might for instance dampen risk premiums on their debt. obviously, this might encourage a number of central, eastern and southeastern european countries which are not ( yet ) part of the euro area to join banking union. to conclude, centralizing banking policy at the european level undoubtedly constitutes a milestone in deepening and completing the euro area ’ s economic and institutional integration. at the same time, banking union is of course no panacea, and in itself does not bis central bankers ’ speeches solve the problems surrounding banks. furthermore, the problems of the banking sector were by no means the only reason behind weak growth, rising government debt or fragmentation in the euro area. banking union can therefore only be one – albeit an important – element in the overall set of measures which are instrumental in putting the future development of the euro area on a more sound economic and institutional footing. | 1 |
deterioration in short - term profitability and cash flow. pressures on profit margins and cash flows have been unrelenting. the earnings estimates of securities analysts for the s & p 500 in 2001, which presumably reflect the guidance that these analysts are getting from corporate management, have been revised downward by nearly 1 percent per week since february. to be sure, the pace of downward revision has slowed this month, but the adjustments remain negative. earnings weakness is evident pretty much across the board but especially for high - tech firms, where the previous extraordinary pace of expansion has left oversupply in its wake. much of the profit squeeze results from a rise in unit labor costs. gains in compensation per hour picked up over the past year, responding to a long period of very tight labor markets and the effects of an energy - induced run - up in consumer prices. faster increases in hourly compensation, coupled with the cyclical slowdown in the growth of output per hour, have elevated the rate of increase in unit labor costs. in effect, fixed costs, both labor and nonlabor, are being spread over a smaller production base for many industries. the sharp rise in energy costs has also pressed down directly on profit margins, especially in the fourth and first quarters. a substantial portion of the rise in total costs of nonfinancial, non - energy corporations between the second quarter of last year and the first quarter of this year reflected the increase in energy costs. prices paid for natural gas and petroleum products by these corporations continued to rise into the first quarter, but have eased this spring. electric power prices, however, continued to rise sharply through last month. going forward, the prospect for higher electricity costs is most pronounced, of course, in california. the rise in natural gas prices last quarter contributed directly and indirectly ( through its effect on the cost of electrical power generation ) much of the rise in overall energy costs for nonfinancial, nonenergy corporations. because we import little natural gas, higher prices largely result in a transfer of income from natural gas users to natural gas producers. nonetheless, these higher prices are likely to weigh on the economy in the short run because the increase in capital spending by energy producers is unlikely to offset the drag on spending by energy consumers. if overall final demand holds up reasonably well, the rate of inventory liquidation must begin to slow as inventory levels shrink toward operational targets. production and imports, taken together, would rise toward the level of final sales as inventories are brought into | have been active in supporting the basel committee in its work with the iasb ’ s technical advisory groups to enhance the iasb ’ s standards for financial instruments and bank disclosures and the basel committee ’ s projects with other international groups to promote sound global bank auditing practices. in conclusion, i believe that the european union should be encouraged to continue its program to strengthen and modernize the rules under which financial services firms operate in europe. this can only increase competition, enhance efficiency and contribute to economic growth in the eu and globally. we are pleased that the european commission is broadening its consultation and comment processes on proposals being considered under the fsap. supervisory and regulatory measures benefit significantly from an open and transparent process in which affected companies may participate. we would expect that the european commission and member state national authorities will apply the fsap ’ s measures to u. s. firms on a fair and national treatment basis. u. s. banking organizations are dynamic and more than competitive with the rest of the world. accordingly, we are confident that u. s. firms will benefit from a strengthened and more efficient european market for financial services. | 0.5 |
2011 – 2016. r & d expenditure reached €1, 733 billion or 0. 99 % of gdp in 2016 from €1, 391 billion or 0. 67 % of gdp in 2011. despite the continuing rise, greece records one of the lowest r & d intensities compared to its euro area peers ( 2. 0 % of gdp ). however, innovation - based growth is based on a much wider range of elements than just r & d spending, such as employee skills and training, investment in information and communication technologies ( ict ), organizational know - how, databases, design, brands and various forms of intellectual property. a more effective use of domestic high - skilled human capital requires the adoption of policies and reforms that encourage research, facilitate the diffusion of technology and boost entrepreneurship. companies should be incentivized to increase investment in r & d in order to improve their capacity to innovate. universities and research institutes should be encouraged to cooperate with the private sector to commercially exploit research results and ideas. these initiatives will promote innovation, increase productivity and facilitate the transition to a knowledge - based economy. the improvement in institutions and the implementation of the reform and privatization program will provide incentives for the initiation of new investment projects. new investment goes hand - inhand with job creation and is, thus, expected to facilitate the reduction of the unacceptably high unemployment rate. however, certain aspects of structural reforms and the stabilisation of the economy might have negative distributional effects. hence, it is essential to provide immediate support to the unemployed and those marginally attached to the labour market by employing active labour market policies and targeted social transfers to counter the temporary income loss and to shorten job - transitions. in the medium - term, emphasis should be placed on skill upgrading and retraining policies to get people back to work as well as improvements in education, given that investment in human capital is a prerequisite to an inclusive and sustainable growth model. viii. address the public debt overhang decisive and concrete actions are needed to ensure the sustainability of greek public debt. the eurogroup reaffirmed last june its commitment to the principles contained in the may 2016 statement, and specific mention was made of measures that could be taken, if necessary, regarding public debt reprofiling. the bank of greece has put forward a specific proposal for extending the weighted average maturity of interest payments on efsf loans of at least 8. 5 years. if adopted, such a proposal | shaktikanta das : 17th c d deshmukh memorial lecture opening remarks by mr shaktikanta das, governor of the reserve bank of india, at the 17th c d deshmukh memorial lecture, reserve bank of india, mumbai, 25 april 2019. * * * on behalf of the reserve bank of india, i am delighted to welcome mr. agustin carstens, general manager of the bank for international settlements to deliver the c. d. deshmukh memorial lecture, the seventeenth in the series. we are also honored to have smt. and shri atul deshmukh from late shri c. d. deshmukh ’ s family. a hearty welcome to all the distinguished invitees of the reserve bank. 2. at the outset, i would like to say a few words about shri c. d. deshmukh to commemorate the occasion. shri chintaman dwarkanath deshmukh was born in nata, near fort raigad in maharashtra on january 14, 1896. he had an outstanding educational career. he stood first in the matriculation examination of the university of bombay in 1912. he graduated from jesus college of cambridge university in 1917 and topped the indian civil services examination, then held only in london, in 1918. upon his return to india in 1920, he worked in the government of bihar and also as a joint secretary to the government of india. 3. his association with the rbi began in july 1939, when he was appointed liaison officer to keep the government of india in touch with the bank ’ s affairs. three months later, he was appointed secretary of the central board of the bank and two years later in december 1941, as the deputy governor. he was the first indian to be appointed as the governor of the reserve bank of india on august 11, 1943 and he continued in this capacity till june 30, 1949. he played a pivotal role in the creation of industrial finance corporation and promotion of rural credit. during his tenure, rbi saw enactment of the banking companies act, 1949 which laid the foundation for regulation of banking sector in india. the nationalisation of rbi on january 1, 1949 also took place during his tenure. 4. after his tenure in the rbi, shri deshmukh went on to become member, planning commission when it was set up in 1950. subsequently, he became union finance minister in 1950 and served with distinction till july 1956. during his tenure, he | 0 |
##d competitiveness. this development showed up in increasingly deteriorating current account positions as well as in bubbles, particularly in the financial and real estate sectors, fuelled by capital flowing from countries with current account surpluses. when the bubbles burst after the global financial crisis of 2007, governments stepped in to support growth and some of them were called to rescue ailing banks. in this way, private indebtedness turned into public indebtedness, with disastrous fiscal consequences even for countries that had run fiscal surpluses prior to the crisis, such as ireland and spain, and even more for those that had not, such as greece. a further shortcoming of the maastricht framework was the inability to deal with what is now being called the “ bank - sovereign nexus ”. when systemically important banks run into trouble, governments are expected to step in and provide fiscal support to contain the spillovers. beyond that, banks are typically the largest holders of government debt from their respective sovereigns. these ties, or nexus, between banks and their governments can lead to a dangerous downward spiral another effect of this downward spiral, under way since the euro area crisis erupted in 2010, is the fragmentation of capital markets. the bank - sovereign nexus has led to a situation whereby cross - border lending of banks has gone down significantly, as banks retreat more and more to their domestic markets, encouraged by their shareholders and, sometimes, by bis central bankers ’ speeches national banking supervisors. the crisis is undermining a key achievement of the euro, the integration of capital markets. a fundamental problem of the maastricht treaty was its over - reliance on the assumption that market discipline and peer pressure would provide sufficient incentives for national policy - makers to conduct sound fiscal and economic policies. this did not prove to be the case. as jacques de larosiere, the former imf managing director, once remarked, what was supposed to be a system of “ peer pressure ” too often turned into a system of “ peer concessions ” or “ peer arrangements ”. on the whole, the maastricht framework proved unable to deal adequately with the high degree of economic and financial integration in the euro area. it was not fully understood that sharing a currency means much more than sharing the same monetary policy. it is a commitment to ensuring sound fiscal, economic and financial conditions. euro area countries largely overlooked the substantial spillover effects that national policy decisions would have on their fellow countries in emu euro area partners. the ongoing crisis | ##isation, exchange rate stability, and national monetary policy. one of the three goals had to be abandoned. the choice as to which one became increasingly clear after the failed attempt to secure exchange rate stability through the exchange rate mechanism. 1 given that a single market, including capital account liberalisation, had been a stated goal since the treaty of rome, and given that exchange rate stability was needed to reap the full benefits of the single market, member states agreed to renounce monetary sovereignty. moreover, sharing a currency makes sense for countries with close trade ties. this is especially true for the euro area countries which, since the start of emu, have conducted almost half of their overall trade among themselves. the maastricht treaty, which was signed in 1992, made monetary policy a euro area competence but left economic and fiscal policies under the responsibility of national governments. the concept of economic union relied essentially on the single market, with few binding constraints on economic and fiscal policies. over time, this turned out to be a significant institutional shortcoming. moreover, the transfer of a core sovereign prerogative like monetary policy to the supranational level is a highly political act which entails important political commitments for the future. in particular, the participating countries must undertake to conduct fiscal and economic policies in a way that allows monetary union to work properly. this is a responsibility that the euro area countries share, a responsibility that governments have to fulfil vis - a - vis their peers and vis - a - vis their own citizens. seen from this perspective, it is clear that the concept of emu goes beyond economic and monetary integration. let me add that the single market itself has a political dimension as the proper functioning of markets requires strong institutional underpinnings, such as enforcement of contracts, consumer protection and competition policy. it has mandated the creation of a federal executive ( the european commission ), legislative ( the european in the late 1970s, european countries agreed on closer exchange rate cooperation by setting standard fluctuation bands of plus / minus 2. 25 % for their bilateral exchange rates. this exchange rate mechanism ( erm ) functioned well for a decade or so but it ultimately fell apart due to the divergences in the economic and fiscal policies of the participating countries. speculative attacks ensued and ultimately triggered a crisis that forced two large countries – the united kingdom and italy – to leave the erm in 1992. bis central bankers ’ speeches parliament ), and judiciary ( the eu court of | 1 |
have a rooseveltian fear of fear itself. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice if the economy were sat on a psychiatrist ’ s sofa, the diagnosis would not be especially difficult. a propensity to dismiss good news and dwell on bad? to catastrophize about the future? the sense of events being beyond our control? these are the psychological symptoms of anxiety. and collective anxiety is as contagious, and could be as damaging to our well - being, as this terrible disease. averting an economic anxiety attack calls for a balanced and flexible approach to the words and actions of businesses and policymakers. planning for the worst is important, but needs to be accompanied by hope for the best. encouraging news about the present needs not to be drowned out by fears for the future. now is not the time for the economics of chicken licken. 8 that means balance in how the economic outlook is described, acknowledging good news as well as bad, contemplating upside as well as downside scenarios, taking positive signals ( as well as some comfort ) from the resilience shown so far. this is not boosterism ; it is balance, at a time when behavioural biases and pessimistic popular narratives offer an unbalanced lens on the economy. the policy authorities, including the bank, have a public responsibility to avoid economic catastrophizing. policymakers, including the mpc, have already demonstrated a willingness to act at speed and scale to mitigate economic risks. they have put in place the uk ’ s largest - ever economic insurance policy. it is important this insurance policy continues to flex as new risks arise, to build damaged confidence among households and businesses. for its part, the mpc has committed to keeping borrowing costs at current extraordinarily low levels to support jobs and incomes for as long as necessary to return inflation to target. the fictional fowl who, having been hit on the head by an acorn, declared the sky was falling in. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice references akerlof, g and shiller, r. 2009. animal spirits : how human psychology drives the economy, and why it matters for global capitalism. princeton. gigerenzer, g. 2004. ‘ dread risk, | ‘ central bank independence ’, speech at the seanza governors ’ symposium, 26 august 2000. all speeches are available online at www. bankofengland. co. uk / speeches over the past twenty years, we have also learned a few important lessons. allow me to highlight three. first, the financial crisis exposed how a healthy focus on price stability became a dangerous distraction. central banks had won the war against inflation during the great moderation only to lose the peace as vulnerabilities built inexorably. now monetary policy isn ’ t best placed to address risks to financial stability but the challenge is that the necessary financial policy decisions are also subject to time inconsistency problems. financial lobbies are strong, and the temptations of a dash for growth are powerful. conversely, there are no obvious or immediate rewards to the tough decisions necessary to avoid future crises. in the world of financial stability, success is an orphan. that is why when the bank was fundamentally reformed after the crisis, the procedures and structures of the mpc were largely replicated in the bank ’ s two new policy committees, the fpc and the prc. crucially, all the bank ’ s committees have access to the bank ’ s information and analysis, all are well - informed about each other ’ s reaction functions and all can coordinate their policies when appropriate. the bank ’ s committees are independent but not isolated. the second lesson of the past two decades has been the importance of the flexibility in flexible inflation targeting. while the inflation target applies at all times, the remit has always acknowledged that inflation may deviate temporarily from the target on account of shocks. since 2013, it has explicitly recognised that in exceptional circumstances, bringing inflation back to target too rapidly could cause undesirable volatility in output and employment. in exceptional circumstances like today when the economy is facing profound structural change, the mpc can extend the horizon over which it returns inflation to target from above in order to balance the effects on jobs and activity. after all, even though monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the eu, it can influence how this hit to incomes is distributed between job losses and price rises. this brings me to my final point : while carefully circumscribed independence is highly effective in delivering price and financial stability, it cannot deliver lasting prosperity and it cannot solve broader societal challenges. this bears emphasising because in recent years a host | 0.5 |
barriers have become more prevalent. administrative protection in the form of antidumping suits and countervailing duties is a case in point. while these forms of protection have often been imposed under the label of promoting “ fair trade, ” oftentimes they are just simple guises for inhibiting competition. typically, antidumping duties are levied when foreign average prices are below average cost of production. but that also describes a practice that often emerges as a wholly appropriate response to a softening in demand. it is the rare case that prices fall below marginal cost, which would be a more relevant standard. antidumping initiatives should be reserved, in the view of many economists, for those cases where anticompetitive behavior is involved. contrary to popular notions about antidumping suits, under u. s. and wto law, it is not required to show evidence of predatory behavior, or intention to monopolize, or of any other intentional efforts to drive competitors out of business. in the end it is clear that all economic progress rests on competition. it would be a great tragedy were we to stop the wheels of progress because of an incapacity to assist the victims of progress. our efforts should be directed at job skills enhancement and retraining – a process in which the private market is already engaged. thwarting competition, by placing barriers to imports, will prevent the needed transitions of the productive capital stock of the united states and other nations that enable it to continuously concentrate on producing those goods and services most desired by consumers. protectionism will also slow the inevitable transition of the workforce to more productive endeavors. to be sure, an added few years may enable some workers to reach retirement with dignity, but it will also keep frozen in place younger workers whose better job opportunities decline with time. i regret that trade policy has been inextricably linked with job creation. we try to promote free trade on the mistaken ground that it will create jobs. the reason should be that it enhances standards of living through the effects of competition on productivity. it is difficult to find credible evidence that trade has impacted the level of total employment in this country over the long run. indeed, we are currently experiencing the widest trade deficit in history with a level of unemployment close to record lows. certainly, the distribution of jobs by industry is affected by international trade, but it is also affected by domestic trade. it is the relative balance of supply and demand in a competitive | , and a pick - up in investment activity, as uncertainty about the political situation diminishes. after widening to 3. 6 % of gdp in 2018, the current account deficit will range between 3 % and 4 % of gdp in 2019 and 2020. in 2019, the deficit will narrow to 3. 1 % of gdp, due to the 2018 bumper corn harvest and a drop in energy prices. in 2020 – 2021, the current account deficit will widen slightly, on the back of a decrease in gas transit, a poorer grain harvest, and a rise in investment imports after the elections. a widening in the trade deficit will be offset by greater private remittances, supported by the higher incomes of labor migrants. a key assumption of the macroeconomic forecast is that ukraine will continue to cooperate with the imf and enjoy relatively favorable access to the international capital markets. 2 / 3 bis central bankers'speeches at the same time, reasonably high interest rates will contribute to the inflow of debt capital, which, together with continued inflows of foreign direct investment, will finance the current account deficit. external official borrowing and the government ’ s placement of eurobonds will make it possible to repay external public debt, the repayments of which will peak in 2019 – 2020. this will improve the expectations of economic agents and promote macrofinancial stability. as a result, international reserves will hover around usd 21 billion in 2019 and 2020. the usual increase in uncertainty during presidential and parliamentary elections poses the main risk to the said macroeconomic forecast, including ukraine ’ s ability to meet its inflation target in 2020. this, in turn, could affect inflation expectations. external risks are also important. these include : a more significant slowdown in the global economy, including in the economies of ukraine ’ s main trading partners ; a drop in the global prices of the commodities exported by ukraine ; persistently strong labor migration and the resulting pressures on wages ; geopolitical risks, such as an escalation of the azov sea conflict, which could cut export earnings ; uncertainty over the volume of gas transit through ukraine starting in 2020, as pipelines bypassing the country are being built to deliver gas to europe. why did the board decide to leave the key policy rate unchanged? taking into account the updated macroeconomic forecast and the above risks, the nbu board deems it necessary to maintain the existing reasonably tight monetary conditions in order to ensure that inflation returns to its target range in q1 | 0 |
over the last two months. for the second operation, we decided to have an expanded collateral pool, so that smaller banks – which tend to lend to smaller businesses that are crucial for the european economic activity – could benefit more. the ltros were specifically designed to help the banking system overcome the dilemma it is facing. the idea was to remove the funding pressures, thereby allowing a smoother deleveraging process ; while at the same time preventing a major credit crunch that could compromise the maintenance of price stability in the euro area. at this stage, positive effects from these operations have already materialized. it is clear that banks were facing major funding uncertainties in 2012 and 2013 : these funding pressures have now been removed. this could in turn contribute to the issuance of new shares and hence to the meeting of the capital requirements without forcing excessive deleveraging. a reduction in counterparty risk is visible through lower bor - ois spreads and banks ’ cds spreads have significantly narrowed as well. it is too early to assess the extent to which these measures will “ trickle down ” to the financing of the real economy, but the fact that more banks participated in the second operation ( 800 compared to around 500 ) indicates that the money is now closer to small and medium - sized enterprises than it was before. 2. 3 the challenge for the eu institutions : enforcing economic union the weakness of european economic union in the context of monetary union contributed to the development of the current crisis and, if we are to emerge from it stronger, real improvement is required in this area. european governments have fully understood this issue and have made concrete and significant progress towards a more integrated economic union. on the one hand, europe has considerably enhanced its fiscal discipline framework. the legislative package ( the so - called “ six pack ” ) entered into force in december and considerably reinforces the stability and growth pact : the surveillance powers of the european commission over national budgets have been enhanced, sanctions have become quasi - automatic, the criteria for public debt and public spending are being more closely scrutinised and a new framework for the surveillance of macroeconomic imbalances and competitiveness developments has been put in place. in addition, 25 european heads of state or government signed the treaty on stability, coordination and governance which establishes a comprehensive new “ fiscal compact ”. it includes in particular a requirement for national budgets to be in balance or in surplus, a criterion that will be met if the annual structural government deficit does not exceed 0. 5 % of | integration so that we europeans take our destiny into our own hands, as chancellor merkel rightly said in munich last spring. in my remarks today, i will explore three economic concentric circles : first the economic union, by presenting the accelerators that are needed to make concrete progress ; second the financing union, by focusing on one of these accelerators, which might be of particular interest to your community of banks and financial institutions ; and third the banking union, which is a key part of the financing union and which has to be completed. it is now time to act in europe : four accelerators of the economic union in rome, on 25 march of this year, the member states all expressed their clear willingness to work “ towards completing the economic and monetary union ". we are in agreement on the “ why ". let me say one word about our monetary policy. taking into account our progress, the governing council decided at the end of october to pursue a gradual normalisation. we will clearly follow this path of gradual normalisation, with caution but combining the whole range of our instruments – and there shouldn ’ t be excessive focus on the net purchases of assets. but monetary policy cannot be the only game in town, and therefore we should not overburden it. furthermore we aim at greater stability, to counter the risk of a new crisis befalling an unprotected euro area, with all its damaging political and economic repercussions ; and greater growth, to catch up our past lag on the united states and finally treat the fatal disease of mass unemployment in europe. 1 / 5 bis central bankers'speeches with this objective in mind, how, concretely, can we make progress on economic union? in my view, we should trigger four accelerators : a macro accelerator, which would consist of a collective economic strategy shared by all euro area member states ; a micro accelerator, which would take the form of a financing union for investment and innovation, going beyond the capital markets union ; a fiscal accelerator, which would draw on a euro area budget. the fourth is not an accelerator in substance, but rather a “ facilitator ” for the first three : in terms of institutions, we would need a euro area finance minister and parliament. these four accelerators are needed, but this does not mean they all have to be implemented at the same time. with the existing treaty, we can take steps straight away on the first two accelerators, macro and micro, on | 0.5 |
to evolve. on your question as to whether commercial banks do play a developmental role, my answer would be : yes, commercial banks have played, are playing and would play a much greater and much more proactive role in economic development. in this context, what needs to be addressed now is as to how to improve their contributing to economic development further, given the fact that their contribution to gdp is still below their potential. some of the thoughts outlined by me earlier deserve attention in this regard and provoke further thinking on the subject. yes, they need to do more. yes, they need to be innovative in order to increase their participation in economic development. yes, there still exists a wide financing gap. but that gap cannot just be filled by commercial banks alone. commercial banks may not have sufficient resources to provide long - term loans for investment purposes because of the structure of their balance sheets as explained by me earlier. other players do need to play their role as well, including the authorities. the challenge is for all of us to come up with workable but lasting solution. i thank you for your rapt attention. | patrick njoroge : entrepreneurial initiatives in kenya speech by dr patrick njoroge, governor of the central bank of kenya, at the 4th annual citi micro - entrepreneurship awards ( cma ), nairobi, 27 october 2015. * * * i am delighted to join you today for this important celebration, the 4th annual citi microentrepreneurship awards ( cma ). i would like to thank the organisers of the awards ceremony, citibank n. a. kenya, and the association of microfinance institutions ( amfi ), for providing an appropriate platform to celebrate extraordinary entrepreneurs in kenya. i also take this opportunity to appreciate all award nominees and participants of this event. you are all winners as the efforts you individually and collectively make in providing services to your fellow citizens are hallmarks of outstanding service. i commend citibank for the concept of the cma awards, and for consistency in hosting them. the objectives of the awards are noteworthy – not just celebrating innovative contributions of micro - entrepreneurs in kenya, but also showcasing the effective role that microfinance plays in supporting poverty alleviation, social empowerment and economic development within the broader context of financial inclusion. financial inclusion continues to play a critical role in the global development agenda given that over half of the world adult population does not have access to basic financial services, and is essential for developing strong financial institutions, reducing poverty, and financing broader economic development. in fact, there is ample evidence that financial inclusion is key in reducing the economic vulnerability of households, promoting economic growth, alleviating poverty and improving the quality of peoples ’ lives. the extraordinary narratives shared today confirm this. i am privileged to have heard the wonderful success stories of transformative growth and development that are being feted today. with regard to micro - small - and medium - sized enterprises ( msme ’ s ), there is a direct correlation between msme development and financial inclusion efforts. msmes represent over 90 percent of private business and contribute more than 50 percent of employment and of gdp in most african countries 1. nevertheless, msmes face several challenges, including access to finance, which is often considered the most significant constraint for this sector. for instance, the world bank enterprise surveys indicate that 41 percent of smes in low income countries report that access to finance is a major constraint to their growth and development, compared with 30 percent in middle - income countries, and only 15 percent in high - income countries. 2 these | 0 |
re - channel at least usd 100 billion of sdr to the countries that need it most. the majority of these reallocations will be redirected towards the resilience and sustainability trust ( rst ) and the poverty reduction and growth trust ( prgt ) funds, to the benefit of low - income countries. still on the imf, progress can hopefully be achieved on two fronts. first, we still have to find additional resources to finance the prgt ’ s subsidy account in a context of growing demand and higher interest rates. second, the ongoing 16th general review of quotas should give the fund more firepower, by leading to an increase in overall quotas of at least 35 %. furthermore, the fund ’ s governance would be improved if, as is currently discussed, a 25th chair at the board for african countries is created. looking beyond the imf, we have to move on to modernise as swiftly as possible the multilateral development banks ( mdbs ). the g20 leaders ’ declaration iii rightly called to enhance the financial capacity of the world bank, and more generally to foster “ better, bigger and more effective mdbs ”. the g20 endorsed a dedicated roadmap which could provide mdbs with an additional capacity of around usd 200 billion over the next decade : progress will need to be closely monitored to ensure concrete implementation of the capital adequacy framework recommendations so as to maximise the leverage effect of potential capital increases. these advances should be implemented effectively and as soon as possible : there have been too many broken promises in the past. restoring everyone ’ s confidence in multilateralism, particularly in the south, means first and foremost, today and at long last, “ walking our talk ”. b2. the next step is to go beyond these measures to truly reinvigorate multilateral cooperation and address the flaws in the current system. multilateralism is at a crossroads, or let ’ s say at a “ darwinian ” moment : iv it must page 5 sur 8 evolve in order to survive or else it may die. to this end, why not start by creating a special taskforce, as an amplifier of the 2017 eminent persons group, with balanced representation of the international community. this independent group would be charged with suggesting more ambitious avenues for reforms of the international financial system. let me dream somewhat and provide some food for thought, building on the lessons of the european experience. first, we need to move towards un | the worst outcomes, as we have done in preparing for a no - deal brexit. and sometimes you need to be bold to avoid truly bad outcomes, exactly as mario draghi did when he said that the eurosystem would do “ whatever it takes ”. third, how should we respond to uncertainty about structural relationships? uncertainty about the transmission mechanism is often used to justify acting gradually. sometimes described as “ tiptoeing in a dark room ”, a central banker following the brainard principle attenuates his response to inflationary shocks if he is uncertain about the precise sensitivity of inflation to monetary policy. but the more cautious he is in the first step, the more ready he should be to take several additional steps : gradualism is not inaction. structural shifts in the economy are also constantly changing economic dynamics and equilibrium relationships, such as r * ( the natural rate of interest ) and u * ( the natural rate of unemployment ). but as john williams of the new york fed has pointed out, these stars are today more a fuzzy blur than a single bright point of light. so whilst they can help with the broad orientation of monetary policy, uncertainty about these stars is too wide to permit precise navigation. overall, therefore, the theoretical guidance on how to respond to uncertainty is itself open, to say the least. my understanding of the present debates leads me to the following four pragmatic suggestions that i hope can stimulate your discussions : 1. remain very clear about your objectives – uncertain times are not the right ones to create additional doubts about, say, your inflation target – and about your capacity and determination to use your tools in a predicable sequence. 2. but, whilst being consistent with your guidance, be very flexible in the precise calendar and calibration of your implementation. in short, be as predictable as possible, but never be precommitted. 3. act to prevent the worst outcomes occurring but without supplying complete insurance, which would create moral hazard. 4. never base policy on only one expected path for the economy. in conclusion, we cannot seek to control, or avoid, uncertainty ; instead we must implement strategies that are the most robust to it. the french philosopher edgar morin put it nicely : “ la connaissance progresse en integrant l ’ incertitude, non en l ’ exorcisant ” – “ knowledge advances by integrating uncertainty, not by exorcising it ”. with that in mind | 0.5 |
, german banks ’ exposures to small and medium companies would require less than the 8 % capital currently needed under the 1988 accord. but the issue is not simply a question of impact. the principal motivation behind the basel committee ’ s efforts has been for bank capital requirements to take appropriate account of risk. in this regard, the committee has over the last six months been engaged in a significant research program to assess whether the size of a borrowing firm should be explicitly considered when banks calculate their capital requirements. at this point, the basel committee is discussing whether and how to factor a firm ’ s size into the new framework. a lower capital charge for a portfolio consisting mainly of loans to many small companies makes economic sense because that portfolio is likely to be better diversified than one concentrated in loans to a handful of large companies. assuming the discussions within the basel committee continue to proceed in this direction, it means that loans to small and medium - sized borrowers would have lower capital requirements than loans to larger companies that are otherwise rated the same. one point should be made about the treatment of loans to small and medium - sized enterprises. the basel committee wishes to ensure that our new framework reflects the sound risk management practices of banks. for example, many banks manage and evaluate their loans to smaller businesses in a way that is similar to the way they handle consumer loans. the design of the internal ratings - based framework will, therefore, allow a number of such loans to be treated like retail credits, as opposed to corporate loans. this principle also will apply to another important issue within our capital framework, namely the role of a loan ’ s remaining maturity. the committee is sensitive to the concerns raised about the need to respect the long - term lending culture prevalent in a number of countries. in this context, we will examine carefully how, or even whether, maturity factors should apply to lending to smaller businesses. treatment of equity exposures the changes i have referred to concern bank loans, which, of course, are a key source of funding for many companies. nearly all businesses – especially those growing into medium or large - sized firms – also rely on investments from outside parties to build up their capital base. here, i ’ m referring to outsiders who provide “ venture capital ” for growing firms, as well as to investors who buy the publicly traded stock of more established firms. what do i mean by venture capital? many small firms seek an “ angel ” investor, one who sees the potential in the firm ’ s strategy and is | ##igler ( 1961 ), " the economics of information ", journal of political economy, vol. 69 ( june ), pp. 213 - 25. thomas a. durkin ( 2006 ), " credit card disclosures, solicitations, and privacy notices : survey results of consumer knowledge and behavior ", federal reserve bulletin, vol. 92, pp. a109 - a121 ; thomas a. durkin and gregory elliehausen ( forthcoming ), financial economics of information disclosure : applications to truthin - lending ( new york : oxford university press ). consumers. 9 the prohibition of the provision of misleading or erroneous information can also help to improve competitive outcomes. to evaluate the effectiveness of disclosures, we must know what consumers understand, what information they use, and how they use the information in making decisions. in designing rules, we need to take consumers'actual behavior and understanding into consideration. as a result, the federal reserve has been using consumer testing to address the considerable challenge of making disclosures effective. as mentioned, consumers increasingly face more - diverse and more - complex financial products, including nontraditional mortgages and credit cards with multiple and complex features. given this complexity, we are mindful of the challenges of information overload and seek to design disclosures that are not only accurate, but also clear and concise, so that they are meaningful and useful to consumers. numerous pages of fine print may provide the comprehensive descriptions that lawyers may prefer, but they can also be confusing, or provide limited value, to consumers. we increasingly rely on feedback from surveys and testing from actual consumers to determine the information they need to make informed choices. in this regard, we recently completed several rounds of consumer testing for credit card disclosures. that testing has been essential to our effort to redesign and improve them. we have also begun using consumer testing of mortgage disclosures to help develop more - effective disclosures around product features and other terms that consumers need to know. limitations of disclosure protections when consumers are fully aware of and understand product terms and features, they are better positioned to make the right choices and achieve the outcomes most appropriate to their given circumstances, as well as give the signals and rewards to businesses that produce the products and services consumers most value. however, some product features and contract terms may be so complex that they are not readily understood. in some instances, even small misunderstandings, misjudgments, or the challenge of focusing on the most essential features | 0 |
ims stability is likely to be of second order importance to countries ’ own near - term interests. at a bare minimum, a “ shared understanding ” would be required among surplus and reserve issuing countries on the stability requirements of the system and on how their behaviour can undermine its stability. this understanding could be achieved either informally – at the g - 20 level, through the “ framework for strong, sustained and balanced growth ” – or in a more institutionalized context for international cooperation such as the imf. a concerted, non - coercive approach would be surely preferable to one based on “ penalties ” ( including a threshold on “ excess ” reserves or automatic taxes on persistent current account imbalances for reserve issuers ). this approach should contemplate : ( i ) for reserve accumulating countries, a move towards flexible exchange rates and a significant reduction of foreign exchange intervention, or the abandonment of their pegs to national currencies ; ( ii ) for reserve issuers, the adoption of a macroeconomic ( fiscal ) policy framework to sustain credibility of their currencies and the ims as a whole. more ambitiously, steps could be taken to strengthen the global reserve system by ( iii ) enhancing the role of the sdr. this said, both in the g - 20 and imf settings the question remains as to how to make countries accountable ex post for the implementation of these understandings. a more diversified allocation of reserves among existing ( or newly created ) assets could, in principle, reduce global and individual exposure to risks stemming from economic shocks and policies of a single country, and provide more stable stores of value by increasing reserve issuers ’ incentives to pursue sound policies. reserve diversification is a marketdriven process that is unlikely to evolve rapidly without active promotion of the official sector. in addition, in the absence of greater policy coordination between reserve issuers to manage their exchange rates within acceptable ranges, a multi - polar system ( with several reserve currencies operating as broad substitutes ) may entail greater exchange rate volatility, especially in the transition phase. thus, the diversification process should be managed in a smooth and transparent way, to avoid large swings unwarranted by economic conditions. the fund could ( i ) promote greater transparency and an only gradual adjustment in the currency composition of reserves, ( ii ) engage with potential major reserve issuers to help remove the obstacles to a broader use of their currencies, and ( iii ) assist | financing business initiatives. 4 these are reflected in the composition of their lending, with 66 per cent of the total going to firms, against 59 per cent for other banks. comparing the figures for the five largest banking groups headed by banche popolari with those for major the data are from the european association of co - operative banks, 2007. p. bongini and g. ferri, “ governance, diversification and performance. the case of italy ’ s banche popolari ”, paper presented at the conference corporate governance in financial institutions, organized by suerf and the central bank of cyprus, nicosia, 2007. g. ferri, g. michetti, c. pacioni and c. tondelli, “ banche popolari tra crescita e localismo ” in r. de bruyn and g. ferri ( eds. ), le banche popolari nel localismo dell ’ economia italiana, edicred, rome, 2005. and large banks of comparable size, the gap widens to 10 percentage points ( 65 against 55 per cent ). strong roots in local economies are a prerequisite for mitigating the difficulties of access to credit even in hard times like these. excluding bad debts and repos, lending to residents by banche popolari and other banks belonging to their groups grew by 6. 8 per cent in 2008, compared with 5. 6 per cent for the banking system as a whole. the growth in lending by the five largest banking groups headed by banche popolari was in line with that of the other major and large banks. by contrast, lending growth was much livelier for the smaller banche popolari ( 13. 9 per cent ), also by comparison with other banks of comparable size and with similar operational characteristics ( 7. 2 per cent ) including the mutual banks ( 10. 4 per cent ). the gap between the growth rates of large and small banche popolari is explained in part by the difference in the intensity of their relationship with firms and local communities, since this tends to weaken progressively the more banks grow, open up to the market and expand their range of operations. when there is a significant development of business relationships and areas of activity, including abroad, there can also be a weakening of the control exerted in the form of social pressure and in other ways by the local community ( customers and shareholders | 0.5 |
banking industry should make the necessary proposals in a prompt fashion and the public authorities should commit to considering them. lastly, i want to elaborate on two other issues. the first relates to governance and accountability in banking operations and the second to the improvement of capacities for the identification, evaluation and management of risks. these two issues have continuously been part of our regular communication as they rest on the cornerstone of a safe and successful banking activity, public confidence on which remains unwavering. concerning governance, last year i constantly highlighted the need for professionalism, commitment, responsibility, farsightedness and accountability to be reflected not only by you but they should also be embodied in your staff. to make this happen, policies and rules for defining strategies for the development, concrete decision - making, control of particular activities and their reporting to the institution and the public need to be continuously completed and improved. internal control systems are the ones to determine the institution ’ s capacity to operate safely. they are indispensable to avoid any room that may be used for abusive actions that would impair the institution. i therefore request that you take the necessary measures in terms of financial, human and technological capacities in order to ensure the safety of each banking operation. in pursuing its supervisory function, the bank of albania will have this matter under close focus and i assure you that any decision that may have hampered the safety of the activity will be handled with utmost stringency by the law. in a broader context, banking activity, in addition to operational risks, is faced with other financial - related risks. we will therefore increase the regulatory requirements for banks to be engaged in an integrated process of risk evaluation and management proportionate to the level of development and sophistication. in a more practical approach, this implies that banks should have specific functional structures that monitor risks in the main activity areas and endeavour to anticipate their possible evolution and impact on banks ’ activity. these structures must be in place in the largest banks and their products should be an integral part of the decisionmaking process. dear participants, we are leaving behind a challenging year but other numerous challenges will follow for banking activity. they provide us the opportunity to put our vision into practice, in order to ensure a stable banking activity as a precondition for conducting an efficient intermediation activity with remarkable contribution to economic development at home. weathering the challenges requires courage and professionalism. in addition, banking institutions should provide an environment where accountable and professional human capacities are in the | service of the public and the institution. i am confident that you will prioritize the foregoing matters in 2011. i wish you success in your work and many wishes for the new year! thank you. | 1 |
meeting on 11 november to conduct monetary policy in a less expansive direction. the repo rate was therefore increased by 0. 35 percentage points to 3. 25 %. as has been said, the difficult balance to be struck in the present situation is to adjust the instrumental rate at a rate that does not interrupt the upswing in capacity utilisation but does it with sufficient foresight to avoid a drastic rise. we do not want to experience “ stop - go ” policies again. let us not forget the late 1980s and early 1990s. that period represents a tragic failure for economic policy, a failure that cost sweden destruction of both physical and human capital. earlier in my speech, i pointed to the imbalances in wage formation that could lead to inflation accelerating if they are handled incorrectly. this would make monetary policy tightening necessary that would risk interrupting growth and structural transformation, because the inflation target is mandatory and will not be given up. the riksbank has both the instrument and the political mandate to achieve the target of 2 % ’ s inflation. the issue then is not whether the inflation target will be met but the consequences that achieving the inflation target will have for the rate of growth and employment in the medium term. the riksbank is responsible for achieving the inflation target, but responsibility for the positive development that we can now see in front of us being sustained over a longer period, is shared by everyone in sweden. | . when capacity in the economy is not fully made use of and unemployment is high, the interest rate may - on condition that inflation expectations are in line with the target - need to be below its neutral position in order to stimulate demand so that it increases more quickly than capacity utilisation. in this way, unemployment can be taken up in production, capacity utilisation increase and inflation be adjusted upwards to the target. in the same way, the interest rate needs to be above its neutral position, when capacity utilisation is full and demand is tending to grow more quickly than the utilisation of capacity. the economy then needs to be cooled down to prevent inflation exceeding the target. it is the task of monetary policy to control short interest rates so that demand pressure is adjusted to capacity growth to achieve the inflation target. the growth in capacity in the long - term is determined by other factors, however, than monetary policy. the level of the neutral interest rate varies over time. according to some theories on optimality, a very rough rule of thumb is that the neutral real interest rate in the long term and when the economy is in balance is near the long - term growth of gdp. in germany, real short - term interest rates have since 1980s been around 3. 3 % while the corresponding rates in the usa are around 3. 5 %. while it is not possible to specify a neutral level for swedish interest rates, there is no doubt that monetary policy even after last week ’ s increase will continue to have an expansive effect on demand. in practice, monetary policy decisions are based on an overall assessment of a number of inflation indicators. the interest rate reductions during the past year from 4. 35 % in june 1998 to 2. 9 % in march this year took place with a view to stimulating demand, increase employment and increase capacity utilisation in order in this way to bring inflation up to the goal of 2 %. the riksbank ’ s most recent inflation report makes the assessment that there are unused resources in the present situation but that the available resources will gradually be taken into use during the forecast period. the statistics published thereafter give a somewhat fragmented picture but, taken as a whole, do not occasion any change in the view of growth prospects in the economy. the assessment of the riksbank is now that inflation in 1 to 2 years will be marginally higher than in the most recent inflation reports. in the light of this, the riksbank made the assessment at its | 1 |
##ed from a monetary policy perspective as long as programme conditionality is fully respected. we would exit from omts once their objectives have been achieved or when there is a failure to comply with a programme. omts would not take place while a given programme is under review and would resume after the review period once programme compliance has been assured. let me now explain our assessment in greater detail, starting with the economic analysis. euro area real gdp contracted by 0. 2 %, quarter on quarter, in the second quarter of 2012, following flat growth in the previous quarter. economic indicators, in particular survey results, confirm the continuation of weak economic activity in the third quarter of 2012, in an environment characterised by high uncertainty. we expect the euro area economy to remain weak in the near term and to recover only very gradually thereafter. the growth momentum is supported by our standard and non - standard monetary policy measures, but is expected to remain dampened by the necessary process of balance sheet adjustment in the financial and non - financial sectors, the existence of high unemployment and an uneven global recovery. the risks surrounding the economic outlook for the euro area continue to be on the downside. they relate, in particular, to ongoing tensions in several euro area financial bis central bankers ’ speeches markets and the potential spillover to the euro area real economy. these risks should be contained by effective action by all policy - makers in the euro area. euro area annual hicp inflation was 2. 7 % in september 2012, according to eurostat ’ s flash estimate, compared with 2. 6 % in the previous month. this is higher than expected and mainly reflects past increases in indirect taxes and euro - denominated energy prices. on the basis of current futures prices for oil, inflation rates could remain at elevated levels, before declining to below 2 % again in the course of next year. over the policy - relevant horizon, in an environment of modest growth in the euro area and well - anchored long - term inflation expectations, underlying price pressures should remain moderate. current levels of inflation should thus remain transitory and not give rise to second - round effects. we will continue to monitor closely further developments in costs, wages and prices. risks to the outlook for price developments continue to be broadly balanced over the medium term. upside risks pertain to further increases in indirect taxes owing to the need for fiscal consolidation. the main downside risks relate to the impact of weaker than expected growth in the euro area, in the event of a renewed | that matter for the main economic decisions that the central bank wants to influence. how is it then that monetary policy can have an impact on the economy? well, one can think of long - term interest rates as comprising two elements : expectations regarding the future evolution of short - term rates ; and premia. premia relate to the compensation investors demand for holding on to an asset for a specific period of time ( the term premium ). moreover, they relate to the compensation for risks, such as the possibility of incurring capital losses due to difficulties they may encounter when selling the asset back to the market before maturity and at short notice ( the liquidity premium ). changes in the current policy rate are typically interpreted by markets to also signal changes for short - term rates in the future. that is, they affect market expectations for future short - term rates and therefore, long - term rates. in normal times, this signalling channel works well and market expectations tend to be in line with monetary policy makers ’ intended long - term rates. when, however, short - term nominal rates are at zero or close to zero, this signalling channel loses its potency. the risk is that long - term rates may drift away from the central bank ’ s intended path, in which case financing conditions in the economy will not properly reflect the stance of monetary policy. some academic economists have advocated that, particularly in such a situation, the central bank should engage in active communication regarding the future path of policy rates. 6 this communication would serve as a commitment device for the central bank to follow in the future the announced path of short - term rates, possibly conditional on actual developments in the economy. 7 if this commitment is sufficiently credible, it will be effective in steering expectations regarding future interest rates and so influence the first component of long - term interest rates to which i was referring before. this is turn, will allow the central bank to deliver accommodative financing conditions in the economy over a certain horizon. a number of central banks around the world – most recently including the us federal reserve – have adopted some version of this approach. but the decomposition of long - term rates i mentioned a few moments ago suggests that there is also another possible way for the central bank to deliver appropriate financing conditions in the economy. this second approach is to exert influence on the premia, to the extent that they are unwarranted and reflect dislocations in markets. i would argue that the the argument was originally | 0 |
chart 6 : distribution of fatf effectiveness ratings frequency low moderate substantial high immediate outcome rating why are aml sovereign ratings important? because, singly and in aggregate they often form a material input into the risk considerations of correspondent banks and others who deal with the bahamas. the effect is similar to debt ratings agencies : if moody ’ s and standard & poor ’ s lists a country as subinvestment grade, it becomes much harder and more expensive to raise funds. if the aml ratings agencies list a country as high aml risk, it becomes harder for that country and its institutions to operate effectively in the global financial markets. financial inclusion now, let ’ s talk about financial inclusion. “ financial inclusion ” is something of a buzz phrase globally, but that hardly detracts from its importance. it is easy to conclude that bahamian financial inclusion is not nearly as complete as it needs to be. our populace is still not fully banked on either the deposit / transaction or the credit side of the balance sheet. our insurance penetration, investments, and pension participation are a long way from what might be optimal. our capital markets are neither large nor liquid in global terms. then there is the geographic issue that inclusion in the family islands is in some cases markedly less than in new providence. neither the central bank nor any other agency can fix this on their own, but collectively we can do quite a lot to create a more inclusive bahamian financial system. we look forward to providing advice to the government on this point. financial inclusion is not mainly about aml, but it does generate two distinct aml advantages. the first is that cash intensity in the economy will drop, in favor of electronic transactions. this makes our society and economy safer and more efficient, and it makes large and possibly suspect cash transactions easier to identify. the second advantage flows indirectly from the increased data intensity of the financial system. it will become harder for financial criminals to hide in the undocumented recesses of a non - inclusive system. the central bank and other agencies are already progressing a number of financial inclusion initiatives. in our case, these include joining the alliance for financial inclusion, or afi, and adopting that body ’ s maya declaration. the afi has already helpfully created a number of national inclusion benchmarks which we can adapt for bahamian use. the afi also provides many case studies, research reports, and other information, which will help us generate ideas for bahamian financial inclusion. the central bank ’ s digital | ##gned finances were viewed as having a credible chance of being remedied. the monetary authority is also part of the fiscal picture. failed public finance dynamics can show up in unchecked borrowing from the central bank and in growing gaps between local currency liabilities of the monetary authority and foreign reserves, which are held to support the currency. central bank lending to the government can also be a source of accumulated bank liquidity, of the sort that might seek to flee the jurisdiction, if they are allowed to become mobile. the confidence boost that a financial system would need, before opening itself unchecked to short - term financial flows would be, in a case where deficits and debts are a concern, to quiet such concerns. deficits or debt burden need not disappear at the outset, but there has to be an anchored belief that such reduction would occur within a comfortable time frame. at the central bank, we are focused on gradually reducing the amount of outstanding credit provided to the government. it will also achieve, as a side benefit, some important reduction in surplus liquidity within the banking system. over the medium - term it is also expected that a new central bank act would put stronger governance arrangements in place to continue to reduce lending to government. at the same time the public finances will have to support some of the liquidity reduction in the medium - term through direct slowdown and eventual reduction in the debt burden. 7 aside from exchange control, liberalisation also has to be considered in the context of the national investment policy. if certain sectors are constrained from foreign participation, then bahamians operating in those sectors would also be constrained in how they a costly option that many countries have taken is to have the central bank issue its own securities to soak up liquidity. however, if done aggressively the institution could incur losses. 7 | page collateralise access to foreign currency financing. if majority ownership in a venture must be bahamian, then the majority financing source, unless it is domestic would not be permissible in foreign currency. 8 also, to the extent that restrictions apply to how nonresidents acquire real estate in the bahamas, use of such assets as security for mortgages would be subject to a layer of processing and approval that is independent of any ec rules. figure 2 : central bank financing to government as the government debt burden increased, reliance on central bank financing, especially over the last decade, has also increased …. the balance sheet impact for the central bank has been that the | 0.5 |
and challenges. the most prominent risk is the risk of disintermediation if the issuance of digital currency results in deposits flowing from commercial banks to central bank accounts with adverse implications for lending activity and consequently, real economy. in particular, in case of financial systems distress, it can intensify the run risk and amplify the shocks. the need to balance between integrity and the privacy of money also comes to the fore. elevated cyber risk is also inevitable, given the technologies deployed for digital currencies. all this indicates that central banks have " fulltime job " in devising the most appropriate cbdc design that will minimize these risks and maximize benefits. our national efforts more or less resemble global trends and initiatives. as a central bank, we strive towards encouraging innovation in finance, as visible through the establishment of our innovation hub. we map the ecosystem, via fintech surveys to better understand its current state and act towards eliminating barriers, while containing risks. the recently adopted fintech strategy is providing a platform for coordinated and streamlined efforts by all stakeholders in the regulatory area. a recent central banking survey revealed that only 54 % of surveyed central banks do have a strategy that underscores our visionary approach towards the fintech area. we have already created a stimulating legislative background, with the new law on payment services and payment systems that entered into force this year, furthermore, we have recently embarked on exploring the possibilities for introduction of digital denar. last but not least, propelling efficient and harmonized cross border payments is key to support and stimulate cross border integration. this is particularly the case for small - size economies, such as ours, with growth model based on international trade and finance. our regional efforts to comply with european standards, fulfill sepa requirements, and integrate into the target instant payment system - tips of euro system is a step in a right direction. looking forward, it is always challenging to foresee the future, but it is highly probable that the pace of financial transformation is set to continue, if not to accelerate. few years ago, a study denoted ten avenues that will shape the future of payments, and some of them are already taking place. issuance of digital currencies, more active role of regulators, data – based payments value chains, a consensus on data privacy, biometrical id, and strong collaboration between new entrants and traditional players. these are now all already existing dimensions of the finance matrix. i would add that esg concerns are | i now declare the 10th jubilee conference on payments and market infrastructures open. i wish you pleasant days here in ohrid and many fruitful discussions. thank you! 2 / 2 bis central bankers'speeches | 0.5 |
, forthcoming. rungcharoenkitkul, phurichai ( 2011 ), “ risk sharing and financial contagion in asia : an asset price perspective ”, imf wp / 11 / 242. kim ( 2012a ). bis central bankers ’ speeches | of the financial markets in asia and the pacific does not match that of the real economy seems to be because the degree of regional financial integration is relatively low compared to that of trade integration, in other words, real integration. while the share of regional trade in total trades in asia and the pacific, by the way, in my speech this morning, asia and the pacific refer to 12 acc members of the region, has generally maintained a high level of around 49 % for the past ten years, the degree of capital integration is low, with the share of regional portfolio investment running at only around 10 %. ahuja and nabar ( 2012 ). elekdag et al. ( 2012 ). imf ( 2012b ). bis central bankers ’ speeches consequently, at a time of shocks external to the region like the global financial crisis, the real sector showed relatively high resilience thanks to its high regional dependence, but the financial sector even became an innocent bystander due to its heavy extra - regional dependence. more specifically, when the global financial crisis broke out, financial institutions in the us and the euro area embarked on massive deleveraging. hence asia and the pacific experienced large scale capital outflows, which were unrelated to pull factors, and consequent financial market unrest. in this regard, one step toward enhancing the resilience of the asia - pacific financial system is to further strengthen regional financial integration in such a way as to relieve the asymmetry between the degrees of financial and real integration. the initial target level for strengthening financial integration can be taken as that of regional trade integration. if so, risk sharing with offshore regions including the u. s. and the euro area will decrease, while risk sharing through the asia - pacific financial system will increase. 4 besides the risk diversification effect in moderating offshore shocks, closer regional financial integration will lead to consumption smoothing in regional economies, a typical effect of financial integration, and will also contribute to the easing of global imbalances and the development of regional financial markets. in the course of the euro area crisis, the asia - pacific is actually enjoying certain positive effects ― its financial system has become more stable along with a rise in regional financial transaction. this appears attributable to the fact that, while european banks have deleveraged out of asian emerging market economies, regional banks, such as those of japan and australia, have stepped up their lending to regional emerging market economies, which has helped ease the | 1 |
are low relative to other jurisdictions, even taking account of the current sizeable fiscal stimulus. the https : / / www. rba. gov. au / speeches / 2020 / sp - dg - 2020 - 09 - 22. html 10 / 13 22 / 09 / 2020 the australian economy and monetary policy | speeches | rba increase in debt is definitely manageable. moreover, there is not, in my judgement, a trade - off between debt and supporting the australian economy in the current circumstance. absent the fiscal stimulus, the economy would be significantly weaker and debt levels even higher. this is particularly so with interest rates at their historically low levels, where the growth benefit from the fiscal stimulus will improve the debt dynamics and help service the debt in the future. foreign exchange intervention is another potential policy option. however, with the australian dollar broadly aligned with its fundamentals, it is not clear this would be effective in the current circumstances. the swiss experience over the past decade ( ahead of the introduction of the ceiling on the swiss franc ) illustrates the issues that can arise in terms of the effectiveness of foreign exchange intervention when a currency is not far from its fundamental value. it is also important to remember that the exchange rate is a relative price. part of the recent movements in the australian dollar reflects the depreciation of the us dollar against other major currencies. it also reflects the high price of iron ore i mentioned earlier. the relatively better growth outcomes in australia compared with other economies shown in graph 1 are having an influence too. that said, a lower exchange rate would definitely be beneficial for the australian economy, so we are continuing to watch developments in the foreign exchange market carefully. a third option is to lower the current structure of rates in the economy a little more without going into negative territory. the remuneration on es balances is currently 10 basis points, the three - year yield target is at 25 basis points and the borrowing rate of the tff is also 25 basis points. it is possible to further reduce these interest rates. a fourth option is negative rates. the governor has talked about this before. [ 11 ] i will just make a few points here. the empirical evidence on negative rates is mixed. [ 12 ] in the short - term, they can contribute to a lower exchange rate. in the medium term, the effectiveness can wane including through the effect on the financial system. negative rates can also encourage more saving as households look to preserve the value of their | light of the fact that, in an international comparison, these two institutions are particularly large relative to the economy, this strengthening is necessary for two reasons. first, the big banks ’ loss potential relative to their capitalisation is substantial. given their significance to the swiss economy, it is important that the big banks remain adequately capitalised, even in the event of such losses occurring. second, while leverage ratios at both swiss big banks have improved by international standards, they are still below the average for large globally active banks. the snb welcomes and supports these reforms. we will continue to be actively involved in the finalisation of the international reforms. the combined package of national and international reforms represents a decisive step in the process of resolving the ‘ too big to fail ’ issue in switzerland. bis central bankers ’ speeches domestically focused banks : adequate resilience, despite substantial increase in mortgage exposure this brings me to the domestically focused banks. for these banks, whose activity centres on swiss lending and deposit - taking business, i would like to highlight three developments. first, these banks ’ risk exposure to the swiss mortgage and residential real estate markets rose markedly in 2015, with their mortgage lending volume growing at a similarly robust pace as in the previous year. in addition, they further increased their affordability risk and interest rate risk exposure from maturity transformation, against a background of slightly higher imbalances on the mortgage and residential real estate markets. second, in 2015, these banks ’ interest rate margins stabilised at a low level, after having fallen steadily and significantly since the start of the low interest rate period at end - 2008. this stabilisation is remarkable, given that pressure on interest rate margins continued last year. swiss money and capital market rates fell once again in 2015. at the same time, the interest paid by banks on customer deposits remained largely unchanged. thus, the difference between these two interest rates – the liability margin – narrowed further. the reduction of the liability margin was offset by an increase in the asset margin, and by taking on greater interest rate risk. third, domestically focused banks were able to maintain their level of resilience compared to the previous year, despite the increased risk exposure. overall, their capitalisation is well above regulatory minimum requirements, and is also adequate according to snb stress tests. the currently available capital surpluses at most banks would be sufficient to cover the losses projected in these stress tests. given the level of prevailing risks, this is positive. however, the risks to | 0 |
njuguna ndung ’ u : transformation of banks in kenya address by prof njuguna ndung ’ u, governor of the central bank of kenya, during the inaugural session of the 11th bank human resources conference 2011 of the indian institute of banking and finance, nairobi, 28 april 2011. * * * distinguished guests ; the chief executive officer, indian institute of banking and finance ; members of the institute ; all protocols observed ; ladies and gentlemen : i am delighted and honoured to have been invited to preside over the opening ceremony of this conference organized by the indian institute of banking and finance. at the onset, kindly allow me to extend a warm welcome to all participants attending this important conference. the theme : “ managing transformation for achieving growth ” is indeed compelling. growth is driven by fundamental factors, but key among them is the transformation of markets and institutions to guard the market and define appropriate incentives. one such market is the financial market guided and regulated by several institutions. today, i will share my thoughts on how the central bank has transformed the banking sub - sector as a means of transforming and deepening the financial sector in line with kenya ’ s development goals. let me parade at least seven of them : 1 ) rollout of branch networks to provide financial services to remote and lower income areas : the expansion of branch networks in the financial services industry has registered significant growth over the last 4 years and is well distributed across all regions in both rural and urban centres. currently, we have 1064 branches from 740 in 2007. 2 ) allowing mobile phone financial services to provide a new technological platform : this entails approval for banks to leverage on mobile phone technology to present convenience and lower costs to their customers without compromising quality of service. through mobile phone banking, customers are now able to perform their transactions “ anytime, anywhere ’ ’. mobile phone money transfer has evolved from the initial concept of transferring money from one individual to another to include other functions such as payment of utility bills, disbursement and repayment of loans, payment of salaries and deposit mobilization. 3 ) introduction of agent banking mechanism : this is the “ banking beyond branches ’ ’ model where commercial banks are allowed to engage third parties to provide certain banking services to increase outreach of the banks to the vast under - banked and unbanked kenyan populace. in a nutshell, agency banking enables banks to leverage on additional cost effective distribution channels to offer financial services. so far 5552 agents have been approved and are providing | to tap the market for long term funding through bond issuance. five infrastructure bonds worth ksh. 130. 85bn have so far been issued thereby increasing the range of products in the market for purposes of diversification. 4. creating more investment opportunities to spur national savings – the issuance of a 30 - year savings development bond in 2011 and the reduction of minimum entry into treasury bills market from ksh. 1, 000, 000 to ksh. 100, 000 in january 2009 were key milestones towards promoting a savings culture among the populace and in widening the investor base for the government securities market. bis central bankers ’ speeches 5. putting in place the automated trading system ( ats ) – the introduction of the ats at the nse in november 2009 was a great step towards achieving bond trading efficiency, effective pricing, increased market confidence and transparency as well as enhanced reliability and firming of the yield curve. ladies and gentlemen, a well - developed and functioning financial market is regarded as the lubricant for the economy. in order to further enhance the proper functioning of the financial market, the central bank together with other market stakeholders has been working on a number of initiatives to further enhance the bond market so as to support the country ’ s development agenda under vision 2030. these reforms include : • development of the over the counter trading platform, • introduction of online bidding for government securities, • implementation of government securities market makers. the step taken by the nairobi securities exchange to introduce the ftse nse government bond index is a welcome initiative for this market as the index will play a key role in providing a benchmark tool for measuring market performance. it will also facilitate diversification through emergence of new financial products and market participants thereby encouraging foreign investors. finally, it will have the benefit of opening up the market to the rest of the world and increasing kenya ’ s financial sector competitiveness in the region and across the world. it surely does set the pace for the regional market. i wish therefore to congratulate the nairobi securities exchange for the foresight of developing the bond index. with these remarks, ladies and gentlemen, i now declare the ftse nse kenya shilling government bond index formerly launched. thank you all for your listening bis central bankers ’ speeches | 0.5 |
the analysis of the information set out above, the supervisory council holds that the risks around the expected inflation trajectory remain balanced. on the demand - side, below - potential economic growth will continue to generate low inflationary pressures, while supply - side shocks are also expected to remain contained. at the end of discussions, the supervisory council decided to keep the key interest rate unchanged at 4. 25 %. this decision aims to create adequate monetary conditions for meeting the inflation target in the medium run. it also provides proper support to boost aggregate demand. bis central bankers ’ speeches | ardian fullani : recent economic and monetary developments in albania speech by mr ardian fullani, governor of the bank of albania, at the press conference on the monetary policy decision of the bank of albania supervisory council, tirana, 29 may 2012. * * * today, on 29 may 2012, the supervisory council of the bank of albania reviewed and approved the monthly monetary policy report. based on the analysis of albania ’ s latest economic and monetary developments, and following discussions on their performance outlook, the supervisory council of the bank of albania decided to keep the key interest rate unchanged at 4. 25 %. this decision reflects the supervisory council ’ s opinion that the actual monetary conditions are adequate to meet the bank of albania ’ s inflation target in the medium run. it holds the key interest rate at a record low, thereby maintaining the strong stimulating nature of monetary policy, in order to boost aggregate demand and economic growth. this decision also reflects the heightened uncertainty deriving from the external economic environment and, particularly, from the recent economic developments in greece. let me now proceed with an overview of the economic developments and key topics discussed at today ’ s meeting. * * * annual inflation marked 1. 6 % in april, continuing to pursue an upward trajectory over the last two months and approaching the lower limit of the target band. after marking a minimum low in february, the rising trend of inflation was expected and communicated by the bank of albania. it reflects, to a large extent, the gradually subsiding supply - side shocks on inflation. the decelerated rise in primary commodity prices in the global markets, the low inflation in albania ’ s trading partners and the stable exchange rate have generated reduced imported inflation rates. however, despite increasing, inflation remains low due to the incomplete utilisation of capacities in the economy, which is reflected in weak pressures on the rise of wages and producer prices. at the same time, economic agents ’ inflation expectations are low and growth of money is in line with the demand of the economy for money. in addition, the absent rise in regulated prices has contributed to the low inflation rate over 2012. while making an analysis of the economic developments, the supervisory council noted that the reappearance of stress in the global financial markets in the current month has heightened the uncertainties in these markets markedly, being translated into more strained financing conditions for the public and private sector. the fall of foreign demand and the higher perceived risk for the entire area have started to affect the performance of | 1 |
too far : as i have already made clear, many fintech innovations hold tremendous promise for improved security and speed of transactions and, importantly, financial inclusion. but it makes the point that central bankers have conservatism, and with it scepticism, ingrained in our dna. this is how it should be. not least, together with our co - regulators, non - bank financial institutions regulatory authority, the financial intelligence agency and botswana communications regulatory authority, we act and serve public interest ; collectively and in our respective statutory roles, are responsible for alleviating system - wide risks that are not always so readily appreciated by individual operators. as a case in point, measures to combat money laundering and other forms of financial crimes are undoubtedly inconvenient at the individual level. but this would be nothing compared to the inconveniences that would be experienced if international sanctions were imposed against botswana for falling short of the required minimum standards on anti - money laundering and the combatting of the financing of terrorism. that said, central bankers must also do their part to avoid the risk of what might be termed “ reckless conservatism ”, and embrace opportunities that not only meet customer needs but also, in many instances, reduce systemic risks. chairman of bsel, director of ceremonies and distinguished ladies and gentlemen, i thank you for your kind attention. | further. the sustainable development of financial markets is supported by macroeconomic and financial stability. botswana has been lauded for its strong macroeconomic environment, a position which was recently reaffirmed by the 2018 global competitiveness index. the macroeconomic environment was the best performing pillar for botswana, with the country ranked first, globally, supported by a public debt to gdp ratio of 15. 6 percent and inflation of just about 3 percent. to further support financial markets development, the bank has recently initiated important changes in the communication of monetary policy, including the launch of the inaugural monetary policy report ( mpr ) on september 9, 2018 at national business conference in francistown. and on monday, this week, the bank published the second mpr following the monetary policy committee meeting of october 22, 2018. but, important as these developments are, neither observations address the key issue. that is, how can central banks deal with the problem developments in financial that, services at that some are point, otherwise legitimate and desirable may be held back, discouraged, or even halted by over -, or outdated, regulation? here, i would highlight two distinct risks that must be addressed : first, the nexus between prudence and innovation may prove to be a challenge and too often financial sector regulators favour the status quo which, in turn, almost inevitably works to frustrate radical, but beneficial innovation. moreover, this risk may be amplified by lack of appreciation for trends in modern technologies ; second, there is also a danger that the regulators overcompensate against this risk, by adopting too lax an approach, and welcoming all kinds of start - up entities so as not to stifle innovation. this may be aggravated in cases where more than one regulator has an interest, a situation which calls for greater collaboration, proper coordination and effective communication. navigating these risks remains work in progress, with central banks across the world adopting a wide variety of approaches. from my perspective key elements of a robust approach by central banks should include the following six elements : first : clear leadership, guidance and consultation on the desirable direction for the development of the financial sector, including reforms to the regulatory environment. for this reason, the bank of botswana strongly advocates the updating of the financial sector development strategy, which is now two years past its end date of 2016. in terms of consultation, the banking committee, botswana financial markets committee and the recently established financial stability council, provide important channels for consultation. second : leadership through advocacy and by | 1 |
current developments in financial markets relates to the role of monetary authorities in the context of such a crisis. this issue is of concern to all of us in central banking. over the last decade or two, it would appear that the focus of central banks has been narrowing relative to the more complex responsibilities that they have traditionally shouldered. a great deal has been written on this issue, a great deal has changed in terms of practices and, in some countries, the regulatory structure itself has been altered to move central banks to being relatively pure monetary authorities. according to this view, central banks should focus largely on keeping inflation low and stable, and in doing this also contribute to financial stability. to quote harvard economist kenneth rogoff : “ indeed many economists believe that central bankers could perfectly well be replaced with a computer programmed to implement a simple rule that adjusts interest rates in response to output and inflation. but while [ this ] view is theoretically rigorous, reality is not ” ( businessworld, september 17, 2007 ) although some central banks, such as the us federal reserve, have an explicit mandate to also promote growth, a good deal of thinking in recent times tends to argue that inflation control by itself would promote growth and that central banks would be better off to concentrate on this objective alone. it is instructive to examine what central banks have done in the current context. the responses of the central banks to the recent events in financial markets have shown that concerns for financial stability can assume overriding importance, irrespective of the legislative mandate handed down to central banks as part of ongoing reforms. this is evident in the fact that central banks initially reacted by the injection of liquidity, including through special facilities and the expansion of eligible securities for collateral, rather than through interest rate cuts. discussions involving central bankers in various fora indicate their willingness to consider other courses of action in favour of protecting growth. as we all know, the us federal reserve has gone further this week in cutting interest rates to promote both growth and in the interest of financial stability. and the u. k. authorities have had to provide liquidity to a specific institution, while giving a blanket guarantee to depositors on the safety of their deposits. accordingly, it is becoming evident that central banks do have a role beyond inflation targeting. evidently, both growth and financial stability matter for central banks. when it comes to the crunch, in their roles as lenders of last resort ( lolr ), and in discharging their responsibilities as the | to the puerto rico economy. our earlier report cited low labor force participation among younger and less educated workers as one important factor limiting the island ’ s competitiveness. since that report, overall labor force participation has continued to decline. the unemployment rate on the island has consistently exceeded the rate on the mainland by several percentage points. although the rate has fallen by more than a full percentage point year to date, the gap with the mainland remains wide. moreover, poor labor market opportunities for many workers have contributed to a significant increase in the rate of outmigration of puerto rico ’ s residents, accelerating the island ’ s population decline. the prolonged period of weak economic growth has compounded puerto rico ’ s fiscal problems : puerto rico ’ s public sector debt has been on an upward trend for a decade. the stagnation of the economy and persistent fiscal deficits underlie this debt buildup. the level of outstanding debt as a percentage of the island ’ s annual gnp, a ratio used by many fiscal analysts, rose from about 60 percent in 2000 to more than 100 percent in 2013. debt ratios in this range can inhibit economic growth in that they generally lead to higher financing costs, which in turn, can lead to constraints on access to further financing. the recent downgrading of puerto rico ’ s public debt to non - investment grade was a clear signal that the current fiscal situation poses serious risks to the island ’ s economic future. steps toward fiscal sustainability next, i will discuss the buildup of puerto rico ’ s public debt and then provide some thoughts on ways to improve the island ’ s fiscal health. to open this discussion, it is worth noting some key features of puerto rico ’ s fiscal institutional environment. the commonwealth has a close relationship with the u. s. government which, in many ways, is analogous to that of a mainland state. puerto rico shares a common market and a common currency with the u. s. mainland leading to strong economic interdependencies. federal aid is a major source of revenue for the commonwealth and puerto rican residents participate in large u. s. social insurance programs such as social security and medicare. in addition, puerto rican debt trades as a municipal security in the u. s. capital markets, and much of the interest earned on this debt is exempt from local, state and federal income taxes, regardless of where in the u. s. the investor lives. and like all but one state, vermont, puerto rico has a self - imposed | 0 |
encik adnan zaylani mohamad zahid : islamic finance - future trend keynote address by mr encik adnan zaylani mohamad zahid, assistant governor of the central bank of malaysia ( bank negara malaysia ), at the 13th kuala lumpur islamic finance forum 2016 ( kliff ) " islamic finance - future trend ", kuala lumpur, 21 november 2016. * * * it is my pleasure ; and an honour to be given the opportunity to speak at this forum today. since the first introduction of kliff, more than a decade ago the event has gained recognition as a prestigious annual gathering for industry experts and key players in islamic finance. i therefore wish to congratulate the organisers for its success in organising this event and maintaining its momentum. this year, in line with the chosen theme deliberations in the forum will revolve around strategies to elevate islamic finance to the next level. as we are now at an important crossroads in islamic finance, its continued dynamism in the journey ahead, requires the industry to strategically respond to the changing requirements of the global economy. my remarks today centres on the future trend of islamic finance. in charting our growth for the industry, i will reflect on our achievements ; and offer some thoughts on key areas that can accelerate the industry forward. i would then deliberate on the key underpinnings for the industry to successfully meet the intended objectives, in my conclusion. islamic finance with a growth rate of between 10 to 12 % annually in the past decade is gaining prominence at many fronts, including its ability to meet the unique demands of the modern economy. the sukuk market in particular, has produced a dynamic stream of cutting edge products with an appeal that transcends beyond borders and beliefs. it has a wide geographical spread, with global sukuk outstanding domiciled in over 20 countries, and an investor base that spans from europe to the middle east and asia, thus allowing greater diversification of exposures and risks. malaysia, with a consistent global sukuk market share of more than 50 %, over the last 10 years, has sustained its position as the market leader. in the last few years, we have witnessed increasing sovereign sukuk issuances by non - muslim jurisdictions to meet the varying motivations of its issuers. in 2015, at least 13 jurisdictions have tapped the global sovereign sukuk market. issuances by the united kingdom and hong kong | ##ise. concluding remarks ladies and gentlemen, i shall conclude with a few brief remarks of a more general nature. the ultimate goal of entry into the euro area is an ambitious one and, for this reason, it is necessary to start preparing for this prospect well in advance. broadly speaking, the prospect of eu membership should encourage accession countries to make all the macro and microeconomic adjustments necessary to join the euro area. in this way, eu accession may set in motion a virtuous cycle of long - term sustainable economic growth. as the experience of current euro area participants shows, accession countries may encounter difficulties, and even sometimes feel frustration, during the different stages of this process. however, these difficulties should not discourage accession countries from going ahead with the project of entry into eu and, later on, the euro area. undoubtedly, eu enlargement poses great challenges to both the accession countries and to the european union itself. creating the right economic and political conditions and adjusting the european institutions for the eventual integration into the eu of all accession countries is certainly an enormous task. however – and here i come back to what i mentioned at the beginning of my speech – the project of european integration should not be regarded just as a stimulating exercise of facing up to never - ending “ challenges ahead ”, but rather as a historic opportunity to deepen and extend the idea of europe. i am confident that we, as europeans, and more specifically in our central banking function at the ecb, will be able to master the “ challenges ahead ” and, in this way, to contribute to the completion of the european project through the successful integration of the future member states into the euro area. thank you for your attention. | 0 |
as the sdrm is a more debtor - friendly mechanism, it could induce more fiscal discipline, strengthening the financial markets early warning function. in my opinion, this is not a secondary aspect. the key to an efficient approach to preventing sovereign distress lies in strengthening market pressure while also making it operate more gradually than is usually the case. an example is the cf. reinhart, rogoff and savastano ( 2003 ). cf. giordano and tommasino ( 2009 ). greek crisis. the spread between 10 - year greek and german bonds was less than 30 basis points in 2007. it widened to about 150 at the end of 2008 in the aftermath of the lehman brothers collapse and then fluctuated between 100 and 250 basis points until the beginning of this year. after that it skyrocketed, surpassing 900 basis points in the summer, and only in recent weeks has it fallen back somewhat to below 700. of course, any institutional reform that forces governments to become more sensitive to the warning signals coming from financial markets is welcome. with the stability and growth pact ( sgp ) the eu decided to use fiscal rules rather than market constraints, which were considered ineffective and slow in imposing fiscal discipline. as early as 1989, the delors committee had remarked that : “ the constraints imposed by market forces might either be too slow and weak or too sudden and disruptive ” 4. a solid fiscal framework can improve budgetary coordination over time by removing the built - in bias towards fiscal profligacy that is often attributed to democratically elected governments. a medium - term fiscal framework is particularly important, especially in the current situation, which requires credible plans to anchor expectations and, at the same time, a degree of flexibility in implementation so as not to hamper economic growth. however, it does not follow from this that market forces necessarily have to work only ex post and continue to be “ too slow and weak or too sudden and disruptive ”. we must strengthen “ gradual ” market pressure. for that, i believe having pre - defined procedures for debt - restructuring and a well - designed crisis management framework would help greatly. defaults are certainly “ unnecessary, undesirable, and unlikely ”, as cottarelli et al. ( 2010 ) assert. but we should not only be ready in case they take place but also have institutions capable of conveying to the market the message that they are in fact possible. the sovereign debt crisis and the institutional setup in the eu i | of the asian economy will be similar to that of the pre - enlargement eu. in the first half of the 2020s, it will match that of the three north american countries. picturing the world economy in 2040, asia's share in world gdp is forecast to be 42 %, while the shares of north america, europe, and other regions are expected to be 23 %, 16 %, and 20 % respectively. meanwhile, in terms of per capita gdp, as of 2003 asia recorded an average of $ 2, 400 - less than one - tenth of the average $ 29, 000 in north america and $ 27, 000 in europe. by around 2040, however, this difference is likely to be greatly reduced with asian per capita gdp being expected to be one - fourth of the figure in north america or in europe. looking at the big picture by country, in terms of overall national gdp, china is forecast to overtake japan by around 2020 and be on a par with the us by approximately 2040, to account for about 1 / 5 of global gdp. india would overtake japan by about 2030, and by 2050 or so is projected matching europe's 12 % global gdp share. by about 2040, korea's share in global gdp is forecast to have increased slightly to 2 % from 1. 7 % in 2003, while that of japan, due to its relatively slow growth, is estimated to have shrunk to about half its current 12 % share. in terms of per capita gdp, by around 5 / 6 2040, china is expected to be 1 / 4 of the figure in the us or in japan, and 1 / 3 of that in korea, while indian per capita gdp is, like today, estimated to be half of the figure in china. 3. the effect of the rise of the asian economy on the world economy how then will this high growth of the asian economy influence the world economy? it is already having a big impact on the global economy and this will increase in the future. this is because asia can offer an inexhaustible supply of labor to the world economy, which is rapidly integrating under the influence of information technology development and economic openness. a vast market that was once self - sufficient is joining the world economy. a number of effects are expected to arise from the integration of the asian economy with the open world economic order. first of all, labor costs will be reduced. with the | 0 |
groups with ulterior motives to exploit farmer sentimentalities and calling for government intervention to protect farmer interests at the cost of tax payers. the heaviest economic cost of wide price fluctuations is the inability to discover future price developments and plan out the future production accordingly. in developed countries, the issue has been solved to a great extent by the development of forward and futures markets for commodities. when both producers and buyers participate in futures transactions, both parties, having assessed the market information available to them, lock themselves in prices that would fairly rule the market in the future. hence, the absence of a forward sale mechanism in a formal form in sri lanka was considered a serious setback to stabilise the incomes of farmers and thereby ensure socio - economic security. in view of this deficiency, the central bank stepped in 1998 to introduce a forward sale contract system to ensure an agreed price for the major agricultural crops produced by the farmer community. the enforcement of the forward contracts was done in terms of the provisions of sale of goods ordinance enacted during the british period. in terms of this law, people could get into sales contracts and violation of the contract by either party was considered an offence which would permit the aggrieved party to seek redress through courts of law. while the central bank provided the guidelines and the mechanism of the system by connecting the farmers to the would - be buyers of products, commercial and development banks functioned as facilitators, financiers and guarantors of the contracts. initially, the major crops such as paddy, corn, onion, ginger and sesame were brought under the system. the success of the scheme could be gauged from the very negligible incidence of violating the contracts by either the farmers or the buyers during this whole period 27. the system of forward sale contracts has led to the improvement of the quality of products as well. since the buyers stipulated the quality specifications in the contract itself, the farmers had to change their production methods to meet the required quality standards. this change has specifically occurred in the case of producing paddy for seed paddy purposes and corn for producing nutritious pre - natal food requirement of pregnant mothers. in addition, the system provided a market guaranteed price to both buyers and producers enabling them to plan their cash flows properly. it also helped both parties to raise loans from banks for both working capital and investment capital purposes. the future sustainability of the forward sale contract system will depend on the establishment of proper futures market for commodities in sri lanka. it | time, we must not forget that the depreciation of the dollar has occurred from levels that were generally deemed much too high, and that a change in the dollar exchange rate is likely to be a precondition for resolving the problem of the high us current account deficits in the long term. there has also been some new data on the real economy. as regards the us, the data suggest that economic growth there last year - once again - may have to be revised up. for example, housing construction reached record highs in october and november. in addition, consumption growth was stronger than expected during the same period. one reason for this was that households chose to save a smaller proportion of their income than expected. a pattern can be discerned here ; on several occasions before we have underestimated us consumer demand, in spite of rather optimistic forecasts. thus, there may be reason to revise down the forecast of households ’ saving ratio in the coming years, which if so would point to higher consumption growth. the increasingly weak dollar and stronger euro should also boost us exports, particularly in europe. in the short term, there is really only one serious concern in the us economy : that employment growth continues to be weak. this could create uncertainty among households and contribute to subduing consumption. but it is hard to believe that it would derail the current upswing. also with regard to europe, we began to see signs of somewhat more robust growth and greater optimism at the end of last year. in our assessment in december, we forecast a rise in growth in the years ahead. new data received since december broadly supports this assessment. business tendency surveys for manufacturing indicate that optimism has continued to increase while industrial production has now begun to rise slowly, although for the euro area as a whole the picture is still not as unambiguous as in the us. the strong performance of the euro could also result in higher imports and lower exports than expected, which of course would have an impact on demand in the economy and growth. to sum up, as i see it there is no reason to change the main features of the assessment we presented in december regarding international economic activity and price developments. it could perhaps be argued that the upswing in europe may be somewhat weaker as a result of the stronger euro, whereas the opposite may prove to be the case in the us. therefore, there is neither any strong reasons to change our view of swedish export market growth compared with december. in the period | 0 |
banks and supervisors further. the bank, having a keen interest in sound corporate governance has therefore adopted the internationally accepted basel committee ’ s guiding principles of good corporate governance in its admission requirements for local and international banks and its corporate governance guidance notes for the supervisory boards of supervised financial institutions by choosing for a two - tier board model consisting of a managing board and a supervisory board. this despite the fact that our general law on companies permits a one - tier board. ( which will be elaborated later upon by mrs. hammoud and mrs. de windt ). according to the bank, an institution's supervisory board is ultimately responsible for the conduct and affairs of the supervised institution. it is the supervisory board ’ s duty to oversee management affairs and to monitor the institution's direction and, hence, its adherence to its overall policy. by doing this, the supervisory board determines how the institution will conduct its business in the long term. in general, the supervisory board establishes or approves and monitors the policies by which management will operate. the supervisory board should set the “ tone at the top ” and oversee management ’ s role in fostering and maintaining a sound corporate and risk culture. in favorable times the supervisory board contributes by setting the tone and direction, it oversees and supports management ’ s efforts by testing and probing their recommendations before approving them. the supervisory board should also ensure that adequate systems and controls are in place to identify and address problems before they become a threat for the viability of the institution. in adverse times the supervisory board should be even more actively involved with the institution assisting it with the undertaking of the necessary corrective actions and, when needed, to keep the institution on track until effective management can be reestablished. the supervisory board is considered therefore by the bank as an extension of its supervision within the regulated entities because well - governed banks contribute to an efficient and cost - effective supervisory process which permits the bank to place more reliance on the bank ’ s internal processes which may result in less need for supervisory intervention. in this respect we consider communication as key for an adequate supervision of the institutions supervised by the bank. therefore, we applaud the contribution of laad in its communication towards the bank by having annual presentations of laad ’ s results, where a representative of the managing board is always present to explain the results and developments in the markets. the bank furthermore welcomes periodic exchange of information between the bank and the supervisory board of laad ( for example on the strategy, | joseph yam, jp : the hong kong monetary authority ’ s main initiatives in the area of banking supervision speech by mr joseph yam, jp, chief executive of the hong kong monetary authority ( hkma ), at a lunch with representatives of the finance constituency organised by dr david li, held in hong kong on 15 january 2001. the speech outlines the latest state of play on the hkma ’ s current initiatives in the area of banking supervision, as well as responding to some points raised by dr li on behalf of the finance constituency. * * * 1. i would like to thank david li for arranging today ’ s lunch with representatives of the finance constituency. the number of live issues in the realm of bank supervision, some of which have been set down in david ’ s letter in advance of this lunch, is currently quite considerable, so it is useful to have this opportunity to get together to exchange views. as you will know, it is very much our style to work in close collaboration with the banking industry on developing our policies rather than to adopt a confrontational approach, and long may this continue. 2. let me run through what i see as the hkma ’ s main initiatives in the bank supervision area in the next twelve months, in the course of which i will try to pick up some of the points made in david ’ s letter. i see there being three main initiatives, namely : 1. deposit protection ; 2. deregulation and other market reforms ; and 3. the credit reference agency. 3. on deposit protection, we are now coming to the end of the consultation period on the consultants report – in fact there are just two days left, so if you want to make a submission, you will have to hurry! once we have collected in everyone ’ s comments we will carefully review them and determine whether to recommend going ahead with such a scheme and, if so, exactly how it should be structured. as you will be very aware, the views of the banks on this issue are mixed, whereas legco has given a clear endorsement, and most other parties are also in favour. but, assuming we do go ahead, this is really only the beginning, and there will be a lot of work to be done on the design features. for example, should coverage of the scheme be limited to $ 100, 000, or should it be $ 200, 000? should funding be ex - ante or ex - post? should premiums be risk - based? | 0 |
by the adequacy standard. ladies and gentlemen, esteemed colleagues until recently, hardly anyone could have imagined that the world would face the consequences of the coronavirus pandemic, the energy crisis and such heightened geopolitical tensions at almost the same time. at present, there are many great unknowns – the duration of the ukraine conflict and its possible long ‐ term consequences for global trade, as well as the prices and availability of energy, industrial raw materials and food. uncertainty also refers to the complexity of the functioning of global markets in the conditions of geopolitical tensions and global value chain disruptions, speed of normalisation of monetary policies of leading central banks and the effects on global financial conditions, etc. for the time being, we judge the risks to the projection of global and domestic growth to be tilted to the downside, and those to inflation – to the upside. as the economic policy makers, we are faced with multiple challenges. you may, however, rest assured that the government and the nbs will pursue a consistent and responsible economic policy and do everything to make sure our economy is strengthened further, just as we did after the pandemic broke out. in this way, we will increase our economy ’ s resilience further and stand ready to respond to all challenges coming from the international environment. going forward, we will continue to carefully monitor and evaluate factors from the domestic and international environment, which will determine our future decisions and steps. depending on geopolitical developments and the movement in key inflation factors from the domestic and international environment, the nbs will estimate whether there is a need to tighten monetary conditions further or whether the effects of past tightening ensure a sustainable return of inflation within the target tolerance band over the projection horizon. delivering price and financial stability in the medium term remains the nbs ’ s monetary policy priority, while supporting further economic growth and development, a further rise in employment and a favourable investment environment. i now give the floor to my colleagues from the economic research and statistics department to present our latest projections in more detail. | in the imf's estimate, ensures external sustainability. over the coming years, the current account deficit is expected to contract gradually towards 5 % of gdp ( assuming a normalisation of energy prices ) and to be covered by net fdi inflows to a substantial degree. chart 12 current account and fdi projection chart 13 dinar exchange rate and nbs transactions in the fx market ( in % of gdp ) ( eur / rsd ) * * - 5 - 10 - 15 - 20 source : nbs. * nbs projection. 2022 * secondary income services current account 2023 * 2024 * primary income goods fdi ( in eur mn ) 1, 000 - 200 - 400 - 600 - 800 nbs transactions in the fx market, monthly ( rhs ) * eur / rsd, monthly average ( lhs ) * * - 1, 000 - 1, 200 source : nbs. * + net purchase ; - net sale. * * eur 1 in rsd. depreciation pressures also stemmed from increased risk aversion amid uncertainty prevailing in the international financial market and households ’ elevated demand for cash in the initial weeks of the conflict. fdi inflow worked in the opposite direction, measuring eur 745 mn in the four months of the year and remaining diversified by project and geographical region. the nbs alleviated depreciation pressures by intervening in the fx market, thereby providing additional fx liquidity to banks, and, in april, also by raising the key policy rate. as a result, the dinar remained almost unchanged against the euro. by preserving exchange rate stability, we prevented the spillover of rising import prices of food and energy to other prices from being compounded by the effects of dinar depreciation, which was the case in previous episodes of robust growth in these prices. by doing this, we also prevented a fall in consumer and investment confidence. at the same time, i wish to reiterate that, thanks to a responsible conduct of economic policy and the proactive measures taken over the past years, we increased our fx reserves in order to be able to use them for responding to crises such as these which we have been facing in the past two years. despite hefty interventions in march, serbia ’ s fx reserves remained adequate at eur 14. 1 bn at end ‐ april, covering five months ’ worth of the import of goods and services, which is almost twice the level prescribed | 1 |
directly with employers helps steer them toward long - term, steady employment. conclusion in conclusion, i am proud that the federal reserve is contributing to the efforts of the p - tech program in the rochester area and i look forward to the video presentations we will have shortly. i want to congratulate in advance the winners of the video competition, who will also be announced shortly. i also want to congratulate all of you for being part of a 21st century education program that will help connect you to pathways of opportunity and help enable you to make important contributions to the vitality of your community. 1 i am grateful to heidi kaplan for her assistance in preparing this text. the remarks represent my own views, which do not necessarily represent those of the federal reserve board or the federal open market committee. 2 p - tech is short for pathways in technology early college high. 3 see lael brainard, “ coming of age in the great recession, ” speech given to the federal reserve ’ s conference on “ economic mobility : research and ideas on strengthening families, communities, and the economy, ” april 2, 2015. 4 for more information on the working cities challenge, see www. bostonfed. org / communitydevelopment / smaller - industrial - cities / working - cities - challenge. aspx. for the dallas fed ’ s work on closing the digital divide, see www. dallasfed. org / cd / pubs. aspx. for the atlanta fed ’ s center for workforce and economic opportunity, see www. frbatlanta. org / cweo. aspx. and on the investing in america ’ s workforce initiative, see www. investinwork. org. 3 / 3 bis central bankers'speeches | the concept had stagnated, and the benefits of specialization and the provision of niche service were recognized instead. i believe that this past experience with business conglomerates could be tempering some enthusiasm for affiliations among the larger financial firms. the difficulty of finding synergies, planning management structures, engaging in post - merger integration, and other management issues may be influencing the willingness of larger firms to affiliate. these same experiences should temper our views of the future structure of the financial services industry. managing much larger, more - diversified firms clearly offers both challenges and benefits. although this business strategy may be optimal for some, it is surely not the best approach for all financial services firms. so what will the financial services industry look like in the future? obviously, no one can say for sure, but i expect that consolidation will continue to occur both within and across segments of the financial industry. the number of commercial banks is likely to continue to decline, but i expect that we will always have a large number of banks in the united states and that they will vary considerably in their size and geographic scope. as one telling piece of evidence, i note that over the 1980s and the 1990s more than 4, 000 new commercial bank charters were granted in the united states. essentially all of these new banks were quite small, but were able to achieve profitability in a relatively short period of time. this having been said, we may well see the formation of a few very large financial conglomerates, but we will almost certainly continue to see many firms, both in banking and other financial businesses, that specialize in providing a narrower range of financial products and services. we will probably see an increase in the number of combinations between u. s. - based and foreignbased entities, but many strictly domestic financial service providers will remain. in short, i believe that diversity in size, product offerings, and geographic scope will continue to characterize the american financial services industry for many years to come. some implications for supervision and regulation what do these trends and projections mean for bank supervision and regulation? a full answer to that question is too tall an order for today, but i would like to highlight what i consider some of the most important implications for maintaining a safe, sound, and competitive banking system. perhaps the best place to begin is with an understanding of the regulatory framework of gramm - leach - bliley. this landmark legislation facilitated the development of truly diversified financial institutions, allowing the market system to decide what arrangements are | 0.5 |
soon, the federal open market committee ( fomc ) will devote time at its regular meetings to assess the lessons from these events, supported by analysis by staff from around the federal reserve system. we will publicly report the conclusions of our discussions, likely during the first half of next year. in the meantime, anyone who is interested in learning more can find information on the federal reserve board ’ s website. 1 let me turn now from the longer - term issues that are the focus of the review to the nearer - term outlook for the economy and for monetary policy. so far this year, the economy has performed reasonably well. solid fundamentals are supporting continued growth and strong job creation, keeping the unemployment rate near historic lows. although inflation has been running somewhat below our symmetric 2 percent objective, we have expected it to pick up, supported by solid growth and a strong job market. along with this favorable picture, we have been mindful of some ongoing crosscurrents, including trade developments and concerns about global growth. when the fomc met at the start of may, tentative evidence suggested these crosscurrents were moderating, and we saw no strong case for adjusting our policy rate. since then, the picture has changed. the crosscurrents have reemerged, with apparent progress on trade turning to greater uncertainty and with incoming data raising renewed concerns about the strength of the global economy. our contacts in business and agriculture report heightened concerns over trade developments. these concerns may have contributed to the drop in business confidence in some recent surveys and may be starting to show through to incoming data. for example, the limited available evidence we have suggests that investment by businesses has slowed from the pace earlier in the year. against the backdrop of heightened uncertainties, the baseline outlook of my fomc colleagues, like that of many other forecasters, remains favorable, with unemployment remaining near historic lows. inflation is expected to return to 2 percent over time, but at a somewhat slower pace than we foresaw earlier in the year. however, the risks to this favorable baseline outlook appear to have grown. last week, my fomc colleagues and i held our regular meeting to assess the stance of monetary policy. we did not change the setting for our main policy tool, the target range for the federal funds rate, but we did make significant changes in our policy statement. since the beginning of the year, we had been taking a patient stance toward assessing the need for any policy | we can turn this crisis to our long - run advantage by reviewing and reforming the structure and regulation of banking. as sir walter scott noted, the failure of the ayr bank in 1772 “ was a terrible [ warning ], and has been so well attended to in scotland … forcing a capital on the district could only lead to wild speculation, instead of supporting solid and promising undertakings ”. of the bankers themselves, scott recognised that, while the majority were “ good men ”, “ there may have been, among so numerous a body, men of a different character, fishers in troubled waters, capitalists who sought gain not by the encouragement of fair trade and honest industry, but by affording temporary fuel to rashness or avarice ”. if unsustainable capital flows provided the fuel and an inadequately designed regulatory system ignited the fuel, the past two years have shown how dangerous it is to let bankers play with fire. this is not a question of blame – as sir walter rightly said, the majority in the industry are “ good men ” and women. it is a matter of the incentives they face. to protect our genuinely successful financial centres – of which edinburgh is clearly one – reform of banking is essential. with that, i am confident that we will have attended to our terrible warning and our varied and internationally competitive financial services industry will thrive. | 0 |
luis m linde : the regulatory responses to the crisis speech by mr luis m linde, governor of the bank of spain, at the fundacion de estudios financieros, madrid, 22 may 2014. * * * good morning and many thanks to the fundacion de estudios financieros for your kind invitation. let me start by recalling that just three years ago i contributed to another book of the fundacion, on the international financial crisis, as we then saw it. as governor of the banco de espana and erstwhile collaborator of the fundacion, it is a pleasure for me to participate in this presentation. knowing the authors ’ profile, i have no doubt the book will make us reflect on how to enhance our financial culture and also on the much - needed recovery, following the crisis of confidence in the financial sector. * * * * * * * my intention today is not to talk once more about the crisis and its causes. i would rather focus on the regulatory consequences of the crisis which, as we all know, have been farreaching and which we cannot consider as complete. that crises should have regulatory consequences has been a fairly frequent occurrence in financial history. you may recall, for instance, that the basel committee on banking supervision was created in 1974, in the wake of the mistrust triggered by the bankruptcy of the german bank hersttat ; that the financial stability forum was set up in 1999, following the bankruptcy some months earlier of the hedge fund “ long term capital management ” ; and that the successor to this forum, the financial stability board ( fsb ), came into being in 2009, after the lehman brothers debacle some months earlier. it is this latter institution, the fsb, which is pushing through a thoroughgoing amendment of the international regulatory framework, seeking to reduce the likelihood of further crises in the future. in this connection, the fsb has benefited from decisive contributions by, among others, the basel committee on banking supervision. identification of initiatives on the international regulatory agenda initially, the fsb identified a series of issues with a view to organising a coordinated agenda of regulatory initiatives at the international level. some aspects of the initial analysis, such as the design of structural measures in the banking sector ( which were, in principle, highly oriented towards setting limits on the size of banks ), were initially rejected by the fsb. however, as we now know, there have been several initiatives along these lines. cases | . • second, workers should understand that inflation cannot be offset by demanding wage increases that are not justified by productivity developments. this would just keep inflation persistently high, as the 1970s experience painfully showed. from the perspective of gdp growth, if we are to see a quick return to our potential, we need flexibility in supply and demand responses. we need to see increased dynamism, particularly in those sectors which are not as directly affected by the current slowdown. other measures are also necessary, such as liberalisation and deregulation policies, to improve competitiveness. policies aimed at improving the human capital of our workers and increasing labour mobility should also be encouraged. finally, a comment on fiscal policy. the current fiscal situation in spain is sound, having ending 2007 with a budget surplus and reduced public debt. indeed, let me recall that our public debt to gdp ratio, at 35 %, is the lowest among the big eu countries. it is important to maintain this stance in the face of the current slowdown. expansionary demand policies could prove counterproductive. we should avoid a deterioration of the budgetary situation beyond that implied by automatic stabilisers. let me turn now to the financial sector. so far, the impact of the recent turbulence on financial stability in spain has been limited. this is largely thanks to the actions of the banks themselves, who have not entered into the kinds of business that have been most directly affected. spanish banks have demonstrated that you do not need to turn to the originate - todistribute model to become an efficient and profitable banking business. plain vanilla, traditional business can be compatible with high returns on equity and efficiency. it also has the added value of implying greater stability. but i think that the bank of spain ’ s approach to supervision has also had a positive effect. let me emphasise two key characteristics in this respect. • the first characteristic, which has set us apart from other supervisors, has been our strong role in accounting rule - making for the banking sector in spain. this has meant that the accounting rules for the banking sector take into account supervisory sensitivities, whilst being also consistent with ifrs. one example of this is the socalled “ dynamic provision ”, which we introduced in 2000. this allowed spanish banks to build up a significant provisioning buffer in a transparent manner, to be used in bad times, when problem loans increase. in 2005, the bank of spain reformed the dynamic provision when adopting international financial reporting | 0.5 |
services, services for amusement and hobbies, and transport. 2. in the right - hand chart, the forecasts presented are the medians of the policy board members'forecasts in the october 2022 outlook for economic activity and prices ( outlook report ). the values of real gdp for fiscal 2022 onward are calculated by multiplying the actual figure for fiscal 2021 by all successive projected growth rates for each year. sources : ministry of economy, trade and industry ; cabinet office ; bank of japan. chart 3 i. recent economic and price developments and the bank's conduct of monetary policy prices the boj's forecasts for the cpi crude oil prices y / y % chg. fy 2022 + 2. 9 % $ / bbl fy 2023 fy 2024 + 1. 6 % + 1. 6 % forward month futures prices - 1 - 2 fy 13 14 15 16 17 18 19 20 21 22 23 24 fy 13 14 15 16 17 18 19 20 21 22 23 24 notes : 1. in the left - hand chart, figures are the cpi for all items less fresh food, excluding the effects of the consumption tax hikes, etc. the forecasts presented are the medians of the policy board members'forecasts in the october 2022 outlook report. 2. in the right - hand chart, figures are futures prices of west texas intermediate ( wti ). figures through november 2022 are monthly averages, while the figure for december 2022 is the average for december 1 - 22. figures for forward month futures prices are those as of december 22, 2022. sources : ministry of internal affairs and communications ; bank of japan ; bloomberg. i. recent economic and price developments and the bank's conduct of monetary policy chart 4 modification of the conduct of yield curve control ( ycc ) impact of increased volatility in overseas markets deterioration in japan's bond market functioning relative relationships among interest rates of bonds with different maturities arbitrage relationships between spot and futures markets possibility of a negative impact on financial conditions yields on japanese government bonds ( jgbs ) are reference rates for corporate bond yields, bank lending rates, and other funding rates. jgb yield curve ( before the december 2022 mpm ) 1. 6 1. 4 1. 2 1. 0 0. 8 0. 6 0. 4 0. 2 0. 0 - 0. 2 % years source : bloomberg. measures decided by the | are mostly unchanged mainly due to the decrease in prices of electric machinery. meanwhile, consumer prices continue to be somewhat weak owing to the slight decrease in the prices of private - sector services and the decline in prices of imported products reflecting the past appreciation of the yen. corporate service prices are still falling slowly. this report was written based on data and information available when the bank of japan monetary policy meeting was held on 11 august 2000. the bank ’ s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on 11 august 2000 as the basis of monetary policy decisions. as for the outlook on prices, downward pressure on prices stemming from weak demand is declining significantly while an economic recovery is expected to continue moderately. upward pressure on prices is likely to arise temporarily from the increase in crude oil prices. on the other hand, in addition to the declining trend of machinery prices due to technological innovations, the decline in prices of consumer goods arising from the past appreciation of the yen and the streamlining of distribution channels will exert downward pressure on prices. thus, prices overall are expected to be stable or weak somewhat. in the financial market, the overnight call rate has generally stayed near zero, and financial institutions have been confident about the availability of overnight funds. the amount of funds outstanding in the call money market has decreased slightly. interest rates on term instruments once declined from mid - july, but have recently increased again reflecting the change in expectations that the zero interest rate policy would be terminated. the japan premium remains negligible. yields on long - term government bonds recently increased somewhat, and has been around 1. 75 percent. the yield spread between private bonds ( bank debentures and corporate bonds ) and government bonds remains mostly unchanged as a whole. stock prices fell from mid - july mainly due to the filing of reconstruction proceedings by a major retailer and the decline in u. s. stock prices. in the foreign exchange market, the yen fell moderately towards the end of july and the yen - dollar exchange rate temporarily rose to around 110 yen. the yen is currently being traded in the range of 107 - 109 yen to the u. s. dollar. with regard to corporate finance, private banks have basically retained their cautious lending attitude. however, constraint that had been caused by severe fund - raising conditions and insufficient capital base has eased considerably. given this, major banks continue to be more active in extending loans, while carefully evaluating the credit risks involved. on the other hand, the | 0.5 |
patrick honohan : good times and bad for a globalised economy – macroeconomic policy lessons from ireland address by mr patrick honohan, governor of the central bank of ireland, to the gilman rutihinda memorial lecture, bank of tanzania, dar es salaam, 12 august 2011. * * * the lecture draws freely on the output of the research project “ turning globalisation to national advantage : economic policy lessons from ireland ’ s experience ”, part - funded by the irish council for the humanities and social scientists and led by profs frank barry, john fitzgerald and iulia siedschlag and the author. thanks to eddie casey, peter dunne, suzanne linehan, yvonne mccarthy, kieran mcquinn and gerard o ’ reilly for assistance and comments. the global crisis has left no part of the world unaffected. tanzania may have weathered the crisis better than many, but even here an externally - driven credit crunch resulted in a temporary growth set - back in the period 2008 – 9. market turbulence has increased again, but i do not want to discuss those very current matters today. after all, it is not only the immediate and direct impact that needs to be considered arguably more important is to reflect on the lessons that are to be learnt in terms of how a relatively small economy should be positioned in regard to global trade and finance in order to survive well from that experience. in order to learn those lessons, there is no more instructive example than that of ireland, albeit a country in a very different state of development to that of tanzania. after all, ireland is one of the most globalized economies in the world, and it consolidated this position in the period 1986 – 2007, during which aggregate living standards rapidly converged to those of the world ’ s leading economies. during that apparently highly successful period – dubbed the “ celtic tiger ” commentators – ambitious countries at lower levels of per capita income, such as tanzania, began more and more to look to ireland as a potential model against which to evaluate their own growth strategies. but ireland ’ s navigation through the hazards of the emergent global economy hit severe shoals in 2007 – 8, since when an acute economic contraction has seen per capita gnp fall – faster than almost anywhere else – back to the levels of 2000, a return to high net emigration reflecting job losses and high unemployment, and a loss of access to financial market access reflecting international financial market concern at the extent of bank losses and the sustained jump also | counties. reducing poverty is a major challenge for policymakers. the new york fed ’ s measures of regional credit conditions suggest continued financial challenges for families here. as of the second quarter of 2012, for those people with a credit report, average debt per person in new jersey was about $ 63, 000, roughly unchanged over the past several years. delinquency rates on that debt are high : 8. 4 percent of all debt in the state is seriously delinquent, up from 7. 4 percent in 2011 and above the national rate of 6. 7 percent. so, many new jersey households are still struggling with their finances. although there are some recent signs that home prices in the state are starting to firm, nevertheless, the housing crisis continues to take a toll on our homeowners. as of june, 9. 3 percent of all mortgage debt in new jersey was 90 - plus days delinquent, three percentage points above the national rate. and that delinquency rate is actually a little higher here in northern new jersey. national economic conditions the performance of the u. s. economy since the end of the recession in 2009 has been disappointing. real gdp has grown at an annual rate of just over 2 percent over this period, and it was even slower in the first half of 2012. as a result, employment gains have been modest, unemployment remains above 8 percent – an unacceptably high level – and participation in the jobs market remains depressed. moreover, about 5 million workers have been unemployed for six months or more. this is important because long - term bis central bankers ’ speeches unemployment can cause job skills to atrophy making it more difficult for such people to find jobs in the future. while the good news is that the job - finding rates of the long - term unemployed have not yet deteriorated as many feared, we ought not to take this for granted going forward. although energy prices have begun to rise again, total inflation, as measured by year - overyear changes of the consumer price index, is still around 1¾ percent – less than half the rate in september of 2011. in recent months, core inflation has also slowed and it is now also under 2 percent. higher energy and grain prices mean that headline inflation will likely edge somewhat higher for a few months before moving slightly lower again. but measures of the underlying rate of inflation are moderate, wage gains remain subdued, and longer - term inflation expectations are fully consistent with our longer run inflation objective of | 0 |
is that central banks could be left with a responsibility for overall financial stability that is neither clearly defined nor supported with the necessary powers or access to information to discharge it. so where separate supervisory authorities are being established, it is important to set up a structure that promotes the necessary exchange of c a e goodhart : “ the organisational structure of financial supervision ”, fsi occasional paper no 1, bis, basel, 2000. information and coordination. much attention is being given to this subject in the united kingdom, japan and other countries where new supervisory structures are being put in place. my argument in this lecture, however, is that even with these developments, the basic conceptual framework for the promotion of financial stability is not fully adequate. it tends to see the interrelationship between monetary policy and financial supervision as being important in managing crises, rather than in their origination. there is not sufficient focus on the genesis of financial instability. it is this framework that i wish to try and broaden. my conjecture is that the relationship between monetary and financial stability runs deeper than is often imagined. more specifically, the pursuit of price stability can sometimes allow financial imbalances to arise inadvertently, and can sow the seeds of subsequent instability. conversely, the pursuit of prudential objectives, institution by institution, can take inadequate account of feedback mechanisms that can exacerbate macroeconomic cycles. allow me to elaborate on these points. beyond the current debate : the genesis of financial instability i will begin with two observations to support my conjecture that monetary and financial stability cannot be put in separate compartments and separately pursued. my first observation is that since the 1980s inflation has been largely conquered, and yet financial instability has, if anything, intensified. it has taken the form both of price misalignments and widespread financial distress, both in industrial countries and emerging market economies. exchange rate relationships have been highly volatile, and “ bubbles ” appear to have emerged and occasionally burst in property and equity markets. bond yields, too, have varied over a wide range. in financial systems, there have been highly damaging crises in the nordic countries, in japan, in east asia and in mexico. several common features of these episodes of instability are worthy of comment. first, they occurred in circumstances where inflation was either not a threat, or was on a downward trend. in a liberalised financial system, the absence of inflation is therefore a necessary but not sufficient condition to avoid financial instability. secondly, systemic problems were not caused by | ##ies ). in implementing prudential policies, supervisory authorities may require a keener recognition that some of the main roots of systemic instability have been macroeconomic. one common macroeconomic element behind overextension in the financial system has been misjudgements about the economy ’ s potential growth rate – a major factor in japan in the 1980s and in south - east asia in the mid 1990s. another element is that financial market sentiment tends to move with the business cycle. many of the dilemmas of policy arise because it is difficult in practice to distinguish what is cycle and what is trend. likewise, in framing monetary policy, central banks may require a keener recognition of the role of monetary policy in unintentionally accommodating the credit expansion that contributes to the build up of financial imbalances. in developing these themes, i will try to derive some operative conclusions both for the monetary policy and the supervisory function. the structure of what i have to say is as follows : i will begin by recalling, in a somewhat stylised manner, the current debate on the relationship between monetary and financial stability. next, i will broaden the focus so as to bring out some of the under - appreciated aspects of this relationship. finally, i will try to draw some policy implications, both for the monetary and the supervisory authorities. the current debate the conceptual framework underlying the current debate is one in which the two objectives of monetary and financial stability, and the instruments used to achieve them, can be largely separated. the monetary authorities direct interest rate and credit policies towards a clearly defined objective of price stability. increasingly, this is being done in the framework of inflation targeting, though hong kong, for reasons related to both its history and its economic structure, has chosen to anchor its monetary policy on an external peg. against a background of price stability, financial stability is seen to be assured by rigorous prudential supervision, targeted at the risk management practices, and the solvency of individual institutions. within this broad conceptual framework, there are areas of agreement and disagreement. it is generally agreed that there is a clear division of responsibility between the monetary policy function and the prudential supervisory function. and it is accepted that information needs to be exchanged and actions coordinated, particularly during periods of financial turbulence. but otherwise, little need is seen for continuous interaction between the authorities responsible for these two functions. where disagreement has arisen is on the subject of whether supervisory functions should be placed in the central bank or | 1 |
was given to the bank of albania ’ s target, that is keeping up the annual inflation rate within the limits of 2 - 4 percent. in hitting this target, the monetary program aims the control of money supply growth so that the level of real monetary assets responds to the real needs of the economy for a 6 percent economic growth. the economy demand forecast does still rely on the quasi - constant velocity forecast of money circulation. this forecast, judging from the nominal gdp level, is the bridging gap between inflation and money supply growth ( intermediate objective ). the monetary program guarantees the observance of quantitative objectives set by the bank of albania, the level of nda and nir of the bank of albania within the limits and the control of government ’ s domestic borrowing at the level of 2. 7 of the gdp. 3. 1 money supply and its constituents money velocity is forecasted to be relatively stable during 2004. this assumption is based on keeping up the monetary developments trends of 2003 even for 2004. thus : • inflation is expected to be within the target of the bank of albania • interests rates are expected to be stable or in downward trend • the government demand, which is also the main source of requiring funds, is expected to be at the same level, 2. 7 percent of the gdp • the growth rate demand for the economy is expected to be almost the same as the 2003 one. based on these considerations, the m3 circulation velocity - as to trimesters - is presented as follows : table 3. money circulation velocity in 2004. ( gdp as to trimesters * 100 / m3 ) dec'02 march june 42. 9 43. 9 43. 9 september dec'03 42. 9 42. 9 march june 44. 1 43. 3 september dec'04 43. 2 43. 1 based on this forecast, the money supply is expected to grow by 10. 6 percent or by lek 47. 4 billion. 3. 1. 1 money supply constituents the ratio of money outside banks versus the money supply noticed during 2003 is not expected to undergo significant changes during the coming year. however, an upward trend of the foreign currency deposits ratio versus m3 is expected, bringing about a decrease of the lek deposits weight versus money supply. foreign currency deposits are expected to have a considerable annual increase, of about 18. 2 percent, or lek 17. 7 billion, by the end of 2004. table 4. money supply growth as to trimesters ( in | are basically family - run businesses, have a greater need to cooperate with non - bank financial institutions, due to difficulties they have in fulfilling the requirements for collateral or detailed financial documentation, criteria that banks require. this is another argument that leads to the logical conclusion that, in addition to own capital and bank credit, these enterprises would benefit greatly from other segments of the financial market. the low level of financial inclusion of the population is another element that prevents the deepening and expansion of the financial market in albania. latest data from the world development indicators show that only 38 % of adults have an account with a financial institution, while only 6 % and 22 % of adults have a credit card and a debit card, respectively. financial inclusion may not be increased only through the banking system. the financial system, especially the capital market and the corporate securities market should play a significant role in increasing financial inclusion. i take this opportunity to emphasise that, in addition to the need for expanding and deepening the financial market, it is necessary to increasingly pay attention to the management of risk that accompanies any financial investment. we are witnesses of a rapid technological evolution, which has practically eliminated physical boundaries, has eased access to electronic investment platforms, and has rendered very difficult the supervision and regulation of many innovative financial instruments that are traded in these platforms. the phenomenon of informality coupled with the speed of innovation in the field of financial instruments are a real risk for every investor that is naively driven by profit and does not stop to analyse the magnitude and nature of risk to which he is exposed. anyhow, inclusion should take place carefully, relying on specialised financial intermediaries and auxiliaries, whose activity is regulated and supervised by a legitimate authority in albania or abroad. dear participants, the depth and expansion of the financial markets determines the set of financial instruments eligible for trading, in a broad spectrum from the maturity perspective. these instruments are nothing more than consecutive steps in the monetary policy decisions pass - through mechanism. the whole process of instrument trading serves to determine the value of assets, the price of risk and savings, and, eventually, the propensity toward consumption, savings or investments. in this sense, the existence, completeness, and effectiveness of the financial market play a significant role in the monetary policy pass - through. this is the reason why the central bank places its focus on these markets and on their proper functioning. based on these specific reasons, the bank of albania has initiated, time ago | 0.5 |
by borrowing gold from the central banks and reselling it immediately. this increases the amount of gold offered directly on the market. the gold lent by the central banks flows back to the lender upon expiration of the forward contract. if the mining companies hedge less, the gold on offer is reduced correspondingly. in the second half of the 1990s, gold producers massively expanded their hedge positions, which led to an increase in supply and thus contributed to depressing the gold price. since 2000, and especially in recent months, the picture has changed. the mines have opted for another strategy and have cut back on price hedging. this strategy change can be partly attributed to more positive expectations regarding the gold price. as a result of the central bank agreement on gold sales, producers no longer fear large - scale sales by the central banks. moreover, it seems that producers have recently become more upbeat in their assessment of private investment demand. it is interesting, in this respect, that gold producers'hedging activity tends to accelerate market trends. when they expect price decreases, prices do in fact decrease faster as a result of hedging, and when they expect price rises, prices do rise faster owing to the decrease in hedging. such strategy changes, which are always due to changed market expectations, have to be reckoned with in future as well. • reviving private investment demand in the industrialised countries has also contributed to giving the gold price a boost. this phenomenon has been particularly pronounced in japan, but europe and the united states have also seen gold demand booming. economic imponderables, concern over the financial health of some companies, heightened political tension in different parts of the world, the terror attacks of september 2001 and concomitantly subdued stock markets have caused investors to increase their holdings of the yellow metal. it seems as if gold is, for the time being, once again assuming its role of a safe haven investment. • fabrication demand for gold, by contrast, for jewellery as well as for industrial uses, has contracted in recent months. in the industrialised countries, this decline has been mainly brought about by the economic slowdown. the high gold price, however, has also played a role, especially in developing countries. in countries such as india, which accounts for a quarter of gold demand, the precious metal is held in the first place for saving purposes. investors use a more or less fixed portion of their disposable income to purchase gold. in | german agreement on a fiscal capacity is welcome and also has important political significance for european integration. building up the esm rescue fund is more urgent. we also need to complete the banking union and the capital markets union without undue delay. the banking union envisages a common deposit insurance scheme. germany has serious misgivings that this would amount to risk - sharing. a common deposit insurance is essential for the completion of the banking union and to underpin the confidence of all depositors in the financial system. this protection of deposits up to €100, 000 will be funded by contributions from banks. but this scheme is just one of the components that are necessary to make the banking sector more resilient and safeguard financial stability. it is of the utmost importance to implement the rules for bank resolution which stipulate that at least 8 % of banks ’ liabilities should be made up of instruments that could absorb losses in the event of bank failure. in my view, all of these instruments should be either equity or subordinated bonds so that all customer deposits would be effectively protected. we have now talked a lot about problems. let ’ s now ask what you see as the greatest achievement of the euro? citizens have overwhelmingly embraced the euro. people appreciate how it brings europeans closer together. many aspects of everyday life have become easier, such as doing business or travelling. the level of acceptance is high in all euro area countries. let ’ s look ahead : your term of office expires at the end of may. do you have any regrets? i am confident that the sustained convergence of inflation to a level below, but close to, 2 % over the medium term will proceed. i will be here for another six months, and i expect to see further progress towards our aim by the end of my mandate, but i will clearly have to leave before the normalisation of our monetary policy. to be successful in our monetary policy we need to be patient, prudent and persistent. 4 / 4 bis central bankers'speeches | 0 |
will act because they know that the objectives of the terrorists are totally beyond the pale. these are not innocent political dissidents exercising their democratic rights. they are ruthless fanatics, quite willing to destroy innocent lives in order to create civil strife and animosity between communities and countries, shake confidence in southeast asian economies and their legitimate governments, and weaken the basis of the states. they cannot succeed, but they can cause great harm in trying. provided the governments respond vigorously to the extremist threat, they can contain the problem and gradually restore confidence to the region. access to markets third, southeast asian economies need to boost external demand by strengthening their access to the major developed markets. in the short term, there is little we can do about the cyclical downturn. but for the longer term, favourable and assured access to key trading partners will allow southeast asian countries to maximise benefits from free trade and globalisation, and make themselves more attractive to investors. one basic approach is to promote multilateral trade, and contribute to a successful outcome of the doha development agenda of the world trade organisation ( wto ). but we need to complement the multilateral approach with bilateral free trade agreements ( ftas ) with our key trading partners. this is why singapore is actively pursuing an fta strategy. we have concluded ftas with new zealand, japan, and the european free trade area ( efta ), and hope to conclude agreements with the us and australia very soon. singapore ’ s aim is not just to boost our own trade links with our fta partners, but also to catalyse broader economic engagement between asean and its trading partners. this is indeed happening. after new zealand concluded its fta with singapore, australia and new zealand proposed starting a closer economic partnership agreement with asean. last year, asean and china agreed to set up an asean - china fta within 10 years. weeks later, prime minister koizumi of japan proposed a japan - asean comprehensive economic partnership, to be modelled on the japan - singapore bilateral agreement. similarly, we hope that the us - singapore fta will become a model for a usasean fta in the longer term. these link - ups show that asean is not turning inwards and away from the global economy, and will give asean a valuable edge as an investment destination. singapore ’ s economic restructuring : philosophy & initiatives given this bracing environment, singapore is at a turning point in our economic development. the whole landscape has changed. we | convenience. although cash is widely used and accepted in our society today, e - payment alternatives such as mobile payments and electronic wallets are gaining popularity. the “ tap - and - go ” feature of contactless cards is much in sync with the hurried lifestyles of today, hence the growing popularity of these cards. convenience is an important consideration in developments within the cashless space of payments. in 2008, for the first time, giro overtook cheques by volume of transactions in singapore. in fact, giro itself – which is based on batch processing – will be eventually overtaken by straight - through, real - time payments systems. the third “ c ” is cost - effectiveness. handling cash is costly. according to a 2010 study by retail banking research, the cost of distributing, managing, handling, processing and recycling cash in europe is estimated at €84 billion. this is equal to 0. 6 per cent of europe ’ s gdp. how to reduce the cost of cash without compromising confidence and convenience? a number of countries are exploring alternative note substrates and coinage materials to increase their durability, quality, security, and cost effectiveness. besides managing manufacturing costs, countries are looking at the end - to - end costs of currency distribution and collection. some have outsourced their currency functions, while others have automated their currency facilities to improve efficiency in currency processing. in singapore, we began automating currency processing and warehousing operations in 2000. today, singapore has one of the few fully automated currency handling facilities in the world. conclusion all of us gathered here share a common objective in establishing a secure, convenient, and cost - effective payment system. it is important for central banks and key industry players to engage one another and share best practices and lessons learnt. the currency conference serves this purpose. we have a large turnout from some 75 countries. we have many excellent speakers, and a diverse cast of delegates. i hope all of us can benefit from the sharing of experiences and the networking opportunities provided by the conference. i wish you all a successful and fruitful conference ; and to our guests from abroad, an enjoyable stay in singapore. bis central bankers ’ speeches | 0.5 |
rest of the world could lead to strong capital inflows. this could in turn fuel asset prices, thereby increasing the risk to financial stability which could undermine the process of economic recovery. indeed, some countries in the asian region are already facing these issues and have introduced measures to reduce the risks associated with capital inflows. for malaysia, however, it should be noted that the financial industry, the private sector and the country have the capacity to manage these challenges, given the stronger overall financial conditions in the country, low levels of corporate leverage, a sound banking system and a strong external balance of payments position. beyond the immediate priority of establishing economic recovery and preserving macroeconomic stability, it is also acknowledged that the malaysian economy currently stands at a pivotal juncture. in order to secure continued medium and long - term growth and development, the structure of the economy has to undergo several important changes – changes that would better position malaysia in meeting the new challenges and reaping the opportunities that the future asian and global landscape brings. foremost, the events of the past two years have brought to the forefront the importance of having a more balanced and diverse model of development. malaysia ’ s openness and integration with global trade and investment flows is an important source of our economic strength, and must remain so going forward. however, given the more dispersed growth prospects of the global economy in the future, it is important that the export structure of malaysia evolves to be more diverse too. this will both increase our economic resilience and decrease our reliance on the traditional markets for our export growth. encouragingly this trend of export market diversification has already started before the onset of the crisis. a decade ago, the share of malaysia ’ s exports to emerging and developing economies were below 50 % of our total exports, but now, the figure has exceeded two - thirds. going forward, it is important that this trend is reinforced. however, to achieve a more balanced growth, we need to not only leverage on our competitive advantage in the external sector, but also expand the strength of our domestic sector. since 2003, domestic demand has been a main contributor to our economic growth, especially private consumption, in which growth has consistently outstripped that of the overall economy. going forward however, a more sustainable balanced growth would require higher contribution from private investment. it is important to recognise that no country has ever managed to consume its way to prosperity. both economic theory and the history of economic development point to the lesson that high - | ##rted. now, a new world is emerging, one that is very different from the one before the crisis. in this new world, the prospects for asia is encouraging, in both contributing to and assuming greater responsibility for supporting global stability and longer - term growth. for malaysia, sustained growth and successful transformation of the economy towards a higher level of development would depend crucially on how we prepare ourselves in facing the coming challenges and seizing the emerging opportunities. | 1 |
and international trade in the second era of globalization ’, journal of economic perspectives, volume 21, 3, 2007, pp. 131 - 154. f. p. hochberg, ‘ the iphone isn ’ t made in china : it ’ s made everywhere ’, the wall street journal, 31 january 2020. been lifted out of poverty. 7 this phenomenon has been so pronounced that between 1980 and 2008 the centre of gravity of global economic activity moved some 5, 000 km eastwards. 8 this shift in trade has also been accompanied by geopolitical shifts. * * * for all the successes i have listed, we must acknowledge that globalization has also created vulnerabilities. some have only recently become apparent. others have been brewing for a long time. 9 this brings me directly to the issue of global fragmentation. the covid - 19 pandemic and the geopolitical tensions following russia ’ s aggression against ukraine have highlighted the vulnerabilities associated with over - reliance on single suppliers or regions. these events have shown how specialization can improve efficiency but also lead to excessive concentration, creating bottlenecks in global supply chains. interdependence is increasingly perceived as a source of risk to national security. examples include the sudden interruption of russian gas flows to europe, or china ’ s export quotas on gallium. at the same time, several advanced economies have curbed technology exports to non - aligned countries. 10 geopolitical blocs are now considering how to manage specialization and international trade to ensure their supremacy in the race for technology. companies are already taking note. 11 geopolitical considerations are becoming more important in their foreign direct investment decisions. 12 in the european union ( eu ), companies have begun to implement de - risking strategies, mainly by replacing chinese suppliers with eu - based ones. 13 globalization is not over, but the geography of trade is changing. 14 at the global level, inequalities have decreased since the 1980s thanks to a reduction in the gaps between countries. see l. chancel, t. piketty, e. saez and g. zucman ( coordinators ), world inequality report 2022, world inequality lab, 2022. d. quah, ‘ the global economy ’ s shifting centre of gravity ’, global policy, volume 2, 2011, pp. 3 - 9. f. panetta, ‘ the future of europe ’ s economy amid geopolitical risks and global fragmentation ’, lectio | trust of our governments and are independent from politics that we can do what we have to do : ensure financial stability and confidence in the financial system. 1 / 4 bis - central bankers'speeches to play our part in building and managing a reliable financial system that ensures a stable and responsible provision of credit to the real economy, that ensures that citizens and companies can build their future, in the knowledge and confidence that their money is safe. in the knowledge, in the confidence, that they can pay their bills without any problems and that they can get credit to buy a house or start a business. that is our role in the team. to play that role best, it is important that we work together with the other team members. not only with the government, but also with other central banks, the financial sector and with the business community. i am therefore happy to be here now to further strengthen our ties with the central bank of curacao and st. maarten and with your business communities. i am also happy to be your guest today, because i know that you can and want to play an important role in the transition to a sustainable economy here on curacao. your actions make that clear. for instance, in the financial sector. i start there, because it is the sector i know best. but also because the financial sector is the hub for bringing savings and investments together. the hub that ensures that entrepreneurs can do business. the financial sector can only be a sustainable sector if it it focuses on more than just large companies. it is a sustainable sector if and when it also finances small and medium - sized enterprises. the cbcs is working hard to make this possible. why is this important? because this is how the financial sector can become more diverse and more inclusive, and therefore more sustainable. another way to make this happen is by providing basic payment accounts to people who currently do not have access to banking services. and by empowering those who are less experienced with financial matters to understand how the system works.. and, if necessary, by promoting digital skills. the cbcs is involved in all of this. a sustainable financial sector is also a sector that combats money laundering. it is very promising that a national risk assessment has been carried out in curacao. and that sint maarten is working hard to make this happen too. this assessment makes clear what the remaining vulnerabilities are. i hope and expect that these will be sufficiently addressed before the | 0 |
mario draghi : central bank communication opinion piece by mr mario draghi, president of the european central bank, of the edited transcript of his speech at the pr manager of the year award ( 15 july 2014 ), published in handelsblatt, 4 august 2014. * * * today, central bank communication is right at the heart of monetary policy. it is actually a monetary policy tool in itself. even for those with little interest in central banking, it is difficult to avoid the pronouncements of one or other of us in the newspaper. those people may even end up reading the articles, if only because central bank communication can have a major impact on financial markets – and hence on their savings. central bank communication was not always so extensive. think back to the days when the most important central bank in the world – the federal reserve ( fed ) – would not even publish its interest rate decisions ; rather, it would let the outside world derive them from the market reaction. today, this sounds unbelievable. but it was only in 1994 that the fed decided to make its interest rate decisions public in real time. designed between 1994 and 1998, the european central bank ( ecb ) was born at the start of a new era for central banking. two developments during this period raised the importance of communication. first, the increasing independence of central banks made it more important to communicate with and be accountable to the public. second, against a backdrop of liberalising financial markets, the effectiveness of monetary policy became more and more dependent on steering expectations of future interest rate policy. in the first case, the main challenge for the ecb was to reconcile three attributes of central banks that do not immediately fit together : being very powerful and independent yet unelected. the best example of a country that had done this successfully was germany. its answer was to uphold the deutsche bundesbank ’ s independence but to constrain its powers within a narrow mandate. and the contours of that mandate were not set by the central bank itself, but by legislators, who themselves were democratically elected. this model has worked because, by sticking closely to its mandate, the bundesbank has gained the trust of the people. it has cultivated this trust by actively communicating the rationale for its mandate and its plans to achieve it. this inspired the ecb ’ s founding fathers to give the ecb an equally clear and narrow mandate oriented towards price stability. and we have established trust by clearly communicating that mandate and | , of course, delivering it. this task is more complex for the ecb, however, than it was for the bundesbank in the past or the fed today. building trust among the 335 million citizens of the euro area is a major communication challenge. we are communicating in 18 countries using 15 different languages. in all these countries, citizens ’ expectations are different. for example, my predecessor as ecb president would tell me that if he took a walk in frankfurt, people would often ask him “ when are you finally going to raise interest rates? ” but if he took a walk in another major city just a few days later, people would ask him “ when are you going to lower interest rates? ” we deal with this plurality by making use of the inherent advantage of having a eurosystem of 18 national central banks – that is, having communications departments in each country that make our messages heard and understood in the local context. but this remains a continuous challenge. the ecb also plays its part in building trust by opening up to the public. from the outset, we have taken a lead on transparency : for example, we were the first major central bank to offer monthly press conferences. but in these challenging times, when monetary policy has become more unconventional, we cannot stand still. that is why we have taken another step forward : from the start of next year we will publish summaries of the monetary policy bis central bankers ’ speeches meetings of the governing council. this will be an additional way to explain our actions and the discussions that inspired them. we are currently working on finding the right format by conducting test runs. after all, we want these summaries to be understandable to interested members of the public. only that way can they be fully effective. bis central bankers ’ speeches | 1 |
within single digits – standing at 4. 0 percent • the difficulties in the foreign exchange market will dissipate in the coming weeks bis central bankers ’ speeches • business confidence is cautiously optimistic and should be bolstered by a successful conclusion to the clico resolution, which is underway. therefore it ’ s not all doom and gloom. at the same time, we at the central bank are not complacent. we recognize the significant threats faced by emerging markets such as trinidad and tobago ’ s in the still uncertain global economy. we see the obstacles that are on our road to recovery. the central bank continues to monitor the economic landscape and exercise our monetary options. as business leaders and stakeholders, we encourage you to take your place and be the positive change you want to see in trinidad and in tobago. i thank you. bis central bankers ’ speeches | double - digit growth to march 2014, and there has been an increase in property prices, there is no compelling evidence to suggest overheating in the residential property market. more importantly, commercial banks have maintained their prudent mortgage lending standards. over the past few years, the government ’ s budget has been the main stimulus supporting economic recovery. the non - energy budget deficit is the key indicator of whether government is engaged in fiscal stimulus activity. after running a non - energy fiscal deficit of just over $ 19 billion in 2012 / 2013, the central government ran a non - energy budget deficit of $ 12 billion in the first six months of fiscal 2013 / 2014. at this pace the government is likely to meet its projected budgeted stimulus for the entire fiscal year. foreign exchange ladies and gentlemen, i now turn to a matter grabbing headlines and generating intense interest in the country over the past few months, and the reason i suspect most reporters are here this morning ….. to grill me about - foreign exchange. there have been many opinions circulating on this topic and i will say in most cases these opinions are uninformed. the foreign exchange matter came to a head last week when this sensitive issue entered the political domain with comments made by those who displayed little knowledge and understanding about the central bank ’ s role in the domestic foreign exchange market. so please allow me say a few words about the central bank ’ s actual role in the foreign exchange market. first, the bank seeks to foster orderly conditions in the market, mainly by meeting the gap between the demand for, and the supply of, foreign exchange. this gap arises because the general public and the business community usually consume more foreign exchange than is generated by companies in the energy sector which are our main suppliers of foreign exchange. demand for foreign exchange is continuous throughout the year but the supplies come in at discrete intervals. this leads to periodic tightness in the domestic foreign exchange market which the central bank alleviates by selling foreign exchange from its stock of official reserves to the banks. second, until april 2014, the central bank was using a twenty year - old system to sell and distribute foreign exchange to the banks. as an aside, i was part of the team at the central bank that instituted this distribution system following liberalization of the foreign exchange market in april 1993. this system served the market well, particularly in the early years. over the past 20 - odd years, however, there was little, if any, modification this arrangement even though the economy | 1 |
##ctual analysis is inherently impossible, and i will not pretend to know the answer. but let me just say that we have been happy to sit out the storm within the euro area rather than outside it. the exchange rate is not a straightforward policy instrument. although in principle, it may support faster adjustment of real imbalances, experience has shown that it becomes difficult to control precisely when the challenges are greatest. in times of crisis, the exchange rate tends to respond to financial disturbances rather than to real imbalances and, more often than not, it becomes a constraint on policies rather than a useful adjustment channel. membership in the euro area eliminates one potential adjustment channel, but above all, it eliminates a major source of uncertainty at times when uncertainty is already high. we are glad to accept that trade - off. the final viewpoint to euro membership relates to the role of a small national central bank in the decision making process of a large currency union. decision making in the eurosystem : getting your voice heard this is one aspect of the single currency that is often misunderstood ; what actually is the role of national central banks in the ecb and in the eurosystem? over the past ten years we at the bank of finland have been asked often why the bank of finland still matters. isn ’ t everything decided in frankfurt? what is the role of national central banks? how do the ecb and eurosystem operate? as a result of the maastricht treaty and practices established over these ten years, the institutional structure of the eurosystem is carefully balanced. the hub remains relatively small in comparison to the spokes. in important ways, the eurosystem remains highly decentralised. all important decisions are taken by the governing council, which usually meets in frankfurt. a large majority of the council ( all but six members of the executive board ) are governors from national central banks. they sit around the table making decisions in their personal capacity as members of the governing council, not as representatives of their countries. they are fully independent in this role as are the members of the european commission or the european court of justice. but when each of them is also a head of a national central bank, it is clear that their staff is deeply involved in preparing all issues on the agenda of the governing council meetings. so when the governor takes off to frankfurt, he is thoroughly prepared and carrying loads of papers and briefing notes in his briefcase. the single currency has delivered many important benefits | 2000, 32 %, of the total workforce in finland had achieved tertiary education, while the eu15 average was 24 %. educated labour force has fostered innovation and increased the innovation absorption capacity. supply of science and technology graduates has helped to maintain the salaries of researchers and engineers in the itc - cluster moderate, in spite of strong demand. strong current account and international diversification of investment portfolios the growth of the ict industry is reflected in the current account, which has been in surplus since 1994. the emergence of large current account surpluses is a marked difference with the past. besides competitive open sector and strong growth of exports, the current account surpluses reflect a rather subdued growth of domestic demand after the crisis of the early 1990s. the corporate sector adopted a more cautious investment policy line by reducing its debt exposure and increasing its buffer stocks. the general government sector has been in surplus for years. as a consequence of international diversification of investors'portfolios, non - residents'holdings of shares in the finnish stock exchange rose to over 70 % of the total market capitalisation in 2000. this greatly reduced the exposure of the finnish economy to the ict asset price bubble at the turn of the century, as the main ownership risks were born by foreign investors. prudent fiscal policy as to economic policies, after the crisis in the early 1990s there was a clear need to adopt policies which would be compatible with the free movement of capital across national borders. broad support has developed for stability oriented fiscal policy as a basis for more long - term stable economic development. in line with this, public finances were consolidated. in recent years fiscal policy has been effectively based on explicit policy rules such as spending limits covering the whole electoral term. as a result of prudent fiscal policies, the general government sector is in surplus. the surplus ratio is on the level of 2 – 3 % and is expected to remain so. established social dialogue established social dialogue has been helpful in the implementation of some reforms. recently a major pension reform was agreed between employees, employers and the government. in the reform, which has already been implemented, two early - retirement schemes were abolished. there will be a longevity coefficient linking pensions to life expectancy, and benefits will be calculated on the basis of the whole lifetime income and not the last working years only, as earlier. this has improved the stability of the financing of the pensions, but challenges still remain. collective wage agreements play a relatively prominent role in shaping the relationship between employee and | 0.5 |
better forward - looking economic decisionmaking by households and businesses. given the expertise on this panel and the ultimate responsibility of the congress and the president for the tax system, i would not presume to suggest the best specific path for reforming the tax system. however, past experience suggests that as the panel's work gets under way, one of the first decisions that you will confront is the choice of tax base ; possibilities include a comprehensive income tax, a consumption tax, or some combination of the two, as is done in many other countries. as you know, many economists believe that a consumption tax would be best from the perspective of promoting economic growth - particularly if one were designing a tax system from scratch - because a consumption tax is likely to encourage saving and capital formation. however, getting from the current tax system to a consumption tax raises a challenging set of transition issues. in 1986, tax reformers considered a consumption tax base and, despite the arguments in favor of such a system, they decided to enhance the comprehensiveness of the income tax system then in place. circumstances are different today, and the right choice will require assessing anew the tradeoffs between complexity, fairness, and economic growth. the choice of the tax base and other provisions of the code must also be taken in light of coming demographic changes. i believe that, as the baby boom generation begins to retire in a few years, it will become increasingly important for the nation to boost resources available in the future through greater national saving and enhanced incentives for participation in the labor force. the tax system has the potential to contribute importantly to those goals, and, at a minimum, tax reform should not hinder the achievement of those objectives. finally, fundamental, thoroughgoing tax reform will require tradeoffs among competing objectives and will create both winners and losers. in the past, these difficult choices were facilitated by bipartisan cooperation. in the 1954 reform, congressional support was bipartisan, and president eisenhower signed the legislation. in the 1969 reform, efforts were started under president johnson but were completed during the nixon administration. similarly, in 1986, president reagan worked with democratic congressional leaders to see reform through. i am confident that this panel can lay the groundwork for another historic reform and can get this process started off on the right foot. thank you for the opportunity to share some thoughts with you today. i look forward to the results of your deliberations. | alan greenspan : the tax system testimony by mr alan greenspan, chairman of the board of governors of the us federal reserve system, before the presidenta€™s advisory panel on federal tax reform, washington, dc, 3 march 2005. * * * the president has assembled a very able panel to address an issue that is both important and exceptionally challenging. the u. s. economy is the world's most dynamic and flexible, and the federal government's system for raising revenue must not hinder the processes generating that economic success. however, since the exemplary 1986 reform, the tax code has drifted back to be overly complicated and burdened by higher marginal rates and by many special provisions that have undesirably narrowed the tax base. changes since the 1986 act have been largely incremental without the appropriate all - encompassing context that broad reform brings to the table. it is perhaps inevitable that, every couple of decades, drift needs to be addressed and reversed. i believe some useful lessons can be learned by examining earlier systematic reforms of the tax code, such as those of 1954, 1969, and 1986. among those reforms, the 1986 effort is widely regarded as having been the most successful of the post - war era. this success was achieved, in large measure, i believe, because the reform hewed to an explicit set of principles. i am not suggesting that today's reform should follow the specifics of the 1986 reform. both the economic and fiscal conditions, as well as the existing state of the tax system, have changed in important ways since that time, and some aspects of the framework that worked well in 1986 may be inappropriate today. nevertheless, i believe that a number of the principles underlying that reform are still applicable. a defining feature of the 1986 reform was the broadening of the tax base and the lowering of tax rates, and it is widely believed that these changes enhanced economic efficiency. high tax rates ( whether the base is income or consumption ) exacerbate the distortions that taxes invariably create. moreover, distortions arise when similar activities are subject to different tax treatments. such distortions reduce economic efficiency as households and businesses respond to the tax code rather than to underlying economic fundamentals. lowering tax rates by broadening the tax base generally will reduce the costs of such distortions, which are approximately proportional to the square of the tax rate. over the years, economists have disagreed about the size of the efficiency gains that might be achieved from a broader base and | 1 |
the new silk road. the first was made at the 2nd world islamic economic forum ( wief ) on " unleashing the potential of emerging markets " in islamabad, pakistan in november 2006, while the second reference was during a special address at the global islamic finance forum - investors and issuers forum in march 2007. like the 14th century silk road, the current emergence of islamic financial products and services has brought together financial services providers across continents to trade on this new route. the emergence of the new silk road reflects the increasing and evolving economic and financial relationships and interlinkages, with islamic finance well positioned to further facilitate these linkages to offer mutually - reinforcing benefits to those who participate in it. the economic and financial linkages between asia and the middle east are growing through a significant expansion in trade and investment between the two regions and opportunities to leverage on the high level of savings and resources both these regions have been endowed with. indeed, the new silk road opens up the prospect of exciting opportunities for greater economic progress and prosperity for us. the new silk road has created linkages that build on the comparative advantages between asia and the middle east. for example, middle east domestic infrastructure requirements are estimated to total usd500 billion for the next 5 years, and asian companies have demonstrated the capacity to provide the technology, expertise and human capital to meet these infrastructure demands. indeed, the new silk road has facilitated the development and effective use of talent and expertise across the two regions. in addition, the new silk road has reinforced the rapidly evolving islamic financial industry and the growing significance of islamic financial markets and institutions. to meet the escalating demand for new products and services, top - tier financial institutions are known for their commitment in research and development to enhance innovation, especially in process and product innovation in order to remain competitive. in the process, such financial players will be able to better position themselves to be part of the global financial community. as such, human intellectual capital has become an important factor in sustaining the performance and competitiveness of the islamic financial industry. indeed, the fast pace of innovation in global financial services in general and in the islamic financial services sector in particular, demands new expertise and skills. since research and development remains at the forefront of any well - acclaimed international financial framework, the same is true for any player in the islamic finance industry. at a time when global economic development plays a decisive role in determining how markets perform, the accessibility to accurate and concise market information is crucial. | kuwait finance house's initiative, in this regard, as the first islamic bank worldwide to possess an economics & investment banking research arm based in malaysia, is a major advancement on this front. the establishment of the research unit will facilitate information sharing amongst the islamic financial institutions and other key stakeholders. the setting up of the research unit provides vital information which can be shared. the promotion of information sharing and exchange of knowledge will encourage better understanding and spur global collaboration among the financial players. through in - depth market knowledge of the financial services industry, it will without doubt spur greater innovation in islamic financial services, leading to cutting - edge products and services. equally important, it is also expected to enhance linkages between the middle east and asian regions, acting as a conduit to promote greater economic integration and encourage deeper intermediation of islamic markets. this further underscores the economic integration of both the middle east and asian regions and further enhances linkages in the new silk road, a manifestation of the thriving global islamic finance market. ladies and gentlemen, on this occasion of the official launch of kuwait finance house research, it is with pleasure that i congratulate kuwait finance house for its forward - looking outlook and commitment to contribute to the success of islamic finance by allocating resources in having a dedicated research entity to drive its islamic banking business forward. it is my hope that kuwait finance house will continue to play a major role in the initiatives to further develop islamic banking both here and in asia. i wish kuwait finance house research every success in its endeavours. in the name of allah, most gracious, most merciful, it now gives me great pleasure in officiating the launch of kuwait finance house research. thank you. | 1 |
for release on delivery 12 : 00 p. m. est november 28, 2018 the federal reserve ’ s framework for monitoring financial stability remarks by jerome h. powell chairman board of governors of the federal reserve system at the economic club of new york new york, new york november 28, 2018 it is a pleasure to be back at the economic club of new york. i will begin by briefly reviewing the outlook for the economy, and then turn to a discussion of financial stability. my main subject today will be the profound transformation since the global financial crisis in the federal reserve ’ s approach to monitoring and addressing financial stability. today marks the publication of the board of governors ’ first financial stability report. earlier this month, we published our first supervision and regulation report. together, these reports contain a wealth of information on our approach to financial stability and to financial regulation more broadly. by clearly and transparently explaining our policies, we aim to strengthen the foundation of democratic legitimacy that enables the fed to serve the needs of the american public. outlook and monetary policy congress assigned the federal reserve the job of promoting maximum employment and price stability. i am pleased to say that our economy is now close to both of those objectives. the unemployment rate is 3. 7 percent, a 49 - year low, and many other measures of labor market strength are at or near historic bests. inflation is near our 2 percent target. the economy is growing at an annual rate of about 3 percent, well above most estimates of its longer - run trend. for seven years during the crisis and its painful aftermath, the federal open market committee ( fomc ) kept our policy interest rate unprecedentedly low - - in fact, near zero - - to support the economy as it struggled to recover. the health of the economy gradually but steadily improved, and about three years ago the fomc judged that the interests of households and businesses, of savers and borrowers, were no longer best served by such extraordinarily low rates. we therefore began to raise our policy rate - 2gradually toward levels that are more normal in a healthy economy. interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy - - that is, neither speeding up nor slowing down growth. my fomc colleagues and i, as well as many private - sector economists, are forecasting continued solid growth, low unemployment, and inflation near 2 percent. there is a | ascertain the vulnerabilities and threats potentially affecting individual online systems, and to establish compensating internal controls with a view to mitigating those risks. we need to have robust systems that would ensure integrity of online transactions and backup mechanisms in case of failure. the smooth functioning and confidence in the payments system are areas that are very dear to a regulator ’ s heart. indeed the extent of that confidence determines to a large extent the decision of investors and businesses on where to place their funds or to locate their company ’ s ventures. therefore all initiatives geared towards ensuring a modern, efficient and safer banking environment are most welcomed. in fact, innovation, whether in the banking sector or elsewhere, is subject to important network externalities. to illustrate the point i am making here, let us take the example of the tgv ( train a grande vitesse – high speed train ) having to share rail networks with an old - fashioned steam engine train. it probably would not get very far and run the risk of damaging the whole rail network. in the same way innovation by an individual bank is greatly enhanced if everybody else is innovating, not least the regulator. the global financial crisis has very clearly exposed the dangers of the failure of regulators to keep abreast of developments taking place in the financial arena. the bank of mauritius is fully aware that it has a role to play in supporting innovation by individual banks. it has also been active on this front with a heightened role in the area of regional integration. central banks ’ concerns are however of a different nature. central banks look at the critical role of a smoothly functioning payment system in maintaining financial stability and in promoting the orderly and balanced development of the economy. the bank initiated a number of projects, regrettably those projects have been unduly stalled – for reasons that i would not wish to evoke here. however i will give you an overview of the changes that the implementation of those projects would have brought to the payments, clearance and settlement system in our country. repss as cross - border trade grows, the increased volume of transactions and migration to open account terms, that is, supplier credit extended to buyer at time of sale, are exerting pressure on banks as well as on the payment systems to improve the cross - border payment process. the current system of cross - border trade payments handled through correspondent banking relationships is slow, inefficient and costly for banks and businesses. improvements require significant investments in | 0 |
mario draghi : ecb press conference – introductory statement introductory statement by mr mario draghi, president of the european central bank, and mr vitor constancio, vice - president of the european central bank, frankfurt am main, 6 september 2012. * * * ladies and gentlemen, the vice - president and i are very pleased to welcome you to our press conference. we will now report on the outcome of today ’ s meeting of the governing council, which was also attended by the president of the eurogroup, prime minister juncker, and by the commission vice - president, mr rehn. based on our regular economic and monetary analyses, we decided to keep the key ecb interest rates unchanged. owing to high energy prices and increases in indirect taxes in some euro area countries, inflation rates are expected to remain above 2 % throughout 2012, to fall below that level again in the course of next year and to remain in line with price stability over the policy - relevant horizon. consistent with this picture, the underlying pace of monetary expansion remains subdued. inflation expectations for the euro area economy continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2 % over the medium term. economic growth in the euro area is expected to remain weak, with the ongoing tensions in financial markets and heightened uncertainty weighing on confidence and sentiment. a renewed intensification of financial market tensions would have the potential to affect the balance of risks for both growth and inflation. it is against this background that the governing council today decided on the modalities for undertaking outright monetary transactions ( omts ) in secondary markets for sovereign bonds in the euro area. as we said a month ago, we need to be in the position to safeguard the monetary policy transmission mechanism in all countries of the euro area. we aim to preserve the singleness of our monetary policy and to ensure the proper transmission of our policy stance to the real economy throughout the area. omts will enable us to address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro. hence, under appropriate conditions, we will have a fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability in the euro area. let me repeat what i said last month : we act strictly within our mandate to maintain price stability over the medium term ; we act independently in determining monetary policy ; and the euro is irreversible | . in order to restore confidence, policy - makers in the euro area need to push ahead with great determination with fiscal consolidation, structural reforms to enhance competitiveness and european institution - building. at the same time, governments must stand ready to activate the efsf / esm in the bond market when exceptional financial market circumstances and risks to financial stability exist – with strict and effective conditionality in line with the established guidelines. the adherence of governments to their commitments and the fulfilment by the efsf / esm of their role are necessary conditions for our outright transactions to be conducted and to be effective. details of the outright monetary transactions are described in a separate press release. furthermore, the governing council took decisions with a view to ensuring the availability of adequate collateral in eurosystem refinancing operations. the details of these measures are also elaborated in a separate press release. let me now explain our assessment in greater detail, starting with the economic analysis. recently published statistics indicate that euro area real gdp contracted by 0. 2 %, quarter on quarter, in the second quarter of 2012, following zero growth in the previous quarter. economic indicators point to continued weak economic activity in the remainder of 2012, in an environment of heightened uncertainty. looking beyond the short term, we expect the bis central bankers ’ speeches euro area economy to recover only very gradually. the growth momentum is expected to remain dampened by the necessary process of balance sheet adjustment in the financial and non - financial sectors, the existence of high unemployment and an uneven global recovery. the september 2012 ecb staff macroeconomic projections for the euro area foresee annual real gdp growth in a range between – 0. 6 % and – 0. 2 % for 2012 and between – 0. 4 % and 1. 4 % for 2013. compared with the june 2012 eurosystem staff macroeconomic projections, the ranges for 2012 and 2013 have been revised downwards. the risks surrounding the economic outlook for the euro area are assessed to be on the downside. they relate, in particular, to the tensions in several euro area financial markets and their potential spillover to the euro area real economy. these risks should be contained by effective action by all euro area policy - makers. euro area annual hicp inflation was 2. 6 % in august 2012, according to eurostat ’ s flash estimate, compared with 2. 4 % in the previous month. this increase is mainly due to renewed increases in euro - denominated energy prices. on | 1 |
derivatives association ( isda ) has consulted widely on this issue, 2 and concluded that market participants would prefer the historical median approach, with an adjustment spread based on five years of data. 3 this method would be robust against data outliers resulting from unusual market conditions, as well as potential manipulation. 4 consequently, this method was adopted in cash and derivatives markets in the united states, united kingdom and many jurisdictions that were impacted by the london interbank offered rate ( libor ) transition. 2 / 5 bis - central bankers'speeches nonetheless, in south africa, market participants are not only concerned about dealing with data outliers ; they are also concerned about structural shifts in the behaviour of the jibar, especially since the sarb's migration to a surplus system for implementing monetary policy in june 2022. it appears that this reform has squeezed liquidity premiums, in that the spread between zaronia and jibar has narrowed somewhat. the mpg is currently finalising its work on the adjustment spread methodology to ensure that the chosen methodology considers all the idiosyncratic factors that would concern market participants. it is also important for market participants not to over - rely on fallbacks to facilitate legacy jibar referencing contracts. the best way to minimise risks would be to actively migrate to zaronia referencing contracts as soon as practicable. 5 there will nonetheless be instances where, despite best efforts, it may not be possible to transition or adjust certain contracts before jibar ceases. these so - called tough legacy contracts will require regulatory measures to facilitate their transition. as such, it may be necessary for the mpg to consider a synthetic jibar, similar in structure to the current forward - looking jibar, to minimise the impact on systems and processes. furthermore, the mpg, the sarb and the financial sector conduct authority will consult with national treasury on the appropriate regulatory instruments for ensuring contract continuity and safe harbour provisions for the protection of contract parties, supervisors and the benchmark administrator. building a new foundation shortly after the mpg conference in april 2023, the remaining us dollar libor panels were discontinued. this concluded a massive decade - long global project to replace libor. 6 reflecting on this effort, the co - chairs of the financial stability board's official sector steering group, nikhil rathi and john c williams, concluded that it had been like building a new foundation under an existing home – an undertaking of extreme difficulty, one many doubted would succeed, and | the board of directors and management. the policy on shareholding will therefore be enhanced to promote greater shareholder activism within banking institutions. shareholders need to be concerned with the practices of banking institutions, particularly those which can have adverse implications on depositors'interests and on financial stability. similarly, given the increasingly competitive environment, advancement in risk management practices and the strengthened corporate governance framework, a more flexible policy framework on lending to connected parties will be put in place. however, to prevent abuses of such flexibilities, there will be safeguards and conditions that need to be observed by banking institutions. ladies and gentlemen, the adoption of a principle - based regulatory approach will provide banking institutions with greater flexibility in deciding on strategic options in a more competitive environment. as the banking industry grows at an accelerating pace, there are common areas where collective efforts by the industry will not only bring benefits to the financial sector but also to the overall economy. in this regard, there is an increasing trend among developed countries such as the united kingdom, canada, and australia, where the bankers associations have an important role in spearheading initiatives to promote high standards of ethical code of market conduct to meet consumers'rising expectations and demands. the bankers associations have increasingly assumed the role as a focal point for consultation with not only the regulatory authorities, but also by the other stakeholders on policies affecting the financial sector. in this respect, such associations have played an important complementary role to the regulatory authorities'efforts in promoting a more progressive, dynamic and resilient banking system. in addition, banking associations in these countries have also acted as the voice for the industry in articulating the position of their members to promote the interests of the industry. in malaysia, there are several areas of common interest to the industry which the associations can spearhead. it is, therefore, to the benefit of the industry to reassess the role of the associations with respect to taking forward common initiatives and interests of the industry. ladies and gentlemen, moving forward, consumer and sme financing will continue to be two important areas of growth. the overall macroeconomic and interest rate environment would continue to be supportive of growth in these two sectors. the challenge for banking institutions is to ensure that consumers and the businesses have access to a wide range of products, while at the same time ensuring that the necessary infrastructure is in place to manage risks arising from these businesses. this is to ensure that lending to these sectors would be sustainable and avoid the risks that have recently been experienced in | 0 |
to be well justified as total inflation fell back into line with core inflation. the ongoing effectiveness of monetary policy the bank's projection of an economic recovery reflects, in part, the monetary easing that we have already put in place – cutting the policy rate by 350 basis points since december 2007. guided by its forward - looking framework, the bank began cutting interest rates sooner – and has cut deeper – than most other central banks. with the usual lag, these moves will have a powerful impact on economic activity and inflation. nonetheless, some are questioning, with rates already so low and global credit markets strained, whether the bank's moves can still have an effect. we know from experience that inflation control works much more predictably when there are well - functioning financial markets operating within a sound and stable financial system. the canadian system has been under some strain since the onset of global difficulties, but it is important to keep those strains in perspective. it bears repeating that the canadian banking system does not face the same challenges as those in other major economies. canadian banks had modest exposures to the u. s. subprime market and other complex structured products. more importantly, our banks are better capitalized and substantially less leveraged than their international peers. in contrast to many international banks, which face enormous pressures to scale back their assets and liabilities to bring them into line with their capital, canadian banks have actually been raising private capital to grow their businesses. indeed, over the past year, they have raised over $ 15 billion in tier 1 capital from the private capital markets. consequently, canadian banks continue to lend. this is significant, because banks are a more important part of our financial system than in many other countries, and their relative strength means that total credit is continuing to grow in canada. that said, we expect this credit growth to slow in the coming months as result of declining demand during the recession. it is worth noting that our lower overnight rates have largely been passed through at shorter maturities. since the easing cycle began in december 2007, we have lowered the overnight rate by 350 basis points. the prime rate has fallen by 325 basis points, bankers acceptance rates ( key short - term financing instruments for corporations ) have fallen by about 380 basis points, and variable rate mortgages by about 185 basis points. at longer maturities, the declines have been more modest. in part, this reflects the typical pattern, as long - term rates tend to be less volatile than short - term rates over | growth across all canadian regions. canada is not the only economy that has coped better with recent shocks. to varying degrees, other countries have as well - which partly explains why world economic growth has held up better this time around. clearly, many national economies have been able to respond more flexibly than in the past to unexpected developments. and this has helped to mitigate the impact of shocks, advance the adjustment, and support continued strong economic performance. this increased flexibility has been the product of economic policies and structural reforms that many countries, including canada, have undertaken over the years to strengthen their economies and make them more resilient to shocks. but this does not mean that we have nothing to worry about as we look ahead. we live in an era of rapid change, and we operate in a global environment that is constantly shifting. uncertainty, risks, and shocks are a constant feature of the economic landscape. for canada, this is particularly relevant given how open our economy is to international trade and capital flows. at the bank of canada, we believe that world economic prospects remain favourable as we look out over the medium term. but while this reflects our central expectation of how the world will unfold, there are important upside and downside risks around this scenario. on the downside, persistent global imbalances immediately come to mind, as does the lack of success in the doha round of trade talks. these risks could result in significantly slower global economic growth. at the same time, we cannot rule out the possibility of stronger growth, especially in asia. of course, we know that events can turn out very differently from our expectations today. so we must plan accordingly. in terms of potential risks and sudden developments, the best approach is to constantly ask ourselves what steps we can take to make our economy and domestic markets more flexible and thus better able to adapt. and we need to recognize that the pursuit of such an approach is a shared responsibility among firms, workers, and policy - makers. firms and their workers need to be able to respond quickly to technological advances and to various shocks that require significant changes in the way they conduct business, the type of goods and services they produce, and the markets they choose to develop. a well - functioning market - based economy and clear relative price signals are critical in this context. at the same time, policy - makers need to be wary of barriers to adjustment, such as labour regulations that inhibit the movement of workers from one type of job, or from one sector | 0.5 |
, and on their tenure of office. i have no doubt that the management and board of bramer bank share our belief that a sound corporate governance framework is the bedrock on which to build a successful bank. we expect to initiate a national payment switch soon. this will connect all transactions by card and mobile phone to a central point, and lead to significant cost savings for all stakeholders. it will level the playing field for all banks by removing the barriers to entry which the costly initial investments represent for small banks, acting singly. we also recognize the importance of protecting depositors and we sincerely hope we shall overcome remaining pockets of resistance and set up a national deposit insurance scheme, which is a critical missing link in our domestic financial architecture. the bien - etre of consumers of banking services is a key concern. customers are in a weak bargaining position vis - a - vis banks. the task force on unfair terms, that we have set up, is hard at work and will soon come up with its recommendations on how customers can get a fairer deal. so, these are some of the priority areas for us in our quest to ensure that consumers are treated fairly and get the protection that they deserve. as regulator, i would not earn my keep if i did not use the occasion to offer some words of advice to my regulatees. i am inclined to caution banks against undue risks. i greatly appreciate the efforts of our banks in technological innovation but this must not be at the expense of any relaxation in controls and risk management processes. by all means, venture into new areas but, first, do put in place safeguards to mitigate the potential risks! banking is becoming increasingly transnational and it only takes a click of the mouse for funds to switch jurisdictions. we must remind ourselves that the risks of money laundering are ever - present. banks should always be on the alert to combat money laundering and to prevent our financial system from being used as a conduit for such crimes. i welcome the recent measures in the budget to combat financial crime. my final comment is prompted by a recent press remark attributed to a local banker. the banking industry differs in crucial respects from other business sectors and i would expect a banker to be aware of it. locally, the shareholding of non - bank corporates in some domestic banks is very significant – which is not permitted in many jurisdictions. the return on equity ( roe ) in the banking sector is well above those of the real sector – at 30 june 2013, | have long been known to be an effective supervisory tool to ensure compliance, the tool of education should be used in the first instance for more effective results. the fatf has highlighted the importance of education which is a key supervisory tool for effective aml / cft systems. supervisors are students and also trainers, not only instilling knowledge, but also transforming compliance cultures of regulated entities. 1 / 2 bis central bankers'speeches so, ladies and gentlemen, may i wish you fruitful deliberations in this workshop, which i hope will bring added value to your work in the area of beneficial ownership. thank you for your attention. 2 / 2 bis central bankers'speeches | 0.5 |
##ization of the financial sector are creating new ways to bring about more inclusion. many examples of this “ financial inclusion 2. 0 ” will be presented this afternoon and how specific technologies such as blockchain can play a role. there are many areas where fintechs can help bring more financial inclusion, but let me name a few : improving access to financial services, for instance via mobile devices ; gathering more and better data, which allows for more tailored and better priced products ; driving down operation costs, and making relationships with fragile clients more profitable. this also means major change for public authorities. fintechs means dealing with new firms, new technologies, new ideas. to be reactive and engaged, many authorities have set up fintech units, which is the case for acpr in france. we work in close cooperation with our counterparts worldwide, and in particular with mas, which is spearheading these developments. as public authorities, we also encounter new risks and challenges related to financial inclusion in a digitalized world. for instance, when embedding artificial intelligence in financial solutions, the risk grows higher of a “ black box ”, where it is more and more difficult to trace and understand outcomes. discrimination bias may occur and leave out customers, without even being detected as such. and big data never forgets : yet, financial inclusion means being sometimes able to overcome past conditions and give customers a “ second chance ”. in addition, digitalization of our economies also brings about a risk of digital divide between those who are at ease in a digital world and those who don ’ t understand it or don ’ t have access to it. this is a major issue for financial inclusion. when a bank or an insurer prioritizes access to its services via digital devices, those who don ’ t use those devices can be left out and become “ second - class ” clients. we must not overlook this. 3 / fintech and financial inclusion : moving forward faced by the new ways, the new challenges and the new risks that fintechs are bringing to financial inclusion, how do we, at the banque de france, adapt to the digital age and leverage digital tools, to further improve our policies and actions in favour of financial inclusion? the first way is by developing our understanding and use of new technologies : in addition to our fintech unit at acpr which i ’ ve mentioned, banque de france has launched in june 2017 “ le lab ”. le lab is a genuine open innovation laboratory | “ economic and financial regulation in the era of big data ” paris, 24 november 2017 closing remarks by francois villeroy de galhau, governor of the banque de france i am very pleased to close this conference on “ economic and financial regulation in the era of big data ”. i was in london this morning and i therefore regret having missed your discussions on an issue which i consider of paramount importance. let me thank warmly all speakers, in particular benoit coeure, member of the board of the ecb, who opened this conference and philip - hans franses, professor at eramus school of economics, who i am told gave an outstanding lecture. big data indeed deserves a global view, from a number of angles. it was the objective of this conference and i am grateful to all of you, presenters and participants, to have made this possible. in closing this conference, i will not come back to the specificities of big data and its numerous usages. all presentations have given a fresh look on big data and i am sure that on such an excellent basis, discussions will continue beyond this one day conference on issues which are of key importance for all of us. i would rather like to focus on the consequences of big data for the economy in general and for central banks in particular. i will develop this into three parts : i. big data will have significant economic effects. it will in particular change the relationships between the members of the financial community and between this community and the non - financial world ii. regarding big data, central banks will have to switch from an observer status to a user or player position, which implies significant changes in performing part of their activities iii. big data raise regulatory issues that cannot be solved within a national context but require a global reflection from public authorities. i. big data will have significant economic effects. entry costs for carrying out financial transactions have already been reduced and will be lowered further in the future. customer knowledge, in particular regarding the conditions applied by financial institutions, will be enhanced and more generally information asymmetries between clients and providers of financial services will narrow. big data can be a powerful card to play by gafas or other native non - financial firms to develop new activities. the financial industry has therefore to adapt rapidly to face the data revolution and compete with the new entrants, while protecting privacy against increasing cyber risks in particular. all in all, competition will increase, which is beneficial to the economy. the flip side can be enhanced | 0.5 |
. 8 leverage ratio one of the more discussed elements of basel iii is the introduction of a leverage ratio. the aim of this measure is to restrict the banks ’ total indebtedness and to set a limit for how large a part of the balance sheet the banks may fund with debts. to comply with the new regulation, the banks must retain capital corresponding to at least three per cent of the value of their total exposures, or assets if you like. in contrast to the minimum capital requirement, the leverage ratio is not a risk - weighted measure. this means that the banks should not take into account to whom or for what they are lending when they calculate their total assets. in addition, most of the items off the balance sheet should be included at their full nominal value. one reason why this new type of measure has been developed is that a number of banks – not least the us investment banks and ubs in switzerland – experienced major problems when the financial crisis began because of their high level of indebtedness. for a debt instrument to be included as tier 2 or tier 1 capital the contract must clearly state that it can be converted into share capital if the responsible supervisory authority finds this necessary. this applies to debt instruments issued after 1 january 2013. bis central bankers ’ speeches however, many observers believe that a risk - neutral measure such as the leverage ratio constitutes an incentive for the banks to invest in assets that carry a higher risk and that this is directly counter to the traditional capital adequacy regulations. in sweden, the criticism from the industry has been particularly sharp. the reason for this is that a large proportion ( approximately 40 per cent ) of the swedish banks ’ balance sheets consists of mortgages. as mortgages are considered to carry a low risk they are also subject to low capital requirements. this thus means that banks can have large volumes of mortgages and relatively little capital but still be able to report a high level of capital adequacy. when we now introduce a measure that does not take into account the banks ’ risk profile, this will probably hit the swedish banks harder than those in some other countries. it is probably the case that regulations that do not take risks into account can lead to a poorer pricing of risk and to greater risk taking. as banks are companies that aim to maximise their profits and high risk is generally related to high returns, there will always be a willingness to invest in high - risk assets. and taking high risks can, as we all | a change may create instability and reinforce cyclical swings. therefore it would appear that there is reason to proceed with some caution when the policy is changed. central banks also tend to adjust interest rates in relatively small steps. nevertheless, the conclusion that a central bank should proceed carefully is not self - evident. the question is how the markets players interpret a certain behaviour. ever so small changes in the instrumental interest rates, which may be interpreted as the first step in policy change, can have a big impact. ( cf. the federal reserve ’ s increase in february 1994 ). there is probably no obvious and simple rule for action. most likely, the central bank ’ s task is to account for, as clearly as possible, both its long - term plans and the uncertainty that is inherent in its assessment. figure 2 m o n e y m a r k e t ag e n ts ’ i n fla t io n e x p e c t a t io n s p e r ce n t o c t. ’ 9 4 o c t. ’ 9 5 m a y ’ 9 6 cpi n o v. ’ 9 ’ 9 6 f e b. ’ 9 ’ 9 7 - 1 - 1 s o u rce s : s ta tis tics s w e d e n a n d p ro s pe ra r e s e a rch the way in which the instrumental interest rates are changed also has to do with credibility and tactics. if complete credibility in monetary policy and a low - inflation regime have not been achieved, it will naturally influence the pace with which interest rates are lowered or raised. in situations of this kind, the result may be that the central bank has its instrumental rates set at either a too high or a too low level compared with what would have been warranted in an environment of high credibility. developments during 1996 can illustrate the effects on policy of both uncertainty and insufficient credibility. at the beginning of the year, the riksbank estimated that activity in the economy was declining and that inflationary pressure was falling. both the demand situation and the indicators that exist for inflation expectations pointed in the same direction. ( figure 2 ). however, the forecasts of inflation, which were made by private players, were still not wholly in line with the riksbank ’ s target. nevertheless, the riksbank ’ s assessment was that in this situation there was room to begin lowering interest rates without threatening the inflation target. initially, the | 0.5 |
holders have also seen their wages go up. some have proactively adjusted their spending to help offset higher debt payments. many also report higher levels of savings available to offset increased payments. 2 / 3 bis - central bankers'speeches overall, the evidence suggests that households have the flexibility to continue servicing their debt at higher rates. we will be watching the data closely for signs of increased financial strain among households, both mortgage holders and non - mortgage holders. we'll also be watching how the labour market evolves, since the biggest factor that determines whether someone can service their debt is if they have a stable income. higher interest rates are also affecting businesses. higher rates are slowing demand for the goods and services that businesses sell, while also increasing their financing costs. so far, the financial health of large businesses appears solid. but smaller businesses are showing more signs of financial stress. insolvency filings by smaller firms have recently jumped after several years of below - average filings. there is some indication that this recent increase could be a catch - up or normalization, and the timing could be driven in part by the expiry of government support programs put in place during the pandemic. turning to canadian banks, overall, credit performance remains strong. banks are proactively contacting customers who are facing payment increases at renewal and working with them on a payment plan. they have also been putting more money aside to cover future loan losses, and they continue to maintain healthy capital and liquidity buffers. this means that even if financial conditions and credit performance deteriorate, banks are positioned to absorb losses and continue to provide credit. in the non - bank financial sector, more frequent volatility in financial markets in recent years has led to an increased focus on liquidity risks. at the same time, some firms are increasingly using leverage, or borrowed money, to fund trading activities. this makes them more vulnerable in the event of large market swings. let me close by repeating an important point the governor made at the beginning : the connections in the financial system mean that if risks materialize in one sector, they can spread quickly. this puts a premium on preparedness. the proactive steps taken by financial system participants have been positive. and they need to continue. a stable and resilient financial system benefits all canadians. the governor and i will now be happy to take your questions. 3 / 3 bis - central bankers'speeches | of the uncertainty that impedes debt restructurings by providing independent analysis of the future growth prospects of the country concerned, advice on possible adjustment measures, and an assessment of the global economic and financial outlook. with this information at hand, creditors and debtors can then seek market - based solutions. the fourth and final characteristic is transparency and accountability. i said earlier that the fund needs to be clear about its main objectives and its policy framework. the imf must also ensure that clear lines of responsibility within the organization support the framework. and it must be transparent about the reasons for its decisions. in other words, the fund needs a governance structure that helps it achieve its goals and holds individuals accountable. currently, decision - making responsibilities are divided among the board of governors, the executive board of directors, and the managing director and staff. but the division of responsibilities among these groups is not, in practice, always clearly defined. accountability is dispersed, and decision - making lacks transparency. the imf would be more effective if the executive board focused on setting strategic direction, as well as ensuring that policies are sound and that objectives are met. the managing director would then be responsible for policy implementation, and be accountable to the board. this framework would help to ensure that the responsibility for policy formulation and implementation was clear and borne appropriately by the members of the board and the managing director, respectively. toward this end, bank of england governor mervyn king has recently suggested establishing a non - resident executive board that meets periodically, rather than almost continuously, and that focuses on strategic direction and oversight. accountability and transparency of the board's decision - making would also be enhanced with more frequent and more timely reporting. finally, and very importantly, surveillance and analysis must be, and seen to be, independent of political influence. conclusion i'd like to conclude by underscoring a key point. the progress made by central banks in furthering the economic well - being of their citizens has largely been the result of determining the most appropriate objective - low and stable inflation - and determining how best to achieve it in a transparent and accountable fashion. for many central banks, this has meant inflation targeting. i've suggested that there are lessons here for the international monetary fund. a more effective imf really does matter. in a world of floating exchange rates, large private capital flows, and liberalized trade, we need an effective forum in which the issues that shape the global economy can be discussed with candour and good will, | 0.5 |
the numbers of the young and the old determine the demand and supply for these assets. 5 the recent history of crisis seems to confirm this line of reasoning. in figure 3, the real land price in japan ( national average, for all purposes ) is juxtaposed with the country ’ s inverse dependency ratio from 1955 to date. this figure shows, firstly, that the relative abundance of young people coincided with sharply higher property prices. secondly, in contrast, the relative abundance of old people seems to be leading to lower property prices. in the united states also, an increasing reverse dependency ratio coincided with the property bubble ( fig. 4 ). after the bubble burst in 2007, property prices seem to have followed the long run movement of the inverse dependency ratio, although it would be premature to draw any conclusions from this at the moment. we see a similar pattern in the irish and spanish experience ( figs. 5 and 6 ). the period is known as the “ great moderation ” in the us case. european central bank ( 2010 ) and basel committee on banking supervision ( 2011 ) provide a concise survey of models with macro - financial linkage proliferating recently in this literature. bianchi ( 2010 ), jeanne and korinek ( 2010a, 2010b ), and stein ( 2011 ) focus on the credit externalities and pave the way for exploring the effects of macro - prudential measures. in particular, bianchi ( 2010 ) and jeanne and korinek ( 2010b ) study financial crises in open economies, aiming to provide macro - prudential remedial measures. however, there is unfortunately relatively little from an asian perspective. exceptions include hattori et al ( 2010 ), and hahm et al ( 2011 ). i take these figures from nishimura ( 2011b ), which contains more figures about other european countries, both core and periphery. empirical evidence suggests strongly that this is the case. see takats ( 2010 ) for property prices, and liu and spiegel ( 2011 ) for equity prices. the economist ( 2011 ) carries a readable account of this issue. bis central bankers ’ speeches i am not suggesting that this demographic factor is the sole cause of the asset bubbles that led to the crisis. there may be other factors, as for example in the case of greece and portugal, who experienced “ bubbles ” in their public sectors rather than in asset prices, but still faced the crisis. likewise, there are | interest rates on loans ; the two monetary aggregates, m2 and m3 ; deposits ; land prices nationwide and in large urban areas ; as well as 3 and 9 year government bond yields. the leading indicators cover mainly balance - sheet information, so that the lagging fcix reflects domestic financial conditions. in the scheme of kamada and nasu, a possible financial crisis is warned of when the leading fcix falls to the zero point. this simple scheme successfully forecast the bnp paribas shock about one year ahead of its occurrence in august 2007. however, this result should be interpreted with caution, since the index fails to take into consideration the uncertainty caused by real - time estimation problems. 15 fig. 10 plots the predicted type - d leading fcix. it forecasts three financial crises successfully, falling to zero in may 1988 ( 19 months before the triple sell - off ), in february 1997 ( 8 months before the bankruptcy of sanyo securities ), and in june 2006 ( 14 months before the bnp paribas shock ). in fig. 10, the predicted leading fcix takes positive values during november 1999 – december 2001, reflecting the it bubble. however, no crisis was observed in japan during this period. to avoid a potential false alert, we have to be able to discern such an “ economic lull ”. the lagging index is useful for this purpose. the lagging index ( not shown here ) indicates that japan remained in a contraction phase during november 1999 – april 2004, suggesting that the revival of the leading index during november 1999 – december 2001 might be indicative of an economic lull. some caveats are in order here. first, although fcixs make it possible to detect signs of impending financial crises, they do not enable one to identify the source, type, or size of the crisis. second, fcixs do not make obvious the optimal policy measures that should be undertaken. with the help of fcixs, policymakers must monitor financial institutions carefully and devise policy measures appropriate for the economic and financial conditions. fcixs are not immune to real - time estimation problems, such as the end - of - sample and lagged - datapublication problems, which may cause serious delay in warning signals. as a solution, kamada and nasu propose to predict the juglar cycle ’ s turning point, where the growth rate falls to zero, by an inflection point, where acceleration falls to zero in real time data | 1 |
frameworks, it is important that there are no obstacles in the transfer of collateral. in the euro area, continuous attention is needed on ensuring that there are sufficient settlement links between ( i ) csds, that these have appropriate operating hours to address the needs of the market, and that triparty collateral management services are further developed. on the latter, i pause for a moment to recall that one important milestone was achieved earlier today with the signing of a memorandum of understanding between ( i ) csds, banks ( in the name of the european repo council ) and a ccp, with the respective parties committing to work further on a solution for triparty settlement interoperability. triparty settlement interoperability is an important initiative that will help foster greater financial integration and harmonisation, reduce fragmentation and help to create a single european repo market. the aim of the “ tsi initiative ”, as you are all well aware, is to bring together borrowers and lenders, regardless of where the underlying liquidity or collateral is held, thereby avoiding the build - up of silos of collateral in the market. more should be done, and i therefore fully subscribe to the actions identified by cogesi. in particular, i encourage the group to further increase the transparency, clarity and understanding of the linkages between collateral frameworks, regulatory rules and market practices. we need also further improvements in the processes that support the mobilisation of collateral. the eurosystem will do its part in 2014, by abolishing the so - called repatriation requirement. that will allow for more efficient mobilisation of assets for use in eurosystem credit operations via the correspondent central banking model ( ccbm ). the eurosystem is also integrating the support of triparty collateral management services on a cross - border basis into its central bank framework and of course t2s, which will go live from 2015 to 2017, will support more efficient cross - border collateral transfer. from the industry, we may expect to see further improvements in the services that support a more optimal use of collateral assets. bis central bankers ’ speeches in this regard, i encourage you to analyse solutions to optimise the use of collateral. i am very interested in the group ’ s deliberations on the tools to increase the efficient use of collateral, and the implications of collateral transformation services. against a background of increasing demand for collateral, cogesi should drive further development of effective procedures for enhancing collateral | the key fundamentals for a capital markets union by providing the market infrastructure through which capital can move freely across europe. notably, the launch of target2 - securities or t2s in 2015 brought technical and operational harmonisation to the post - trade market. and t2s also provided the concrete incentive needed to drive the harmonisation process forward more generally. markets have aligned their rules and practices to get the most out of t2s, and, over the past years, we have seen how they have harmonised out of choice rather than legal obligation. this market initiative was supported by the legislative action needed to give the market the space it required to achieve its full potential. central securities depositories regulation streamlined the rules and provided the legal framework for t2s ’ s technical operations. but the work is by no means complete ; more remains to be done to attain a full capital markets union. this will be the topic addressed by today ’ s first panel, which brings together expertise from both regulators and industry. it will take stock of the work done on capital markets union and post - trade integration so far and assess where we go from here. 1 / 3 bis central bankers'speeches digitalisation, innovation and integration now, let us turn to the other adjective in our conference title : europe ’ s digital integrated market. the financial integration process in europe is subject to many challenges – economic, political and technical. one additional – and important – challenge is digitalisation. this is part of a fundamental change that affects not only the financial industry but society at large : the internet, smart phones and tablets have changed the way we communicate, the way we do business, the way we access and store information – in short, the way we live. some claim that we are at the dawn of a new technological age, so - called “ industry 4. 0 ” or even the fourth industrial revolution. others dispute this, or take exception to the nomenclature. but, however you choose to label it, it cannot be denied that – as digitalisation gathers pace – it continues to insinuate itself into all aspects of our daily life and work. and the journey has by no means reached its end. digitalisation can make business processes faster, cheaper and generally more efficient. but it also entails risks that need to be addressed. several of our sessions today explore the risks and opportunities of digitalisation from a variety of angles, and the potential effects for financial markets. our second speaker, jeremy rifkin, | 0.5 |
sarah bloom raskin : community bank examination and supervision amid economic recovery speech by ms sarah bloom raskin, member of the board of governors of the federal reserve system, at the maryland bankers association first friday economic outlook forum, baltimore, maryland, 6 january 2012. * * * thank you for the opportunity to speak with you this afternoon. it is always a pleasure to be back in baltimore and to see so many old friends. i was here during the most intense days of the financial crisis, and i will never forget how bankers worked around the clock to ensure that the credit needs of maryland residents and businesses could continue to be met – a dedicated effort that benefited communities across the state. that episode is behind us now, but community banks continue to face numerous challenges, including challenges from an enhanced regulatory regime that has evolved in the wake of the crisis. this regime includes the potential effects of the dodd - frank wall street reform and consumer protection act ( dodd - frank act ). from my many conversations with you, i have a sense of the challenges that you face regarding the changing regulatory landscape. against that backdrop, i appreciate the opportunity to speak at the first friday economic outlook, at the start of a promising new year, and share my thoughts with you on two vitally important topics : how the federal reserve ’ s monetary policy aims to increase the availability of credit to foster economic growth, and how we are tailoring our examination and supervision of community banks to ensure that we are not inadvertently constraining lending. i believe that examination and supervision of community banks is a timely and important topic. why do i say that? because, as i will discuss shortly, lending by community banks plays an important role in the ongoing economic recovery, especially by providing credit to small businesses. and it is absolutely critical that examination and supervision do not produce outcomes that are barriers to small business expansion. unlike most other businesses, banks are subject to a system of examination and supervision, developed over the past century, that has particular and deliberate characteristics : regular on - site visits by specially trained examiners ; exit meetings between examiners and bank senior management to explain examination findings ; written examination reports with narratives and metrics describing the findings of the examiners ; and, if necessary, follow - up on action items that the bank must pursue to remedy specific problems. the ultimate focus of examination and supervision is the safety and soundness of the bank, as well as compliance with laws and an assessment of the bank ’ s ability to withstand risks | , see, for example, https : / / www. federalreserve. gov / monetarypolicy / bst _ openmarketops. htm and https : / / www. federalreserve. gov / monetarypolicy / expiredtools. htm. - 8traditional interest rate tool. in any case, we have a responsibility to thoroughly evaluate what mix of these tools is likely to work best when the next elb episode arrives. perhaps it is time to retire the term “ unconventional ” when referring to tools that were used in the crisis. we know that tools like these are likely to be needed in some form in future elb spells, which we hope will be rare. we now have a significant body of evidence regarding the effectiveness, costs, and risks of these tools, including those used by the fomc and others tried elsewhere. our plans must take advantage of this growing understanding as assessments are refined. the third question concerns improving communication, which i discussed earlier from the standpoint of governance and accountability. but transparency also plays a central role in policy effectiveness through its effects on the expectations of households and businesses. of course, this was the major insight behind the transparency revolution in central banking over the past few decades. today, central banks publicly share a large and ever - increasing amount of information about policy. but policymakers and commentators inside and outside central banks sometimes question whether all of the transparency adds up to effective communication. 14 the fomc ’ s famous dot plot is one example. a focus on the median forecast amounts to emphasizing what the typical fomc participant would do if things go as expected. but we have been living in times characterized by large, frequent, unexpected changes in the underlying structure of the economy. 15 in this environment, the most a 2016 brookings conference titled “ understanding fedspeak ” ( see https : / / www. brookings. edu / events / understanding - fedspeak ) raised several aspects of this issue. for example, olson and wessel ( 2016a ) presented results of a survey of those who follow the fed closely ; in an op - ed ( 2016b ), they noted that “ some 73 percent of academics said fed communications helps the markets ; only 44 percent of private - sector fed watchers agreed. ” for more on changes in the underlying structure of the economy, see powell ( 2018 ). - 9important policy message may be about how the central bank will | 0.5 |
riccardo faini memorial conference italy ’ s lost productivity and how to get it back bank of italy, via nazionale 91 opening remarks by ignazio visco governor of the bank of italy rome, 13 january 2017 i am pleased to welcome all participants to this conference to remember professor riccardo faini. i first met riccardo in 1978 when i presented a paper written with stefano micossi in the famous monetary workshop held by franco modigliani and stan fisher at mit ( riccardo was then a phd student with giampaolo galli and luca barbone … ). we met often in the following years inside and outside of italy, socially and professionally, exchanging views and commenting on each other writings. indeed, issues related to the topic of today ’ s conference – long - standing poor productivity dynamics in italy – happened to be at the centre of a couple of professional exchanges between us in the mid - 1990s and early 2000s, which i would like to briefly share with you. in 1994, at a seminar on “ the new frontiers of economic policy ” ( le nuove frontiere della politica economica ) organised by the innocenzo gasparini institute for economic research ( igier ), i discussed – along with luigi spaventa – a paper by riccardo on wage and productivity differentials ( stesso lavoro, diverso salario?, i. e. “ same jobs, different wages? ” ) between northern italy and southern italy – the mezzogiorno. the starting point of riccardo ’ s analysis was that a convergence in nominal wages between the two regions since the late - 1960s had not been accompanied by a parallel convergence of productivity levels ; the ensuing higher unit labour costs in southern italy were thus contributing to higher unemployment there. in order to achieve more wage flexibility in southern italy ’ s labour market, riccardo ’ s main proposal was to introduce a third type of wage bargaining arrangement – a regional one – to complement or replace bargaining at the centralised and firm levels, with a view to bringing closer wages and productivity levels while addressing higher unemployment in the south. in my comments i raised some criticisms, but on one major point we were in close agreement, namely that the issue of lower productivity ( and higher unit labour costs ) in southern italy should be addressed not only by reforming the labour market but also by implementing broader structural reforms to overcome well - known distortions of the general institutional | addition, in line with the best practices issued by the international standard setters, the deposit guarantee schemes directive ( dgsd ) recognized dgss as fully - fledged participants of the safety net. under the dgsd, member states may allow dgss to perform more than a reimbursement function and use the available financial means to prevent the failure of a credit institution ( preventive interventions ) and to finance measures in the context of national insolvency proceedings ( alternative interventions ), subject to certain conditions and limitations ( notably the least cost criterion ). 4 the use of measures other than payout has significant advantages. not only are they less costly than payout, but from a system - wide perspective they also help to safeguard depositors ’ confidence and overall financial stability, mitigating the disruptive effects of piecemeal liquidation. 5 italy ’ s longstanding experience confirms the central role of dgss in crisis management. since the establishment of the two italian dgss, 90 interventions out of 93 have been preventive or alternative and only 3 have been payouts. 6 alternative measures proved to be paramount to solve banking crises and a real strategic partnership can be identified among banca d ’ italia and the two italian dgss. see article 11 ( 3 ) and 11 ( 6 ) of the dgsd. piecemeal liquidation is therefore the worst crisis management option, with negative impacts on public confidence and on overall financial stability, while interventions other than payout ensure the continuity of the bank ’ s borrowing relationships and the preservation of the enterprise value and of the employment level, and a high degree of depositor protection. see ‘ the banking crises of 2023 : some initial reflection ’, speech by paolo angelini, deputy governor of banca d ’ italia, at the event ‘ promoting accountability in times of crisis ’, november 2023 ; a. de aldisio, g. aloia et al., ‘ towards a framework for orderly liquidation of banks in the eu ’, notes on financial stability, 15, august 2019 ; and ‘ protecting depositors and saving money ’, occasional paper series, ecb, frankfurt am main, june 2023. more specifically, the interbank deposit protection fund ( fitd ) has managed 16 interventions since 1987, of which 9 were alternative interventions, 2 were depositor payouts and the remaining 5 were preventive interventions. the deposit guarantee scheme for cooperative banks ( fgdcc ) has carried out | 0.5 |
##s. third, the u. s. has an independent central bank – the federal reserve – which has been successful in keeping inflation low and stable. as a result, the dollar has been a reliable store of value in recent years. another point in the united states ’ favor is the considerable steps taken to shore up areas of weakness revealed by the financial crisis. in particular, the safety and soundness of our financial system has been enhanced. capital and liquidity requirements for u. s. banks have been raised significantly. stress tests have been imposed to enhance the viability of large systemic institutions even in very adverse economic and financial environments. reforms have been enacted to facilitate the recovery and resolution of troubled institutions. this bis central bankers ’ speeches includes living will requirements for the major systemically - important financial institutions, and the development of an improved resolution regime to ensure that institutions that do get into difficulty can be resolved without disrupting the stability of the financial system. in conclusion, i welcome other countries ’ progress toward achieving the preconditions necessary for their currencies to attain the stature of a reserve currency. however, we should not act as if this is sufficient to achieve a well - functioning global financial system. in particular, the current regime is inefficient in a number of important ways. countries have found it necessary to self - insure against the risk of large capital flow reversals. this has led to a very sharp rise in aggregate foreign exchange reserve holdings. this form of selfinsurance is very expensive – especially when the return on the foreign exchange reserve portfolio is less than the cost of the domestic liabilities that fund these holdings. as i have said in the past, i encourage more work to examine whether there are other more efficient regimes that, for example, would economize on required foreign exchange reserve buffers. in this regard, i think expanding the capacity of the imf ’ s resources and working to further destigmatize drawing on the imf ’ s liquidity facilities could be worthwhile steps in this direction. thank you for your kind attention. bis central bankers ’ speeches | deepali pant joshi : strategy adopted for financial inclusion speech by dr deepali pant joshi, executive director of the reserve bank of india, at a workshop, organised by the government of madhya pradesh, new delhi, 24 january 2014. * * * one of the major challenges for next decade or more to banks in the country is to capture the banking business of over 50 % population of this country of over 1. 2 billion people. poor people need to be provided with access to financial products at low transaction cost. they need to be provided assistance on the demand side ( in terms of financial awareness and literacy ) as well as on the supply side ( in the form of availability of customized financial products ). taking into account their seasonal inflow of income from agricultural operations, migration from one place to another seasonal and irregular work availability and income, the existing financial system needs to be designed to suit their requirements and to be more responsive to their needs. no doubt banks and regulators play a major role in this, but we also need to think beyond traditional ways and delivery channels to speed up the efforts. dr. raghuram rajan, hon ’ ble governor, rbi has powerfully enunciated the need for broad based diversified growth leading to rapid reduction in poverty. governor has also laid down rbi ’ s developmental measures for the near future on five pillars and one of the most important pillar amongst them is financial inclusion where the objective is to expand access of finance to small and medium enterprises, the unorganized sector, the poor, and remote and underserved areas of the country. the approach adopted for achieving the objectives under financial inclusion rbi ’ s perspective on financial inclusion aims at giving a specific direction to the collaborated efforts to gain synergic benefits. therefore, we have defined financial inclusion as “ the process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular at an affordable cost in a fair and transparent manner by mainstream institutional players. ” reserve bank of india has made sustained efforts to increase the penetration of formal financial services in unbanked areas, while continuing with its policy of ensuring adequate but viable flow of credit to priority sectors of the economy. we have adopted a structured, planned and integrated approach towards fi which is focusing on improving access to financial services and also encouraging demand for financial services through financial literacy initiatives. some of the defining features of our approach to fi are : institutional | 0 |
volatility might appear to suggest that global markets are not expecting large changes in asset prices. and yet, in a short period over the end of last year and start of this one we saw very sharp moves across asset markets in response to what seemed relatively modest amounts of news. between mid - october and the end of the year spreads on investment grade bonds, for example, went up by around 50bps. all speeches are available online at www. bankofengland. co. uk / speeches since then, these moves have completely retraced – spreads at the start of may were the same as they were in mid - october last year. bonds in other currencies and high yield bonds went on a similar round trip. at one point towards the end of 2018, the s & p was 15 % lower than it had been just 3 weeks earlier – it is now at record highs. 20 the fall in financial asset prices seems to have been due in no small part first to market concerns about future economic growth and the recovery to better news about the world economy and to the signal of greater support to economic growth from central banks than had hitherto been perceived. but the episode may also suggest that when it comes to expectations about the value of debt, the market itself is very sensitive to changes in sentiment and a correction might come very quickly, either because of weakening expectations of economic performance or signs of inflation. given the apparent current compression of risk pricing, such a correction could be a sharp one. conclusion the level of the global debt stock relative to gdp remains near its record high, though it has stabilized over the past five years. the sustainable level of debt to gdp is not, however, a constant and there are reasons to believe that the lower trend real rate will likely support sustainability. while less expected, however, a relatively small increase in the trend rate could lead to a reassessment of debt sustainability. while there is evidence that the level of debt, as opposed to the growth rate, does not appear to be a good predictor of recessions and financial crises, the level does seem to be associated with depth of losses when crises occur. the historically high level of debt may generally suggest a higher vulnerability in periods of stress. the composition of debt, within the aggregate numbers, has changed since the crisis. emerging market debt has grown as a proportion of the global debt stock, over the past 10 years, with much of the increase driven by china. advanced economy public | of water and electricity. this task is now being fulfilled by the bureau of telecommunications and post ( bt & p ). bis central bankers ’ speeches ladies and gentlemen, i would like to turn now to the best practices that have evolved during the last several years. for effectively regulating the water and energy infrastructure services some form of regulation is needed. best practices in recent years point at the creation of autonomous and independent institutions. this is only possible if there is a political commitment to facilitate this development as the regulatory decision making powers are transferred from the government ( minister ) to an independent regulator, sourced out through a regulatory contract or to an expert panel. the commitment of the government should be shaped in a constitutional and legislative framework. the aim of establishing an independent regulatory board is to encourage efficient, low - cost, reliable service provision, to ensure financial viability and to facilitate new investments. furthermore, it will insulate tariff setting from political opportunism and make decisions more transparent and predictable. one of the constraints of setting up independent regulatory agencies is the institutional capacity. it is often difficult to find a competent institution and staff. in this and next sheet, i will give an overview of the status of energy policies in selected caribbean countries. a number of caribbean islands already have depoliticized the decision making process and instituted regulators. bis central bankers ’ speeches in barbados – we often mirror ourselves against this caribbean island – a regulatory body exists since the middle of last century. from 1955 till 2001 the public utilities board was responsible for regulation. on january 2nd, 2001, the fair trading commission was established with a much broader mandate than its predecessor. its duties include among other things : determining principles, rates and standards of service for regulated service providers ; monitoring general business conduct ; investigating possible breaches of the acts that it administers ; educating and informing businesses and consumers about the requirements of these acts ; and taking enforcement action when needed. ladies and gentlemen, choosing a regulatory framework for curacao ’ s energy and water sector is not an easy task. however, we can draw upon international best practices and the experiences of our neighboring caribbean islands to help us making the right decisions. we must keep in mind though that best practices do not mean that we should simply apply these concepts to our environment. we have to adapt them to our own specific circumstances. thank you for your attention. bis central bankers ’ speeches | 0 |
links between banks and sovereigns. the recent agreement to recapitalise the spanish banking system marks progress towards a greater financial and fiscal union that will reinforce the monetary union. it is further evidence of europe ’ s resolve to address its problems. if such measures are combined with swift implementation of the financial stability board ’ s ( fsb ) financial reform agenda, which i will outline in a moment, there is a prospect of relaunching a deeper, more robust pan - european financial system. bretton woods ii the second flawed monetary union is at the heart of the current international monetary system : the so - called bretton woods ii arrangement, which is centred on china and the united states. the current international monetary system is a hybrid of, on the one hand, mainly major advanced economies with floating exchange rates and liberalised capital flows and, on the other, a group of countries that actively manage their exchange rates. the result is a system that does not facilitate timely and symmetric adjustment to shocks or structural change. for example, despite its economic miracle, china ’ s real exchange rate did not appreciate in the two decades before the global financial crisis. in the decade before the crisis erupted, china ’ s relentless accumulation of reserves contributed to low real interest rates and, for a time, subdued macroeconomic volatility. market participants increasingly assumed this stable macroeconomic environment would persist – prompting a search for yield, rising leverage and a dramatic underpricing of risks. when combined with inadequate supervision of the financial system and ill - conceived deregulation of housing and financial markets, u. s. private non - financial debt quickly rose to levels last seen during the great depression. with 20 per cent of global output, the united states imported 60 per cent of global capital ( on a net basis ) on the eve of the crisis. this would not have been a problem if this capital had been invested in expanding productive capacity. unfortunately, not enough of it was. now, the debt cycle has decisively turned. creditors demand repayment, and global growth will require global rebalancing. bis central bankers ’ speeches how to pay down debt austerity is a necessary condition for rebalancing, but it is seldom sufficient. there are really only three options to reduce debt : restructuring, inflation and growth. whether we like it or not, debt restructuring may happen. if it is to be done, it is best done quickly, and on a sufficient scale to restore sustainability. policy - | listed on the stock exchange. and for all of the above the bank of albania, over the years, has undertaken a series of measures in the form of legal acts that regulate the well - functioning of the capital market, approximating them to the european directives. also, the necessary infrastructure for trading and electronically recording exchange of securities has been established, thus improving the payment system and creating deposit institutions, including private ones. currently, we have also worked to push forward the secondary government securities market, in order to increase its liquidity and its capability to cushion the impact from the shock of the liquidity risk premia. dear ladies and gentlemen, the stock exchange is an important capital market institution, which coordinates the demand and supply of securities issued openly, freely and continuously. the trade of securities on the stock exchange always represents an exceptionally sensitive indicator of the financial soundness of a certain company as well as the economy, overall. another important aspect is transparency to the general public, in regards to both the price of the quoted stock or debt and the financial information of listed companies, derived in real time. therefore, signing and launching the first public offering, as the one conducted by the non - bank financial institutions, noa, marks a success not solely to the issuer, who will fund its expansion through this medium - term financing, but also to the institutional and individual investors, who will use this investment to diversify their portfolios. the agreement was reached fully and before the assigned deadline, which show that investors trust the entire preparatory process and the transparency of the issuer regarding the financial soundness and integrity of its financial statements. the listing of this product on the stock market will provide an opportunity to investors to exchange ownership early on, depending on personal expectations on issuer's performance and as well as liquidity preferences. whereas for the central depositor, alreg, the listing is expected to facilitate keeping the registry and exchanging securities between various investors. thus, the first public issuance of a private debt instrument opens the door for domestic banks to provide the service of signing securities in the domestic market. in this aspect, i would like to express, once more, my support for all the regulatory actors and, particularly, the afsa for its long - lasting and valuable contribution in drafting and reviewing a series of legal and regulatory acts over the past years, where the bank of albania has also played its part in providing opinions and recommendations, thus showing the close cooperation between our institutions. dear | 0 |
. and a very relevant factor in the psychological problem is the traders ’ expectations as to the intentions of the authority which fixes rates. ” - - monetary reconstruction by walter bird, bromide print, 1958 © national portrait gallery, london ( cc by - nc - nd 3. 0 ) chart 3 monetary policy discussions by economists in the uk in the first half of the 20th century ralph george hawtrey ( 1879 - 1975 ) by walter bird, bromide print, 1958 © national portrait gallery, london ( cc by - nc - nd 3. 0 ) effects of interest rate policy “ the pressure applied to traders by a moderate rise in the shortterm rate of interest, say, 1 percent, is undeniably very slight. yet apparently the bank of england always counted on a rise of 1 percent or even of 0. 5 percent having a noticeable effect. ” “ in the first place, when the use of bank rate to restrict credit became an established practice, traders, being aware of the intentions of the bank, were inclined to anticipate them. when bank rate went up from 3 to 4 percent, a trader would reason that this was intended to have a restrictive effect on markets, and that, if the effect was not brought about, the rate would simply go higher and higher till it was. those who took that view would restrict their purchases and demand would fall off, and so the 4 percent rate might be found potent enough, even though, if unsupported by traders'anticipations, a 6 or 7 percent rate might have been necessary. ” - - a century of bank rate chart 4 monetary policy discussions by economists in the uk in the first half of the 20th century announcement effect of monetary policy john richard hicks ( 1904 - 1989 ) “ i want to use the announcement effect of an act of policy to mean the change which takes place in people's minds, the change in the prospect which they think to be before them, before there is any change which expresses itself in transactions of any kind. it is the same as what hawtrey calls'psychological effect'; but that is a bad term, for it suggests something irrational, and this is entirely rational. expectations of the future ( entirely rational expectations ) are based upon the data that are available in the present. an act of policy is a significant addition to the data that are available ; it should result, and should almost immediately result, in a shift in expectations. this is what i | a very relevant factor in the psychological problem is the traders'expectations as to the intentions of the authority which fixes rates. " in other words, hawtrey highlighted that private entities decide their actions based on expectations for the future, identifying - at this extremely early stage in the study of economics - - that the central bank's policy stance toward future price stability is an important factor working on the expectations of such economic entities. hawtrey also provides us with instructive insights about why interest rate control by the central bank produces significant policy effects ( chart 3 ). in his 1938 book a century of bank rate, he argues that " [ t ] he pressure applied to traders by a moderate rise in the short - term rate of interest, say, 1 percent, is undeniably very slight. yet apparently the bank of england always counted on a rise of 1 percent or even of 0. 5 percent having a noticeable effect. " he continues by stating that, when the bank of england raises the official discount rate by 1 percent, " a trader would reason that this was intended to have a restrictive effect on markets, and that, if the effect was not brought about, the rate would simply go higher and higher till it was. " hawtrey thus probably was the first to clearly point out that the reason why a minor change in the policy interest rate creates a major policy effect is people's expectations regarding the future monetary policy stance of the central bank. i vividly remember hearing about this last point from professor john richard hicks during my days at oxford. however, while hawtrey called this policy effect resulting from people anticipating the intentions of the central bank the " psychological effect, " hicks argued that the effect was based on extremely rational behavior of economic entities ( chart 4 ). from a theoretical perspective, hicks found this to be a stronger argument with regard to the transmission mechanism of monetary policy than hawtrey's argument. hicks called this the central bank's " announcement effect, " saying that the central bank's policy " should almost immediately result in a shift in expectations, " and that " [ w ] hat i learn from hawtrey's analysis is that the'classical'bank rate system was strong, or could be strong, in its announcement effects. " this identification of the announcement effect by hicks is based on the so - called expectations theory with regard to long - term interest rates. he therefore can be said to have pointed out at an early | 1 |
ethics. in advancing this endeavour, the fspb will promote, advocate and facilitate the identification, development and the adoption of professional and ethical standards across all sectors of the financial services industry. the primary purpose of such standards will be to clearly define the expected level of performance and ethical conduct that financial services professionals are required to achieve in the service of the public. it is particularly important that the standards are unambiguous about the values for the industry and its workforce. it would facilitate financial services practitioners to understand and embrace their professional obligations, and be held accountable for their own continuing professional development. bank negara malaysia and the securities commission malaysia believe that with its stature and global complexion, the fspb is well positioned to lead efforts aimed at raising the bar of bis central bankers ’ speeches professional and ethical standards including continuous professional development for across the financial services industry, thereby strengthening confidence in the industry and affirming the industry ’ s commitment to better serve public interest. its membership of eminent experts and financial practitioners from the united kingdom, europe, australia and asia provides a valuable global perspective that will enhance the relevance of the standards developed by the fspb and their universal application. the establishment of fspb also reflects the advancement and progress of the financial services industry in malaysia and the vision of its members to embrace and promote globally acceptable and applicable standards of professionalism, human capital development and ethical behaviour that will provide the much needed clarity to the public and the industry on what is expected of financial services practitioners. indeed, in moving forward, the emphasis on the development of human capital which includes elevating professionalism and ethical behaviour of financial services professionals is paramount. today, professionalism, ethics and the quality of human capital have become key drivers and enablers of change in the financial services industry. i would like to take this opportunity to acknowledge the role of the asian institute of finance ( aif ). the idea of fspb culminated from engagements initiated by aif with the industry which was followed by a process of developing the conceptual framework to reflect the shared aspirations of the industry and the board of aif that has supported the establishment of fspb. i would also like to take this opportunity to highlight the participative role that the financial services industry would need to have in enabling fspb to meet its objectives. the value of the establishment of fspb lies in the role taken to develop professional and ethical standards that are relevant and practical, which could, subsequently, be | consumer education and protection measures have been implemented, which would also be applicable broadly to branchless banking related issues. a specific department known as consumer and market conduct department was established in 2006 to spearhead the initiatives. these initiatives included financial education at schools and for the general public ; greater disclosure requirements about the features of financial products and the associated risks ; the financial mediation bureau to provide an avenue for redress ; the credit counselling and debt management agency to assist individuals in financial distress ; and a public service centre at the central bank and all its branches to provide information and advice. the market conduct regulations also give the regulator powers to oversee fees and charges to ensure the quantum is reasonable for the services provided. these measures are broad enough to provide consumer protection in relation to branchless banking in general terms. however, they may be less effective in addressing some of the unique aspects of branchless banking, such as disputes with non - bank agents located in remote or rural locations. perhaps this forum could consider some of these aspects. collaboration in terms of sharing best practices, standards and regulations would reduce the cost as well as expedite the development of more inclusive financial sectors. we need to be mindful of the fact that for effective collaboration to take place, we must have common goals to bind our work. in this case, that common goal is the development of more inclusive financial sectors, by making available a broad range of financial services to the poor and micro enterprise segments of society and the economy, as well as those living in remote areas. before i conclude, let me again stress that the development of more inclusive financial sectors is an important objective, and as policymakers we need to pursue this without compromising on the prudential standards that sustain confidence in the financial system. branchless banking has tremendous potential to increase the outreach of financial services provided the different players and regulators are able to work within common regulatory framework. and finally that we must adopt a collaborative stance in pursuing this important global agenda which can make a real difference for the millions of people that remain caught in poverty. on behalf of bank negara malaysia i would also like to thank our principal facilitators for the workshop from the consultative group to assist the poor, the subject matter experts from world bank, the representatives from maxis communications malaysia and global exchange of philippines, and the representative from group speciale mobile association who joins us from london. i also welcome the participation of the alliance for financial inclusion in this forum, and we look forward to | 0.5 |
. | i am honored to be with you today, to inaugurate the opening of the new raiffeisen bank head office. your investment in this facility is a clear indicator of your commitment to continue operating successfully in kosovo's banking and non - banking systems, in the future as well. raiffeisen bank has played a very important role in creating a safe and sound financial system that has contributed to kosovo's economic growth. we are very honored with your presence and the success you have shown so far and we hope you will continue with this success in the future. raiffeisen bank has greatly contributed to the development of fair competition, continuous improvement of products and development of new products, by increasing access to finance, contributing to the development of trade relations with other countries, helping to attract more foreign investors and, as well, in improving the reputation of kosovo in general. we are thankful for this. raiffeisen bank has also helped in the development of human capital, and continues to use the potential of our youth. among other things, raiffeisen bank remains an example of a good employer, for which, we are all proud of. the cbk as a financial system supervisor will continue to work on maintaining a safe and sound financial system and will continuously improve the economic environment, in which the financial industry operates. the financial sector is a sector with great dynamic development and rapid changes in the economic environment that surrounds it. the financial systems of different countries are constantly integrating and this requires increased cooperation between these countries. the cbk remains committed to cooperating, with the aim of overcoming challenges in the future and integrating kosovo's financial system into the systems of developed economies. banks in kosovo, as in all other countries, have a special status in the economy. this status is associated with different regulatory requirements and greater requirements for social responsibility, and i am pleased to say that banks in kosovo successfully meet these requirements. today in kosovo our savings are safe and advancements in technology allow us to access them faster. banks are an example of success in kosovo, so i urge them to promote their success even further, in order to attract and increase foreign investments in other sectors as well. this would affect the economic development that is most needed for financial stability, as well as the further advancement of the banking sector in which raiffeisen bank plays a very important role. at the end, i would like to thank you for your contribution to the economic development of kosovo and wish you success in the future | 1 |
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