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high levels and this will put the focus back onto productivity growth and economic reform as the drivers of increasing living standards. the second issue is the importance of ensuring that the economy remains flexible, and can respond to unexpected developments. my colleagues at the reserve bank and i have spoken at length on previous occasions about the key elements here. having a flexible exchange rate has been one of the great stabilising forces in the australian economy over the past 30 years. labour market flexibility is also important. so too is retaining the flexibility of both monetary and fiscal policy to respond quickly to unexpected developments. to this list, i would add the importance of having a highly trained and educated workforce. not only does education help lift productivity, but it also makes the economy more flexible and this helps lower risk. the third element that affects the nature of the risks is the way that investment is financed. historically, much of the external funding for business investment has come from banks. while bank financing is likely to remain important for many firms, a greater share of investment is likely to be financed from other sources than has been the case in the recent past. this may not be welcome news for the banks, but having investment financed from a variety of different sources helps reduce aggregate risk. over the years ahead, foreign direct investment and capital market raisings by firms in the resources sector are both likely to play a more important role than they have over the past decade. this means that some of the risks β and, of course, some of the expected returns β from the rapid increase in australia β s capital stock will be shared with foreign investors. the fourth element of risk management is the response of domestic consumption to the improved outlook. the textbook says that if future income prospects improve, the level of national consumption β either private or public β should increase now. but the textbook also says that the lower our appetite for risk, or the greater the uncertainty about the future, the smaller should be any immediate adjustment in consumption. it also says that the more uncomfortable we are about the possibility of a future decline in consumption if things do not work out well, the smaller should be adjustment now. if we look back at our own economic history, the early 1980s provides a good example of what can happen if the adjustment is too quick. in the first couple of years of that decade, there was much optimism about the future of the resources sector, largely reflecting the rise in oil prices as a result of opec ii. this optimism was translated quickly into higher
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wages and increased spending, and the economy grew strongly for a while. but, the optimism turned out to be short lived and the result was a significant hangover, which required a substantial adjustment in spending and real wages over the following years. by way of contrast, the current experience looks quite different. despite the considerable optimism about the future, household spending has been relatively restrained over the past couple of years and the appetite for debt has declined. partly as a result, the pace of household borrowing has slowed significantly ( graph 11 ). one interpretation of this is that the household sector, after having increased its debt levels for many years and witnessed the problems elsewhere in the world, has a better appreciation of the risks. graph 11 if this interpretation is correct it is likely to be a good thing from a risk - management perspective. i say this for two reasons. first, restraint now provides some insurance against the possibility that things do not work out as well as expected. in doing so, it can help lower the probability that costly adjustments will be required at some point in the future. second, given that there is currently a relatively limited amount of spare capacity in the economy, the risk of upwards pressure on inflation would be increased if investment and consumption were both to increase very strongly over the next few years. in summary then, while we can do little to control the external environment that australia faces, the choices that we make on productivity, flexibility, financing and national consumption will influence the overall risk - profile of the australian economy. so while we look forward with considerable optimism about our medium - term prospects, we also need to be alert to the risks and how we might best manage them. conclusion i would like to close with just a couple of observations on what all this means for the collection of statistics. first, we need high - quality and comprehensive statistics if we are to understand the structural changes that are taking place in the economy. one obvious area where the demand for statistics is increasing is the resources sector. we need to understand where the investment is going, and how both production volumes and prices are changing. but we also need to understand how these developments are affecting other parts of the economy β what are the linkages and how are they changing. second, the abs β s work is also important in helping us understand some of the riskmanagement issues i spoke about. we need to continue making progress on the measurement of productivity and improving our understanding of what drives increases in output per head. and on the financial
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for forcing banks to build up more capital and reserves during the good times, which they can then draw down if things turn bad, so improving the general robustness of the system β so - called β macro - prudential regulation β. under instruction from the g20, the financial stability board, together with the basel committee on banking supervision, is therefore developing an appropriate set of cyclically - varying regulatory requirements on financial institutions 5, together with a range of other changes to improve the stability of the global financial system. of course, no regulatory regime will be perfect, and financial institutions have an incentive to try to circumvent requirements that they perceive as onerous. so there may be times when monetary policy will need to work alongside regulatory policy in order to restrain excessive credit and asset price growth, even though the achievement of the inflation target may not immediately appear threatened. but, in my view, that is best facilitated by retaining the clarity of the present remit, rather than muddying the waters by introducing another objective for monetary policy. the onus would then lie with the monetary policy committee to explain that it was permitting a temporary deviation from the inflation target so as to reduce the likelihood of future financial disruption and improve its chances of meeting the inflation target further ahead. the past two and a half years have certainly been tumultuous for both the economy and for policy makers. after such an event, we should certainly examine how the overall policymaking framework should be re - made in order to reduce the chance of a repetition. but we β the role of macroprudential policy β, bank of england, november 2009 provides an outline of some of the bank β s thinking in this area. should be careful not to throw the baby out with the bathwater. the inflation targeting framework served the real economy well for a decade and a half before the financial crisis. in addressing the shortcomings in the overall policy framework revealed by the crisis, we should be careful not to discard those parts that functioned satisfactorily. thank you.
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with clear communications to help firms understand our plans for future changes to policy. to that end, the regulatory initiatives grid now provides firms with a comprehensive overview of initiatives planned by eight financial regulators, including the pra. being more accessible also means making it easier for firms to understand the requirements they must meet. firms today face requirements scattered across primary legislation, statutory instruments, retained eu law, uk technical standards, pra supervisory statements, pra statements of policies, and guidelines, recommendations, and q & as originally drafted by european supervisory agencies. we need to change that. under the reforms implemented by the financial services and markets bill, we intend to create a single, easily useable rulebook written in plain english, although this will be a multi - year project. in the meantime, we don β t think firms should have to wait before we provide more accessible rules. that β s why have already launched a new policy index. [ 18 ] it is an online resource that divides policies into sectors and topic areas. for each topic area, a dedicated webpage lists relevant policy material and provides quick access links, allowing firms to find applicable policies more easily. conclusion i β m going to conclude by reminding you that while these are our ideas about how the pra should make policy, we really want to hear your views. that is why we have published our discussion paper on our approach to policy making. i encourage you to submit responses. if parliament approves the changes that make up the frf, we will consult on proposals for how we make policy. responses to this discussion paper will help us shape those proposals. i would like to thank austen saunders for helping me write this speech. i would also like to thank andrew bailey, charlotte gerken, hannah schraer, gareth truran and sam woods for their helpful comments. any errors are my own. 1. pra discussion paper 4 / 22 β the prudential regulation authority β s future approach to policy β, september 2022 2. β our responses to coronavirus ( covid ) : regulatory measures for pra firms β 3. pra dear ceo letter β existing or planned exposure to cryptoassets β, march 2020 4. pra discussion paper 3 / 22 β operational resilience : critical third parties to the uk financial sector β, july 2022 5. pra policy statement 6 / 21 β operational resilience : impact tolerances for important business services β, march 6. pra consultation
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01. 10. 2020 the role of the european central bank β s monetary policy in the covid - 19 crisis deusto business alumni meeting pablo hernandez de cos governor good morning, ladies and gentlemen. it is a pleasure for me to be able to participate in this meeting organised by deusto business alumni. i would like to take this opportunity to share firstly with you some thoughts on how money monetary policy has helped stave off some of the more serious consequences, at least from the economic standpoint, of the covid - 19 crisis. in the second part of my speech, i would also like to reflect on certain challenges that the gradual reduction in the so - called β natural interest rate β poses for monetary policy conduct in advanced economies. this is an issue which will be particularly significant in the context of the monetary policy review initiated at the european central bank ( ecb ). the monetary policy reaction during the crisis the outbreak of covid - 19 in europe in late february and early march was a shock of great magnitude which triggered an unprecedented economic impact due to the reduction in both the supply and demand for goods and services. the serious, temporary and global nature of the shock initially required powerful economic policy actions. the objective of this β shock therapy β was to avoid a temporary shock from generating effects which persist over time. fiscal policy is undoubtedly the most appropriate tool to act as the first line of defence in this setting, since it has the instruments to achieve this objective with immediate and targeted actions that are suited to a shock whose duration is uncertain and heterogeneous. the response of european governments has generally been commensurate with the challenges posed by this crisis. their response has also been resolutely backed by the european union ( eu ), especially following the approval of the european recovery fund by the european council. for its part, monetary policy should act, and has acted, very forcefully too. indeed, the economic shock triggered by the pandemic was accompanied by aa strong tightening of financial conditions in the euro area. as various governments, including spain β s, announced plans to contain the virus, financial markets began to discount heavy declines in economic activity and increases in public and private debt. this drove risk premia ( i. e. the compensation demanded by bond investors for the probability of borrowers defaulting ) higher. that resulted in an increase in the interest rate that governments, households and firms pay on their rising debts, which will necessarily amplify the
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roger w ferguson, jr : back to the future in managing banking risk remarks by mr roger w ferguson, jr, vice chairman of the board of governors of the us federal reserve system, at washington and lee university, lexington, virginia, 4 march 2002. * * * good evening. i wish to start by acknowledging the contributions of h. parker willis, a leader in teaching economics and political science and a major contributor to the establishment of the federal reserve. i suspect he would be pleased to know that his contributions are remembered and that they have served national and academic interests so well. in his teachings, dr. willis recognized the relationship between monetary and fiscal policy, the role of banking, and their combined effects on economic growth. recent events have illustrated, once again, the cyclical nature of the u. s. and world economies and the direct effect that economic conditions can have on banks as intermediaries of credit. after nearly a decade of steady improvement, earnings from core bank operations and other measures of financial strength for the u. s. banking system have taken an inevitable turn. while concerns about these indicators of financial health continue to grow, the deterioration is not a source of alarm. since the end of 1999, for example, the growth of industry assets has far outpaced the rise in earnings ; nonperforming assets, though still relatively low, have expanded more than 70 percent ; and the number and the assets of unsatisfactory or problem banks have increased, again still remaining relatively low. fraud by bank employees has led to losses and even the closure of some banks recently. more broadly, after the failure of enron, the stock market has reacted as we might expect to the uncertainty created by opaque balance sheets by punishing firms, both banks and nonbanks, whose risk profiles are less easily understood. to be sure, the u. s. banking system remains strong by virtually any measure and is well positioned to support future economic growth. by historic standards, current profitability figures are robust ; and relative to the industry's equity, reserves, or asset size, nonperforming assets are still low. banks survive and prosper by accepting risk, which is their crucial economic role and the reason for their existence. nonetheless, risk must be well managed and at many institutions that task has become much more difficult and complex. indeed, in my remarks today, i want to discuss the changing nature of risk management in banking and its implications for bankers and bank supervisors.
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, i have described the bank's thinking regarding the conduct of monetary policy in terms of interest rate policy. now, let me remind you of an important fact : proper functioning of financial markets is a prerequisite for monetary policy to be effective. it is therefore vital to ensure the stability of japanese financial markets when global financial markets remain volatile. fortunately, japanese financial markets have so far been stable unlike their u. s. and european counterparts. mainly this is because japanese financial institutions have had only limited exposure to subprime - related products, but i believe that a considerable role was also played by the fact that the bank, based on its past experience of financial crises, had already established a framework for flexibly providing liquidity. as you know, since last summer central banks in north america and europe have introduced various tools for liquidity provision to address elevated pressures in short - term funding markets. for example, the fed has extended the maximum maturity of its funds - supplying operations to one month, from two weeks. the bank employs funds - supplying tools with a variety of maturities β some of which have a maximum maturity of one year β and this enables the bank to provide funds with the appropriate maturity. in march this year, the fed introduced a credit facility that allows securities companies to borrow funds. the bank has included securities companies as counterparties since 2001, when it introduced a complementary lending facility. as for collateral, central banks in north america and europe have recently expanded the range of eligible collateral they accept, while the bank has long accepted a broad range of assets as eligible collateral. moreover, the bank has a " pooled collateral " system, which allows counterparties to change their collateral in a flexible manner when necessary. needless to say, excessive use of such supportive measures may hamper the proper functioning of financial markets, which should operate autonomously, and therefore it is important to maintain a good balance between offering supportive measures and leaving things to the autonomous functioning of the market. what we have learned from japan's experience in 1997 and subsequent years, however, is that once strains occur in borrowing from the market, smooth borrowing and lending become difficult, and problems cannot be easily resolved. in order to maintain a financial environment in which monetary policy accommodation effects derived from the present low interest rates are fully realized, the bank will continue to carefully monitor market developments and to ensure the stability of the money market. it will also carefully assess the future outlook for economic activity and prices, closely considering the
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financial regulation and economic policies for avoiding the next crisis ( urjit r. patel, governor, 32nd annual g30 international banking seminar, october 15, 2017, inter - american development bank, washington, d. c. ) 1. let me start by reminding ourselves of some numbers that are a key backdrop for today β s panel discussion. total global external liabilities have grown from 30 per cent to 190 per cent of global gdp between 1980 and 2015, far outpacing the growth in global trade ( from 19 per cent to 28 per cent of gdp over the same period ). the main vehicle of this new globalisation has been crossborder banking flows, which constituted a third of global capital flows in the decade prior to the financial crisis. in parallel, the global trade network has become increasingly interconnected through supply chains that transcend national borders, and by the advent of new players, especially from the developing world. china now accounts for about 11 per cent of global trade and emerging market and developing countries ( emdcs ) taken together contribute 37 per cent ( up by about 15 percentage points since 2000 ). 2. during the global financial crisis, the explicit pre - crisis assignment of policy instruments to objectives became blurred. the experience demonstrated that macroeconomic policymaking is expected to do a fine balancing act to achieve multiple and, at times, conflicting objectives of monetary stability, fiscal stability and financial stability. within these trade - offs, financial stability has assumed some seniority, entailing for national authorities the constant need to monitor, identify and minimise the build - up of systemic risks in financial systems and reduce spill overs in the most efficient and effective way. this involves a fine dovetailing of the objectives of market efficiency into consumer protection and the management β even pre - emption β of systemic risks. 3. in my remarks today, i would focus on the following issues in the role of financial regulation in averting the next crisis : β’ β’ β’ β’ globalisation and adherence to global rules / standards β synergies and challenges. financial regulation and suddenness of crisis incidence β regulatory intervention needs to be more anticipatory and data - based. backward - looking versus forward - looking risk - based supervision β need for global systemically important banks to disclose their internal rating models. too - big - to - fail and moral hazard. β’ adequacy of global financial safety nets ( gfsns ) in the context of the size and speed of crises β gaps and
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. let me conclude by wishing the graduating students all the best in their future careers, and to wish you all a very successful conference.
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result, a very high percentage of islamic banks have a strategy that is heavily weighted towards real estate and asset finance. the downturn in global economic conditions will provide these business models with a stern test. project - driven business strategies will be affected by the reduction in global liquidity and the slowing of global economic growth. islamic financial institutions will need to plan and prepare for these more challenging operating conditions. the industry needs to respond to this challenge by developing a greater diversity of business models, more diverse and stable income sources, and more rigorous risk management and stress testing techniques to assess its preparedness to deal with any downturn in economic activity. the essential consideration in islamic finance, as in all forms of finance, is to find the right balance between business development and risk management. there are certain measures that the central bank of bahrain can take to assist islamic financial institutions in this process. we have recently launched an islamic sukuk liquidity instrument, which is a repurchase agreement that enables financial institutions, both conventional and islamic, to access short - term liquidity against the government of bahrain ijara sukuk. at the same time, however, the primary responsibility for sound risk management and control resides with the firms themselves. the principles and standards developed by aaoifi provide islamic financial institutions with a sound basis on which to manage their activities. those of you today, who are graduating with the qualification of β certified shari β a adviser and auditor β, and β certified islamic professional accountant β, will be at the forefront of islamic financial institutions β ability to manage, monitor and control their risks in the future. there is a continuing need for high quality human resources in the industry. islamic banking has been growing so fast that it has been difficult for institutions to find enough skilled or qualified staff. this is why the cbb has participated with islamic institutions in bahrain in setting up the waqf fund to provide financial and technical support in upgrading training programmes and introducing new ones. we are now beginning to see a larger number of financiers qualified in shari β a related subjects and this can only be to the benefit of the islamic finance industry. the two courses which are graduating today, are both challenging study programmes, and congratulations belong first and foremost to those students who have successfully completed them. doing so has required hard work and commitment. it is an achievement to be proud of, and one that i am sure will serve you in good stead, as you further develop your professional careers
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the needed interventions aimed at improving the use of communication as a tool, not only for managing crisis but also to prevent them. 8. on behalf of the governor of the bank of ghana, i wish to thank the aacb for choosing ghana to host this seminar. i believe through this seminar, our international delegates have had the opportunity to taste ghanaian culture and hospitality. yet, i would still encourage you to stay longer, if possible, or return to ghana on your next vacation to explore more of the marvellous sights and sounds unique to our country, ghana. 9. finally, may you carry our warm felicitation to your governors and colleagues in your central banks. i also expect you to share the experiences, the gains and the take - away points from this seminar with my fellow governors so that we can expand the coverage of the intended impact beyond this year β s seminar. 10. i wish you all safe flight back home. thank you for your attention
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and actions. monetary policy β s role is to ensure low and stable inflation. experience shows that we cannot reduce unemployment over time by simply accepting somewhat higher inflation. in many countries, including norway, confidence that inflation will be held at bay has increased because interest rate setting has been delegated to the central bank. we are now in a period where petroleum wealth is being invested in foreign financial assets via the government petroleum fund. the government is to gradually phase in petroleum revenues into the domestic economy by using approximately the expected real return on the fund. the fiscal rule was established in 2001. growth in public spending started to accelerate in 1997 from its low level in the mid - 1990s. spending growth has also been fairly strong in recent years, but perhaps somewhat slower than earlier. the fiscal rule for the budget implies that the government can use 4 per cent of the fund over time. this year, a little more than 6 per cent is being used. the deviation partly reflects an unexpected shortfall in tax revenues in recent years. the government budget deficit is the difference between total revenues and total spending. they each account for about half of total gdp in norway. even small deviations from spending and revenue projections can have a major impact on the deficit. exchange rate changes will also lead to fluctuations in the value of the petroleum fund. for these reasons alone, the use of petroleum revenues may in periods deviate from the 4 per cent rule. spending was also increased in response to the economic downturn. we can therefore safely affirm that the fiscal rule has been normative for fiscal policy. at the time of the introduction of the fiscal rule in 2001 projections pointed to a continued increase in the use of petroleum revenues. we had to expect this growth in spending to lead to weaker competitiveness in norwegian manufacturing, either through higher wages or an appreciation of the krone. with wage growth in norway higher than abroad, the competitive position of norway β s manufacturing industry has weakened by about 15 per cent since the mid - 1990s. competitiveness is about 4 per cent weaker than the average for the past 30 years. the krone has been influenced by high oil and gas prices and prices for other norwegian export goods. monetary policy has also influenced the path for norway β s relative costs, but the nominal value of the krone is about the same as 10 years ago. strong growth in public spending and expectations of moderately higher growth in the use of petroleum revenues now seem to have been factored into the cost level. over the
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normalisation of policy rates and the end of the asset purchase programme in the us, the high - yielding emerging market economies β securities has lost their appeal somewhat. bis central bankers β speeches a further channel of transmission for quantitative easing has been through exchange - rate movements. capital inflows, particularly portfolio inflows, to emerging market economies have resulted in the appreciation of some emerging market economies β currencies. however, according to the imf, the overall impact on emerging market economies was generally positive. it further argues that the positive spill - over effects from the relatively stronger demand in advanced economies, as well as from the lower costs of capital, cheaper sovereign financing and higher equity prices, outweighed the negative effect of currency appreciation. some of the positive net effects of quantitative easing on emerging market economies were, however, reversed following the β tapering β announcement in may 2013 which triggered changes in us policy expectations. some evidence suggests that the announcement has likely reduced market participants β risk appetite for investing in emerging market economies. indeed, many emerging market economies experienced a sharp withdrawal of private capital inflows and increased financial market volatility. the impact has, however, increasingly become differentiated among economies. countries with stronger fundamentals, deeper financial markets and a tighter stance on capital flows and macro - prudential policies, prior to tapering, seems to have experienced less volatility. south africa was among the emerging market economies strongly affected by the us fed β s tapering announcement. as in other emerging market economies, portfolio inflows slowed from may 2013 and turned to outflows in the second and fourth quarters of 2013 and again in the third quarter of 2014. the exchange rate of the rand has also been volatile. although some of this volatility can be explained by the changing expectations of the timing of the first us interest - rate increase, domestic idiosyncratic factors were also at play, including weak growth projections, large twin deficits, a sizable share of foreign holdings in rand government debt and downgrades of south africa β s credit ratings. the flexible exchange - rate system and robust macro - prudential policies in south africa have, to some extent, served as a buffer in offsetting some of the negative spill - overs. market perceptions of a possible delay in us normalisation, coupled with the european central bank action, have changed global market risk sentiment and improved the prospects for capital flows to emerging markets over the short - term. this, however
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global growth outlook is likely to persist for some time, and we need to be mindful that the prevailing financial crisis has already lasted five years, with no end in sight, the challenges facing the domestic economy are daunting. but not all of our problems can be ascribed to these global factors. there are numerous underlying structural problems in the economy which are exacerbated, but not necessarily caused, by these global developments. in line with the weak and deteriorating global outlook, the bank has been progressively downgrading its economic growth forecasts over the past year. growth in 2012 is expected to average around 2, 7 per cent, down from 3, 1 per cent in 2011. the most recent forecast for bis central bankers β speeches 2013 is a growth rate of 3, 8 per cent, but the risks are seen to be on the downside. according to reuters, the market consensus forecast for 2013 is 3, 3 per cent. growth rates of this order of magnitude will not have an appreciable impact on south africa β s unemployment rate which currently stands at 24, 9 per cent. it is instructive that during the high growth years between 2004 β 2007, when growth averaged around 5 per cent, unemployment declined to 21, 9 per cent but this was quickly reversed following the crisisinduced recession in 2009. so if these patterns are to be repeated, we would need a number of years of significantly higher growth than we are currently expecting simply to get back to pre - crisis levels of unemployment. however, the sustainable growth rate itself is constrained by the potential output of the economy, which, in turn, is determined by capacity and other structural constraints. at a simple level that implies that if we have unemployed resources or spare capacity in the economy, output can be increased in a non - inflationary manner. research done in the bank prior to the crisis showed that the potential output growth of the economy was between 4 and 4, 5 per cent. since the crisis, that has declined to around 3, 5 per cent. this decline may have been due in part to some destruction of capacity and we also now know that growth will be constrained by the lack of adequate electricity provision until sometime next year at the earliest. i should note that this does not imply that a growth rate in excess of 3, 5 per cent would necessarily be inflationary. currently the economy still has a negative output gap, which we estimate to be around 3, 5 per cent, which is indicative
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the aim is to establish the parameters within which the takaful operators operate their business, whilst allowing for the different takaful models currently adopted by the respective takaful operators to continue to operate. this consultative process is a further reflection of the approach adopted to take into consideration the feedback from the industry players in designing appropriate regulatory framework and thus towards balancing the interests of the various stakeholders. the industry can also expect to see progress on the development of international best practices for the takaful industry by the islamic financial services board ( ifsb ) in the near future. an important step towards this direction has been taken with the recent establishment of an ifsb working group to develop supervisory standards on corporate governance. ladies and gentlemen, given the strong progress to date and the positive economic environment, i am confident that the malaysian takaful operators will continue to make significant strides in becoming world - class players. in the process, this will strengthen the positioning of malaysia as an international islamic financial centre. on this note, i wish to congratulate prudential corporation holdings limited and bank simpanan nasional on the occasion of the official launch of prudential bsn takaful berhad. i wish prudential bsn takaful berhad every success in achieving its objectives. akhir kata, dengan lafaz bismillahir rahmanir rahim, saya dengan sukacitanya merasmikan pelancaran prudential bsn takaful berhad. terima kasih.
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of gdp respectively, had become decisively decoupled from, and had far outstripped real economic activity. domestic credit by the financial sectors in iceland and the us had by 2007, risen sharply to 299 % and 236 % of gdp respectively. the experience of the global financial crisis highlights the potential for the benefits of finance to be dramatically reversed, resulting in destructive rather than constructive effects of finance. several studies have shown that the marginal returns to growth from finance diminish at high levels of financial development. in other words, there can be β too much finance β where the costs to growth and stability outweigh the benefits of financial development. similar to other booming industries, the financial sector at the height of its exuberance showed an overinvestment of resources in terms of capital including human capital which only became apparent after the bust. with the benefit of hindsight, it has become clear that in the lead up to the global financial crisis, many financial systems were close to, or had long surpassed, the point where bigger was better. the breakdown of financial systems the gradual severance of the link between finance and the real economy, in my view, represents the foremost factor that has weakened the positive role of finance and increased the potential for financial instability. as witnessed during the recent crisis, the degradation of finance eventually rendered its noble economic function of intermediation as ineffective, causing greater harm than good to the economic growth process. the various factors contributing to the recent crisis have already been extensively researched and discussed, highlighting that in most cases finance had become highly disconnected from real, productive economic activity. additionally, is the role that it had in altering the relationship between the growth and distribution of risks created distortions in which the gains from excessive risktaking were privatised among the few while the losses were socialised among the many. the abuse of securitisation and the β originate and distribute β model was a particularly telling display of this malaise, severing the link between risk - taking agents and those who ultimately bore the risk. while intended to facilitate better risk management by transferring risk from the banks to a diversified set of investors, this distancing gave rise to problems in the incentive structure and in the availability of information. there was a clear breakdown in the relationship between creditor and borrower. banks were essentially incentivised to focus on aggressively originating loans which were of compromised quality due to lowered underwriting standards. investors of such bundled risks had then become far
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yakiv smolii : national bank of ukraine press briefing - monetary policy statement speech by mr yakiv smolii, governor of the national bank of ukraine, at a press briefing on monetary policy, kyiv, 5 september 2019. * * * dear colleagues, the board of the national bank of ukraine has decided to cut the key policy rate to 16. 5 % per annum, effective 6 september 2019. the nbu is continuing the cycle of monetary policy easing, as it expects inflation to decline to the target of 5 %. what inflation developments followed the last monetary policy meeting? despite seasonal decrease of prices in july, inflation in annual terms was higher than our forecast and made 9. 1 % the nbuestimates inflation to have declined in august, although still remaining above the forecast level. the deviation was mostly driven by temporary factors related to food supply, in particular the supply of vegetables. meanwhile, core inflation was 7. 4 % was in line with the nbu β s forecast. the tight monetary policy continued to hold back the underlying pressures on prices, in particular through the exchange rate channel. the appreciation of the hryvnia had the strongest impact on prices of fuel and some food products. however, disinflation was restrained by the greater consumer demand and the rise in real wages by almost 10 % over the year. what are the future inflation developments? the nbu reiterates its forecast that inflation will meet the 5 % medium - term target at the end of next year. macroeconomic factors in place since the previous monetary policy meeting of the nbu board have not changed the balance of risks to the forecast. on the one hand, according to the nbu β s estimates, a strengthening in the exchange rate will help curb inflation in the next few months. the hryvnia appreciation was driven by fundamental market factors, such as : favorable global commodity prices good harvest of grain crops continued growth in it services exports a stronger investor confidence in the ukrainian economy the simplified access to the domestic government securities market for investors. that reduced the amount of repatriated dividends and spurred demand for domestic government bonds. although the impact of foreign capital inflows on the domestic government bond market weakened substantially over past weeks, the foreign exchange market has remained in balance. the current drop in global oil and gas prices will be translated to domestic prices, with a certain time lag. on the other hand, the rapidly rising domestic demand and strong wage growth will
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push prices upward. the more rapid gdp growth seen in q2 2019 ( to 4. 6 % yoy ) was mainly driven 1 / 2 bis central bankers'speeches by a pick - up in domestic consumption amid a faster improvement in consumer sentiment. the preliminary estimates of july economic activity showed that sustained domestic demand had persisted. internal political risks to reducing inflation to its target decreased after the new convocation parliament started to operate and a new government was formed. this makes it possible to intensify negotiations on a new cooperation program with the international monetary fund. at the same time, there are still threats to financial stability arising from current court proceedings related to the decisions taken by the state to improve the health of the banking sector. external risks are also important. these include : a suspension of russian gas transit through ukraine starting in 2020 increased trade tensions and more turbulent global financial markets an escalation of the military conflict and new trade restrictions introduced by russia. what is the nbu β s current view of the future monetary policy stance? the nbu will continue the cycle of monetary policy easing, provided inflation is steadily declining to its 5 % target. how quickly the key policy rate is reduced to its neutral level of 8 % will depend on both internal and external risks. if structural reforms speed up, the nbu could cut the key policy rate more quickly. another important condition is inflation decreasing steadily to its target. conversely, if inflation risks materialize, in particular through persistent demand pressure, the easing of monetary policy will be more gradual. a summary of the discussion by monetary policy committee members that preceded this decision will be published on 16 september 2019. the next meeting of the nbu board on monetary policy issues will be held on 24 october 2019. thank you for listening! 2 / 2 bis central bankers'speeches
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fig. 1. 1 ). the economically troubled countries of the eurozone have a similar pattern to japan and the united states. the ratios for greece, portugal and spain have almost the same time profile, and all of them peaked around 2000 β 2005. the peak of the spanish property boom was just after the ratio β s peak, and the financial problems of greece also started at the same time. a particularly interesting case is ireland, which showed a sharp rise in the ratio until around 2005. the bust of the country β s property market bubble was just a few years around the corner ( fig. 1. 2 ). incidentally, for the sake of completeness, i have included the figures for china ( fig. 1. 3 ), whose ratio seems still to be rising rapidly, but will peak a bit later than in euro - american countries. the peak will be around 2010 β 15, after which it will go down as rapidly as it is now going up. the inverse dependency ratios of many other asian countries have a quite similar time profile to that of china. i am not suggesting any causality here, but simply pointing out the balance sheet adjustments after the bubble burst in japan, united states and the eurozone, whether private bis central bankers β speeches or public, must be carried out as the population is ageing. i believe this fact has an important bearing on the future of monetary policy, especially unconventional monetary policy. in section 2, i first examine the process of balance sheet adjustment after the bursting of a bubble and when the population is ageing, juxtaposing japan in the 1990s and the united states in the 2000s. then, in section 3, i summarize the consequences of severe, prolonged balance sheet adjustment, as seen in japan in the 2000s. finally in section 4, i identify the multi - faceted challenges central banks may face as a consequence of carrying out balance sheet adjustments under population ageing, and i explain the bank of japan β s policies to tackle these problems. 2. balance sheet adjustment and the breakdown of the transmission mechanism who leveraged during the bubble period? japan and the united sates in order to find out the effect of balance sheet adjustments after the bursting of a bubble, let me first clarify who leveraged during the bubble periods. in japan, it was the corporate sector, especially small to medium - sized firms, which for the first time gained access to large banks after the so - called financial liberalization ( fig. 2
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developments in overseas economic activity and prices ; developments in the situation surrounding ukraine and in commodity prices ; and the course of covid - 19 at home and abroad and its impact. in this situation, it is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on japan's economic activity and prices. meanwhile, japan's 1 / 2 bis - central bankers'speeches financial system has maintained stability on the whole. although attention is warranted on, for example, the impact of the tightening of global financial conditions, the financial system is likely to remain highly robust on the whole, mainly because financial institutions have sufficient capital bases. regarding financial risks from a longer - term perspective, while there is a possibility that prolonged downward pressure on financial institutions'profits may lead to a gradual pullback in financial intermediation, the vulnerability of the financial system could increase, mainly due to the search for yield behavior. although these risks are judged as not significant at this point, it is necessary to pay close attention to future developments. ii. conduct of monetary policy next, i will explain the bank's conduct of monetary policy. japan's economy is on its way to recovery from a downturn caused by covid - 19 and uncertainties for the economy have been extremely high. on the price front, the year - on - year rate of increase in the cpi is projected to decelerate to a level below 2 percent from fiscal 2023. given such developments in economic activity and prices, the bank will continue with monetary easing, aiming to firmly support japan's economy and thereby achieve the price stability target of 2 percent in a sustainable and stable manner, accompanied by wage increases. thank you. 2 / 2 bis - central bankers'speeches
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mario draghi : interview in the guardian interview with mr mario draghi, president of the european central bank, in the guardian, conducted by mr shiv malik on 18 february 2016 and published on 11 march 2016. * * * what does the ecb β s own research on incomes and younger generations say? during the great recession, the young ( 16 to 34 ) lost about 5 percent of household income in real terms. that was of course substantial and had a big impact on the personal plans of many young people. but the magnitude was not so different from the losses suffered by other generations, although of course the young do not have the same assets and savings to fall back on in tough economic times. even more worrying was the sharp increase in youth unemployment in europe. are you worried about the position of young adults in europe and is this an increasingly urgent issue? youth unemployment is a tragedy and prevents people from playing a full and meaningful part in society. if every second young person is out of work β as is still the case in some countries in europe β it seriously harms the economy, because people willing to work cannot work and skills are not developed. and it threatens social harmony. unemployment can lead in the long run to increased social problems and ill - health. are you worried about future consumption levels of young adults, as this group β who have been especially β scarred β by the global recession β move into middle life? consumption within a society is determined partly by wealth distribution, but even more important is that the young generation can participate in the labour market in a fair way. in many countries the labour market is set up to protect older β insiders β β people with permanent, high paid contracts and shielded by strong labour laws. the side effect is that young people are stuck with lower - paid, temporary contracts and get fired first in crisis times. that also means that employers are reluctant to invest in young people, so the incomes of this generation stay lower over their lifetime. what might be the forces at work here β demographics / changing workplaces / fiscalmonetary policy β that mean that young adults appear to be receiving little of the rewards of two and half decades of average economic growth? nobody stays young forever. the crucial question is whether a person can participate fully in the economy over his or her life - time β get a good education, find a job, buy a home for the family. income and wealth follow. what makes me worry is that increasing inequality might prevent people from
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mr. greenspan gives a testimony on the global financial system and the role of the imf in the asian crisis testimony of the chairman of the board of governors of the us federal reserve, mr. alan greenspan, before the committee on agriculture of the us house of representatives on 21 / 5 / 98. the global financial system has been evolving rapidly in recent years. new technology has radically reduced the costs of borrowing and lending across traditional national borders, facilitating the development of new instruments and drawing in new players. information is transmitted instantaneously around the world, and huge shifts in the supply and demand for funds naturally follow, resulting in a massive increase in capital flows. this burgeoning global system has been demonstrated to be a highly efficient structure that has significantly facilitated cross - border trade in goods and services and, accordingly, has made a substantial contribution to standards of living worldwide. its efficiency exposes and punishes underlying economic imprudence swiftly and decisively. regrettably, it also appears to have facilitated the transmission of financial disturbances far more effectively than ever before. three years ago, the mexican crisis was the first episode associated with our new high - tech international financial system. the current asian crisis is the second. we do not as yet fully understand the new system β s dynamics. we are learning fast, and need to update and modify our institutions and practices to reduce the risks inherent in the new regime. meanwhile, we have had to confront the current crisis with the institutions and techniques we have. many argued that the asian crisis should be allowed to run its course without support from the international monetary fund or the bilateral financial backing of other nations. they asserted that allowing this crisis to play out, while doubtless having additional negative effects on growth in asia, and engendering greater spill - overs onto the rest of the world, would not likely have a large or lasting impact on the united states and the world economy. they may well have been correct in their judgment, and some would argue that events over the past six months have proved them right ; we have so far avoided the type of continuing downward spiral that some feared. there was and is, however, a small but not negligible probability that the upset in east asia could have unexpectedly large negative effects on japan, latin america, and eastern and central europe that, in turn, could have repercussions elsewhere, including the united states. thus, while the probability of such an outcome may be small, its consequences, in
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francois villeroy de galhau : financing of very small enterprises ( vses ) introductory speech by mr francois villeroy de galhau, governor of the bank of france, at the symposium on the financing of very small enterprises ( vses ), organised by the bank of france in conjunction with the federation of approved management centres, paris, 15 january 2016. * * * ladies and gentlemen, welcome to the banque de france for this symposium on the financing of very small enterprises or vses. it was conceived and organised in conjunction with the federation of approved management centres, and i would like to extend my warmest thanks to them, and in particular to their president yves marmont. i am very pleased to have developed such a close and lasting relationship with your organisation, which plays a vital role in supporting smes and vses. this event would also have been impossible without the help of the individuals and organisations who have agreed to take part in our three round tables today, and i would like to thank them sincerely for their contribution. it is a particular pleasure for me to be able to open this symposium today. as you know, just a few months ago, i had the honour of submitting a report to the prime minister on the financing of business investment, the first proposed recommendation of which was to β improve access to credit for very small businesses, especially cash loans β. this is our focus today. although my role has changed since then, my belief in the fundamental importance of this issue remains the same. indeed, my conviction has been reinforced by the banque de france β s own commitment to supporting vses, both at a central level and through its local presence in france β s regions. one of the main advantages of this nationwide network is that it makes it easier to listen to and support local businesses, the majority of which are clearly vses. through its local branch network, the banque de france is responsible for dealing with credit mediation applications. it provides valuable insight for economic and social actors by publishing statistics on vses, and is the only central bank in the eurosystem to publish data in this level of detail. in addition, the banque de france conducts studies into vse finances and their positioning in the french economic landscape. clearly, this symposium is not just a one - off event reflecting a passing interest in a subject that β s currently in the spotlight. in fact, it is part of an ongoing and enduring initiative, and will provide additional impetus to
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to significant savings in the business - to - business supply chain. one of the implications of this increase in the availability of information is a great improvement in inventory management. the optimal level of inventories is becoming smaller, so that the real economy reacts faster to demand and / or supply shocks, reducing both the length and the width of the cycle. and shorter cycles make for a more effective monetary policy. krugman, p. β crisis : the price of globalization? β paper presented at jackson hole, wyoming, 2000. world economic outlook, may 2001, chapter iii : β three current policy issues : impact of the global technology correction on the real economy β, page. 57 - 66. brookings institution ( 2001 ) : β the economic payoff from the internet β. www. brook. edu / es / research / areas / it / ipibisummary. htm. blinder, alan ( 2000 ) : β the internet and the new economy β, brookings institution policy brief nΒ°60, june. altig d. y peter rupert ( 1999 ) : β growth and the internet : surfing to prosperity? β, federal reserve bank of cleveland economic commentary, september. for instance, robert gordon ( does the β new economy β measure up to the great inventions of the past? journal of economic perspectives, fall 2000 ) mentioned β the new economy has meant little to the 88 percent of the economy outside of durable manufacturing ; in part of the economy, trend growth in multifactor productivity has actually decelerated, despite a massive investment boom in computers and related equipment β. page 72. optimal inventory management in an increasingly open international economy will not only imply shorter, but also, most probably, more synchronic cycles. a by - product of this development is an expansion of the geographical limits of optimum currency areas a la mundell. 3. terms of trade shocks and emerging economies the synchronization of the cycle increases volatility in commodity markets, an important source of international transmission of the cycle to a good number of emerging economies. the synchronization and shortening of cycles will probably also increase the volatility of international interest rates. economies with liquidity constraints and limited access to international financial markets will suffer the most. the policy prescription here is to strengthen fundamentals and open and deepen the integration of both product and capital markets with the rest of the world. the effect of synchronization and shortening of
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eva srejber : the divorce between macro financial stability and micro supervisory responsibility - are we now in for a more stable life? speech by ms eva srejber, first deputy governor of the sveriges riksbank, at the 33rd economics conference of the oesterreichische nationalbank ( austrian national bank ), vienna, 13 may 2005. * * * introduction i hope i won β t disappoint our kind hosts who asked me to deliver this address but i have a confession to make β in sweden, macro financial stability and supervision are not divorced. they have never been married. indeed, it is only quite recently that the riksbank and the fsa ( financial supervisory authority ) have started to acknowledge β operationally in their respective policy frameworks β the link between macro financial stability and micro supervisory issues. whether we just got divorced or are soon to get married, the relationship between financial stability and supervision is highly relevant. i will structure this address in the following way. first, i will give a brief description of how the relationship between supervision and financial stability has developed in sweden. then, i will move on to the financial sector developments that now challenge the ways supervisors and central banks have been working. the process of internationalisation, in general, and cross - border integration, in the eu, will force both supervisors and national central banks to focus on their core tasks and to a certain degree invent new ways to perform those tasks. finally, i will comment more specifically on some of these challenges, and in connection to that also discuss some of the proposed alternative ways of responding to these challenges. the swedish case before the banking crisis in the early 1990s, the cooperation between the riksbank and the swedish fsa ( then the banking inspection ) was limited to high - level contacts. in their day - to - day activities, however, the two authorities worked in different silos β the riksbank with monetary and exchange rate policy and the fsa with regulating and supervising financial institutions. the crisis made it very clear to the swedish authorities that there is a strong link between soundness of financial institutions and macro financial stability, and hence a need for close cooperation between the fsa and the central bank. this economic link is mirrored by a parallel link spanning at least three aspects of regulatory involvement in the financial sector β crisis prevention, crisis management and crisis resolution. in sweden, these aspects of regulatory involvement are shared between the supervisor, the central bank and the ministry of
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the issue at some length. in a speech to the economics association in february 1995, for instance, i noted that there are shocks, such as altered indirect taxes and subsidies, which may affect the price level at short notice and cause inflation to deviate from the target. while such effects are usually absorbed inside the tolerance interval, they may sometimes be so pronounced that inflation fluctuates more widely. in such situations it is up to monetary policy to ensure that the deviations from the target do not have permanent consequences for the rate of inflation and inflation expectations. while drastic countermeasures might produce quick results, they would destabilise the economy, which is not desirable. in various contexts i made it clear that monetary policy would be conducted so that price effects from the consolidation of government finances would be left to materialise in the price level. at the same time, it was important to ensure that the transitory effects were, in fact, temporary and did not colour inflation expectations. at that time, however, survey data indicated that the level of inflation expectations was already around 4 per cent. the overall assessment of inflation, based on an unchanged instrumental rate, accordingly pointed to a risk of the inflation target being exceeded as economic activity became stronger. moreover, the high inflation expectations contributed to excessively high wage settlements in the spring of 1995. it was partly this β not the price effects from budget consolidation β that warranted the upward adjustments of the instrumental rate from august 1994 to july 1995. transitory effects again conditioned the rate of inflation during 1996 and 1997 but now in a downward direction via falling house mortgage interest costs. the krona β s appreciation, in connection with the rapid enhancement of confidence in budget policy, also tended to lower the cpi. had the riksbank continued to reduce the instrumental rate β after the earlier cuts had had a transitory downward effect on inflation β s current rate β it would have tended to destabilise the economy. the riksbank would, as it were, have been chasing its own tail, with interest rate cuts that became increasingly large and frequent. inflation expectations and actual inflation would ultimately have risen, obliging the riksbank to swing to a markedly restrictive stance. as interest rate increases also have transitory effects on inflation, the riksbank would again start to chase its own tail but now in an upward spiral. this illustrates how absurd it would be to raise or lower the instrumental rate as a response to the direct, but
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the government on 29 march 2001, the operational objective of monetary policy is low and stable inflation. pursuant to the regulation, norges bank β s mandate is as follows : β monetary policy shall be aimed at stability in the norwegian krone β s national and international value, contributing to stable expectations concerning exchange rate developments. at the same time, monetary policy shall underpin fiscal policy by contributing to stable developments in output and employment. norges bank is responsible for the implementation of monetary policy. norges bank's implementation of monetary policy shall, in accordance with the first paragraph, be oriented towards low and stable inflation. the operational target of monetary policy shall be annual consumer price inflation of approximately 2. 5 per cent over time. [ β¦ ] β the first paragraph of the mandate sets forth its intentions. the last paragraph specifies what norges bank is required to do. the first sentence in the mandate refers to the value of the krone. stability in the internal value of the krone implies that inflation must be low and stable. low and stable inflation fosters economic growth and stability in financial and property markets. the regulation also states that monetary policy shall be aimed at stability in the norwegian krone β s external value, contributing to stable expectations concerning exchange rate developments. with open trade with other countries and free capital movements, we do not have the instruments to fine - tune the krone exchange rate. the krone has appreciated when economic activity has been high and there have been expectations of a wide interest rate differential. the krone has depreciated when activity has declined and the interest rate differential has narrowed. there is also a strong tendency for the krone to revert to a level that stabilises the price level in norway relative to our trading partners, measured in a common currency. 1 the conduct of monetary policy norges bank β s operational conduct of monetary policy shall be oriented towards low and stable inflation. norges bank operates a flexible inflation targeting regime, so that variability in output and employment and in inflation is given weight. inflation shall be 2Β½ per cent over time. monetary policy influences the economy with long and variable lags, and the bank must therefore be forward - looking in interest - rate setting. in the operational conduct of monetary policy in norway, the path of inflation and the real economy in the period ahead will be taken into account. we also give emphasis to predictability and transparency. normally, the interest rate is set with a view to achieving inflation of 2Β½
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euro has brought about a new international monetary order, that it has produced an element of stability that benefits many countries, not just europe β s immediate neighbours, but nations around the globe. as we have seen, movements in the dollar / mark exchange rate were magnified as far as the swiss franc is concerned in the past, but are much dampened today. when the euro depreciated against the dollar, the swiss franc did so too, but by a much lesser degree. and later, when the euro appreciated against the dollar, the franc appreciated as well, but again to a lesser extent. in other words, our effective exchange rate has been less affected, the movement of the dollar being offset, at least to some extent, by a movement of the euro in the opposite direction. it seems to me that this phenomenon has benefited not just switzerland, but also many other countries with their own independent currencies, such as the united kingdom, canada, australia, new zealand, singapore, and norway. this evolution might not last. perhaps it is the outcome of chance, but it has been persistent enough over the past few years to be noticeable. maybe one day some smart graduate student will write a thesis on this topic, and confirm or falsify my hypothesis, but in the meantime let me outline why i believe that there are some good reasons for the assumption that the stability of the international monetary system has been enhanced by the creation of the euro. i do not think that anybody would argue that the world as a whole makes up an optimal currency area. our planet is not yet ready for a single currency. we are therefore bound to live in a world with n, n greater than one, currencies. for the second half of the 20th century, we lived with one dominating currency, the u. s. dollar, and many less important currencies, such as the british pound, the japanese yen, the german mark, the swiss franc, and so on. moreover, the united states is a largely closed economy, so it could regard fluctuations in the external value of the dollar with benign neglect. of course, most other countries, being rather small and quite open, were fully exposed to turbulences in foreign exchange markets, but there was not much they could do about it. there were several episodes when the internal stability of the dollar was threatened as well, with u. s. inflation rates in the double digits. the flight into more stable cu
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as has been the case recently. it cannot correct the pandemic - related supply chain disruptions or reduce the high energy and food prices stemming from the war in ukraine. in the fight against inflation, sound fiscal and energy policies of governments have also a significant part to play, and so has a responsible wage 1 / 3 bis - central bankers'speeches negotiating behaviour of social partners, which should prevent an exogenous energy shock that has worsened the terms of trade for a large net energy importer, like europe, from turning into an upward wage - price spiral bringing us back to the stagflation of the 1970s and early 1980s. it is encouraging and promising that, for the time being, there is no such wage - price spiral that would knock us off the 2 % target, nor is there any deanchoring of medium - to - long - term inflation expectations from that target. this gives us hope and courage to continue the anti - inflationary policy without raising interest rates so much as to cause a deep recession. and of course we keep hoping and working for a definitive end to this continuing uncertainty with the most effective means available : the end of this devastating war. central banks certainly recognise that fiscal policy should bear the brunt of supporting vulnerable citizens, with measures that need to be appropriately targeted and temporary, rather than permanent, and to provide incentives for energy saving. in this context, and given that 2023 is a national election year, the bank of greece, in its latest monetary policy report, called for an alignment and an understanding among the political forces, in order to implement the key economic policy commitments β most notably a return to sizeable primary surpluses that can ensure long - term public debt sustainability β and to preserve the remarkable achievements of the greek economy in the past ten years, pursuing as a key β national, i would say β goal an upgrade of greek government bonds to investment grade this year. in 2022, the bank of greece hosted the meeting of the ssm supervisory board ; in 2023, we will be welcoming the members of the ecb governing council in athens. hosting the two top meetings of the decision - making bodies of the ecb and the single supervisory mechanism, respectively, is a challenge for the organisational alertness of the bank of greece and its staff. i am sure that, this year too, we will all do our best to ensure impeccable organisation and offer our colleagues the hospitality that our country is famous for. in recent
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years, the bank of greece has gradually evolved into an institution that is inspired by what organisational psychology defines as " psychological safety ", i. e. ensuring a workplace which promotes innovation, coordination and cooperation, while encouraging a creative exchange of views and ideas between employees. it is also worth noting that, in july 2022, the bank of greece co - signed the escb & ssm equality, diversity and inclusion charter. the past months saw the completion of the bank's internal reorganisation project entitled " mellon " ( meaning " future " ), aimed to improve the way the bank is structured and operates in order to effectively respond to the challenges of the new era and of technological developments. the project has produced invaluable tools, which we are now called upon to use in the best possible manner. in addition to its external activities on climate and sustainability, the bank also implements an internal wide - ranging programme of environmental actions, called " bogreen ". these actions focus on a more efficient use of the natural resources consumed in all its buildings and the optimal management of the waste generated in its facilities, along with environmental awareness activities addressed to all its staff. in the past year, the bank's environmental management system obtained iso certification. 2 / 3 bis - central bankers'speeches 2022 marked an important milestone : 50 years since the official inauguration of the coin minting section of the national mint. on this occasion, a commemorative medal was designed and produced, which will be distributed to all colleagues working at the bank, as a symbolic gesture of gratitude for the services they have offered over time. i would like to thank you, once again, for your diligence and commitment with which you performed your duties in 2022, and i invite you to keep up the very good work this year. i wish you all a happy, healthy and prosperous new year! 3 / 3 bis - central bankers'speeches
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of the impact of such measures when house prices are increasing rapidly, but we believe that macro - prudential instruments could have played a useful role in building up capital buffers and reducing credit demand and asset price pressures in the housing price boom of 2003 β 2007. iv ) the exchange rate and the housing market the exchange rate and the housing market present difficult challenges for monetary policy when both the currency and asset prices appear to be overvalued and investor demand is expected to remain strong. generally, housing demand can be constrained by raising official interest rates and letting them feed through into higher mortgage costs. however, while this would help constrain the demand for mortgage finance, increasing the ocr would carry significant risks in new zealand in the current environment. it would increase the interest rate differential between new zealand and most of the advanced countries, and could lead to a further strengthening in the exchange rate and further downward pressure on tradable goods prices. this would, in turn, be expected to push cpi inflation further below the 1 to 3 percent target range. the exchange rate impact could be pronounced if investors believed that the increase in the ocr was a precursor to further increases and saw new zealand as leading other countries in the monetary policy tightening phase. viewing the issue from another perspective, if our exchange rate continues to strengthen on a trade weighted basis, in the absence of a corresponding improvement in new zealand β s economic outlook, inflation pressures would diminish and a reduction in the ocr might be warranted. however, with mortgage interest rates at a 50 - year low, large housing shortages in auckland and christchurch, and surveys indicating that home buyers expect price rises to continue, a lower ocr would quickly feed into higher house prices and further increase the risks to financial stability. this is where macro - prudential policies can play a useful role. capital and liquidity overlays can help build up buffers in the banking system while adding to the cost of bank funding. and loan - to - value restrictions may help to reduce the actual supply of mortgage lending. while these measures are aimed at financial stability objectives, their effects might also have the benefits of increasing the degrees of freedom available to the reserve bank in conducting monetary policy. for example, if house price pressures abate, all other things unchanged, it would increase the possibility that the ocr could remain at its current level for longer than through this year, which is the time profile built into the forward projections contained in the march 2013
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the debt ratio after the global financial crisis was gradual relative to the build up over the 15 years prior to the global financial crisis, and the ratio has recently picked up. figure 4 : household debt as a percent of disposable income source : rbnz despite being over - valued, house prices could continue rising for some time. in this respect, the recently agreed auckland accord reflects the growing need to improve the responsiveness of housing supply. other measures can help. the adoption of the full range of supply side measures in the productivity commission β s recent report would lower costs, and the demand for housing could also be moderated by changing the tax treatment of housing to reduce its attractiveness as an investment relative to other assets. but the current imf, april 2013, β new zealand β staff report for the 2013 article iv consultations β. bis central bankers β speeches supply / demand imbalance in auckland is very large and it could take several years to address this through supply measures alone. adding to the challenge is the decline in capacity in the construction industry in the last five years. according to the latest business demographic statistics, in february 2012 there were 5, 000 fewer firms and 14, 000 fewer employees in the construction sector than there were in february 2008. despite this overall decline, construction sector employment in canterbury had increased by 15 percent. although the construction sector is a relatively fluid industry and attracts workers from other sectors, the level and pace of construction activity outside canterbury will no doubt be constrained by the pull of resources into the canterbury rebuild. a strong run - up in housing markets can be a risk to future financial stability because it can increase both the risk of a sharp correction and the consequent financial sector disruption. the reserve bank is concerned that the current escalation of house prices is increasing the probability and potential effect of a significant downward house price adjustment that could result from a future economic or financial shock. these concerns are shared by the oecd and by the imf in its recent review of the new zealand economy, and housing risks have been noted recently by all three of the major international credit rating agencies. we are responding to the financial stability risks around the housing market in several ways : by raising banks β capital requirements for housing lending ; conveying our concerns about risks to financial stability ; and putting in place a framework for macro - prudential policy to address those risks and increase the financial system β s resilience. earlier this month, following a review of the major
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agathe cote : the promise of potential remarks by ms agathe cote, deputy governor of the bank of canada, to the cfa society winnipeg / manitoba chambers of commerce, winnipeg, manitoba, 29 october 2013. * * * accompanying charts can be found at the end of the speech. introduction thank you. it is a great pleasure to be here. i want to talk today about potential, a word that speaks optimistically to the future β to what can be. it β s a word that means different things to different people under different circumstances. it β s an abstraction : a concept that promises a road leading to success. that is the finish line β the promised destination. getting there is another story. the way forward is seldom direct and reaching potential is a trajectory where the journey is as important as the destination, especially for the β dismal β science of economics. we can think of canada β s economic potential as where we can be if we do our best and make all the right decisions. it is what we can hope to achieve over the longer run. since potential output growth is key to a country β s standard of living, it should be of interest to all of us. consider this : if potential output were to grow by an extra percentage point every year for the next ten years, the cumulative increase in income would be almost $ 30, 000 for every canadian. at the bank of canada, we care about potential output for two reasons. first, the growth rate of potential output sheds light on the prospects for our country β s economic growth. second, the difference between the level of actual and potential output β or the output gap β is a key measure of inflation pressures. and keeping inflation at the 2 per cent target rate is the best contribution that monetary policy can make to the financial well - being of canadians. the bank β s assessment of the current output gap and the projected growth of potential output have a direct bearing on the bank β s inflation outlook and monetary policy decisions. other things being equal, a larger degree of slack in the economy implies a greater need for monetary policy stimulus. as well, the higher the projected growth rate of potential output, the higher the economy can grow without stoking inflation. 1 each year in october, the bank reviews its estimates of potential output. i will share with you some of our findings and what we think they say about the journey canada β s economy is taking. although canada came out of the recession earlier and recovered faster
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to the ottawa economics association, 24 march 2010 ) ; t. macklem, β a measure of work β ( speech to the winnipeg chamber of commerce, 4 october 2012 ) ; and β canada β s competitive imperative : investing in productivity gains β ( speech to productivity alberta, 1 february 2011 ). bis central bankers β speeches become more noticeable. we are getting older, living longer and having fewer children. 5 baby boomers are retiring or reducing the amount of hours they work and lower fertility rates over the past 20 years means that more people are leaving the workforce than entering it. while net immigration is important, and currently accounts for half of the population growth in canada, it cannot stop the labour force deceleration. other factors, besides demographics, are evidently affecting labour input, but their impact on the trend is harder to discern. for instance, the recession affected both the demand and supply of labour. on the one hand, firms cut back on hiring and hours worked diminished. on the other hand, individuals looked to work more to make up for lost wealth and income. it is unclear to what degree these two factors offset each other in terms of the trend and how persistent they are. the bank β s estimates assume that, on balance, the recession had little impact on trend labour input growth. 6 taking stock to sum up, productivity growth was on a downward trend going into the recession and the recession exacerbated this trend. largely as a result, the growth rate of potential output is estimated to have declined from above 3. 5 per cent in the late 1990s to about 1. 5 per cent in 2009. with output well below potential during the recession, the amount of excess supply grew to as much as 3. 5 to 4. 5 per cent. thanks to strong domestic demand, canada recovered fairly rapidly from the recession and registered solid growth in 2010 and 2011. as production increased and business investment accelerated, we estimate that trend labour productivity growth has slowly increased, leading to a pickup in potential output growth to about 2 per cent in the past year. while our estimates suggest that the economy was getting close to potential in late 2011, slower growth since then has led to a significant buildup of excess capacity. taking into account a range of indicators and models, the bank judges that the amount of slack today is between 1 and 2 per cent. given the enormous complexity in estimating potential output, it is no surprise that the various indicators monitored by the bank suggest a range, rather than
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to 3 percent for the rest of the country ( figure 5 ). as a summary measure of excess demand, this points to the auckland housing shortage getting worse, not better. in addition, the volume of house sales is picking up in other areas such as waikato, bay of plenty and northland, and this could translate into growing price pressures in those markets. looking at key house price ratios suggests an increasing degree of stretch in auckland prices relative to sustainable levels. house price - to - income ratios have increased from around 6 to almost 9 in auckland since 2012, a level seen in some of the world β s most expensive cities β cities such as london, san francisco and sydney. for the rest of new these estimates are broadly in line with estimates produced by the auckland council and productivity commission. bis central bankers β speeches zealand, the average price - to - income ratio is about half auckland β s level ( figure 6 ). similarly, rental yields have fallen materially in auckland, and are currently at historic lows of below 3 percent. while low interest rates explain much of this downward trend, rental yields in the rest of new zealand have remained well above auckland yields ( figure 3 ). auckland is increasingly being seen as a regional ( asia - pacific ) centre, and this no doubt accounts for a part of the stretch in price - to - income ratios. however, good long - run fundamentals do not make auckland immune to a correction. international evidence shows that the further house price - to - income ratios deviate from historical norms, the greater the potential for a sharp and damaging correction. 4 in auckland β s case such a correction could be triggered by a range of domestic and external factors. the demand for housing would be reduced by a slowdown in the economy, which could result, for example, from continued weakness in export prices ; or a drop off in the net inflow of migrants. externally, if the current slowdown in china persists or accelerates then the flow of funds from that source could diminish. or we could see an increase in the risk premium in new zealand interest rates β either due to a global financial shock or due to a perceived increase in new zealand specific risk. indeed recently we saw an indication of this with standard and poor β s reducing the stand - alone rating of the new zealand banking system, citing heightened risk in auckland housing as their primary concern. 5 interest rates internationally are at historic lows and well below rates seen in recent decades prior
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ahead of the formal commencement of the policy. second, banks noted that the proposed 2 percent speed limit for high lvr investor lending was insufficient to accommodate special circumstances such as extra lending required to provide assistance to borrowers in hardship. in response we are adopting a higher speed limit of 5 percent on high lvr investor lending. this will provide banks with more scope to manage the existing pipeline of pre - approved lending. based on our experience with the existing lvr speed limit, it is expected that the actual flow of high lvr lending to auckland investors will settle well below 5 percent as banks adopt a buffer to ensure compliance. third, in light of feedback from the consultation, we have decided to introduce a new exemption category for lending for significant remedial construction work, such as for houses with weather tightness issues or requiring seismic strengthening. it would be undesirable to prevent banks from providing this lending, from both a financial stability and a broader efficiency perspective. to date, high lvr lending for such remedial work has counted against the existing speed limit. in conjunction with the new lvr restrictions, and consistent with basel guidelines, the banks will be required to establish a new asset class for all loans to residential property investors. loans in this asset class will attract a higher risk weighting than owner occupied mortgages, requiring banks to hold more capital against them. for banks following the standardised approach to capital adequacy, the average risk weight for investor loans will increase by about 6 percentage points. for the larger banks, that will be developing new internal risk models, our expectation is that average risk weights on investor mortgages will increase by a similar amount. bis central bankers β speeches conclusion the resurgence in auckland house prices over the past year has made the reserve bank increasingly concerned about the risks to financial stability. it is certainly on our β what keeps us awake at night β list. auckland prices have risen a further 24 percent over the past year, stretching the price - toincome ratio for the region to 9. this is double the ratio for the rest of new zealand and places auckland among the world β s most expensive cities. new housing supply has been growing but nowhere near fast enough to make a dent in the existing housing shortage. in the meantime, net migration is at record levels and investors continue to expand their influence in the auckland market. the increasing investor presence, now accounting for 41 percent of auckland house purchases, has been supported by rapid growth in new lending
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reforms that were finally addressed in 2003 when domestic problems such as high structural unemployment, rising social security contributions and repeated excessive public deficits became more and more pressing. i will therefore take a closer look at this german experience trying to draw some conclusions for those countries that have lost competitiveness since the launch of the euro. euro β what have we gained? my positive assessment of the first ten years of monetary union results mainly from the fact that emu clearly contributed to a favourable climate for economic growth within the euro area. throughout the financial crisis, however, the euro proved to be far more than a growth factor for the euro area. in several respects it has stabilised the member economies. as market participants β risk aversion increased, any additional risk would have depressed their propensity to invest. therefore, the absence of exchange - rate risk within the euro area has represented an additional benefit during the crisis. more specifically, even though the effective exchange rate of the euro area rose sharply in the financial crisis β before falling again more recently β the euro prevented emu member states from witnessing a scenario that europe had experienced in former times, for example during the crisis of the european monetary system ( ems ) in 1992 / 93. at that time, the ems had been exposed to a massive flight primarily into the d - mark, which resulted in significant tensions among ems currencies. this caused massive adjustment problems for those economies with appreciating currencies and inflationary pressure. finally, the fact that banks within the euro area obtain short - term liquidity through the eurosystem at the same terms and conditions has proved to be a great advantage during the financial crisis. it has significantly mitigated money market tensions and therefore served as a buffer against global financial market shocks. this has protected smaller economies especially. otherwise some of them would probably have needed to make additional efforts to defend the credibility of their currencies, for example in the form of higher interest rates, interventions on the foreign exchange market or swap agreements with other central banks. economic divergencies β a challenge for emu 3. 1 increasing intra - emu heterogeneity the search for the causes of the financial crisis has intensified the discussion about global imbalances. what is often overlooked in this discussion is the fact that the euro area as a whole has an almost balanced current account. consequently, the euro area has not contributed to the build - up of global imbalances. however, the economic diver
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as well. this is why the effects of the real economic crisis have not yet fully arrived in the financial system. market valuations are actually relatively high at present and only partially reflect the real economic fundamentals. phase 2 : prepare for insolvencies as weaknesses in the real economy remain, solvency problems will become apparent in the corporate sector and affect the financial system. so far, firms have been able to tap into their own assets and rely on government liquidity measures to cushion losses in revenue. it helps that many german firms improved their capital base over the past few years. the obligation to file for insolvency was temporarily suspended in the pandemic. the current number of insolvencies therefore reflects the situation in the corporate sector only to a limited degree. our simulations predict that insolvencies and loss allowances will rise in the future. in the corporate sector as a whole, insolvencies could increase to more than 6, 000 per quarter in the first few months of 2021. that would be fewer than during the global financial crisis, at which time roughly 8, 000 enterprises filed for insolvency each quarter. the increase in relative terms would be the greatest in the manufacturing sector ; this would also be a key driver behind banks β loss allowances. if these adjustments are similar to past patterns, banks should be able to cope. needless to say, though, such simulations are subject to a high degree of uncertainty. they are based on past 2 / 4 bis central bankers'speeches patterns of adjustment. but the current real economic crisis is affecting other sectors, and policymakers have responded differently. in short, we cannot rule out the possibility that, in an adverse scenario, significantly more enterprises could become insolvent than currently expected. so the priority is ensuring that all agents are well - prepared and preventing harmful feedback loops between the real economy and the financial system. rising insolvencies will certainly leave a mark on banks β balance sheets. corporate insolvencies lead to credit defaults. this weighs on banks β capital ratios. banks may attempt to reduce their lending in order to stabilise capital ratios. but that would hurt the real economy. bank capital therefore plays a key role in feedback loops between the real economy and the financial sector : if banks use their existing capital buffers, the risk of deleveraging is reduced. what does β use of the buffers β mean? a bank β s supervisory capital consists of minimum
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tool β a board charter acts as an induction tool for new directors and senior managers. standard key board documentation β it contains documentation templates for such things as the board meeting agenda and board paper format. having said this, i need to place a rider by stating that these charters that you will be examining this morning only set out minimum standards of what the boards are required to do. some institutions present here may already have charters which are more elaborate than the model charters. that is fine as you will not be required to downgrade your existing charters. but for those institutions which might not have any charters, it may well be useful to consider customising the model charters. if in adopting model charters, some of you find certain provisions too onerous, it may be necessary to consider a phased approach to their adoption. in this way, the process of adopting model charters will not place on an bis central bankers β speeches organisation undue difficulties. the model charters, it is hoped will act as guide for institutions to adopt elements that are applicable to their sub sector and industry and act as a benchmark, for you, and for assessing board and management and for assisting the oversight function by regulatory supervisors., such as ourselves. i expect that individual institutions requiring further advice will continue to engage us, as well as the consultants, to ensure that they extract maximum benefit from the work that has gone into this phase of the fsdp. i thank you all and wish you fruitful deliberations. bis central bankers β speeches
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introduction of a regulatory framework for the introduction of a credit reference bureau ; ( v ) development and issuance of anti money laundering guidelines and the establishment of a financial intelligence unit ; bis central bankers β speeches ( vi ) development and issuance of the corporate governance guidelines by the regulators ; and, ( vii ) strengthening the autonomy and enhancing the supervisory capacities of the three financial sector regulatory authorities. through the fsdp, the boz is also working with stakeholders like the institute of directors ( iod ) in enhancing corporate governance among various stakeholders within the financial sector. under the first phase of the fsdp, iod conducted seminars on core principles of corporate governance targeted at executives and senior officials in the financial and business sector. in addition, the iod provided input into the corporate governance model board charter which has been developed with technical expertise from mtn special engagements led by ms mary ncube. the outcome of this work is what will be presented to you today. the presentation will focus on the significant position that boards of directors occupy in the whole corporate governance process and how their role, functions and operations may be reduced into a charter that might guide their work., including ; powers, functions and delegations of the board ; board composition and mix β and the challenge in state - owned institutions ; the chairperson and ceo β and whether they should be different persons and why ; rights and duties of directors β and that ultimately the buck stops here ; the role of the board secretary β and how they can help drive the right agenda ; disclosure of conflict of interest and the challenge of ethical standards ; members β remuneration and expenses β and what is morally right? corporate social responsibility ; and, evaluation of the board β s performance, etc. but why do we need a board charter one may be tempted to ask? i think it is correct to say that second only to the articles of association, a board charter is probably the most important corporate governance policy document which defines the respective roles, responsibilities and authorities of the board and management in setting the direction, the management and control of an organisation. it is a document that is useful to both old and new directors, particularly those who may not be familiar with how a company conducts its business and what is expected of them as directors. in this respect, the charter serves the following functions among many ; one - source reference β a board charter is a one - source document which clearly sets out how the board and directors are to perform their roles. as an induction
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the approval of the treasury department, the primary dealer credit facility ( pdcf ) under our emergency lending authority in section 13 ( 3 ) of the federal reserve act. under the pdcf, the federal reserve provides loans against good collateral to primary dealers that are critical intermediaries in short - term funding markets. similar to the largescale purchases of treasury securities and agency mbs i mentioned earlier, this facility helps restore normal market functioning. in addition, under section 13 ( 3 ) and together with the treasury department, we set up the commercial paper funding facility, or cpff, and the money market mutual fund liquidity facility, or mmlf. both of these facilities have equity provided by the treasury department to protect the federal reserve from losses. indicators of market functioning in commercial paper and other short - term funding markets improved substantially and rapid outflows from prime and tax - exempt money market funds stopped after the announcement and implementation of these facilities. in mid - march, offshore u. s. dollar funding markets also came under stress. in response, the federal reserve and several other central banks announced the expansion and enhancement of dollar liquidity swap lines. in addition, the federal reserve introduced a new temporary repurchase agreement facility for foreign monetary authorities. these actions helped stabilize global u. s. dollar funding markets, and they continue to support the smooth functioning of u. s. treasury and other financial markets as well as u. s. economic conditions. as it became clear the pandemic would significantly disrupt economies across the world, markets for longer - term debt also faced strains. the cost of borrowing rose sharply for those issuing corporate bonds, municipal debt, and asset - backed securities ( abs ) backed by consumer and small business loans. effectively, creditworthy households, businesses, and state and local governments were unable to borrow at reasonable prices, which would have further reduced economic activity. in addition, small and medium - sized businesses that traditionally rely on bank lending faced large increases in their funding needs as they struggled with possible closure or substantially curtailed revenues. to support the longer - term, market - based financing that is critical to economic activity, the federal reserve took a number of bold steps. these steps were designed to ensure that credit would flow to borrowers and thus support economic activity. with credit protection provided by the treasury department, on march 23 the board announced that it would support consumer and 2 / 4 bis central bankers'speeches small business lending by establishing the term asset - backed
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, and lower long - run operating costs. some argue that in certain markets, faster and more predictable processing will also reduce the capital and liquidity costs of operations. but upgrades are often costly, lengthy, and risky, particularly if the technology is still being proven, as is the case for dlt. network effects can also affect adoption, since multiple firms may all need to adopt a particular implementation of dlt in order to justify its use in a specific market. third, technical issues remain. practical issues such as whether a particular version of dlt will work for the intended purpose are still being explored. issues of reliability, scalability, and security remain very important. beyond these issues, standardization and interoperability across different versions of dlt will need to be addressed to allow technology integration and avoid market fragmentation. in general, industry members and technology providers recognize these important issues and have taken initial steps to address problems. it will be important to keep these 3 / 5 bis central bankers'speeches challenges firmly in mind as we move beyond experimentation and into the development and deployment of new products and processes. fourth, governance and risk management will be critical. for individual firms or clearing houses that adopt dlt as an internal technology upgrade, the governance and risk - management processes are likely to be internalized within existing organizations and be akin to other technology upgrades. however, if new networks of bilateral payment, clearing, and settlement are established, the new technology may involve tightly coupled protocols and operations. the safety of the overall design will depend on a highly interdependent framework. if automated risk management, smart contracts, and similar tools are deployed across a network, cascades of rapid and hard - to - control obligations and liquidity flows could propagate across a network and the financial system in response to events. this interdependence will likely call for creative organizational thinking to address the need for governance and strong risk management. finally, the legal foundations supporting dlt will need attention. deployments of dlt will involve firms, perhaps in different jurisdictions, with systems that record and transfer information and assets under existing legal frameworks. which bodies of law apply to the particular firms, assets, and activities will determine the associated rights and responsibilities when transfers are made, cleared, and settled. for example, whether and how banking, payments, securities, or commodities laws apply in a given context are likely to be important in designing systems and services and understanding their properties. and, as with any new technology
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frederic s mishkin : the importance of economic education and financial literacy speech by mr frederic s mishkin, member of the board of governors of the us federal reserve system, at the third national summit on economic and financial literacy, washington dc, 27 february 2008. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system β s website. * * * as an educator myself, it's a pleasure to be here today to take part in this important event that brings people together from educational organizations all over the country, with the common goal of educating students and citizens in the fundamentals of economic and financial literacy. as many of you know, the federal reserve has had a long and fruitful relationship with the national council on economic education ( ncee ), through our many reserve bank collaborative efforts around the country, and through leadership at the national level. this leadership is evidenced, in part, by the involvement of my former and present colleagues on the federal open market committee, cathy minehan and gary stern, who currently serve as ncee board members. cathy, of course, is the former president of the federal reserve bank of boston, a bank that under her leadership has played a key role in furthering economic education in our new england states. gary is president of the federal reserve bank of minneapolis, from where he has served not only as a long - time member on ncee's board, but also as its chair. and they are just two of the many federal reserve bank presidents and officials who have worked to foster and improve economic education with the national council over the years. there can hardly be a better time to make the case for economic and financial literacy than right now. others have doubtless stood before an audience like you in years past and made the same case, but now we face a downturn in our housing industry fueled, at least in part, by unwise mortgage borrowing and, at times, abusive lending practices. improving consumers'knowledge of the home mortgage process will better equip them to avoid unsuitable mortgages in the future. our national economy has been strained by this housing slowdown and other forces, causing policymakers and others to debate what response is necessary. also, during this election season, we are reminded of the importance of economic issues. just a brief consideration of these three cases shows that a better - educated citizenry can not only contribute to a better functioning economy, but also to a more
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the banner of apec is seeking to promote securitisation and credit guarantee markets, in order to try to narrow the perceived credit and liquidity mismatch between borrowers in the region and institutional investors. this is helpful, so long as it does not amount to governments taking on large contingent liabilities which weaken their own credit rating. then we have the asian bond fund being developed by the eleven central banks in the asia pacific region known as emeap. 1 the first step ( abf i ) was the creation of a fund which pooled a small portion of the us dollar reserves held by the member central banks to invest in us dollar denominated bonds issued by east asian governments, as opposed to the us government. this fund commenced operations last july. 2 the second and more difficult, but more fundamental, step will be the creation of abf ii, to invest in local currency - denominated sovereign and quasi - sovereign bonds in the region. progress in developing the overall structure of this fund is well - advanced. the emeap central banks are now in the process of detailed study of design. as it happens, there was earlier today a press release informing markets and other observers of progress. 3 while this work obviously adds slightly to demand for asian bonds, the objective is not to lower artificially the funding costs for governments in the region by trying to divert major sums of central bank or other official money. rather, it is to identify and remove where possible impediments to bond market investment, to develop some useful infrastructure for investors, and to show the way with a small investment by official institutions. once established, the abf ii will hopefully be emulated by the private sector, and some parts of the abf ii infrastructure itself will be available for use by private investors looking to acquire an exposure to asian local currency debt. a well functioning market will, of course, surely deliver lower cost borrowing to well run government programs and to private borrowers over time. apart from apec and emeap mentioned above, there is also work being done under the auspices of asean plus 3, and the asian cooperation dialogue. so clearly there is a lot of work going on. to date, these groups have managed to avoid working at cross purposes. as the various initiatives actually take more concrete form, it will be important to continue that parallel and complementary development - hence a degree of information sharing will be useful. but ultimately, after all the facilitation efforts
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be an efficient system. that is precisely why we should make similar arrangements for the new european supervisory mechanism, with the bundesbank performing ongoing supervision, and the ecb taking the decisions. bis central bankers β speeches it just so happens that, at the same time as we are holding this forum, germany β s federal cabinet is discussing amendments to the german banking act ( kreditwesengesetz ) today. the cabinet will consider whether changing this division of tasks and interrupting the direct reporting channel from the bundesbank to the ecb constitutes β good regulation β. i doubt it. i believe that the bundesbank has to be on an equal footing with the other supervisors. that is the only way to ensure effective european - level supervision. 4. conclusion and outlook ladies and gentlemen, the french writer francois fenelon once claimed that, β the more you say, the less people remember β. as this obviously isn β t my aim, i would like to conclude my remarks by taking a peek into the future. the past history of regulation has been one of constant ups and downs. periods of deregulation have usually been followed by a crisis, then followed by a period of reregulation, and again by a period of deregulation. it is precisely in phases of re - regulation that banks tend to complain about the time and money it costs β and the present period is no exception. but are we really overregulating? if we look at the benefits to society of a stable banking system and the social costs of a banking crisis, i believe the costs of regulation are justifiable. however, for the future i would like regulation to evolve somewhat more steadily and adapt more quickly to new challenges : the low - interest - rate phase, high - frequency trading, charges of manipulating the libor or the setting of forex rates and gold prices, to name just a few examples. we should not wait until the aftermath of the next crisis to come up with ways of responding to these challenges. i do not believe, however, that regulators and supervisors are all - knowing and all - powerful. as i noted at the beginning of this speech, we can only maintain financial stability if we work together. you, the bankers, are just as responsible as us, the supervisors and regulators. i am well aware that the number of β bad apples β is very small. however, their behaviour causes all of us to suffer : the public, when a crisis breaks
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as across borders, regions and sectors. fourth, regulation must be guided by the principle of proportionality. abiding by these principles will not, of course, allow us to solve every single regulatory problem. yet they do provide us with a yardstick for assessing regulatory provisions. and i do believe that is very valuable. 3. what is β good supervision β? all in all, though, even the best regulation is useless if nobody is overseeing compliance. and that is precisely the job of supervisors. supervisors have to make sure that, in the banks β search for profit, they follow the rules and do not lose sight of the public interest. do supervisors have to be the β better bankers β? no, absolutely not. business decisions must be left to those being paid to make them. however, supervisors have to know β and understand β how banking works. against this background, i personally would very much welcome an increase in the migration of staff between the banking industry and the supervisory agencies. i therefore consider it a good sign that a large number of bankers have been applying to join the ecb β s new european supervisory mechanism. and at the bundesbank we are also noting a rise in the number of bankers showing an interest in and applying for vacancies in our banking supervision units. it is also important for supervisors to always remain aware of their true objective : to uphold the public interest. they must not allow themselves to succumb to a sort of β stockholm syndrome for supervisors β and confuse the public good with that of the supervised banks. bis central bankers β speeches 3. 1 the new european supervisory mechanism... this is an area where the new european supervisory mechanism can make a key contribution. by adding a european perspective to the national view, it will put more distance between the supervisor and the supervised entity. this will minimise the danger of supervisors getting all - too - close to their banks and thus treating them with β kid gloves β out of national interest. all in all, european - level supervision is the most important step towards financial market integration in the euro area since the launch of our single currency. it is a logical step, too, since a single monetary policy also requires integrated financial markets β which includes, without doubt, european - level supervision. an in - depth examination of all banks which will later be supervised directly by the ecb is now underway. the objective of this comprehensive assessment is to ensure that the new european supervisory authority has a smooth launch. we
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seung park : economic situation and monetary policy in korea contribution by mr seung park, governor of the bank of korea, to the korea times, 24 september 2003. * 1. * * the korean economic situation and outlook from early this year, korea has been experiencing the most difficult economic situation since overcoming the 1997 currency crisis. last year β s strong gdp growth of 6. 3 percent was achieved against the backdrop of the depressed world economy. this year, though, korean gdp grew only 3. 7 percent in the first quarter compared to the same period of the previous year before sliding further to 1. 9 percent in the second quarter. although economic activity appears not to have worsened from its trough in the second quarter, no clearly marked recovery trend has yet become evident. this lackluster economic performance came primarily from unfavorable external factors. the recovery of major economies worldwide and most significantly that of the u. s. proved to be delayed. uncertainty also mounted in response to the war in iraq, the north korean nuclear issue and the widespread outbreak of sars within east and southeast asia. unsurprisingly, domestic demand contracted greatly, particularly in the form of consumption and facilities investment. lately, external conditions have been showing a gradual improvement. after the early end to the war in iraq, the economies of the u. s. and japan have shown clear signs of a recovery. euroland has not yet shaken off its recession, but there too indicators of consumer and business confidence are picking up. china is again seeing strong economic growth now that sars has been contained. all in all, the general outlook for the global economy is brightening. in addition, hopes are growing that the north korean nuclear issue can be peacefully resolved as, prompted by the holding of multilateral talks, all the countries involved have stepped up their efforts to bring this about. the effects of the various pump - priming measures taken by the bank of korea and the government are expected to become progressively more tangible. for its part, the bank of korea has lowered its policy rate twice this year. meanwhile, fiscal expenditure is being expanded by the drawing - up and approval of a 4. 5 trillion - won ( nearly 38 billion - u. s. dollar ) supplementary budget. measures to reduce the tax burden have also been taken including the lowering of the rate of special excise tax and the granting of increased tax credits for investment. given the upturn in global conditions and the emerging effects of the economic stimulation
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package, the korean economy is expected to move onto a moderate recovery track in the near future, though there may be some impact from the damage inflicted by the recent typhoon. the problems we confront, though, are by no means simple. above all else, we have the issue of the high social costs exemplified by the recent confrontation between labor unions and employers and the prevalence of actions placing the interests of vested interest groups above those of society as a whole. the timely resolution of this conundrum is crucial to the long - term health and viability of the country β s economy. we also have to tackle the potential threats to financial stability including the mounting number of koreans on credit blacklists, swelling overdue loans in the household sector and the frail management status of certain financial institutions. one of the characteristics of korean society inherited from a history of adversity is that when people share the perception that the country faces a crisis, they unite as one in enduring whatever hardship it takes to overcome it. this was the wellspring from which korea drew the strength to surmount the currency crisis. and helped by these social dynamics, koreans will, i am confident, deal skillfully with the present challenges. there are already signs that a social consensus has been reached on the need to overcome the problems that i have mentioned for the good of the korean economy. the government is now also directing its attention toward curing the evil of spiralling social costs. 2. monetary policy in the light of the shifting economic environment, the bank of korea has conducted monetary policy so as to support the economic recovery while smoothing out the internal and external disequilibria. early this year, because of the current account moving into the red and the upward price pressures brought about by the steep run - up of international oil prices, we had difficulties in making use of the interest rate policy lever to deal with the downturn in economic activities. we therefore left our target rate, the overnight call rate, on hold. but the current account shifted into surplus and price movements settled down once international oil prices showed downward stability following the early end of the war in iraq. for this year as a whole, too, our forecasts pointed to core inflation being held stable within its target range at the 3 percent level and to the current account maintaining its underlying surplus trend since the 1997 currency crisis. under these circumstances, the bank of korea moved to revive business and consumer confidence. in may and again in july, it reduced its overnight call rate
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progress over the past decades. granular, high frequency data has become much more easily available ; new information is being collected, and new data sources have been tapped. this is a good starting point. however, as statistics providers, we also have to adapt to the new environment. providing relevant information supporting the climate transition requires new ways of gathering, compiling, and disseminating data. this calls for more agility so that we can make progress sufficiently fast. in the following, i will provide some historical examples of how structural change has paved the way for new data and information systems. i will then draw implications for sustainable finance data, including learning from experiences, incentivizing the private sector, regulating the market for information, and providing infrastructures for data sharing. structural change and measurement : historical examples addressing climate change would, ideally, require a global standard to measure and attribute greenhouse gas emissions. history can provide examples of how this can be achieved. the invention of double - entry bookkeeping, the invention of national accounts, and the measurement of time share similarities with today β s challenges. these examples provide three main lessons : β’ β’ β’ structural changes such as globalization and industrialization created the need for innovations in terms of measurement and data. solutions found in the past involved experimentation in the private sector and coordination through the public sector. governments have played an active role in incentivizing innovation and providing the necessary infrastructures. developing new measurement systems has taken time, and it involved continuous improvements. page 3 of 18 deutsche bundesbank, directorate general communications wilhelm - epstein - strasse 14, 60431 frankfurt am main, germany, tel. : + 49 ( 0 ) 69 9566 33511, fax : + 49 ( 0 ) 69 709097 9000 presse @ bundesbank. de, www. bundesbank. de reproduction permitted only if source is stated. 1. 1 the evolution of double - entry bookkeeping accounting for greenhouse gas emissions at the firm - level shares similarities with standard accounting objectives : β’ β’ corporate cost accounting links the costs of resources such as labour and capital to price setting and production decisions. climate accounting and taxonomies aim at measuring the use of carbon and β indirectly β the carbon contained in goods and services. double - entry bookkeeping is a comprehensive information system for commerce that looks at every transaction from two angles : credit ( the uses of funds ) and debit ( the sources of funds ). it developed in parallel
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the european union has been developing a single market for more than half a century. the four fundamental freedoms - mobility of goods, services, people and capital - ensure that what had previously been a customs union became an integrated economic area. convergence is progressing. entry into emu was and is conditional on the fulfillment of β convergence criteria β. countries willing to join the monetary regime must display a β high degree of sustainable convergence β. that is measured in terms of price stability, exchange rates, capital - market rates and sound public finances. in a currency area, we have a β one - size - fits - all β monetary policy, and no exchange rates to cope with asymmetric economic shocks. such shocks may occur despite the advanced state of convergence in the euro area. the countries of a monetary union are therefore in need of flexible goods, capital and labor markets. the eu member states are working to improve the flexibility of those markets. insofar as price rigidities exist mobility, as ensured by the four basic freedoms, is called for. political union has, in the past, proved helpful in preserving the stability of a monetary union. the european union is moving slowly but steadily towards that long - term goal. its willingness to assume greater responsibility in the global context is encouraging in that respect. overall, european policy makers have created a monetary union that is designed to last. features which, in former currency unions, proved destabilizing have been avoided in the design of emu. but institutional features alone do not guarantee emu β s success. commitment to the union, and a true european spirit, are called for. in the ecb council, we show this european spirit. national interests are not relevant to the process of shaping monetary policy for the euro area β the euro area as a whole. v ladies and gentlemen, at its start, the eurosystem has seen a period of unprecedented price stability. in 1998 and 1999, consumer prices rose by only 1. 1 percent ; in the year 2000, the inflation rate, at 2. 3 percent, ran a little above the two - percent ceiling, after the sharp increase in oil prices during 1999 and 2000. this year, after peaking in may, at 3. 4 percent, the inflation rate has been decreasing. in october, prices were 2. 4 percent higher than one year before. in the current environment of a weak world economy, the ecb governing council is expecting a further moderation of price movements. at its most
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john c williams : global issues, global implications remarks ( via videoconference ) by mr john c williams, president and chief executive officer of the federal reserve bank of new york, at the central reserve bank of peru ( bcrp ) centenary conference, 25 march 2022. * * * as prepared for delivery it β s a great honor for me to participate in this event commemorating the centenary of the central reserve bank of peru. i want to start by congratulating julio and everyone at the bank on this special and significant anniversary. i am looking forward to a time, hopefully soon, when we can come together, enjoy some ceviche, and celebrate in person. and while it β s not nearly as enticing as a gathering over fine peruvian food, i need to give the standard fed disclaimer that the views i express here are my own and do not necessarily reflect those of the federal open market committee ( fomc ) or anyone else in the federal reserve system. given this special occasion, let me begin with some reflections on the importance of communication and engagement in central banking. shared concerns as central bankers, we have long understood the value of engaging with colleagues around the world on the challenges we face in our own countries. we all operate in a highly interconnected global economy and financial system. and we have many of the same goals, including price stability, vibrant economies, and financial stability. many of the issues we face are not unique to any one of us, but rather are shared across the region and the globe. recent events, from the covid - 19 pandemic to the war in ukraine, have only underscored the importance of active dialogue and transparency among central banks. beyond the global economic impact of these events, it β s important to emphasize that the pandemic is first and foremost a public health crisis, and that the russian invasion is inflicting tremendous hardship and suffering on the ukrainian people. in terms of economic impacts, all of us in the americas were affected by lockdowns and shutdowns at the start of the pandemic. all of us have faced supply - chain bottlenecks and imbalances, as people around the world shifted their spending habits β buying more goods and spending less on services. and many of us are now confronting a sharp rise in inflation, especially for food and energy, which is hardest on our most vulnerable populations. of course, each country is facing its own set of circumstances, and each
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of our work as central bank governors, and it β s insightful for all of us to hear from leaders beyond our own organizations and the borders of our countries. global issues i touched on many topics β the pandemic, the war, and inflation. these are global issues with domestic implications, and when we address them to fulfill our own mandates, we affect the economies of other countries in the region as well. in this regard, the work of the bis in bringing central banks together has never been more important. i look forward to continuing our dialogue and engagement in the future. again, congratulations to the central reserve bank of peru, and best wishes for your second century. 2 / 2 bis central bankers'speeches
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slive, c. wilkins and j. witmer, β access to central clearing services for over - the - counter derivatives, β bank of canada financial system review ( june 2011 ) : 39 β 45. bis central bankers β speeches the financial system in several advanced economies. since the crisis, it has not been subject to the same degree of regulatory reform as the traditional banking system. that is now changing. this is why regulatory authorities in canada, including the bank of canada, are actively involved, both at the fsb table and here in canada, in assessing market - based financing activities and helping to develop new financial regulations and market infrastructure, such as central clearing services, that will reinforce the safety and efficiency of our financial system. more broadly, with the international financial system still facing serious risks, it is crucial that we maintain the momentum of reform. thank you. bis central bankers β speeches
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. maturing paper was not rolled over as investors became more aware of, and concerned with, the potential risks, especially the uncertainty surrounding the willingness and the capacity of the sponsors to provide a liquidity backstop. a second vulnerability is counterparty credit risk arising from the interconnected nature of the mbf sector. mbf investors are exposed to credit risk, both from their direct counterparties but also, more generally, from their counterparties β counterparties, and so on. the network of bis central bankers β speeches obligations that arises from mbf activities thus requires an investor to be aware of the creditworthiness of its direct counterparty, including risks that could arise from how that counterparty is connected to the rest of the financial system. during a crisis, however, the difficulty of properly assessing one β s exposure to this complex network and the resulting uncertainty may cause or amplify a financial panic as risk aversion increases. a third vulnerability is related to the opacity of some of the securitized assets being used as collateral in secured borrowing. during the recent crisis, this type of collateral became more illiquid and difficult to evaluate. this opacity may also impede the transfer of credit risk. finally, there is a vulnerability associated with the build - up of leverage that can take place in mbf activities, which can be exacerbated by the lower level of regulation. the build - up of leverage embedded in very complex financial products, followed by forced deleveraging, played a crucial role during the crisis. reforming the shadow banking sector while we have a much better understanding of the mbf sector today than we did before the crisis, we still have much to learn. the fsb has created a task force to study shadow banking. 2 it is currently assembling information and developing a methodology to systematically monitor the sector and to explore possible regulatory measures. broadly speaking, there are four types of responses that policy - makers can consider : first, indirectly regulating mbf activities by regulating the banks β involvement in them ; second, directly regulating entities that are active in mbf and that pose systemic risk concerns or create opportunities for regulatory arbitrage ; third, focusing on instruments and activities that potentially create risk in the financial system, rather than on entities ; and, fourth, enacting a range of macroprudential measures, such as those that would reduce procyclicality and strengthen market infrastructure. three points merit emphasis. first, it
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cost to the taxpayer who remains national. this requires rapid decision - making and quick implementation of remedial actions. outside observers assert that the operation of large committees and reliance on consensus may slow decision - making while financial innovation keeps accelerating ; disparate current national practices hinder integration and competition, as well as increase the regulatory burden ; the complexity of regulations and arrangements risks favoring national interests and limiting the exchange of information among supervisors. as the current crisis shows, the outside observer β s view might however be clouded by his prejudice. at political level, decision making in europe was nimble and decisive at all levels β eurogroup, ecofin, euro area summit, european union summit, european commission and european parliament β within a short time frame. they delivered a more powerful and clearer message in shorter time than other constituencies. the same goes for the monetary policy level. the decentralized operational modus operandi of the eurosystem was no hinderness to swift adjustment. during the last month, the governing council had 13 non physical decision - making gatherings, outside its 2 physical meetings in frankfurt, in order to take several dozens of decisions, all implemented since. overcentralization is no panacea for optimal decision - making as it might hamper collegial wisdom and creative thinking. each eu member state has to be concerned by the soundness of financial institutions in other member states. in this respect, the decision to include a european mandate for national supervisors could increase the speed of decisiontaking, reduce the regulatory burden and favor eu integration. the main lesson from the current crisis is that eu financial stability benefits from a commonly shared philosophy. this commonly shared philosophy appears in europe in the area of government intervention. the increased need for cross - border cooperation was initiated in a first memorandum of understanding in 2005 and has been reinforced with a memorandum of understanding signed by all treasuries, supervisors and central banks during last summer, to be implemented by the end of the year. a sense of urgency is instilled in the task of developing a stability framework with an explicit ex - ante, eu - wide, crisis prevention mechanism that increases confidence among national authorities that necessary actions will be taken ; that information will flow ; that there will be adequate representation of their interests in decision10 making and implementation ; and that authorities at all levels ( i. e., eu, national, institutional ) will be accountable for the stability aspects they control. this memorandum of understanding covers crisis prevention,
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regarding financial institutions, their next generation models of risk management will have to incorporate the non - linearities and discontinuities of modern financial markets. we may have already moved toward some form of a new international monetary framework. to conclude this section, i remark that the wide range of coordinated responses to the crisis that we are witnessing, a characteristic feature of which has been the predominant role played by central banks, has perhaps sawn the seeds of a global monetary framework. i think of massive recapitalizations of systemically - large institutions and crossborder financial firms and the boosting of deposit insurance limits. at monetary policy level we have witnessed not only concerted action in lowering the policy rate but also narrowing the policy corridor and through asset swaps, provision of cross - border liquidity in us $ and β¬ in unlimited amounts as well as a lengthening of the term funding. this coordination has been accompanied by the enlargement of counterparties either directly or indirectly and we have also seen a broadening of eligible collateral. this new emerging monetary policy framework adjusted in emergency times was required by large cross - border and globalized financial institutions and products. the more flexible and diversified framework of the ecb has, in this respect, proven its benchmark capacity in times of duress even if itself has been enhanced since. the world has moved toward a much more significant coordinated role of central banks in preserving world financial stability. after the times of duress we are living, it is likely that this de facto framework might evolve toward a more institutionalized set with some ingredients of a world system of information sharing, with world collateral and world monetary policy. from a system of national regulators and supervisors to an eu stability framework financial stability frameworks in the eu are largely national. each country β s supervisory authorities drive their legitimacy from national parliaments, are subject to national accountability mechanisms, and are financed nationally. each country β s authority is these features of crises were already present in the case of continental illinois ( 1984 ), and more recently in the barings β crisis ( 1995 ) and ltcm collapse ( 1998 ). responsible for the consolidated supervision of financial institutions domiciled in that country for which it is the home supervisor. host supervisors are responsible for subsidiaries of institutions from other countries operating in their territories. national authorities are organized differently in the eu, e. g., as a single authority, or according to a sectoral model. their mandates also differ with some including financial stability,
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be weak in the second half of 2001. this is to be seen against the background of the ongoing weakness of the world economy, which depresses the demand for euro area exports. as a consequence, and also taking into account the high degree of uncertainty following the terrorist attacks of 11 september, the current environment is likely to lead to delays in investment activity and, to some extent, also to negatively affect private consumption growth in the euro area. real gdp growth in the euro area is expected to remain below potential growth also for part of next year. further ahead, however, the conditions exist for a recovery to take place in the course of 2002 and economic growth to return to a more satisfactory path. the uncertainty currently overshadowing the world economy should diminish, and there are no major imbalances in the euro area which would require longer - term adjustment. economic policies in the euro area as a whole remain geared towards price stability, the objectives of the stability and growth pact, wage moderation and structural reform. further positive effects on economic growth should stem from the impact of tax reductions in several member countries and from the fact that financing conditions are favourable. as regards the outlook for prices in the euro area, recent developments confirm our earlier expectation of a gradual decline in inflation rates, resulting from the unwinding of the previous increase in energy prices and the absence of further shocks to food prices. in addition, and crucial for the medium term, two factors support the view that wage developments are less of a risk than was previously the case. first, the slowdown in economic activity should contribute to containing inflationary pressure stemming from the labour market. second, there is now sufficient evidence that the increase in consumer price inflation was temporary, and this will help to keep inflation expectations low. looking forward, inflation rates over the next few months will probably show some volatility, on account of base effects resulting from previous price movements. however, such short - term fluctuations should not distract from the medium - term trend. we can now expect that price stability will be safely restored in 2002. this view is confirmed by bond yield developments, which are consistent with financial markets expecting inflation rates in the euro area to be clearly below 2 % over the medium term. overall, as our assessment now points to a further abatement of inflationary pressures, this allowed us to reduce the key ecb interest rates by 50 basis points. this follows three previous interest rate reductions this year, bringing the total decrease to
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caleb m fundanga : transparent pricing initiative in zambia remarks by dr caleb m fundanga, governor of the bank of zambia, at the official lunch of the transparent pricing initiative in zambia, lusaka, 6 june 2011. * * * the vice president, global programs microfinance transparency, ms alexandra fiorillo ; the president of the association of microfinance institutions of zambia ( amiz ), dr. george mulomboi ; executive secretary of association of microfinance institutions of zambia, mr webby mate ; chief executives and representatives of microfinance institutions ; colleagues from bank of zambia ; distinguished invited guests ; members of the press ; ladies and gentlemen i would like to thank microfinance transparency and the association of microfinance institutions of zambia for inviting me to officiate at this important workshop on transparent pricing. i also wish to welcome our visitors from outside the country. i hope you will enjoy the wonderful zambian weather. madam vice president, the importance of microfinance to an economy cannot be overemphasised. the provision of financial services to the majority of people and the small and medium enterprises who have traditionally been excluded from the formal banking sector is a key element to poverty reduction and economic development. mr president, as you are aware, in zambia, the recent finscope survey confirmed that levels of access to financial services continue to be low with only 37. 3 % of zambia β s adult population reported to have access to a financial services. the survey however showed that the number of people accessing microfinance was on the increase. the role that microfinance institutions play in financial inclusion is therefore very crucial. over the years, the microfinance institutions in zambia have played a significant part in the provision of financial services, particularly for low - income households. although access to finance remains low, microfinance institutions have had a somewhat positive impact on the economic activity of low income households, in both urban and rural areas. i am hopeful that the microfinance sector will continue to bridge the financing gap especially to the unserved population. however, the bank of zambia continues to receive a number of customer complaints on the high cost of micro loans in the country. it has been observed that the interest rates charged by some institutions exceeded 300 % per annum in some cases. furthermore, in most instances the effective rate of interest and other charges are not disclosed to the customers resulting in them paying much more that what was initially publicised to them.
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every national specificity β in these few selected areas, national authorities need to fil these gaps, and adjust the standards accordingly. another legitimate, but limited deviation concerns the reduction of administrative burdens for smaller institutions β like they are currently pursued in the us and the eu. further, if a non - eu bank has substantial activities in the eu, it should have a consolidated subsidiary that is supervised in that jurisdiction. an internationally active bank cannot have core capacities of risk management, capital and liquidity only in one spot. we have seen that the intermediate holding corporation laws in the us work quite well ; and the same will be true of the forthcoming eu equivalent, the intermediate parent undertaking regulation. the subsidiarisation requirement will also enhance the systemic stability of the financial ties between the uk and the eu after brexit. generally speaking, it is also a useful backstop against a regulatory race to the bottom, as it will make it difficult to provide cross - border services from less well - regulated locations. so i do understand that in light of brexit and the end of london β s direct access to the eu single market fears of regulatory fragmentation are worsening and leading to more calls to maintain a global level playing field. that β s why the important achievements of non - discrimination against foreign firms on the one hand and the g 20 β s minimum standards should be upheld. however, our approach to international cooperation is to make sure that every supervisor can oversee the entities active in its jurisdiction. 2 / 4 bis central bankers'speeches 5 conclusion ladies and gentlemen, simple answers to complex problems are comforting, but they divert our attention from the real issues. the concept of splendid isolation is a myth ; it solves no problems. if the transatlantic partnership and close multilateral cooperation are to be resilient cornerstones of the world economy, we need rational, careful decision - making, policy case by policy case ; where some cases will be better dealt with in the national realm, while others will turn out to require coordinated or even cooperative approaches. the bundesbank has a reputation as being principles - oriented β sometimes maybe even too much so. we will continue to seek our us partners β advice and work towards mutually beneficial solutions, where cooperation is rational and viable. our new york representative office plays an important role in those efforts, and to end my remarks, i want to introduce four persons who play important roles in furthering cooperation. let me start with the executive board member inter alia
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are only now beginning to realise how dependent their economy has been and still is on eu membership. many problems became only obvious during the exit negotiations β most of which were never an issue during the leave campaign. i think that compartmentalisation helping the national economy is a dangerous illusion which does not provide substantial solutions to serious challenges. there has never been such a mythological nation - state, and it certainly doesn β t exist in the era of the internet, smartphones and mass air travel. what then is sovereignty in the 21st century? it is the capacity to decide rationally about where cooperation is, on balance, better than going it alone, even if it entails unpleasant compromises. 1 / 4 bis central bankers'speeches 3 the rationale for international cooperation in financial regulation following that, it seems reasonable to approach many areas of the economy in an internationally cooperative, rules - based manner. financial regulation, in my opinion, continues to be one area conducive to this approach, as we want to prevent a regulatory race to the bottom and to ensure fair competition, i. e. a level playing field. it was in that spirit that the g 20, led by the united states, spearheaded the efforts to tackle the financial crisis. the g 20 efforts have created a rational, viable approach to international cooperation that is in the interest of all member states β its principles should therefore remain pillars of the regulation of international finance. it is built on close transatlantic and international cooperation between our central banks and our regulators and supervisors. it also rests on the joint work in international regulatory fora to foster our mutual understanding and the common language we have developed over the past thirty years. this approach also builds on a whole body of international minimum standards, like the basel iii regime for internationally active banks that we have developed over the last ten years. the basel iii standards have proven to be a success story, as they are the foundation for banking regulation in more than 100 countries. 4 the illusion of the global level playing field ladies and gentlemen, as we strive to prevent a race to the bottom and maintain a fair, level playing field, i am convinced that international, rules - based cooperation is β and should remain β the method of choice not only, but in particular in the area of financial regulation. at the same time, i am less convinced that basel iii is a β one size fits all β approach and that adherence to international standards makes national supervision redundant. basel standards are minimum standards that cannot cover each and
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william c dudley : what does interconnectedness imply for macroeconomic and financial cooperation? remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the swiss national bank - international monetary fund conference, zurich, 8 may 2012. * * * it is a pleasure to have the opportunity to speak here today. as i see it, the complex interconnections that exist between the real and financial sectors of the economy, both within and between countries, have important implications for both macroeconomic and regulatory policy. in particular, cross - border coordination in both realms is warranted. often, macroeconomic and regulatory policies are too narrow in their focus. at times, policies are designed with the goal of being β best β at the national level. yet the resulting mix of national policies is distinctly inferior to what a well - coordinated global regime could have produced. today i will discuss two important challenges that go along with living in an interconnected world. the first is how to define what aspects of macroeconomic policy or regulation require greater international coordination and harmonization. some issues can be handled effectively at a national level, but the crisis has demonstrated clearly that many can not. the second challenge is how to make international coordination workable so that progress can be made in a timely manner while still preserving sufficient autonomy for countries to fashion policies to suit their particular idiosyncratic structures. as always, my remarks today reflect my own views and not necessarily those of the federal open market committee or the federal reserve system. we live in a globalized economy in which the flows of products, capital, and ideas across borders have led to significant economic gains for literally hundreds of millions of people around the world. thus, there is a strong public interest in ensuring that this global economic integration is supported by a coherent set of coordinated national macroeconomic policies and a harmonized international regulatory regime. this applies to the policy actions we undertake to reduce economic imbalances as well as to the regulations we develop to address the vulnerabilities in our financial system that were exposed by the crisis. the better we are able to develop cooperative global solutions to these types of issues, the more successful we will be in creating a sounder and more sustainable global economy and financial system. it is clear that there were important imbalances in both economic and financial activity in the years preceding the financial crisis. for example, in the u. s., too much of economic activity was based on an
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should be made in order to improve the expenditures structure, in view of decreasing the share of current expenses and increasing the capital investments. monetary performance due to the slowdown noted in the last quarter, the pace of monetary expansion decelerated slightly relative to the previous year. the average annual growth rate of m3 eased to 12. 3 per cent, down from 15. 8 per cent in 2007. growth of monetary assets of the economy is attributed mainly to banking system credit growth. the degree of financial intermediation in the economy further increased. banking system deposits to gdp amounted to 80 percent during 2008, compared to 78 percent for 2007. credit to gdp amounted to 37 percent, recording an annual growth of 7. 3 percentage points. during 2008 deposit developments were characterized by seasonal volatilities. deposits level recorded high growth paces mainly in summer and an obvious slowdown in the last quarter of 2008. on the asset side loan portfolio of the banking system for the economy increased by about 35 per cent during 2008. the credit structure performance revealed a slight shifting of the loan portfolio towards foreign - currency - denominated loans. the preference for foreign currency - denominated loans is attributed to their lower interest rates. it would have been accurate in the presence of a stable exchange rate. it is wrong under albania β s conditions, where the exchange rate is flexible and the possibility for its depreciating movements can not and should not be excluded. therefore, the bank of albania has concluded that commercial banks β clients do not pay due attention to the exchange rate risk, when they choose a foreign currency - denominated loan. credit growth pace has been decelerating along the year, reflecting both the tightening of lending standards in response to bank of albania β s regulatory measures and the tightening of the system β s liquidity position. the banks β difficulties in generating adequate liquidity and their more prudential policy in terms of lending, were reflected in the slowdown of credit to the economy growth and of fiscal sector β s financing. financial markets albanian financial markets have reflected not only the performance of economic developments at home, but also those of international financial markets. under these conditions, their indicators, such as liquidity, interest rates, trade volume and exchange rate, have been characterised by a higher volatility, however, remaining within the normal parameters of operation. in a general view, deposit interest rates indicated upward trends for deposits in the national currency and those in the euro. on the contrary,
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singapore β s public finances were not strong, our monetary policies would not have worked as well. if singapore did not have a sound legal and enforcement framework, our regulatory policies would not have worked as well. if singapore did not have political stability, good infrastructure, and a conducive business environment, mas β strategies to grow the financial centre also would not have worked as well. in a world where central banks typically keep a distance from the rest of government, it is amazing how closely mas works with other government agencies in singapore β macroeconomic surveillance and national economic policies and strategies combating money laundering risks and investigating financial crimes promoting jobs, skills development, and labour market policies advancing technology initiatives ranging from e - payments to digital identity these partnerships have made a decisive difference to the outcomes for mas, the financial industry and the singapore economy. mas has achieved what it has also because of the close partnership it has enjoyed with the financial industry. in a world, where many regulators are aloof at best and hostile at worst when dealing with the industry, the relationship mas has with the industry is special. to be sure, we are a no - nonsense supervisor, not averse to setting high prudential standards, imposing tough remedial measures, and occasionally shutting down a bank or two. but mas has always believed that working with the industry, rather than against it, is the best way to achieve our shared objectives : keeping the system safe and growing the business. in this, mas has been fortunate to have an industry β banking, insurance, asset management, and capital markets β that has actively supported us through thick and thin. without you β the financial industry β we would not have the vibrant and competitive financial centre that we have today, or the market and digital infrastructures that we have built. you stood with us in crisis after crisis β in 1973, when the bretton wood system of fixed exchange rates broke down in 1985, economic recession, pan - el crisis and closure of the stock exchange in 1995, collapse of barings bank from massive losses in derivatives trading here in singapore in 1997, the asian financial crisis and closure of trading of malaysian shares on clob in 2008, the global financial crisis and when singaporean investors lost large sums of money from structured notes like minibonds and you did it again last year, amid the covid - 19 pandemic and plunge in the economy. in less than two weeks of close and intense collaboration between mas and the banking, finance company
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in implementing the new regulatory standards. role of industry participants supervision has to work in concert with effective risk governance in the financial institutions. the boards and senior management of financial institutions must take ownership and responsibility to manage risks. a report issued by the senior supervisors group 2 in march 2008, on observations on risk management practices highlighted many risk management practices that improved the resilience of financial institutions during a crisis. let me highlight three areas. first, effective capital planning. banks need to conduct a thorough and comprehensive assessment of their levels of capital. these have to be β forward - looking β, taking into account the nature and level of the bank β s risk, not only under β normal β business conditions, but also the senior supervisors group comprises senior financial supervisors from seven countries ( united states, canada, france, germany, japan, switzerland, united kingdom ). it is chaired by william l. rutledge from the federal reserve bank of new york. under conditions of stress. the level of capital has an important β signalling β effect in a crisis. hence, banks need to develop funding strategies and contingency plans, ahead of crisis, to ensure there is adequate capital to maintain market confidence. a second related area is stress testing. globally, the financial industry has acknowledged that stress testing practices were insufficiently comprehensive or rigorous. robust stress testing helps the financial institution to identify the impact of adverse events and shocks, outside of the normal environment. however, let me caution that the techniques for integrated firm - wide stress testing remain in the early stages of development and need to be further refined. tipping points, correlations between risks, feedback loops, behaviours and interactions of market participants are difficult to anticipate and quantify. new approaches to stress tests are being considered, such as reverse stress testing, which requires a financial institution to identify scenarios of which the impact could threaten its survival. if done well, such an approach can help question assumptions, and uncover hidden risks and interlinkages between risk factors. capital planning and stress testing rely heavily on quantitative techniques to measure risks. the crisis shows the limitations of value - at - risk ( var ) models and other quantitative techniques. going forward, financial practitioners will have to be more critical of the assumptions behind the models, and be more prepared to apply sound judgment and reality checks. mas will, as part of its supervisory review process, continue to engage the banks on their capital planning processes, and to evaluate whether the framework is sufficiently robust and comprehensive. the
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the business plans which they agreed in order to receive the sanction of the european commission dgcomp for the state aid they received, to reach a net interest margin of 2 per cent. given they are constrained by contracts on the trackers, there is only a limited range of options for achieving this. only then can they build and hold sufficient capital to be compliant with international regulations, to be fully financially autonomous and not dependent on an implicit backstop of the state, to have the resilience to deal with future shocks and to serve customers properly. their recent return to profitability is modest and significantly dependent on provision write - backs rather than normal business profitability. the crisis continues to have serious legacy issues that cannot be resolved easily or painlessly. to mention just one example, ensuring that borrowers whose loans have been sold to unregulated firms do continue to obtain the consumer protections that they previously had is a concern which the bank has been to the fore in advocating. i am glad to see this reflected in legislation ( on which the bank has actively advised ) currently being enacted by the oireachtas. without detracting from the importance of appropriate pricing on the svr loans, i should not conclude without emphasising that delays and uncertainties surrounding the resolution of non - performing loans remains a much more acute problem. the latter problem is of course one which we have discussed in this committee repeatedly and on which progress remains damagingly slow. also, they are required by the terms of the business plans which they agreed in order to receive the sanction of the european commission dgcomp for the state aid they received, to reach a net interest margin of 2 per cent. given they are constrained by contracts on the trackers, there is only a limited range of options for achieving this. bis central bankers β speeches
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gabriel makhlouf : remarks on the occasion of the publication of β love you β remarks by mr gabriel makhlouf, governor of the central bank of ireland, on the occasion of the publication β love you : public policy for intergenerational wellbeing β by girol karacaoglu, 17 february 2021. * * * good morning and good evening. it β s a pleasure to join you at this book launch, and to congratulate the publishers and of course the author, my good friend girol karacaoglu. i β m particularly pleased to have been asked to say a few words on the background and context for the wellbeing work programme ; it β s been a good opportunity to reflect on that part of the journey that β s now about a decade old, although much older overall and in many ways still young. wellbeing has been a focus of economic policy for a very long time but i β ll take 2011, the year girol joined the treasury, as my starting point for today. i became treasury secretary earlier that year, a week after my predecessor β john whitehead β spoke at the publication of a treasury paper on the living standards framework saying, quite rightly, that work on wellbeing was not new but one of the aims of the paper was β to provide some clarity around the ultimate aims of [ the treasury β s ] work β. the framework may not have been new but i felt its time had come, for a number of reasons : economics was going through another intellectual turbulence, at least in the western world, triggered by the global financial crisis and reflecting an emerging recognition that traditional policy approaches were unlikely to be adequate to confront the complex challenges of the modern era, such as the impact of deep international interconnectedness, technological and climate change, along with growing social disconnection and lack of trust in established institutions ; for me it was noticeable that the emerging recognition of the need for different policy approaches was not reflected in the dominant public policy narrative in new zealand at the time. commentators and policy practitioners appeared to be trapped in a frame of reference that seemed to me at best to be outdated ; apart from the treasury β s 2011 paper, joe stiglitz, amartya sen and jean - paul fitoussi β s 2009 report had helped shape my thinking, as had the australian treasury β s own wellbeing framework ( and i recall david gruen coming to wellington in 2011 to talk about their work
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that we will be ready to deploy them if and when we deem it necessary to meet our policy objectives, in line with our mandate. let me stop there. 3 / 3 bis - central bankers'speeches
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well. a sound financial ecologic environment comprises not only comprehensive and integrated institution building on a macro basis, but also improvements in micro infrastructures related to corporate governance, credit culture both for individuals and enterprises, bank - enterprise relationship, intermediary services, etc. with regard to the financial ecology construction, great efforts have been made to enhance the legal system building, engaging in the research, deliberation and draft work on some related clauses in the β property law β, β enterprises insolvency law β and the β criminal law β in terms of property right and financial claim protection and the definition of financial crimes. on the other hand, a nation - wide publicity campaign concerning financial ecology construction has been launched to create a sound institutional and public environment, so as to ensure various enterprises develop on an equitable basis. these financial reform measures not only stressed the market - based orientation of china β s financial reform, but also reflected the goals of our reform to create a favorable environment for enterprises. the people β s bank of china will continue to push china β s financial reform forward in a steady manner, guaranteeing a better monetary and financial environment for enterprises. taking future development trend into consideration, china β s economy is expected to enter a stage characterized by steady growth. currently china is speeding up its urbanization and industrialization process with corresponding growth in investment and demand. consumption is expected to expand further due to the large population ; steady increase of household income and an upgraded consumption structure will also benefit consumption ; and favorable external environment will continue to serve a strong engine for china β s economic growth. all these positive factors will provide a sound macro economic environment for the deepening of financial reform. now i would like to share my insights with you on the financial reform and development trend closely related to the development of enterprises. first, continue to pursue a sound monetary policy. in 2006, china will continue with its sound monetary policy, measures will be taken to maintain the steady growth of money and credit, monetary policy will play a greater role in keeping rmb value stable and managing the equilibrium of money and credit aggregates. based on the changes of economic and financial situation, pbc will maintain appropriate growth of money and credit by using a mix of monetary policy instruments in a flexible manner and controlling the scale of policy. efforts will be made to provide quality financial services to enterprises by strengthening the coordination between rmb and foreign currency policies, and improving the formation mechanism of rmb interest rate and exchange rate.
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or companies fail to survive, scope for new employment is created in sectors where the country enjoys a comparative advantage or in domestic services that are not exposed to competition to the same extent as the goods sector. for a long time, the growth of the public sector compensated for the drop in employment in manufacturing and created new jobs at an even faster rate than the old ones disappeared. if such a change process is to proceed quickly and smoothly, it requires a lot in terms of the ability to adjust and the flexibility of people and companies. it also requires that policy facilitates the ability to adapt through the design of regulatory systems. the labour market has to function in a satisfactory way and it must be feasible to make the time difference between closure and new establishment as short as possible. in other words, it is a question of reducing the frictional unemployment that arises when industries or companies are wound up and people need to move or retrain in order to find work in a new location or in a new company or industry. the fact that employment is so low in sweden today, given the state of the economy, may be a sign that the labour market is not flexible enough to meet the demands imposed by tougher competition or that the economy is not sufficiently dynamic. imf β s definition. among other things, support is needed in the form of education and retraining to mitigate the effects of structural change on the labour market. likewise, changes are necessary to facilitate innovation and entrepreneurship in sweden so that new companies are created. it is also important to lay foundations for swedish business to be competitive in foreign markets and to be able to attract capital, as well as for the economy as a whole to be able to attract labour to sweden. globalisation has contributed to the low inflation in the past decade or so, inflation has gradually fallen, both in sweden and globally. swedish inflation is very low today compared with the inflation rate we had in the 1980s and in the early 1990s ( chart 1 ). the same is true of inflation in the oecd area. one explanation is the shift that has occurred in economic policy and the establishment in many countries of independent central banks with the objective of price stability. but the deceleration in inflation has also been facilitated by globalisation, which, among other things, has resulted in higher competition from low - wage countries, forced old industrial countries to boost productivity and furthered the prospects for cheaper imports. this trend is reinforced by the opportunities that are created by the new information technology
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, road authorities, storage facility companies and ports / air port authorities to raise money through capital markets in countries of the area, especially countries that are capital surplus ones. the area can draw on the experience of the uae in this respect, when it allowed its banking system to raise money for indian companies as early as the eighties of last century. certain indian companies were allowed to raise capital against certain commitments and undertakings. this was possible through the high requirements and standards implemented in both india and the uae at that time. we believe indian companies were able to benefit from such funds for a long period of time. many of such companies are large conglomerates now. providing a special window for infrastructural projects will benefit the flow of trade and investments across regions of the area, and will help to sustain growth of economies. excellencies ladies & gentlemen the distinguished panel speakers with this i come to the end of my speech, but before i close, i would like to thank the organizers of this important forum for inviting me and for the excellent arrangements. thank you for your attention.
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, if the baseline scenario in our most recent projections is confirmed, we will still have ground to cover to make sure that inflation pressures are stamped out. second, while the european banking sector is resilient, with strong capital and liquidity positions, in view of recent financial market volatility, we are ready to act and provide liquidity support to the financial system if needed and to preserve the smooth transmission of monetary policy. but it should be clear that there is no trade - off between price stability and financial stability. as we have proven many times, we are able to set the appropriate policy stance to control inflation and at the same time use other instruments to address risks to monetary policy transmission. we did this when we decided to use reinvestments under the pandemic emergency purchase programme more flexibly, and when we agreed on the transmission protection instrument. these programmes ensured that rate normalisation proceeded smoothly. the third element of a robust strategy is a clear reaction function. at our last meeting, we clarified our reaction function and the sources of information that will be important to us. the future calibration of the rate path will be determined by β and will require continuous monitoring of β three key inputs, and this is what i will explain now. the inflation outlook the first input is our assessment of the inflation outlook in light of the incoming economic and financial data. this will be informed primarily by our staff inflation projections. monetary policy must be forward - looking, given the lags with which our policy works. and the staff inflation projections are the best mechanism for distilling incoming economic and financial data into a comprehensive picture of medium - term inflation dynamics. the future rate path will depend on whether we see inflation converging durably to our target in our forecasts, and the level of confidence we have in this convergence as captured by the balance of risks. our latest forecasts see headline inflation at 2. 1 % in 2025 and core inflation at 2. 2 %, which is a downward revision compared with our last projection round in december. but the confidence band around these forecasts is now unusually wide. as the cut - off date for the projection round was in early march, the forecasts do not incorporate the effects of the recent financial market tensions. those tensions have added new downside risks and have made the risk assessment blurrier. more generally, many of the assumptions in the projections, such as those on fiscal policies and energy and food prices, are volatile
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, a benchmark based on such shaky foundations will collapse. just like hammersmith bridge. only it won β t be a few thousand disadvantaged families, it could be the entire global financial system that suffers, with unimaginable consequences. we can β t let that happen. and that β s why, for the past six years, we β ve been doing two things : - first, we β ve been constructing a new bridge. for sterling borrowers, that bridge is built on the foundations of sonia β the sterling overnight index average, produced every day by us at the bank of england and based β unlike libor β at around 60 billion pounds of real, daily transactions1 ; - and, second, while that work has been underway, we β ve shored up the old libor bridge, through the fca β s agreement with libor panel banks to continue providing submissions to the benchmark. but those repairs were only ever temporary. the fca can β t replace those markets that used to underpin libor submissions : they are gone forever. and the fca β s agreement with the panel banks runs out at the end of 2021. from 2022, therefore, the availability of libor cannot be guaranteed. something that is unsafe today will become lethal at the end of next year. the sterling overnight index average ( sonia ) is administered by the bank and reflects the average of the interest rates that banks pay to borrow sterling overnight from other financial institutions see www. bankofengland. co. uk / markets / sonia - benchmark. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice avoiding that outcome is what we β re here today to discuss. but before we dive into the detail i want to leave you with three key messages : - first, libor transition affects every company that borrows in sterling. you cannot ignore it, or hope that it goes away : you need to act well before the end of 2021. - but, second, there is time if you start now. that new bridge i mentioned a moment ago is up and running. by the end of this month, all lenders should be ready to offer you products linked to sonia or another non - libor rate. six or twelve months ago, that wasn β t universally true. now it is. but don β t just take my word for that. ask national express, which took out one of
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miyako suda : the current situation of and outlook for japan β s economy and the conduct of monetary policy summary of a speech by ms miyako suda, member of the policy board of the bank of japan, at a meeting with business leaders, wakayama, 3 june 2010. * * * i. japan β s economy and prices and the conduct of monetary policy a. developments in financial markets 1. developments in global financial markets and the situation in greece the topic i would like to discuss today is the current situation of, and outlook for, japan β s economy and the bank of japan β s conduct of monetary policy. let me begin by looking at developments in global financial markets. following the unprecedented turmoil triggered by the failure of lehman brothers in september 2008, global financial markets regained stability from around the spring of 2009 due to various measures taken by governments and central banks around the world. the libor β ois spread, an indicator of counterparty credit risk, has narrowed to levels significantly below those seen before the lehman shock. recently, however, signs of instability have reemerged due to concerns over fiscal problems in some european countries, particularly greece, and uncertainty regarding financial regulation in the united states and europe. the crisis in greece has caused large fluctuations in stock prices and foreign exchange rates around the world, increasing investors β risk aversion and deepening the fiscal woes of other european countries. in what follows, i would like to review recent developments in global financial markets, focusing in particular on the situation surrounding greece. the greek debt crisis was triggered by a loss of confidence in greece β s official statistics and its ability to repay its debt. in october 2009, the new administration in greece announced that the country β s budget deficit in 2009 would be far greater than previously estimated. the significant revision gave rise to concerns about the reliability of greece β s official statistics and fiscal discipline, prompting a large rise in greece β s sovereign risk premium. in january this year, the greek government submitted to the european commission a three - year plan to cut its budget deficit, and in april, the 16 euro area member states agreed on a 30 - billion euro financial support package. at that stage, greece was still able to procure funds relatively smoothly through the issuance of government securities. however, greece β s sovereign risk premium increased rapidly from the end of april to early may, following a further revision to its budget deficit estimate, a sharp downgrading of greek government
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as for the price situation in overseas economies, a disinflationary trend in the united states and europe continues. specifically, in the united states, the year - on - year rate of increase in the consumer price index ( cpi ) for all items less energy and food, or the core cpi, has continued to slow, registering 0. 9 percent in april, the smallest increase since january 1966. in the euro area, the year - on - year rate of increase in the core cpi declined to 0. 8 percent in april, the lowest since the introduction of the index. these developments in the united states and europe imply that the deterioration in the aggregate demand and supply balance in these economies has been exerting downward pressure on prices. on the other hand, inflationary concerns are intensifying in emerging economies. in china, in particular, real estate prices in 70 major cities in april marked the largest year - on - year increase on record and the year - on - year increase in the cpi in april was the highest in a year and a half. turning to domestic demand in japan, public investment has been decreasing since the second half of fiscal 2009. on the other hand, corporate profits have been following a recovery trend due mainly to increased production and labor cost restraint. reflecting these developments, business fixed investment has leveled out and started to show signs of picking up, as evidenced by the continued increase in shipments of capital goods, a coincident indicator of business fixed investment. the employment and income situation remains severe, but gradually signs of a recovery are emerging : the unemployment rate has peaked out, and nominal wages per employee increased by 1. 5 percent in april year on year, registering a positive figure for the second consecutive month. against this background, private consumption, notably of durable goods, has picked up due to the effects of policy measures such as tax reductions on purchases of environmentally friendly cars and the introduction of the eco - point system, which favors energy - efficient products. it should be noted, however, that the substantial increase in sales of electrical appliances through march was due to a rush of demand prior to tighter application of the eco - point system for flat panel televisions, and that sales at department stores, which marked a quarter - on - quarter increase in the first quarter of 2010 for the first time since the fourth quarter of 2007, have been sluggish since the beginning of april, largely due to weak sales of apparel reflecting unfavorable weather conditions. although some market
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rasheed mohammed al - maraj : corporate governance lessons to be learned from the global financial crisis keynote address by he rasheed mohammed al - maraj, governor of the central bank of bahrain, at the gulf cooperation countries ( gcc ) board of directors institute β senior director workshop, manama, 2 november 2010. * * * your excellencies, distinguished guests, ladies and gentlemen : it gives me great pleasure to be with you here this evening and to have the opportunity of addressing such a distinguished audience. the events of recent years have certainly pushed the issue of corporate governance to the top of the agenda, both for business leaders and for regulators. it is an indication of the importance that is attached to this subject that so many of you have found the time in your busy schedules to participate in this workshop. it will probably not surprise you that my theme this evening will be the lessons that can be learned from the global financial crisis for corporate governance. i plan to talk about what lessons the financial crisis has for banks and the extent to which these might also be applied to firms and businesses in other industries and sectors. unfortunately, the global financial crisis has provided many illustrations of failures of corporate governance. there is a common pattern in the financial institutions that have failed since the summer of 2007. the chief executive was a dominant figure who made sure that he alone took all important decisions. there was no culture of open debate and discussion among senior management, with the result that other members of the board of directors did not feel able to challenge the chief executive β s decisions. many bank boards lacked banking experts. individuals were recruited to the board of banks for their connections rather than for their knowledge of the banking industry and their ability to ask the right questions. i am sure you will agree that these practices are undesirable in any type of corporation. any business that is run this way is unlikely to succeed. but because of the special position of trust that banks hold, these failures have affected far more people than just their shareholders, creditors or employees. the basel committee on banking supervision, an international grouping of bank regulators drawn from the g20 countries, has recently revised its detailed guidance on the corporate governance of banks in the light of the crisis. in october it issued a set of 14 principles for enhancing corporate governance in banks that up - dates its earlier guidance on this subject. many of the principles set out by the basel committee seem to me to be of general application to all firms, and not just the
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did not carry a high priority with the bp senior management who regarded it as an unnecessary overhead expense. the result was the near collapse of the company after suffering billions of dollars in losses, which a stronger risk management framework might have helped to prevent. the third, and final issue which i would like to discuss this evening concerns compensation practices. as i am sure you are aware, a major contributory factor to the financial crisis was that the staff of financial institutions were rewarded for short - term risk - taking. the incentive structures created by bonuses paid over a limited time horizon encouraged traders to focus on short - term profitability and financial engineers to design new financial instruments that could generate immediate profits, while the risks were pushed off to some indefinite future date. in its principles the basel committee recommends that the board should review the design and operation of the compensation system and monitor it to ensure that it operates as intended. compensation should be effectively aligned with prudent risk - taking, including the time horizon over which risks materialize and should also be symmetric with risk outcomes. this last statement means that compensation practices should avoid paying out large bonuses on the basis of short - term profits, when there is a possibility that the transaction could result in significant losses to the firm in two or three years β time. bonuses should, therefore, reflect the overall financial impact of a transaction, the results of which may not be known for several years. as with the other principles, this one is also of general relevance. all firms, and not just banks, need to avoid a situation in which their compensation practices reward employees for taking excessive short - term risks. this is not to say that bonus systems are undesirable. they clearly have a role to play in providing incentives to employees to perform well and reduce the fixed element in employee compensation, thus giving more flexibility in cost control. but remuneration systems need to balance risks and rewards. the common theme through each of the issues i have talked about this evening is the importance of avoiding short - termism. the conclusion with which i would like to leave you this evening is that the greatest risk to a business arises from an exclusive focus on the short - term, whether it is the next quarter β s results or an employee β s end - of - year bonus. successful businesses are those that plan for the long - term, that understand the risks of their industries and sectors, and which invest and build for the future. high standards of corporate governance are an essential mechanism to
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by the general public β s savings in that the banks were forced to invest in housing bonds. in the 1960s, the general pension fund ( ap fund ) was established, which meant that the state gained further control over savings in the economy and over the conditions for the banks β funding. when pension allocations began to be deposited with the ap fund, it quickly grew to become the largest investor in mortgage bonds, among others. developments accelerated when the credit and currency markets were deregulated in the mid - 1980s at the same time as technological developments were beginning in the financial markets. new participants entered the markets and began to offer new financial products, such as saving in unit trusts. the swedish banks were not slow in following the trend and began to offer their customers their own unit trusts. saving in unit trusts involved gains for both the banks and households. the banks gained a new source of income and households were given the opportunity to actively invest their savings and spread risk. state initiatives have since continued to push household saving towards the securities market. β allemansfonder β ( national public saving funds ), investment savings accounts, unitlinked insurances and individual pension savings are all examples of savings forms that are under certain circumstances taxed at a lower rate than savings in traditional bank accounts. these beneficial tax regulations have given households an incentive to increase their saving in securities. as households have saved to a greater degree in securities, the conditions for the banks β funding have also changed. there is indeed a global trend for households to invest in unit trusts and other securities, but in sweden saving in mutual funds is rather more extensive than in many other countries. 3, 4 although household saving still finances the banks, it now done increasingly indirectly through the securities market, when pension funds and other financial agents, both swedish and international, invest in the banks β bonds. this has meant that the number of intermediaries and links between different financial agents has increased. in other words, the system has become more complex. a more integrated financial system mortgage institutions were for a long time independent of the banks, although there were indirect links in that the banks invested in the mortgage institutions β bonds. when the credit market was deregulated and liquidity ratios were revoked, these investments were to some extent replaced by direct loans to mortgage institutions. over the years, the links between mortgage institutions and the banks have continued to strengthen. at the beginning of the 1990s, a number of amendments were made to the regulations, enabling the
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per hour worked, together with an estimated trend ( figure 3 ). we see that productivity growth varies strongly, but also that it shows a tendency to increase over time, particularly during the 1990s. this is a marked difference compared with developments in the 1970s, when the trend was instead a downward one. during the 1980s the actual productivity growth levelled out at a low level and was often around 1 per cent or below - with the exception of a few individual years. during the 1990s, on the other hand, there was a rapid increase and productivity growth stabilised at a level above 2 per cent. we don't know exactly what was the driving force behind this development. but allow me nevertheless to indicate some factors that may have played an important role. the economic crisis at the beginning of the 1990s probably played a not so insignificant role in raising productivity growth during the first half of the 1990s. during the crisis years production with a low level of productivity was put out of business and unemployment increased which led to an increase in the labour productivity measured. this one - off effect raised the level of productivity growth but at the same time meant that a large percentage of society's available resources was not utilised. in connection with and directly after the crisis there were also a number of changes in the swedish economy that have affected developments since then. new regulations were established for fiscal policy, with an expenditure ceiling and surplus target. at the same time, monetary policy was successfully aimed at safeguarding low inflation. also during the 1990s a number of markets were deregulated and opened to domestic and international competition. in addition, sweden joined the eu. this development entails an increased international integration of product and labour markets, which should have had a favourable effect on productivity growth. a further explanation is the shifting between sectors in the swedish economy. during the 1960s and 1970s there was a rapid growth in employment in the public sector, while the private sector declined. following the crisis at the beginning of the 1990s the situation was reversed ( figure 4 ). as productivity growth in the public sector is probably lower than productivity growth in the private sector, this development results in a rise in productivity for the economy as a whole. these effects are reinforced by the fact that the national accounts are based on the calculation assumption that there is no productivity increase in the public sector at all. during the second half of the 1990s in particular, there was a rapid development in information technology, which entailed greater efficiency in knowledge transfer between individuals and
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roger w ferguson, jr : the importance of education remarks by roger w ferguson, jr, vice chairman of the board of governors of the us federal reserve system, at the commemoration of black history month, the johns hopkins university applied physics laboratory, maryland, 24 february 2006. * * * i am pleased to have the opportunity to be part of the applied physics laboratory's commemoration of black history month. your theme, " celebrating community : a tribute to black technical, educational, and social / civic institutions, " aptly highlights a number of the key building blocks that have enabled many african americans to fulfill their personal dreams. in that regard, i would like to focus my talk today on education - - its importance and its ongoing role in economic achievement. as members of an organization dedicated to cutting - edge scientific research and development, you undoubtedly deeply appreciate the ongoing need for our nation's workforce to embody advanced levels of training. investment in human capital - - as we economists like to call it - - is critical to generating products and services with high economic value. today, much of that high - value output demands workers with the creativity, cognitive abilities, and skills to interact with challenging technologies. in addition, ongoing innovation requires workers to be flexible and to be willing to view education as a life - long commitment. in short, an educated workforce is a must if our economy is to continue to enjoy significant gains in productivity and living standards. at the same time, the link between education and individual economic success is well documented. an investment in education is associated with a higher probability of employment. for african americans, a college degree can substantially narrow the longstanding gap between their labor market experiences and those of whites. last year, for example, when the national unemployment rate averaged 5. 1 percent, the jobless rate for black adults ( 25 years and older ) with a bachelor's degree or higher was 3. 5 percent ; for white adults, the jobless rate was 2 percent. for persons with only a high school diploma, both the rates of joblessness and the disparity between the rate for blacks and that for whites were greater : an unemployment rate of 8. 5 percent for blacks versus 4 percent for whites. perhaps more indicative of the economic value of education, workers with college degrees earn an education premium, and that premium has risen over the past twenty - five years. most economists have found that an additional year of schooling typically raises an individual's earning power between 8 and 15
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firms. the federal reserve, with which fhfa consulted on the conservatorship decision as specified in the july legislation, supported these steps as necessary and appropriate. we have seen benefits of this action in the form of lower mortgage rates, which should help the housing market. the federal reserve and the treasury attempted to identify private - sector solutions for aig and lehman brothers, but none was forthcoming. in the case of aig, the federal reserve, with the support of the treasury, provided an emergency credit line to facilitate an orderly resolution. the federal reserve took this action because it judged that, in light of the prevailing market conditions and the size and composition of aig's obligations, a disorderly failure of aig would have severely threatened global financial stability and, consequently, the performance of the u. s. economy. to mitigate concerns that this action would exacerbate moral hazard and encourage inappropriate risk - taking in the future, the federal reserve ensured that the terms of the credit extended to aig imposed significant costs and constraints on the firm's owners, managers, and creditors. the chief executive officer has been replaced. the collateral for the loan is the company itself, together with its subsidiaries. 1 ( insurance policyholders and holders of aig investment products are, however, fully protected. ) interest will accrue on the outstanding balance of the loan at a rate of three - month libor plus 850 basis points, implying a current interest rate over 11 percent. in addition, the u. s. government will receive equity participation rights corresponding to a 79. 9 percent equity interest in aig and has the right to veto the payment of dividends to common and preferred shareholders, among other things. in the case of lehman brothers, a major investment bank, the federal reserve and the treasury declined to commit public funds to support the institution. the failure of lehman posed risks. but the troubles at lehman had been well known for some time, and investors clearly recognized β as evidenced, for example, by the high cost of insuring lehman's debt in the market for credit default swaps β that the failure of the firm was a significant possibility. thus, we judged that investors and counterparties had had time to take precautionary measures. while perhaps manageable in itself, lehman's default was combined with the unexpectedly rapid collapse of aig, which together contributed to the development last week of extraordinarily turbulent conditions in global financial markets
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a gathering. your membership will have grown by leaps and bounds together with your enterprises. ladies and gentlemen, the road ahead still beckons. we have come a long way together. let us not stop now. thank you for your attention.
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world grows increasingly interconnected, these challenges will not only be more numerous, but they will also be more varied. today, the thai economy again faces challenges from the external front. the main challenge comes in the form of global financial imbalances ; another challenge is the threat of high and variable oil prices. by global financial imbalances, i refer to the pattern of savings and investment allocation across the world. at the present, the us economy saves very little relative to its investment needs. asian and oilproducing economies save more than their domestic investment opportunities. the european union saves just enough. as a result, the us economy has been borrowing a large sum from asia and oil producers. the magnitude of capital flows from the rest of the world to the us economy is not sustainable ; it is a matter of time before the flows eventually reverse. and, in the process, the us dollar will depreciate against various currencies, including the thai baht. the issue here is not only when the correction will take place, but how fast and how disruptive. thailand, like many emerging market economies with small and shallow financial markets, is particularly vulnerable to fast - moving international capital. such rapid movements of capital flows, if vastly out of line with the underlying economic fundamentals, can have negative impacts on the export or import sectors depending on the direction of exchange rate movement. in our case, the surge in speculative capital inflows at the end of last year caused a rapid appreciation of the baht relative to regional currencies. i must stress that the recent capital surge heralds the onset, and not the end, of the unwinding of global financial imbalances. there remains considerable room for us dollar correction. as such, the threat of global imbalances to the economic and financial stability of thailand is still very much present. you may recall that we have experienced sizeable capital inflows, and accompanied with that, a rapid appreciation of the baht effective exchange rate toward the end of last year. in dealing with the rapid appreciation, conventional wisdom suggests an adherence to market mechanisms. this proved to be inadequate. the baht continued to appreciate with the likelihood of it becoming more and more out of line with its fundamentals. after a number of unsuccessful conventional measures, we resorted to the measure of imposing a reserve requirement on capital inflows in december 2006. the measure was designed to break the one - way currency momentum, to preserve
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grow in the lower part of the range of estimates that the bank presented in april. potential output growth should eventually recover as existing capacity expands and new firms are created in the non - resource sectors. this process will unfold over a long period. taking this on board, we can expect the economy to return to its full potential around mid2017. the underlying trend in inflation is still around 1. 5 to 1. 7 per cent. core inflation is currently higher than the underlying trend, because the lower dollar is raising the prices of imports. today, we published a paper that outlines our staff estimates of exchange rate passthrough to inflation. total inflation, however, remains much lower than the underlying trend because of past declines in fuel prices. we expect inflation to return to 2 per cent in a sustainable way as the output gap closes. we see the risks around the profile for inflation as roughly balanced. as part of our risk management approach to monetary policy, governing council always considers financial stability risks. we know that accommodative policy has implications for financial vulnerabilities in the household sector. in the current context, getting the economy back to full capacity with inflation on target is central to supporting financial stability over the longer term. taking all of these developments into consideration, the bank judges that the current stance of monetary policy remains appropriate. therefore, we kept the target for the overnight rate at 1 / 2 per cent. we would now be happy to take your questions. bis central bankers β speeches
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bring inflation down are making things difficult for many canadians. and slow growth doesn't feel great. but the alternative - years and years of high inflation and then a deep recession - is much worse. when we get through this period of slow growth and inflation is back to the 2 % target, canadians will once again be able to budget and invest with confidence, prices will be stable and predictable, and the economy will work better for everyone. conclusion it's time for me to conclude. the past two years have been a painful reminder of how much high inflation hurts households, businesses and communities. it's our common enemy - not only because it creates financial pain and social upheaval, but also because no one wins when inflation is high and volatile. we all want to see high inflation defeated. the lesson from the 1970s is that fighting inflation half - heartedly and living with the stress, labour strife and uncertainty inflation can cause would be a huge mistake. the right way to respond is with a firm commitment to restoring price stability. but we don't want to avoid one mistake only to overdo it on the other side. we are trying to balance the risk of over - and under - tightening. if we do too much, we risk making economic conditions unnecessarily painful for everyone. if we do too little, canadians will continue to endure the harm of inflation and we will likely have to raise interest rates even higher later. to return to low inflation and stable growth in the years ahead, we need these higher interest rates and slow growth in the short term. our inflation target, our track record and our forceful response will get us through to the other side. we're well on our way, and we need to stay the course. thank you. i would like to thank daniel de munnik and brigitte desroches for their help in preparing this speech. 1 bank for international settlements, annual economic report 2022 ( june 2022 ). 5 / 5 bis - central bankers'speeches
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- effective government. on the first point, many lessons can be drawn from the downward swing in the housing industry, ranging from those that individual consumers can learn at the micro level, to those that financial companies can learn about investment and oversight. in that regard, the federal reserve has proposed new rules to strengthen regulatory oversight and to protect consumers in the future, and we continue to assess this episode to determine what more can be done to help homebuyers and homeowners. of course, one of the most effective ways to help consumers is to empower them with information. and this gets to our first case for economic and financial literacy : improving consumers'economic decision making will enhance the effectiveness of new rules and regulations. and while we at the federal reserve are charged with regulatory duties, we certainly see the value of education and the positive impact it can have on the broader economy. while the current troubles in the housing industry stem from a number of causes, a better - informed citizenry would likely have resulted in more - prudent decision making and, consequently, less harm to the economy. in the matter of the national economy, here the call for economic education is based on the idea that a better - informed citizenry makes for better economic policymaking. this is a subtle argument, but its logic is no less clear. as my friend alan blinder, the noted princeton economist and textbook author, as well as the former vice chairman of the federal reserve's board of governors, has said, an uneducated citizenry can lead to simplistic policy solutions, and those solutions are usually suboptimal. " the fact that the basic level of economic literacy in the country, indeed in the world, is so low, " alan has said, " is one of the things that leaves the political process so vulnerable to this malady. " 1 now, even alan would admit that it's difficult to draw a direct line from economic literacy to economic policymaking, but politicians listen to their constituents at home, just as they are supposed to do. and at a time when our elected officials are confronted with a myriad of options to address a slowing economy, or when they consider the increasing fears about a globalizing economy, it's fair to ask whether they are getting good economic counsel from their constituents. this is not to say that there is only one valid answer for these complicated questions, but it does mean that we get a better answer when we are all better informed
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that it not only improves the lives of individual consumers, but that it also makes for more - effective policy and a better economy. delivering on that promise is the hard part, of course, but that's where the national council comes in. we at the federal reserve are proud of our relationship with blinder, alan s, ( 1994 ), " interview with alan s. blinder, " the region, federal reserve bank of minneapolis, december, 1994. bernanke, ben ( 2006 ), " a message from chairman bernanke, " federal reserve bank of dallas, july, 2006. the national council and with other educational organizations around the country, and we look forward to continuing this important work. the task at hand is not easy, as all of you know, but the returns are high.
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as well. last month consumer price inflation rose to 3. 4 %. annual inflation is forecast to reach an average of 2. 2 % this year, supported by temporary factors, such as the strong base effects caused by the rapid rises in energy prices, especially electricity and gas, and the cost pressures arising from more persistent shortages of materials and equipment than previously thought. in 2022, inflation is projected to moderate to 1. 7 %, as the factors now deemed temporary should start to fade away, and projected to stay at 1. 5 % in 2023. in my view, euro area inflation is still mostly transitory, even if some of its components are partly more persistent than previously expected. however, we need to recognize that the micro experience of the ordinary people is quite different from the macro reading of the economists and central bankers. if this state of elevated inflation were to last much longer, it would likely have a more significant effect on inflation expectations. 1 / 4 bis central bankers'speeches indeed, the selling price expectations ( 3 months forward ) of both the industrial and retail sectors have started to rise amid these temporary price pressures. moreover, the short - term inflation expectations derived from the market information ( i. e. inflation swaps ) has increased to 1. 8 β 1. 9 %. however, the counterevidence speaking for the transitory interpretation is quite convincing. when looking at the longer - term expectations, there is no upward trend : the probability distributions of market inflation expectations have strongly concentrated between the levels of 1. 5 β 2. 5 % and the probability of inflation higher than 2. 5 % is very small. core inflation in the euro area is still subdued, the latest reading being 1. 9 %, and it is projected to stay at 1. 5 % in the medium term. so far, there is no major evidence of second - round effects through wages. wage growth is still below pre - covid average, despite significant sectoral labor shortages. so, we may ask : where does the euro area stand when facing the classical monetary policy dilemma of not overreacting to the supply - side shock, on one hand, and engineering a reduction of stimulus without de - anchoring inflation expectations, on the other hand? when answering this question, we should do so against the backdrop of the ecb β s new monetary policy strategy, which is built on a symmetric 2 % inflation target and on a reaction function that tolerates temporary overshooting.
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and newer regulations with greater effectiveness. at the same time, those who engage in finance must have an obligation towards promoting financial inclusion, without which bis central bankers β speeches inclusive growth cannot be achieved. banking should have a human face for it is the households who provide the base for all banking activities. they are the only ones with financial surpluses which can be intermediated to corporate and public sectors that run financial deficits. it has been my endeavour to push policies on bank lending with a view to encourage credit flows to the vulnerable section of the population that would otherwise get financially excluded. over the years, this has been the ethos of the reserve bank. the branch licensing policy and the directed lending route have been the two pillars on which the efforts for financial inclusion have rested for a long time. the bank licensing policy, mandating a certain ratio of rural bank branches for each license for urban branch, has often been criticised by banks as coming in the way of their business interests. however, there is strong research evidence to suggest that this social banking experiment in india has been successful in improving the credit flows to the rural population and even in lowering poverty as a result. the priority sector lending ( psl ) stipulation has also improved the flow of credit to certain productive sectors of the economy that would otherwise have been crowded out of the bank credit market due to information asymmetries. there are reasons to believe that with proper planning and use of technology - enabled efficient delivery channels, banks can pursue financial inclusion in a profitable way. our approach should not be seen as being interventionist. in practice, reserve bank has deftly balanced objectives of equity and efficiency so that financial inclusion is furthered, but banks β financial health is not impaired. in more recent period with which i have been associated, we have redoubled our efforts at financial inclusion. for instance, the prescription for psl in respect of foreign banks has been raised from 32 per cent to 40 per cent in case of those banks which have 20 or more branches. we have also imparted a more human touch to basic banking for those who did not have bank accounts. conclusion let me end by talking about something we need to learn from the east asian tigers in our quest to become one. growth acceleration in these tigers were supported by liberalization, export - led growth, high investment in education, large share of educated workforce, high public and private savings rate and macroeconomic discipline and governance. we are pursuing some of these policies
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a due recognition and respect. if we do so, more women and men would join the workforce. unemployment would be reduced and indian industry would become more competitive globally. 3. revive infrastructure investments and harness natural resources better much has been said about india β s infrastructure deficit and rightly so. india does not have sufficient roads, nor sufficient power. when i was growing up, i was taught that india is a land of poor, but is rich in resources. today we have made a giant leap in lowering poverty and still remain abundant in natural resources. yet, we have not learnt to optimally utilise them. take for example coal, which accounts for india β s 55 per cent of energy needs. we have hard coal reserves of around 246 billion tonnes, of which 92 billion tonnes are proven. yet, we are able to produce only 530 million tonnes of coal, leaving supply shortages of over 150 million tonnes. coal shortages are constraining our power generation and though about 55 gw of new capacity was created during the 11th five year plan ( fyp ), a large part of it remains unutilised due to coal shortages. private sector has failed to develop most of the new coal blocks that were allotted to them. we ended up with inadequate planning and poor execution in this area. we are now planning to create even more thermal power capacity during the 12th fyp, but remain unsure of coal supplies. at the same time, banks have heavily extended themselves into lending to power sector both on generation and distribution side. on the distribution side, the state distribution companies ( discoms ) are sitting on huge losses and bank debt that is threatening to go bad. the end result is a loss of business confidence that has brought the investment boom to a premature halt. what is most important in this context is to revive the confidence for investing and lending to the infrastructure sector. the government, in recent period, has taken several steps to facilitate this. the broad contours of the new fuel supply agreements ( fsas ) have been worked out, though some thorny issues such as price pooling of imported and domestic coal are still to be resolved. these pending issues must be solved quickly. similarly, a debt restructuring package for the discoms has been worked out. the private sector must seize the initiative and rekindle the schumpeterian spirit at this juncture. banks also need to perform their core banking business while balancing risk assessment with the functional need to support growth. we also
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jerome h powell : structure and liquidity in treasury markets speech by mr jerome h powell, member of the board of governors of the federal reserve system, at the the brookings institution, washington dc, 3 august 2015. * * * i β m very pleased to be here to discuss the current structure of the treasury markets. 1 my involvement with these markets dates back to the early 1990s, when i served as under secretary of the treasury for finance. some of you will recall the salomon brothers auction bidding scandal that broke in the summer of 1991. that event required those of us with oversight responsibilities to do a thorough evaluation of the structure of the primary treasury market, and ultimately to propose a series of reforms. 2 as part of that process, we put together a public conference to consider further reforms to treasury auction procedures, with the participation of regulators, academics, and the financial sector. some of the ideas that came out of that conference eventually led to changes in the way primary auctions were conducted, changes that i believe were beneficial to the efficiency and integrity of the treasury market. the issues we are discussing today relate to the secondary market rather than to the auctions. although the treasury market remains deep and resilient, there are nonetheless reasonable questions as to whether market functioning can be improved. the events of october 15 last year have been folded into the more general debate about market liquidity across a number of markets. i take the concerns about a decline in market liquidity seriously. hard evidence on the level of liquidity in secondary treasury markets is mixed, with some measures at or above pre - crisis levels and some suggesting a reduced ability to buy or sell large positions without material price effect β a reasonable definition of liquidity. 3 it is also possible that liquidity may be more prone to disappearing at times of stress. on october 15, for example, market depth declined sharply, and we saw a sudden spike in prices that was without precedent for a period with little relevant news. other events β such as the 2013 β taper tantrum, β the β bund tantrum β last spring, and the sharp moves on march 18 in the euro - dollar exchange rate β all broadly show the same pattern : rapidly diminishing liquidity, and large price moves for a given quantum of news. 4 but the causes and implications of these events are unclear. is this the new normal? we don β t know. current macroeconomic and market conditions are unprecedented in many respects. for now
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), article 106290. - 14 conclusion let me conclude by reiterating that technological innovation and resilience are both attributes of a healthy financial system. i will, of course, remain vigilant with respect to vulnerabilities that appear to be evolving as well as emerging risks, but i see a system that is sound, resilient, and able to support the needs of households, communities, and businesses. the good position of the financial system is consistent with a broader economy that is strong, with a solid labor market and moderating inflation. thank you for your indulgence and thanks, again, to dean logue and the university of michigan law school for hosting this conference. i look forward to our discussion.
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area concluded that credit standards eased considerably for loans to enterprises and housing loans, and loan demand increased across all categories, thereby continuing to support loan growth. as far as the ecb β s qe programme is concerned, ecb holdings amount to β¬1. 96 trillion under the public sector purchase programme ( pspp ), while total purchases under the asset purchase programme ( app ) amount to β¬2. 39 trillion, and the app is expected by the majority of economists to come to a close by year - end. the pace of app purchases was reduced to β¬60 billion per month as of april 2017 ( from β¬80 billion previously ) and to β¬30 billion per month as of january 2018. 2. emu reform and the risks from the lack of progress 2. 1 emu reform i would now like to discuss the concerns about the emu setup, especially in the aftermath of the euro area debt crisis. the crisis brought to the surface major flaws in the euro area β s functioning, which had been building up over time and did not emerge overnight. the eurozone remains a job half - done and, without a doubt, the completion of the emu architecture could further facilitate and motivate member state reforms in view of euro area accession. on the positive side, one has to mention the establishment of a permanent rescue fund, the european stability mechanism, which provides financial assistance to euro area countries experiencing, or threatened by, severe financing problems, which can no longer borrow money on financial markets as a result. a banking union is on track to be completed, ensuring centralised supervision of systemically significant credit institutions subject to a single rulebook applicable across the european union and also ensuring centralised resolution in the event of failure of such a credit institution. a capital markets union is also under way, creating a new financial system that is less dependent on bank financing with the potential to increase risk - sharing via the private sector and address economic shocks. although the emu is now stronger, it is not yet fully shock - proof. table 1 elements to complete an economic and monetary union source : european commission. i will stay a bit longer on the banking union which is of direct interest also to noneuro area eu member states. it is currently still lacking key components that would ensure risk - sharing across the euro area and break the vicious circle between banks and sovereigns. a reflection paper by the european commission on deepening the economic and monetary union proposed concrete steps that could be taken by the time
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and one european, linked respectively to the weaknesses of some countries β economies and public finances ( sustainability risk ), and to the incompleteness of european construction and the attendant fears of a break - up of the monetary union ( redenomination risk ). europe β s response to the sovereign debt crisis has consequently been two - pronged : on the one hand, individual countries have pledged to adopt prudent budgetary policies and structural reforms to support competiveness ; on the other, a far - reaching reform of eu economic governance has been undertaken. the definition and implementation of this response was not smooth, let alone optimal. but the constraints were significant β first and foremost, the lack of trust among member states, partly justified by the episodes which ignited the crisis ( fiscal misreporting and failures in financial supervision ). moreover, there was a lot of ground to be covered in a very short term. europe had no tools with which to manage a sovereign crisis and the legal basis for providing financial support to countries in distress had to be defined. international treaties needed to be drafted and ratified, also to strengthen peer oversight on national fiscal policies and structural reforms. further integration of financial markets was necessary to increase the resilience of the area to asymmetric shocks : the banking union and the on - going project of the capital market union are both far reaching reforms, affecting in depth the institutional fabric of member countries. the ecb governing council, by providing a series of conventional and unconventional monetary policy measures to fulfil its price stability mandate, ensured accommodative financial conditions that mitigated the fall in aggregate demand and helped to β buy β the considerable time needed to implement this strategy, while countering market uncertainties that could undermine its implementation. the european strategy to respond to the crisis has brought overall a stabilization of financial conditions and an easing of tensions in sovereign debt markets, even if we are still in deep and at times unknown waters. but, obviously, bis central bankers β speeches monetary policy cannot guarantee strong and lasting growth on its own, it cannot be a substitute for the needed reforms, it can only provide favourable conditions to speed the process up and absorb its short - term costs. a successful effort requires, once again, action at both the national and the european level. lacking a common fiscal capacity, demand in the euro area must draw support from a more convinced use of the available fiscal space. in particular, this implies a substantial, and symmetric, respect
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to take on more risk. as a result, the basel accord capital ratios are an increasingly less reliable guide to the true capital strength of the firm and thus are less and less useful to both the public and private sectors. importantly, the banking institutions for which the existing capital standards are the most distorted are in many cases the very institutions whose disorderly failure would be most likely to impose systemic risks. in light of these developments, in my judgment, it is of the highest priority that, for the most financially sophisticated and complex banks, we make the capital standards more reflective of the risks that they are, in fact, taking. as i hope everyone in this room is fully aware, such efforts are well under way. in january of this year, the basel committee on banking supervision released its second consultative paper for the new basel capital accord and asked for public comment by the end of may. let me emphasize that we really do need and desire public comment on our proposals. no one in the supervisory community believes that we have solved, or even at this point know how to solve, all of the problems with the 1988 accord. success will come only if both supervisors and private market participants bring their best ideas to the table. moreover, we fully expect that the new accord, like the old accord, will be a living document that is revised as technology and other aspects of the economic environment evolve. let me also acknowledge that the new capital proposals are complex, and the documentation we released in january is, to say the least, daunting. but this complexity reflects the reality that, at least for a small number of generally large and internationally active banking organizations that are engaged in a wide range of traditional and not - so - traditional banking activities, modern risk taking and risk management are complex. moreover, risk management is increasingly susceptible to quantification and statistical analysis. the new accord attempts to respond to these facts for those relatively few institutions to which this reality applies while making only minor changes to the existing capital standards for the vast majority of banking organizations. indeed, an important reason for the new accord's complexity is that it proposes three alternative capital standards to allow for a wide range of needs and risk management practices at individual institutions and for the evolution of both over time. a second priority for bank supervisors is to continue to develop procedures that make sure no bank is too big to fail in these senses : that stockholders can lose all, that existing management can be replaced, that uninsured creditors can suffer losses
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organizations from shuttering, putting them in a better position to keep workers on and to hire them back as the economy continues to recover. the main street lending program ( main street ) has been of significant interest to this committee and to the public. many of the businesses affected by the pandemic are smaller firms that rely on banks for loans, rather than public credit markets. main street is designed to facilitate the flow of credit to small and medium - sized businesses. in establishing the facility, we conducted extensive outreach, soliciting public comment and holding in - depth discussions with lenders and borrowers of all sizes. in response to feedback, we have continued to make adjustments to main street to provide greater support to small and medium - sized businesses and to nonprofit organizations such as educational institutions, hospitals, and social service organizations. nearly 600 banks, representing well more than half of the assets in the banking system, have either completed registration or are in the process of doing so. about 230 loans totaling roughly $ 2 billion are either funded or in the pipeline. main street is intended for businesses that were on a sound footing pre - pandemic and that have good longer - term prospects but which have 1 / 5 bis central bankers'speeches encountered temporary cash flow problems due to the pandemic and are not able to get credit on reasonable terms as a result. main street loans may not be the right solution for some businesses, in part because the cares act states clearly that these loans cannot be forgiven. our credit facilities have improved lending conditions broadly, including for potential main street borrowers. the evidence suggests that most creditworthy small and medium - sized businesses can currently get loans from private - sector financial institutions. many of our programs rely on emergency lending powers that require the support of the treasury department and are available only in unusual circumstances. by serving as a backstop to key credit markets, our programs have significantly increased the extension of credit from private lenders. however, the facilities are only that β a backstop. they are designed to support the functioning of private markets, not to replace them. moreover, these are lending, not spending powers. many borrowers will benefit from these programs, as will the overall economy, but for others, a loan that could be difficult to repay might not be the answer. in these cases, direct fiscal support may be needed. our economy will recover fully from this difficult period. we remain committed to using our full range of tools to support the economy for as long
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convinced that the future of cash, and thus of our new banknote series, is bright. today, our full attention is focused on the new 100 - franc note and the rest of the new banknote family, which is now complete. thank you all very much for your interest. page 4 / 4
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sabine mauderer : climate change, biodiversity loss and the role of central banks speech by dr sabine mauderer, member of the executive board of the deutsche bundesbank, at the deutsche bundesbank spring conference 2023 " climate change and central banks ", eltville, 11 may 2023. * * * 1 welcome ladies and gentlemen, colleagues and friends, a very good morning and welcome to our spring conference! also to the many of you joining us online. i am pleased to tell you that we are fully booked. it looks like we picked not only an exciting topic but also a suitable date. spring has sprung. it is getting noticeably warmer. the trees are beginning to blossom. spring is a time for new ideas, for growth and innovation. clearly, the perfect time for a research conference. spring is also a season we should cherish while we still can, as climate change is playing havoc with our seasons. climate change is a reality. it matters to all of us. it is not only an important research topic ; it also influences my work as a central banker. that is why i am incredibly grateful to our head of research, falko fecht, and his team for organising this superb event. especially for putting together such an impressive line - up of distinguished speakers and guests. there will be keynote speeches by geoffrey heal from columbia university and by esteban rossi - hansberg from the university of chicago. needless to say, there will be a host of other highly relevant presentations over the next two days. welcome to all of you! two exciting conference days lie ahead of us. so let's not waste any more time. shall we get started? 2 the role of central banks why is the bundesbank organising a conference on climate change? this is certainly a valid question. particularly against the current backdrop of increased geopolitical tension and high inflation. be assured, the eurosystem will not rest until inflation is back to its target. that is our primary mandate. that is what the eurosystem is committed to doing. at the same time, the risks associated with climate change are too large to ignore. central banks and supervisors must watch climate - related risks as closely as they watch any other risk. particularly as extreme weather events, such as storms, heatwaves and flooding are becoming more common. 1 / 4 bis - central bankers'speeches this spring, for example, an unseasonal heatwave has hit southern spain
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to be contained. and a mutually damaging trade war would be averted. and this is what emerging asia is doing β liberalising trade within the region and with others. tpp - 11 or comprehensive and progressive agreement for trans - pacific partnership ( cptpp ) this will reduce barriers across economies with a gdp of us $ 10 trillion, roughly 13. 5 % of the world economy. it is expected to be ratified early next year. and five to six more countries have expressed interest in joining the cptpp. asean + 6 or regional comprehensive economic partnership ( rcep ) this fta builds on the existing five asean plus one ftas. negotiations have been going on for some time but the pace has picked up recently as rising trade tensions have underscored the importance of enhancing economic integration to build resilience when it is signed, rcep will be the world β s largest trading bloc in terms of population, covering nearly 3. 5 billion people, and accounting for a third of the world β s gdp. second headwind β tightening global financial conditions. as the fed continues to raise interest rates and unwind its balance sheet, global liquidity conditions will tighten and financial market valuations will come under further pressure. asset revaluations will be keenly felt in emes, which have benefited from large investor inflows driven in part by investors β search - for - yield in the post - gfc period. in emerging asia, some economies will face higher financing costs, rising external debt burdens, short - term capital outflows, and heightened currency volatility. we have already seen some signs of these pressures. they are to be expected β as part of the normal adjustment to the normalisation of global financial conditions. asean is well placed to deal with these pressures as well as contagion effects from emes in other parts of the world first, economic fundamentals in asean are stronger. growth is good β it is close to or above potential across the asean - 4 ( malaysia, indonesia, thailand, philippines ). inflation has been subdued. current accounts are in surplus or only a small deficit. buffers to withstand shocks are strong β be it central banks β reserves or banks β capital adequacy. second, asean policymakers have demonstrated that they are able and willing to adjust policies to deal with external and internal stresses. they have raised interest rates pre - emptively. they have allowed their exchange rates to depreciate in an
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ravi menon : emerging asia - short - term outlook and risks pointers for panel remarks by mr ravi menon, managing director of the monetary authority of singapore, at the 5th milken institute asia summit, singapore, 13 september 2018. * * * global growth has shown remarkable resilience despite mounting uncertainties. growth this year is likely to be as strong as last year β s. and last year β s growth was the strongest since the global financial crisis. and emerging asian economies have been doing well. but the going will get tougher in the months ahead and going into 2019. some slowdown in momentum is to be expected, following 12 β 18 months of strong growth what bears close watching are two headwinds emanating from the us and sweeping across the world, including emerging asia. the first headwind is rising trade tensions. the second is tightening global financial conditions. first, growing trade disputes. the impact of the trade tariffs announced to - date has been limited. if the threats of further tariffs are carried out, trade volumes will come down and some reduction in growth is to be expected β the us by about 0. 5 % points and china by about the same amount. this will have implications down the supply chain and production networks across emerging asia, shaving off growth in most economies. 2019 will most likely not be as good a year as 2018. but the effects will not be devastating β we are not looking at a recession. this is not a global trade conflict. this is centred on the us. the us is of course the biggest export market in the world but total us imports account for only 3 % of global gdp. many other countries β especially in emerging asia β are trading among themselves without a nexus to the us. these trading linkages will grow over time as demand in these economies grows with a rising middle class, urbanisation, and investment in infrastructure. all the same, a prolonged period of trade tensions is not good for the global economy. the more serious casualty is perhaps not trade but investment. corporates may scale back investment amidst uncertainty. this will reduce the productive capacity for future growth, delay technological upgrading, and compromise productivity growth. this is why the best response to unilateral trade restrictions is to push ahead with further trade liberalisation among other willing parties instead of retaliation and escalation. if countries do not retaliate against tariffs imposed by the us, the cost to their own 1 / 3 bis central bankers'speeches economies is likely
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second one - - it was all lost in the ensuing recession. this time around we must make sure we have a much longer expansion, reducing the likelihood and severity of any future slowdown as much as possible. i do not know how that will be possible, but the surest way of ameliorating the business cycle in this way is to avoid the imbalances occurring during the later stages of the expansion. the main imbalance in australia, as elsewhere, has always been the emergence of inflation. the story is never exactly the same - - inflation can be accompanied by a wage push, an asset price boom or an external imbalance - - but the result has been the same following each of the past three booms. that is why we need to have a more medium - term focus in our monetary policy and why the inflation target is such a central part of it. the inflation target is not anti - growth ; low inflation is not an end in itself, we are interested in sustaining a good inflation performance because we are interested in growth and employment. keeping inflation in check is the key to longer expansions. it has sometimes been said that we are too cautious in following this policy. i think that is a little unfair. of course, we are cautious in that we like to look at a range of information and think carefully before we make a move on monetary policy. but we try to be forward looking and pre - emptive. for example, we did not wait till measured inflation was below 2 per cent before easing - - in fact, it was 3. 1 per cent when we first eased in july last year. similarly, there have been suggestions that the reserve bank has a speed limit above which the economy cannot be allowed to grow ( the figure usually cited was 3Β½ per cent ). such a suggestion is, of course, incorrect and i have pointed this out on several occasions. in case there is still any doubt, you only have to look at our behaviour in 1997. as i said earlier, the economy has been growing at 4 per cent per annum so far in 1997, yet it did not stop us easing monetary policy twice this year. if we are getting reasonable news on inflation and our inflation forecasts are in good shape, we have no objection to the economy growing by 4 per cent or 4 per cent plus. when looking at the whole picture of employment and unemployment, monetary policy is only a small part of the story, and it mainly concerns the cyclical
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, their main effect seems to have been to hose down some overheated asset markets slightly, and hence to reduce the likelihood of an imminent tightening of us monetary policy. such a tightening in the next six months cannot be ruled out, however. europe is finally recording some gains after years of disappointingly slow recovery from the early 1990s recession. in fact, european growth has picked up to the point where six european central banks recently tightened monetary policy slightly to head off possible inflationary pressures down the track. so far, i have talked about asian and world economic events as though their only effect on australia was via our exports. of course, that is only part of the story. the other important part is that we now have to face the possibility of further financial market instability. for better or for worse, through knowledge or through fear, the international investment community is taking a more sceptical look at things asian, and that includes all countries in the asian region, including australia. that means they have become more risk - averse, and more likely to judge countries and their policies harshly. we have already seen some of the effects on some asian countries : β’ falling exchange rates ; β’ falling share prices ; β’ rising risk margins in interest rates ; β’ downgrades by rating agencies. we are in a better position to handle this financial instability than we have been at any stage in the last 30 years. we formerly had a reputation as a boom - bust economy, and investors used to build in quite a large premium for risk when holding australian assets. we have come a long way in convincing investors that this is largely a thing of the past. a good example of this is that our bond yields are now virtually the same as us bond yields, whereas five years or ten years ago it was not uncommon for the gap to be as high as five percentage points ; some of this was a risk premium and some of it reflected our higher inflation. another example is that the australian dollar used to be one of the most volatile currencies in the world, whereas in the 1990s it has been no more volatile than the major currencies such as the us dollar, the yen or the deutsche mark. over the past four or five months, this has served us well. while the australian dollar has gone down a fair amount against the us dollar, it remained relatively steady in trade - weighted terms. it is true that over the last fortnight the australian dollar has declined in trade - weighted terms, but it has
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early november. even so, historical relationships with commodity prices would have implied a much larger appreciation of the australian dollar than what's actually occurred. while history only provides a rough guide, this difference suggests that the bank's policy measures have contributed to the australian dollar being as much as 5 per cent lower than otherwise ( in trade - weighted terms ). the reserve bank's use of foreign exchange swaps i'll conclude with some news on the ways in which the bank will be making use of foreign exchange swap markets to manage our operations. for over 30 years, the reserve bank has made use of foreign exchange swaps to manage domestic liquidity. [ 3 ] these are short - term transactions ( of 3 months or less ) that alter the extent of australian dollar liquidity in the banking system. because the australian dollar flows in the near and far legs of the swaps are offsetting, they have no impact on the exchange rate. when foreign currency is acquired in this way it adds to the bank's stock of foreign exchange assets. however, because the swaps are due to be unwound within a few months at most, they are not considered to be part of the bank's foreign exchange reserves available for policy purposes. up till now, the bank has held foreign currency reserves on an outright basis to satisfy its policy needs. this includes the capacity for intervention in the spot foreign exchange market. we also need foreign exchange to assist the australian government in meeting its foreign currency commitments to the imf ( which in turn supports the fund's lending activities ). to meet this specific need we have decided to start acquiring foreign currency via swaps over longer terms. by using sufficiently long - term swaps β with initial durations of 2 years or more β the bank will be able to minimise any rollover risks and hence can treat the foreign exchange acquired in this way as part of its foreign currency liquidity. [ 5 ] and in contrast to outright holdings, foreign exchange swaps do not entail any foreign exchange risk and therefore do not require capital to be held against these positions. [ 6 ] many other central banks and finance ministries use long - term swaps in the management of their foreign exchange reserves. for the reserve bank, outright holdings will continue to represent the vast majority of the bank's foreign currency liquidity. currently, outright holdings are worth around us $ 35 billion. foreign currency will be obtained through long - term swaps over a period of
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##laimer notice. Β© reserve bank of australia, 2001 β 2021. all rights reserved. the reserve bank of australia acknowledges the aboriginal and torres strait islander peoples of australia as the traditional custodians of this land, and recognises their continuing connection to country. we pay our respects to their elders, past, present and emerging.
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consumption was holding up. the labour market was tight, supporting household incomes. at the same time, inflation was at multi - decade highs and interest rates were rising. while this was impacting consumer confidence, we were yet to see much of an impact on consumer spending and business confidence was high. higher consumer prices, rising interest rates and falling housing prices were all expected to increasingly weigh on consumption. in this environment our forecasts were for growth to slow in 2023. in line with this we were forecasting the unemployment rate to gradually increase over the forecast period. inflation was forecast to peak at 7ΒΎ per cent at the end of 2022 before gradually moving back to the top of the target band by the end of 2024. key developments since august there have been a number of developments that have led us to revise our forecasts since august, although the extent of revisions has been reasonably modest compared with the experience of recent years. on the international front, the prospects of a significant slowing in the global economy have intensified. this reflects a number of factors. inflation has stayed persistently high, which has resulted in an upward revision of the outlook for policy rates in a number of advanced economies. there has already been a fast and simultaneous rise in policy rates, and many central banks have indicated that they will do what it takes to get inflation back down to their targets. the energy crisis in europe has also led to a further downgrade of growth in the euro area and the united kingdom. expectations for growth in advanced economies are, therefore, a bit weaker than three months ago, and much weaker than was the case at this time last year ( graph 1 ). and finally the outlook for china has been downgraded. overall growth in australia β s trading partners is expected to be slightly below 3Β½ per cent in 2022 and 2023 β well below its pre - pandemic decade average of 4Β½ per cent. graph 1 gdp level forecasts * december 2021 = 100 index g7 major trading partner east asia * * nov 2021 smp current index * * * dashed lines represent forecasts. major east asian economies excluding japan. sources : abs ; ceic data ; consensus economics ; rba ; refinitiv turning to the domestic economy, the recent flooding in south eastern australia has been disastrous for many households and businesses. the murray - darling basin received a record volume of rain in october following wellabove - average rainfall earlier in the year ( graph 2 ). the full
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are helping to moderate demand pressures. supplier delivery times have shortened, backlogs of work have declined and inventories have mostly recovered to more normal levels ( graph 6 ). along with lower oil prices, this has contributed to a decline in shipping costs and a moderation in input costs more generally. graph 6 supply indicators index delivery times pmi * inverted scale index shipping costs * * 2017 β 2019 average = 100 * * * purchasing managers β index. index of spot and contract container rates by route from china. sources : ihs markit ; rba ; refinitiv domestic price pressures are also playing a role in the current period of high inflation. the outlook for domestic energy prices and rents are two areas we are monitoring closely. the large increases in retail gas and electricity prices that are predicted for next year will directly add over 1 percentage point to headline inflation over the year to september 2023. because energy is an input to many of the goods and services we buy, there will also be second - round effects as businesses increase their prices in response. these effects are uncertain, but the secondround contribution of electricity prices to underlying inflation could be around Β½ percentage point over 2024. rental price inflation has also picked up and is expected to increase further over coming quarters ( graph 7 ). rental vacancy rates have declined since the beginning of the year and are at historic lows in a number of cities. growth in advertised rents for new leases has been very strong as a result. this will continue to flow through to the cpi measure of rent inflation, which measures rent increases for all leases, over coming quarters. close to onethird of australian households rent and many of these households have relatively low income and wealth. higher rents could push some renters into financial stress, particularly when combined with broader cost - of - living pressures. r e s e r v e b a n k o f au s t r a l i a graph 7 rental market indicators % % cpi rents inflation % % rental vacancy rate inverted scale sources : abs ; rba ; reia growth and employment the australian economy appears to have grown solidly over the second half of 2022, as household spending on services remains firm alongside a further pick - up in education and travel services exports ( graph 8 ). gdp growth is then expected to slow in early 2023, as the recovery in household spending from pandemic - related restrictions is expected to have mostly run its course. consumer spending has been supported by past
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household credit was the main driver of bank credit, growing by 11. 8 per cent in september 2023 relative to 12. 2 per cent in july 2023. housing loan growth decelerated, rising at an annual rate of 12. 8 per cent in september 2023 from 18. 4 per cent in june 2023. corporate credit rose by 2. 8 per cent in september 2023, compared to 4. 4 per cent in july 2023, suggesting that growing earnings was supporting the funding requirements of the corporate sector. the credit portfolio of the banking sector remained sound. the npl ratio of the banking sector was estimated at 4. 7 per cent in september 2023, up from 4. 6 per cent in june 2023. the npl coverage ratio stood at 53. 2 per cent in september 2023. banks maintained ample capital and liquidity buffers. the aggregate capital adequacy ratio ( car ) was at 20. 3 per cent in september 2023, well above the minimum regulatory requirement. the liquidity coverage ratio ( lcr ) of the banking sector also stood above the regulatory floor of 100 per cent, with aggregated lcr at 278. 9 per cent in september 2023 while the lcr for material foreign currencies was 213. 1 per cent. 6 / 9 bis - central bankers'speeches the bank's stress test results showed continued resilience of the banking sector, based on its upgraded framework. the new stress testing framework includes forward - looking elements and new modules to cater for evolving macrofinancial conditions. as the domestic economy expands further, banks are expected to consolidate their buffers to absorb potential shocks. the bank continues to monitor risks to the stability of the financial system, while focussing on its price stability mandate. mauritius investment corporation ( mic ) before i come to the mpc decision, let me quickly underscore the pivotal role played so far by the mauritius investment corporation ( mic ) in our economy. as you may be aware, the mic has played a key role in assisting systemic corporates in their recovery process post - covid, thereby safeguarding the safety, soundness and stability of the financial system of mauritius. it has also played an important part in the bank's investment strategy and in diversifying the bank's portfolio. i am pleased to enlighten you that the entity has performed well during the financial year 2022 - 2023. from inception to 30 june 2023, mic
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do about that, and there is nothing the government or the reserve bank can do about that. we live in a world of floating exchange rates. while it is conceivable that we could fix our exchange rate to the us dollar, or the australian dollar, or even the twi ( as we once did ) we can β t fix to all simultaneously. inevitably we have to learn to cope with exchange rate variability. in fact, on measures of shorter - term exchange rate volatility, the new zealand dollar is a surprisingly good performer. day - to - day volatility of our currency is modest when measured alongside the experience of other developed countries - - even those much larger than new zealand. to assess the impact of longer - term exchange rate trends, we need to look to measures of the β real β or inflation - adjusted exchange rate - - because that is what matters for exporters. on that basis, we find that the new zealand dollar moves through the inevitable cycles, but will typically be found within about 15 percent to 20 percent of its longer - term average. our recent experience has been consistent with that. the real twi was around 10 percent below its long - term average at its last trough in 1992. at its recent peak, in april of this year, it was around 17 percent above that same longer - term average. while cycles in the real exchange rate of that amplitude can certainly create discomfort for exporters, it is clear that they are well within the range experienced by other currencies. in essence, exporters should be factoring cycles of that sort into their business planning. it is clearly relevant to the variability of their future earnings stream, and therefore, to the value of their assets and to the nature of the capital structure they require to stay in business. of course, it is also relevant to their balance sheet management and to risk - hedging strategies they may need to adopt. the best contribution that governments and central banks can make to moderating real exchange rate cycles is to embrace policy consistency and transparency - - in monetary policy, fiscal policy, and in tax and regulatory policies. the decline in exchange rate volatility in recent years provides some evidence to support that. one point we should all be clear on. there is no future in thinking we can pursue competitiveness, in forestry or any other sector, through attempts to use monetary policy to engineer a weaker exchange rate. i say that for several reasons : β’ competitiveness and the productivity
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financial inclusion and ( 3 ) to facilitate financial connectivity in the region. allow me to delve into some details. starting with reducing costs of financial services. as the thai economy can no longer compete on supply of cheap labors, cost competitiveness in other areas are critical. in light of this objective, the financial sector master plan and the payment system roadmap envisage that cost savings in the financial sector due to more efficient operation of financial institutions and the payment system would be passed on to the real sector and the households. here, i would like to note that the term financial institutions go beyond banks and finance companies to include non - bank players like e - payment service providers and fintech ( financial technology ) firms as well. 3 / 5 bis central banker's speeches the bank of thailand believes that the very foundation for improved financial services β efficiency is through the adoption of digital technology and shared infrastructure. the former comprises digitization of operations, product offerings and service channels. an example of the shared services initiatives is the promptpay system, the minister of finance mentioned in the speech. promptpay is an integrated retail fund transfer system that will allow individuals, businesses, and government to transfer funds across service providers at low costs with ease, flexibility and resilience. on top of the promotion of e - commerce, promptpay together with other e - payment initiatives, for example shared point of sales ( pos ) terminals, digital tax messaging, standardized qr codes, will lead to significant reduction in costs of cash management and paper processing, currently borne by banks, businesses, consumers, as well as the bank of thailand. in addition, the move from cash - based transactions to more electronic - based transactions can potentially reduce incidences of corruption and improve governance through greater transparency. on the regulatory front, an important development is the crafting of the payment system act which aims to consolidate fragmented laws and regulations governing electronic payments. the act will set out business rules and regulatory framework for our payment systems that meet international standards. to date, the act has been endorsed by the cabinet and expected to soon be presented to the national legislative assembly. let me say a few words about fintech. we view fintech as an important addition to our financial service ecosystem. fintech would give consumers more options and save operating costs for financial institution and service providers. on a bright side, fintech firms are agile and efficient by nature. yet allowing certain types of them to run freely may desta
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. half the time allotted to each session is intended for q and a. presenters are asked to keep their eyes on the clock, to ensure that you do not erode the audience β s time. we look forward to your active engagement in today β s activities. our philosophy of regulation has always been cooperative, never coercive or confrontational. it is an approach which works very well, because it recognizes the interests of everyone, in a context where we all agree that we must, in the end, do what is in the best interests of the country. bis central bankers β speeches
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said, growth outcomes in 2021 and early 2022 generally surpassed expectations. revisions to our mpc growth forecasts were therefore consistently to the upside β in contrast with the pre - covid period, where we were generally revising growth downward. for instance, at that unscheduled april 2020 mpc meeting, we envisioned growth of 2. 2 % in 2021, a number we eventually marked up to 4. 9 %. our estimates of slack in the economy also narrowed over time, mainly because of better - than - expected growth. page - 3 - of 8 in these circumstances, the view of the mpc was that we had provided about the right amount of policy support. our assessment was also that it would be appropriate to start moving away from emergency - level interest rates during the course of 2021. by the fourth quarter of 2021, we had a whole new different. fortunately, unlike some of the advanced economy central banks, we had not committed to forward guidance on interest rates. nor had we changed our framework in ways that made it more backward looking, for instance through average inflation targeting. we also did not have to worry about the sequencing of balance sheet policies, a factor which appears to have complicated timely policy adjustments elsewhere. the path to policy normalisation we started the normalisation cycle with a relatively modest 25 basis point increase at the november 2021 mpc. this was, incidentally, only a few days before fed chair powell said he was retiring the term β transitory β for inflation. the sarb β s gradual pace of normalisation continued with interest rate increases in january and march of this year. from may, we started seeing evidence of inflation persistence. thus, we accelerated the pace of tightening, to 50 basis points, and then stepped it up further in july, hiking by 75 basis points. those decisions were shaped by a deteriorating inflation forecast, with a strong likelihood of a sustained target breach, starting with the unexpectedly high may print, at 6. 5 %, as well as the june outcome of 7. 4 %. the rand had also begun weakening after a period of resilience. furthermore, inflation expectations were clearly rising, both in survey results and as implied in financial market variables. now that we have got rates back up from 2020 β s record lows, the question we face is how quickly we need to get to positive real rates, and ultimately a more neutral stance. in turn, this depends on just how persistent higher inflation will be. here β s
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francois groepe : opportunities and challenges β the south african national payment system address by mr francois groepe, deputy governor of the south african reserve bank, at the pasa international payments conference, sandton, 25 july 2016. * * * introduction ladies and gentlemen, good morning. it is an honour and a pleasure to address the second pasa international payments conference, and i would like to thank the organisers for the invitation to open the proceedings. the timing of this conference is highly appropriate as we are entering a new phase in the south african payment and financial regulatory environment, coupled with significant changes to the international regulatory architecture and framework. not only do we have to contend with challenges in our domestic environment, but we need to be cognisant of the challenges facing the global economy, such as pedestrian growth, low commodity prices, increased geopolitical risks, and a high degree of market uncertainty and volatility. all these factors combined make the economic and financial environment very challenging and rapidly evolving. this morning, i will take a look at the current payment system landscape, highlighting some of the opportunities and challenges that we can expect to face in the near future and where we, the regulators, would like to see the national payment system in the next few years. legislation, regulation, governance, and the south african national payment system the south african payment system has not escaped the fallout of the most recent global financial crisis. following the crisis, global regulators increased their scrutiny of payment systems and of financial market infrastructures ( or fmis ). this has resulted in numerous regulatory reforms, including legislation to strengthen the financial regulatory architecture. south africa will have new, far - reaching and overarching, financial sector legislation by the end of 2016. from a payment system perspective, it will include the introduction of new and more comprehensive regulations as well as expanded oversight and supervision by various regulators. furthermore, as you are aware, the committee on payments and market infrastructures ( or cpmi ) of the bank for international settlements ( bis ) as well as the international organisation of securities commissions ( iosco ) 1 published new principles for fmis in april 2012. as a result of the new international and domestic regulatory requirements, as mentioned above, it has become necessary to re - evaluate the national payment system act 78 of 1998 ( nps act ). the factors that will have to be taken into account include access and participation criteria, licensing criteria in line with international standards for fmis, the governance arrangements in
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peter pang : diverging monetary policies, global capital flows and financial stability opening remarks by mr peter pang, deputy chief executive of the hong kong monetary authority, at the conference on β diverging monetary policies, global capital flows and financial stability β, jointly organised by the federal reserve bank of new york / european central bank / federal reserve bank of dallas / hong kong monetary authority, hosted by the hong kong monetary authority, hong kong, 15 october 2015. * * * 1. it is my great pleasure to welcome all of you to this conference jointly organised by the board of governors of the federal reserve system, the european central bank ( ecb ), the federal reserve bank of dallas and the hong kong institute for monetary research. 2. today β s conference is very timely. with the us fed contemplating an imminent liftoff in policy rates, while the ecb and the bank of japan ( boj ) are still preoccupied with quantitative easing ( qe ), central banks around the world are carefully weighing the potential impact of the expected divergence in monetary policies on global capital flows and financial stability. financial markets often move ahead of the real economy. we have seen global financial markets tumbled and emerging market economies ( emes ) experienced quite intense capital outflow pressures during this summer. many would be interested to know whether such gyrations of capital flows and asset prices have already captured a good part of the adjustment process or are just a curtain raiser for even stronger threats to financial stability of the emes. 3. but, don β t get me wrong. we welcome the normalisation of monetary policy in the us. a timely and orderly exit from zero interest rate policy by the fed should facilitate adjustments of macroeconomic imbalances and help deflate asset bubbles in the emes which have been fuelled by excessive global liquidity since 2008. as the fed β s balance sheet is expected to stay elevated for some time while the ecb and the boj carry on with qe, global liquidity should remain abundant in the near term, which should help cushion the impact of a fed rate hike to some extent. 4. that said, no one should safely assume that monetary policy normalisation in the us would be a smooth, painless process for the global economy. even though the fed has repeatedly signalled that its future rate hike path will be slow and gradual, its impact on global fund flows and financial stability is highly uncertain. this is particularly the case as many emes have built up
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yiu - kwan choi : launch of the cmu bond price bulletin remarks by mr yiu - kwan choi, deputy chief executive of the hong kong monetary authority, at the signing ceremony for the launch of cmu bond price bulletin, hong kong, 9 january 2006. * * * it gives me great pleasure to welcome you all to this signing ceremony for the launch of the cmu bond price bulletin. we are pleased to see the launch of the bulletin. this, we believe, will be a useful tool to help promote the retail bond market in hong kong. as you know, financial infrastructure development has always been a priority item on the hkma's policy agenda. a robust financial infrastructure is important in maintaining the stability and integrity of the monetary and financial systems and in strengthening hong kong's status as an international financial centre. over the years, we are proud that, with the support of banks and other financial institutions, the hkma has built a sophisticated financial infrastructure that meets the best international standards. having said that, we are conscious that there is always scope to further strengthen our financial infrastructure to take account of the latest technology and market developments. it was precisely for this reason that the hkma conducted a comprehensive review last year on financial infrastructure development in hong kong. the launch of the bulletin is one of the recommendations arising from this review. the objective is to provide retail investors with convenient on - line access to information on bond products and bond prices. we believe that the launch of the bulletin will help to raise product awareness and improve price transparency, thereby helping to promote the development of the retail bond market in hong kong. the bulletin is developed by the central moneymarkets unit of the hkma. we are delighted to have eight major banks, which are present here today, to be the price providers. thanks to their support, indicative bid / offer prices of over 200 bonds of different currencies issued by both public and private sector entities will be available on bulletin. investors may access the bulletin later today for bond information. the website address is https : / / www. cmu. org. hk. the bulletin also provides direct hyperlinks to the price providersaβ¬β’ websites to facilitate investors to approach the price providers for trading. relevant transaction charges imposed by individual price providers are also posted on the bulletin. retail investors can easily gain access to, and conclude trades with, the price providers in a convenient, secure and efficient manner. we are thankful to banks and potential users for
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irma rosenberg : monetary policy and financial stability β the riksbank's two main tasks speech by ms irma rosenberg, first deputy governor of the sveriges riksbank, at statistics sweden, stockholm. 2 october 2008. * * * many countries are currently in the midst of a financial crisis that has repercussions throughout the global financial system. headlines referring to problems in large us banks, to rising risk premiums, poorly functioning markets and other consequences around the world have been prominently featured on the first pages of many newspapers. sweden has so far been spared the worst. but now the financial markets here are also clearly affected by the uncertainty and lack of confidence, which thus also affects the swedish banks and other financial agents. the riksbank is working intensively on dealing with these events right now, like most other central banks. the riksbank β s task is to safeguard both price stability and financial stability. i am going to talk today about current monetary policy and the deliberations at our most recent monetary policy meeting in september. but the recent drama in the financial markets gives me reason to devote some time to explaining what our task of safeguarding financial stability concerns and to our assessment of the current situation. two tasks β monetary policy and financial stability some of the questions that have been the focus of attention are what the riksbank and other central banks can and should do about what is happening in the financial markets right now. it is not surprising that these questions arise. but if they are to be discussed, it is important to separate the two tasks the riksdag ( the swedish parliament ) has given us β monetary policy and financial stability. this may not be so easy, as the areas in many ways affect one another. however, i shall try to make things a little clearer. two different tasks β¦ what is happening right now is important, both with regard to financial stability and monetary policy. the financial turbulence has also been included in our analyses of both areas, ever since the problems connected to the mortgage market in the united states became apparent last summer. however the perspectives are different. the stability perspective concerns how the banks, the payment system and the financial system in general are affected by the financial crisis. the monetary policy perspective concerns how inflation and developments in production and employment may be affected. β¦ which are in many ways linked as i recently mentioned, our two fields of activity are closely linked. the financial turbulence that has spread around the world to a large
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collateral for a covered bond is directly tied to a particular portfolio of mortgage loans with high collateral. this means that the credit granter is protected, even if the institution issuing the bond were to collapse. covered bonds are therefore good collateral and many other central banks accept them to a greater extent than the riksbank. in our case, the permitted share was raised from 25 per cent to 75 per cent. this measure meant, to put it simply, that participants in the rix system, were given the opportunity if necessary to use more collateral as a base for their loans from the riksbank. another preventive measure taken by the riksbank has been to establish, together with other central banks, a swap facility with the us central bank, the federal reserve. this agreement entails the federal reserve supplying us dollars in exchange swedish krona if the need should arise. but it should also be pointed out that the riksbank has a substantial foreign currency reserve. the agreement is not the only means for the riksbank to obtain loans in us dollars, but it makes it easier for us to take action quickly. right now, the situation regarding short - term funding in usd has been very strained on many markets. to increase access to liquidity in us dollars and to make the markets function more normally, several central banks, including the riksbank, have agreed on coordinated actions. the riksbank has decided to lend dollars to swedish banks in two auctions during october. the first was held yesterday and amounted to usd 7 billion. a second auction with loans extending over the turn of the year will be held on 22 october and amount to usd 15 billion. a large part of the collateral the banks pledge for these loans will probably be comprised of covered mortgage bonds. the measures should therefore also have a positive effect on the functioning of the mortgage market. together with the measures taken by other central banks, this should lead to better liquidity in the financial markets globally. a further measure is that the riksbank as recently as today decided to establish a loan facility in swedish krona to increase access to loans of longer duration. there have thus been disruptions in the financial markets, but the riksbank, other government agencies and central banks have taken action to improve the functioning of the markets. we will of course continue to follow developments very closely. we are constantly updating our analyses and we are prepared to take action if necessary. in addition, as i have already mentioned, we
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2014 can be explained by more people in work, with most of the rest explained by lower inflation boosting real wages. this has in turn fed further consumption growth as households have kept saving rates stable, leading to higher employment, income and spending. and as aggregate demand has strengthened, investment has also begun a cyclical recovery, which we expect to reinforce growth dynamics going forward. however, it still remains 10 % below its pre - crisis peak and well below its historical trend. importantly, domestic demand has firmed against the backdrop of improved private sector balance sheets, which is the second key feature of the recovery. for virtually the first time since the start of monetary union, spending has been rising while indebtedness has been going down. especially in formerly stressed countries, debt ratios for both firms and households have fallen substantially. and pertinent for the strength of the recovery, the drivers of this deleveraging have been changing. bear in mind that there are two types of deleveraging : β macroeconomic β deleveraging β reducing debt ratios through nominal growth β and β balance sheet β deleveraging : paying off or writing down debt. historically, the most drastic processes of deleveraging, including the post - war episodes and the recent post - crisis episode in the us, have relied on both mechanisms. but the contribution of nominal growth has always been decisive for success. in the euro area, until recently, real growth and inflation were too low to foster macroeconomic deleveraging, so balance sheet repair had to take place through the more painful channel, conflicting with the objective of macroeconomic stabilisation. rising nominal growth is now helping to reconcile those two goals. nevertheless, further efforts are still needed to work through the legacies of the crisis, especially in parts of the euro area banking sector where nonperforming loans remain high. the third important feature of the recovery is its broadness across sectors and countries β which is to say, it has not only strengthened but become more homogenous across the euro area. this reflects above all the effectiveness of our measures in narrowing financing conditions across different economies. if one looks at the percentage of all sectors in all euro area countries that have positive growth, the figure stood above 80 % at the end of last year β above its historical average of 73 % and the level observed during the 2009 β 11 recovery. similarly, the dispersion in growth rates across both sectors and countries has also narrowed significantly and both are now at
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##ilateral commitment, while others aim to maintain the exchange rate much very close to the central parity. at the moment, however, none of the new member states has been participating in erm ii for the required minimum of two years. another challenge that might lie ahead for a number of the new member states relates to their substantial and persistent current account imbalances. although external imbalances are to some extent a natural and necessary part of the catching - up process, care needs to be taken to ensure that these imbalances remain sustainable and eventually decline. even though the balance of payments appears to be less relevant once a country has joined the monetary union, economic adjustments in response to such imbalances will take place at some point in the future. in this respect, it is possible that the current account deficit might β naturally β narrow over time as the cyclical position in the country becomes more aligned with that of the euro area countries. however, if economic policy and market structures do not facilitate the adjustment process, it is also possible that the adjustment of the economy will be abrupt and severe β another reason to emphasise real convergence and the flexibility of economic structures, as i outlined before. finally, where do we stand with regard to the fulfilment of the fiscal criteria? looking at recent fiscal developments in the new member states, the picture is very diverse ( see slides 7 and 8 ). thee two charts show the fiscal positions in the new member states and the reference values as defined in the treaty. while many of the new eu members face no major problems on that front, others exhibit large and even growing fiscal imbalances. in addressing the fiscal policy challenges faced by these countries, one aspect deserves, in my opinion, particular attention : namely that the appropriateness of the budgetary stance cannot only be judged with reference to the fulfilment of the fiscal criteria. as i pointed out earlier, fiscal policy will have to be employed as a policy instrument to help contain inflationary pressures, when other policies ( such as monetary policy ) are increasingly constrained in the run - up to euro area accession. this is especially the case in the final phase of convergence and erm ii participation, when the convergence not only of long - term interest rates, but also of short - term interest rates progressively limits the room for manoeuvre for monetary policy. moreover, as buoyant economic growth in these countries is often supported by very high credit growth, effective financial supervision
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sense of ownership, but also assure ourselves that we are building together a member - governed and member - driven organization that is sustainable. as such, crucial and practical issues such as the membership fee structures and related recommendations on membership rights and participation will be discussed. secondly, the rigorous work of the sub - committee on host country evaluation will be presented to us for our appreciation. the choice of the future home of afi is a crucial milestone in our journey to become an independent institution. thus, it is with a sense of excitement that i inform you that the newly selected afi host country will be announced shortly. thirdly, the independence sub - committee chair, governor njuguna ndung β u of kenya will outline the governance recommendations that will determine how the independent afi will be steered toward our collective mission of adopting and expanding effective, inclusive financial policies in developing nations. bis central bankers β speeches with these, all members are encouraged to be proactive in the discussions. your insights and contributions to the many important issues will enrich the process and ultimately strengthen afi. the important agenda i have just outlined β charting our way toward independence, governance issues, and the conferment of the new afi host country β will allow us to advance our strength as one body and our partnership for the ultimate betterment of the poor people we target to serve. on a final and a more personal note, let me take this opportunity to thank all of you for your personal commitment and individual contribution to afi over the years. after this forum, i will be stepping down as the steering committee chair β a role which has been a privilege and a joy to hold, in large measure due to all your support. warm thanks to my colleagues at the steering committee who have shared their expertise in building and providing strategic guidance to afi ; to the management unit β the team that has made our afi work seamless and efficient ; to all the members β the bright minds behind our financial inclusion policies and various programs that are truly making a difference ; to all those who made afi programs and initiatives a success through their effective organization of activities and events ; our sincerest gratitude to all of you. i am pleased to announce that superintendent daniel schydlowsky of peru is the incoming chairman of the steering committee. i will, of course, stay on as an active member of afi and will remain committed in sharing our institutional knowledge, and, being a personal advocate of financial inclusion, in advancing afi β s global mandate. my colleagues and friends,
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jessica chew cheng lian : opening remarks - fen community of practice's virtual panel discussion opening remarks by ms jessica chew cheng lian, assistant governor of the central bank of malaysia ( bank negara malaysia ), at the financial education network ( fen ) community of practice's virtual panel discussion, 26 october 2021. * * * distinguished panelists, members of the financial education network, ladies and gentlemen. a very good afternoon. the late mr. kofi annan, former secretary - general of the united nations, once said that β education is the premise of progress, in every society, in every family, β and β literacy is a bridge from misery to hope. β reflecting on the onslaught of the pandemic on lives and livelihoods these past two years, the financial education community must surely ask how we can and must prepare our community better to face the financial challenges ahead, both in the short and longer term. it is my pleasure to be invited to deliver the opening remarks today at this inaugural financial education network community of practice. let me especially thank the distinguished speakers who are joining us today from the australian securities and investment commission, the new zealand retirement commission, the new zealand council for educational research, and hong kong β s investor and financial education council for graciously taking the time to share your experience in pursuing financial education strategies with us. fen was formed as an inter - agency platform comprising eight member institutions that are committed to raise the level of financial literacy in malaysia. and it is founded on the belief that we can have a far greater impact by coming together, than we could acting alone. this is embodied in the national strategy for financial literacy 2019 β 2023 which is a product of fen. the national strategy is centred around five strategic priorities that serve to anchor initiatives by fen members to enhance the financial capability of malaysians, thereby encouraging alignment and creating synergies. so what are these strategic priorities? first, nurturing values from young ; second, increasing access to financial management information, tools and resources ; third, inculcating positive behaviour among targeted groups, including the youth, selfemployed and those entering the workforce ; fourth, boosting long term financial and retirement planning ; and fifth, building and safeguarding wealth. since the launch of the national strategy in july 2019, fen members and partners, working in collaboration with the government, business community and education sectors have undertaken over 400 education programmes and initiatives, covering a wide and diverse spectrum of the public
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the currency risk. the assumption of the diversification is that the covariation between individual assets β price movements is not always perfectly positive. this means that a portfolio β s total movement, that is, volatility, will be less. in connection with large movements in the foreign exchange market, an overly narrow currency composition might lead to large declines in value, which could in turn lead to a heavy fall in capital. given this, we quite simply try to achieve a currency allocation that will minimise the currency risk measured in swedish kronor, given the currencies we can hold and given our intervention need. our choice is based on a quantitative analysis using fundamental and standard portfolio theory 8. our analysis does not take into account the expected earnings in currency, but merely the currencies β estimated volatility and mutual correlations. the result of our analysis is illustrated in the following diagram ( see figure 2 ). this and other questions regarding the riksbank β s need to have its own capital are discussed in ernhagen, vesterlund & viotti ( 2002 ). for a more detailed discussion of the riksbank β s intervention policy, see heikensten & borg ( 2002 ). this refers to what is known as the mean - variance analysis that was originally produced by harry m. markowitz in the 1950s. because of the sensitivity of this model, the analysis is supplemented by value - at - risk calculations, risk contribution analyses and stress tests. value - at - risk is an estimate of potential loss risk and is defined as the largest expected decline in value of an asset, or an asset portfolio, with a specific probability and over a specific period of time. as you can see, our largest holding is in euro. this is not surprising, as the relationship between the euro and the krona has remained relatively stable. historically, the currency risk attributable to our euro holding has thus been less than that attributable to other currencies in the reserve. the dollar, on the other hand, has been one of the highest risk currencies. the fact that we nevertheless have a relatively large dollar exposure is due to its importance as intervention currency. it is reasonable to wonder why we do not choose to convert some of the currency assets into swedish assets as long as we have a floating exchange rate regime. in this way the currency risk on these assets would disappear completely. in practice, however, this is not so
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##bank β s various tasks that is the most important explanatory factor behind the focus of our asset management. it is only when we have reasonably ensured that we can carry out these tasks that we take financial risks in order to generate earnings. in the following i shall describe in more detail how this balance is attained. in practice it is a question of the riksbank β s exposure to three different types of risk ; currency risk, interest rate risk and credit risk. currency risk currency risk is by far the largest risk in our balance sheet. it arises when the krona appreciates or depreciates in relation to the currencies in the foreign exchange reserve. this means that the riksbank β s profit and loss account and balance sheet are valued in kronor. an appreciation of the krona reduces the value of our foreign exchange reserve and a depreciation increases it. when the krona appreciates it is thus a negative event to the extent that it leads to exchange losses that are booked in the riksbank β s balance sheet. if these losses are too large, there is a risk that they must be covered by the capital the riksbank has allocated for use in potential financial crises and to cover the bank β s day - to - day operations. there is therefore reason to limit the impact of a krona appreciation on the riksbank β s results. however, the possibility to do so is limited by the fact that we must have currency assets in order to intervene in the foreign exchange market. the need for intervention capacity in the form of foreign assets is determined by the prevailing exchange rate regime. under a fixed exchange rate regime the central bank may need to intervene relatively often, which means that the need for intervention assets is considerable. this need is usually much lower with a floating exchange rate regime 7. however, according to law, the riksbank must be able to implement the exchange rate regime that the government has stipulated for the krona, regardless of whether this is fixed or floating. this means that the currency holding is ultimately determined by the needs of a fixed exchange rate regime. at present, however, we have a floating exchange rate regime, which gives us scope to limit the currency risk. we do this by ensuring that our holdings of the important intervention currencies, i. e. euro and us dollar, are no larger than can be justified for reasons of intervention or diversification. diversification is the possibility we have to reduce
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andreas dombret : restoring financial stability address by dr andreas dombret, member of the executive board of the deutsche bundesbank, on the occasion of the inauguration of the bundesbank representative to turkey, istanbul, 26 november 2013. * * * dear consul general wolke, dear deputy governor kenc, dear ladies and gentlemen. thank you very much for honouring us tonight with your presence. several centuries ago isaac newton observed : β we build too many walls and not enough bridges β. history has shown that there is a lot of truth in this sentence. and i am sure if newton lived today he would be impressed by what has been achieved in istanbul only recently. complementing the existing bridges, the new marmaray tunnel underneath the bosporus strait has just been opened. for the first time in history, a tunnel connects two continents. making connections is also what the bundesbank has in mind in sending representatives abroad. with our network of representatives we aim to cover, in particular, the major g20 countries outside the euro area. turkey is a prime example of a successful emerging market economy. this is also reflected in turkey holding the g20 presidency in 2015. moreover, istanbul is a financial centre of growing importance. therefore, i am very happy indeed that we have now managed to close this gap in our network. it is my pleasure to introduce mr hartmut drager, the bundesbank β s first ever representative in turkey. he will be available in the german consulate here in istanbul for your questions related to the bundesbank and the european system of central banks. in turn, mr drager will report back to us in frankfurt on issues that help us to better understand economic and financial developments in turkey. another important objective behind mr drager β s secondment to istanbul is our wish to further strengthen our relationship with the central bank of turkey. for this reason i am grateful that my g20 colleague deputy governor kenc was able to join us tonight. earlier this year, the governors of our two central banks signed a memorandum of understanding. this memorandum underlines their joint commitment to forge a deeper relationship between our respective central banks. deputy governor kenc and i have agreed to give added substance to the memorandum by holding a joint expert - level seminar on financial stability issues in the course of next year here in your great city of istanbul. ladies and gentlemen, let me come back to the quote by newton. certainly, before european integration started, europe was used
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to building walls. but walls separate. in europe we have since gone some way to responding to newton β s observation. the creation of the european common market without frontiers was the first significant step towards tearing down walls and building solid bridges across europe. another milestone along the road to european integration was the introduction of the euro. currently, we are working again on a historic project of european integration, namely the creation of a european banking union. the banking union is currently our largest institutional construction site. the legal basis for the new european single supervisory mechanism is now in place since 3 november, thus we have entered the implementation phase. the major challenge ahead is the comprehensive assessment of banks. currently, the banking supervisors are selecting the bis central bankers β speeches critical balance sheet items of the banks under the single supervisory mechanism. these items will then be subject to closer scrutiny. this appraisal of the present situation will be complemented by a joint stress test of the european central bank and the european banking authority which will be designed to reveal future risks. it is essential to convince the markets that banks are solving their legacy problems before the european central bank takes over responsibility for banking supervision at the end of next year. the cleaning - up of the balance sheets will be an important pre - condition to ensuring a smooth start for the new supervisory regime. in a market economy it is essential that banks, like any other business firms, can fail and can exit the market. β too big to fail β was with us for much too long. therefore, it is most important that we move from the old bail - out regime to the new bail - in regime in a credible way. consequently, the single supervisory mechanism has to be accompanied by a corresponding recovery and resolution mechanism with a view to protecting taxpayers β money from failing banks. the rules specifying potential bail - ins have to spell out a clear pecking order for covering losses. thereby, the principle of dual subsidiarity should be observed. to put it in a nutshell : before public money is used, private creditors have to contribute to covering losses. and before european financial backstops, such as the esm, are used, member states have to cover losses of their banks. this would reinforce another important principle, namely that liability and control have to go hand in hand. this being said, let me emphasize that the single supervisory mechanism, accompanied by a recovery and resolution mechanism, can neither resolve today β s debt crisis nor act as a substitute for structural reforms
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4, among other countries. in the future, demographic trends will be of greater significance than they used to be in the past, for several reasons. first of all, the population is aging faster in the developed world, yet china will also be affected by this problem due to its one - child policy. second, the past 20 years have seen the global labour market emerge as a result of dramatic progress in information and communication technologies, lower transportation costs and reforms launched in many countries. for instance, richard freeman from harvard university estimates that with the integration of the former soviet bloc this part of the speech is based upon a draft book on globalization written by k rybinski and entitled globalizacja w trzech odsΕonach, published at www. rybinski. eu. estimates available at http : / / esa. un. org / unpp /. see e. g. j hawksworth the world in 2050, pricewaterhousecoopers, march 2006. m aguiar et al., the new global challengers. how 100 top companies from rapidly developing economies are changing the world, boston consulting group, may 2006. economies, china and india into the global labour market, the number of workers available globally jumped from 1. 46 billion to 2. 93 billion people, which freeman calls β the great doubling β 5. the first major change caused by globalization is therefore the emergence of the global labour market in the 21st century. this has already brought about changes both in businesses β operating strategies and employees β behaviour. the global labour market shifts jobs to places with the highest effectiveness and lowest cost of manufacturing. for poland, this means a large inflow of foreign direct investment despite a halt in privatization. in the global labour market, employees move to places where they are better paid for their skills. according to various estimates, about 5 % people at working age have already left poland. for estonia, this figure stands at as much as 10 %. in the global economy of the 21st century, technological progress and lower transportation costs have allowed for the business processes or their parts to be easily moved between countries ( a phenomenon frequently described as business process offshoring ). the relative role of crucial factors behind long - term development prospects is thus changing. in the 21st century, the key factor conducive to economic growth will be knowledge β broadly understood as a country β s intellectual capital β and this country β s ability to drive innovation. if businesses in a given
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experience that high inflation imposes greater costs and fewer benefits than previously thought, then the equilibrium will adjust toward one with lower inflation and lower inflation expectations. this line of explanation of how economies move between monetary regimes, which has been explored by sargent and others, strikes me as quite plausible as a historical description ( sargent, 1999 ). in sum, many of the most interesting issues in contemporary monetary theory require an analytical framework that involves learning by private agents and possibly the central bank as well. implications of anchored inflation expectations why do we care about the variability of inflation expectations? as my colleague rick mishkin recently discussed, the extent to which inflation expectations are anchored has first - order implications for the performance of inflation and of the economy more generally ( mishkin, 2007 ). mishkin illustrated this point by considering the implications of the fact that inflation expectations have become much better anchored over the past thirty years for the estimated coefficients of the conventional phillips curve, which i define here to encompass specifications that use lagged values of inflation to proxy for expectations or other sources of inflation inertia. as he noted, many studies of the conventional phillips curve find that the sensitivity of inflation to activity indicators is lower today than in the past ( that is, the phillips curve appears to have become flatter ) ; 1 and that the long - run effect on inflation of " supply shocks, " such as changes in the price of oil, also appears to be lower than in the past ( hooker, 2002 ). these findings are of much more than academic interest. to the extent that the phillips curve may have flattened, inflation will now tend to be more stable than in the past in the face of variations in aggregate demand. ( of course, this can be a good thing or a bad thing, depending on whether inflation expectations are anchored in the vicinity of price stability. ) likewise, a lower sensitivity of long - run inflation to supply shocks would imply that such shocks are much less likely to generate economic instability today than they would have been several decades ago. notably, the sharp increases in energy prices over the past few years have not led either to persistent inflation or to a recession, in contrast ( for example ) to the u. s. experience of the 1970s. various factors might account for these changes in the phillips curve, but, as mishkin pointed out, better - anchored inflation expectations β themselves, of course, the product of monetary policies that brought inflation down and have kept it relatively stable β certainly play
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yves mersch : the changing role of central banking speech by mr yves mersch, member of the executive board of the european central bank, at the lamfalussy lectures conference of the lamfalussy award at magyar nemzeti bank ( the central bank of hungary ), budapest, 4 february 2019. * * * john von neumann, the hungarian - born mathematician, once said : β there β s no sense in being precise when you don β t even know what you β re talking about β. i saw alexandre lamfalussy in many different roles over the course of 30 years, and i always admired his capacity to be extremely precise because he was professionally knowledgeable. it is therefore a great honour for me to be awarded a prize in memory of a man who made such an important contribution to european integration. during many years representing my country of origin in the belgian constituency at the imf, i witnessed the intellectual strengths of the hungarian representatives, especially from the central bank. i therefore feel particularly flattered to have been awarded this prize by the magyar nemzeti bank and its president, mr matolcsy. i also want to express my thanks to governor ewald nowotny of the oesterreichische nationalbank, who is also a firm believer in the need to bring the people of our continent together without nations trying to dominate each other. indeed, i feel very humble and modest in this environment. i was lucky to be able to develop my views and opinions when accompanying my highest political authorities in their meetings for more than 20 years. moreover, my family provided me with two solid foundations : resistance to illiberalism during world war ii, and the respect of the rule of law. i have been veering between what benoit mandelbrot called β the two poles of human experience β, one driven by my legal background and the deterministic system of order and planning, and the other inspired by my lifelong experience with finance and the stochastic or random systems of irregularity and unpredictability. trying to straddle the two poles with insights from political science brings me to today β s theme : the changing role of central banks. mandelbrot said of the great financial crisis : β financial economics, as a discipline, is where chemistry was in the sixteenth century : a messy compendium of proven know - how, misty folkwisdom, unexamined assumptions and grandiose speculation.
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- to - be - completed single deposit guarantee scheme. according to an empowering clause included in the maastricht treaty activated by unanimity, the ecb received specific supervisory powers, albeit only for credit institutions. this transfer of sovereignty is still being challenged in the german constitutional court. it came hot on the heels of a first move towards greater coordination in the financial sector through the establishment of european agencies for bank, insurance and securities and markets, in which alexander lamfalussy played an important role. indeed, the governance structure of these agencies was modelled on the so - called level 3 committees introduced by the lamfalussy committee of wise men. during these times, another trend became noticeable : the transfer of an increasing amount of new tasks to national central banks. some of these had traditionally been performed by the central banks, but others were totally new. as the ecb has to issue an opinion on every change to laws governing national central banks, a conceptual framework evolved which establishes which tasks are governmental tasks, and which tasks are traditional central bank tasks, or which tasks could be considered ancillary to them. an undue transfer of competences to a central bank of tasks that belong to governments could indeed be seen as circumventing the monetary financing prohibition or threatening its financial or resource independence. ncb consent and the funding of such new activities would therefore need to be scrutinised. the case law of our adopted opinions over recent years in many countries covers topics as diverse as buying paintings, financing culture, education or investments and the financing of resolution funds. we also gave opinions on establishing a central register of bank account numbers ; exercising asset management functions ; insurance premiums ; protection of competition in the mortgage loan market, to name but a few. however, the biggest change in terms of conceptual evolution, strategic thinking and interaction with different policy fields concerns financial stability and macroprudential policy. under monetary policy, the treaty foresees that the ecb shall contribute to the policies of competent authorities relating to banking supervision and the stability of the financial system. the statute lists this as one of the tasks of the ecb. the concept of a financial cycle, as distinct from the business cycle, was only developed much later with the increasing financialisation of our economies. 3 the emergence of this reality of a financial cycle and its relation to central banking was acknowledged with the establishment of the european systemic risk board ( esrb ) at the ecb and supervisory tasks being conferred
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have averaged below specified goals over the past few years. there are several reasons for this : levels of excess capacity in factor and product markets remain high in many economies ; wage outcomes have been subdued, even in countries with low unemployment ; surveys show that inflation expectations have declined ; commodity prices have fallen substantially over the past 18 months ; and the internet and other technologies may be changing the tradables content of traditional non - tradable goods and services. turning to some regional perspectives, the greatest concern at this point lies around the growth outlook for china. over the past 35 years, china has been the world β s most successful economy, increasing its share of world output from below 3 percent to 15 percent currently. although china β s economy is just over 60 percent of that of the united states ( at current exchange rates ) it has a much greater impact on commodity markets and global trade volumes. this includes the 19 euro - area economies, usa, japan, uk, canada, switzerland, sweden, demark and norway. in 13 european countries 2 year sovereign bond rates are still negative. the continuous commodity index is currently about 28 percent below its peak in april 2014. larry summers blog : on secular stagnation : a response to bernanke, april 1, 2015. robert gordon : is us economic growth over? fostering innovation confronts the six headwinds, nber working paper no. 18315, august 2012. bis central bankers β speeches china is now the number 1 or 2 trading partner for over 100 countries and its imports of nonoil commodities are around 2 Β½ times higher than those of the us. recent indicators suggest that challenges in china β s construction and manufacturing sectors continue to be a concern, particularly as much of the investment has been financed through extensive borrowing, much of it in the rapidly expanding shadow banking sector. china β s debt burden has increased at an unprecedented rate β from 130 percent of gdp in 2008 to around 200 percent currently. but financial markets have also been unsettled by other factors, including the types of policy measures introduced as the shanghai index began declining, the magnitude of recent capital outflows, and the questions raised by the decision to allow the rmb to depreciate by 3. 5 % over two days in august. although the chinese authorities have indicated they want a stable rmb, private capital outflows continue to be large. any substantial depreciation in the rmb would have serious implications for the world economy : it would
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##aging the extensive presence of its banking network which is present across all asean countries. in addition, our network of appointed overseas office ( aoo ), spanning asean and key global markets, further enhance our ability to support cross - border transactions and promote regional integration of local currency settlements. all of this bodes well for the economy and our prospects. to realise this potential, i must highlight the significant need for collaboration and coordination between bnm and the industry. we have already witnessed meaningful collaboration, particularly through the financial market committee ( fmc ) and mifc leadership council, and i look forward to build and expand on this foundation and enhancing our joint efforts as we head into the coming year. conclusion in closing, i want to emphasise that while we face challenges, the resilience of malaysia's economy and financial markets gives us reason to be optimistic. the strategies we have in place, supported by sound fundamentals and innovative initiatives, position us well to navigate future uncertainties. izinkan saya akhiri ucapan ini dengan serangkap pantun. dari dollar malaya ke ringgit malaysia, legasi menuju negara yang kukuh, bekerja erat, maju bersama, sistem kewangan terbina utuh. thank you for your time, and i wish you all an enjoyable evening. 5 / 6 bis - central bankers'speeches 1 source : governor'media statement during 3rd quarter gdp release 6 / 6 bis - central bankers'speeches
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prasarn trairatvorakul : managing the economy at a crossroads speech by dr prasarn trairatvorakul, governor of the bank of thailand, at the foreign correspondents β club of thailand ( fcct ), bangkok, 3 july 2014. * * * distinguished guests, ladies and gentlemen, it is my pleasure to be here once again, to address the oldest press club in southeast asia. i congratulate you for the outstanding works in thailand over these years. journalism is indeed a special profession, one whose status is sometimes hailed as β the fourth pillar of the state β alongside the legislature, the executive and the judiciary. such privilege comes with a somber weight of commitment to accurate reporting and balanced viewpoints. these qualities are needed more than ever today, as there is much public demand to understand the implications of the recent political development. i will share with you today my early assessment from a policymaker β s standpoint, regarding the latest economic outlook and key challenges to public policy lying ahead. current economic assessments first, let me give you a brief summary of where we are. the buildup of political tension late last year came at an unfortunate time for the economy. the economic activity was already hampered by weak domestic demand amid high household debt and a lackluster global economy. as the political uncertainties persisted, the repercussion on consumer and business confidence grew, denting private consumption and investment. the lack of a functioning government early this year also curtailed public finance capability, subjecting infrastructure investment to further delay and putting 2015 fiscal budget at risk. tourism, a shining sector in 2013, was increasingly weighed by security concerns. a tepid recovery in exports offers only a partial offset to softening growth, and could not prevent the overall economy from contracting in the first quarter. it is under this backdrop that the end to political stalemate in may provided some cause for short - term optimism. the first relief comes from a resumption of government spending. the presence of a fully functioning government ensures that the budget for 2015 fiscal year could be prepared on time, eliminating the risk of a thai - style β fiscal cliff β. an acceleration of public disbursement in the short - term is also providing a welcomed boost to the economy. plan for public investment in infrastructure is now back on track, and there have been renewed efforts to maximize the efficiency of these projects. a resumption of effective fiscal policy, in turn, lends support
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to domestic demand recovery. repayment of overdue debt to farmers, approvals of backlog projects by the boi, and fresh loans to the smes provided quick relief in and of themselves, but the combined multiplier effects could also be meaningful. by shoring up income and improving overall sentiments, these measures constitute an important effort to revive private spending. fast indicators already suggest that private consumption and investment are stabilizing, and private confidence improving. we expect the recovery of domestic demand to gain more traction going forward, especially in the second half of this year. in light of these recent events, our latest growth projection for this year has been revised upward to 1. 5 percent. while this figure may be much lower than long - term potential growth of around 4 to 5 percent, it is chiefly dragged down by the first - quarter contraction β bygones if you like. from this quarter onwards, we anticipate a clear pickup in growth and a v - shaped recovery. many independent forecasters are currently holding a similar view, and most have revised up their growth projections after the political turning point in may. bis central bankers β speeches this brighter economic outlook is not without risks, however. exports of goods in particular have underperformed thus far this year, despite their insulation from domestic political turmoil. a number of factors are at play, some temporary, others more secular. weaker economic growth in regional trading partners, including china and asean, has been one cyclical hindrance. global trade also appears to be lagging global growth, limiting scope for emerging economies like thailand to leverage on advanced economies β recovery. more deep - rooted structural issues at home may also be responsible, as segments of the manufacturing sector are not integrated into the modern global supply chain. for these reasons, exports may play a less active role in its contribution to growth this year. on the financial stability front, we remain cautious but optimistic. domestically, the prolonged period of economic slowdown has subjected indebted households and smaller businesses to financial strains. loan quality for weaker borrowers has deteriorated somewhat as a result. the good news is that these risks have been confined to specific sectors, and the banking system remains strong and has weathered the slowdown very well, owing to their prudent risk management policies. externally, we also cannot rule out further episodes of volatile capital flows owing to shifts in monetary policy abroad. our economy has proven resilient to such shocks in the recent past, thanks to strong macro
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opening remarks by francois groepe, deputy governor of the south african reserve bank, at the public workshop on proposals to establish a deposit insurance scheme for south africa south african reserve bank, pretoria 23 august 2017 introduction good afternoon, distinguished guests, ladies and gentlemen. it gives me great pleasure to welcome you to this workshop on a possible deposit insurance scheme for south africa. we are privileged to have present here today fellow central bankers, commercial bankers, financial market participants, regulators, public sector representatives, academics, members of the media fraternity, and other staff members of the south african reserve bank ( sarb ). in particular, i would like to extend a very warm welcome to the representatives from the world bank, which has been very supportive over the past two to three years in the formulation of the proposals that will be discussed today, as well as to the representatives from other central banks in the common monetary area that are present. we hope that this workshop will be the first step in expanding our fruitful cooperation in the area of managing bank failures. the sarb and national treasury are currently developing new legislation to put in place a framework that will facilitate the resolution of failing financial institutions in an orderly and transparent way, one which seeks to minimise the use of government funding to bail out such institutions. this new resolution framework is an important pillar of the sarb β s expanded and explicit financial stability mandate, as contained in the financial sector regulation bill. a key component of such a resolution framework is the establishment of page 1 of 6 an explicit deposit insurance scheme to ensure that the depositors who are most exposed to an asymmetry of information and thus least able to hedge themselves against financial loss in the event of a bank failure are protected against any losses and hardship that may stem from a bank failure. this framework is expected to enhance the public β s trust in the banking sector, which is an important aspect of financial stability. the implementation of a prefunded deposit insurance scheme will bring about closer adherence to the key attributes of effective resolution regimes and to the core principles of effective deposit insurance systems issued by the financial stability board and the international association of deposit insurers respectively. south africa has a well regulated and stable banking sector, but one that is also quite concentrated. where one tends to find relatively regular failures of small banks in some other countries, bank failures in south africa are rare β although when they do occur, they are typically more disrupting. because bank failures in south africa do not occur often and
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manual. 6 but the methodological effort is never - ending : we are now working to improve the supervisory review and evaluation process ( srep ), partly in order to promote convergence in the prudential treatment of significant and less significant banks. 7 further improvements are currently being discussed : how to streamline the decision - making process ; how to enhance cross - fertilization in the on - site teams and their community spirit ; and how to improve coordination between prudential supervision and anti - money - laundering oversight. the discussions within the ssm board, the ncas β input gathered through written procedures and the contribution of technical working groups have helped to address all the relevant issues, even the most controversial ones. for instance, regarding non - performing loans ( npls ), while everyone agreed on the need for the banks most affected by this problem to get rid of their npls, there was much discussion about how to proceed at the ssm level. the solution, which we are draghi ( 2015 ). ecb ( 2018a ). ecb ( 2018b ). now working on, is based on a bank - by - bank approach8 and seems to go in the right direction, without entailing any illegitimate foray into the regulatory field. we should take into full account the specific business models of banks and avoid unjustified differences of treatment. 3.... and with the srm the performance of the new crisis management framework is less easy to assess. according to the existing legal framework, if problems arise in a bank, first the ssm is supposed to engineer early intervention to redress the situation. if, in the end, the bank is labelled β failing or likely to fail β, the srm comes into play. the srm is composed of the single resolution board ( srb ), acting as a central resolution authority, and the 19 national resolution authorities ( nras ) ; it has within its remit both significant and less significant banks, but the latter only if they have cross - border activities. the srm decides first of all whether there exists a public interest to justify the rescue of a failing bank under the common β resolution β procedure. if not, the bank must be liquidated according to national rules. the european commission ensures that the national government β s financial support, if any, complies with state - aid rules. i do not want to recall here italy β s painful experience with the four smallto - medium
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granted to resident enterprises is, at over 100 % of the euro area β s gdp, twice as high as the corresponding figure for the united states ( 47. 5 % ). in japan, bank loans, which amount to 92 % of gdp, also play a relatively important role in the financing operations between different economic sectors. 2 by contrast, the us economy may be described as a securitised economy ; much of the financing is done not through the banking system but directly on the securities markets. at the end of 1999 outstanding domestic debt securities in the united states were valued at over us $ 15, 000 billion, or 161 % of gdp. in the euro area they came to around 90 % of gdp and in japan to 131 %, although in for the source of these figures, see ecb, the euro area one year after the introduction of the euro : key characteristics and changes in the financial structure, monthly bulletin, january 2000, pp 35 - 49. for more on this see also oecd financial market trends no 76, july 2000, main changes in the financial structure of the euro - zone since the introduction of the euro, pp 109 - 127. the latter case it should be borne in mind that many of the debt securities were issued by the public sector. it is also interesting to observe the amount of financing which companies obtain on the capital market. whereas euro - area corporates have issued debt securities amounting to only 3. 5 % of gdp, the corresponding ratio for japan is four times as high and for the united states eight times as high. the figures for equity market capitalisation confirm the initial impression that the securitisation of lending has an upward potential in the euro area. expressed as a percentage of gdp, market capitalisation in the euro area is only about half as large as that in the united states or in japan. however, while it is true that the financial system in the euro area is still more oriented towards the banking industry, bond and equity markets have already begun to play a bigger role. there is also reason to believe that the presumed dominance of bank loans has been exaggerated and the degree of equity financing correspondingly underestimated. new data for germany show that at the end of 1998 the volume of bank loans to non - financial companies exceeded equity financing by a mere 5. 3 %. in addition, the aforementioned figures provide only a snapshot at a certain point of time and, as such, do not reflect changes in their status
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second place in this segment after the dollar, the gap between the two is large. imf estimates have set the volume of foreign reserves held in euro at the end of 1999 at 12. 5 %, compared with a us dollar share of 66. 2 % and a yen share of 5. 1 %. 6 however, one could argue that the euro has held up well in comparison with its predecessor currencies. v at this point, allow me to summarise while at the same time casting a glance towards the future. with the introduction of the euro, the balance of forces within the international financial system has shifted. a second currency now exists alongside the dollar which - given the size and economic strength of the euro area β s financial markets - has the potential to become a significant currency with global status. the extent to which the euro will actually realise this potential also depends on political decisions taken within the euro area and on the confidence which market participants world - wide place in the new currency. thus the first priority must be to guarantee the internal stability of the euro. this constitutes the primary objective of the eurosystem, which has already reacted to imminent inflation risks with several interest - rate increases. however, economic and fiscal policy makers, who are capable of accelerating economic momentum in the euro area through the appropriate structural reforms, are also called upon to act. much has already been undertaken or set in motion, as in the case of taxation policy. however, the markets have not ( yet ) rewarded these efforts. important policy initiatives still have to be introduced in the financial markets as well. the introduction of the euro has succeeded in ending the segmentation into different national currency zones and in intensifying the competition in individual market areas. some obstacles to the integration process only really became apparent once this had been achieved. if one is truly to speak of uniform financial markets in the euro area, priorities for the future will have to include further improvements in the infrastructure of the equity and bond markets and a standardisation of legal and administrative frameworks. transaction costs between two euro - area countries should not entail higher costs than those of purely domestic transactions. moreover, transaction costs within the euro area must not be higher than the international standard, if the euro is to prosper in international competition with other currencies. let me conclude by emphasising that the financial market trends in the euro area should also be seen in the light of the developments in the β real β sector of the economy. the financial
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the advanced economies have been through this process are on a path of sustained recovery. the us economic recovery appears to be taking hold, with a clearer path of fiscal consolidation and stronger bank and corporate balance sheets. households deleveraging has also occurred, and the housing market has shown signs of improvement. however, severe weather conditions earlier in the year resulted in a contraction in the first quarter, and it will be difficult for the economy to achieve the 2, 8 to 3, 0 per cent growth forecast recently by the us fed. nevertheless, the underlying strength appears to be there, and the market consensus is for an annual growth rate of around 2, 5 per cent. the uk economy also appears to have moved to a sustained recovery path, with growth of around 3 per cent expected this year. unfortunately, the outlook for the eurozone, an important export market for south africa, is much less favourable. although the region has emerged from recession, growth is expected to be anaemic, with continuing concerns about deflation, particularly in some of the european periphery. consequently, the ecb has taken significant measures in an endeavour to stimulate growth in the region. the german economy appears to be sound, but france has recently slowed down significantly. although the japanese economy recorded strong first quarter growth of 5, 9 per cent in anticipation of bis central bankers β speeches the introduction of consumption taxes, this is not expected to be sustained, and the outlook remains uncertain with an annual growth rate expected to be around 1, 5 per cent. the mixed signals emanating from the advanced economies have important implications for emerging markets, including south africa. the abnormally low interest rate environment in the advanced economies, coupled with quantitative easing, led to an almost undiscriminating wall of money flowing into emerging markets. these flows suddenly reversed following the announcement by the us fed in may last year that it was considering tapering its programme of quantitative easing. the initial impact on emerging market bond and foreign exchange markets was severe, particularly those markets which were relatively open and liquid, including south africa. the uncertainty surrounding the timing and speed of tapering resulted in a highly volatile period for emerging markets. when tapering was eventually confirmed in december last year, attention then focused on the timing and speed of us policy normalisation, which is the increase of the policy rate from the zero bound to more β normal β levels. so while tapering is steadily continuing, and is expected to be completed later this year, there is a
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the deterioration in inflation expectations was also reflected in the increase in the breakeven inflation rates, measured by the spreads between the yields on south african cpi inflation - linked bonds and conventional nominal bonds of the same maturity. if the deterioration in inflation expectations were to continue, it would be a cause for concern given the critical role of expectations in the price and wage formation process. the economy has continued to grow at a robust pace, with quarter - on - quarter annualised real gdp growth accelerating from 3, 5 per cent in the first quarter of 2005 to 4, 8 per cent in the second quarter. this acceleration was attributed in part to the strong increase in the real value added by the manufacturing sector, which appears to have recovered from the contraction in the first quarter. the utilisation of production capacity in manufacturing, having fallen back in the previous two quarters, picked up again in the second quarter of 2005. the physical volume of manufacturing production continued on an upward trend in the third quarter and the most recent value of the investec / ber purchasing manager's index ( pmi ) also indicates that the recovery in this sector has continued, although at a more moderate pace. most other sectors have also remained buoyant and the composite leading business cycle indicator shows a favourable growth outlook. this positive growth performance had a positive effect on employment. according to the quarterly employment statistics survey, formal non - agricultural employment increased at an annualised quarteron - quarter rate of 7, 6 per cent in the second quarter of this year. over the past year this reflects an increase of 84, 000 employees. domestic demand shows few signs of significant moderation and all components of final demand grew at a healthy rate in the second quarter. new motor vehicle sales reached new record highs in september, although there was a moderate slowdown in the growth of motor vehicle sales which increased by 25, 3 per cent over the year. the strong domestic demand has been underpinned by low nominal interest rates, higher real incomes and increases in asset prices. share prices on the jse limited, for example, reached new record highs, and since the previous mpc meeting the all - share price index increased by 4 per cent. the vigorous demand was financed in part by increased borrowing, and the household debt ratio continued to rise in the second quarter. household debt as a percentage of disposable income rose from 60 per cent in the first quarter to 62 per cent in the second quarter of 2005. however, because of
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stable framework for the subsequent process of industrialisation. it is just this stability in the fundamental conditions for economic activities that was no doubt important for the process that resulted in the industrial revolution, which in itself was full of commercial risks and uncertainties. improvement in opportunities for change but β¦ a similar gloss can be applied to the realignment of economic policy from the second half of the 1980s to the middle of the 1990s. there have been a number of reforms aimed at creating stability and opportunities. the credit and currency markets have been deregulated, components of the social security system have been reformed, a tax reform has been implemented, targets have been established for government finances, price stability is enshrined in law and the riksbank has been given an independent status. all this represents good possibilities of the swedish economy facing a stable future as we step over the threshold to a new millennium. the question is, however, whether the new information technology will be implemented in the far - reaching ways that are necessary in order to reap the really large benefits. let us look at another period in sweden β s economic history when things did not go quite as well. after world war ii, when activity in the industrialised countries recovered and competition grew, partly because trade barriers were lowered, it became necessary to realign production in sweden. the need for change resembled what we are beginning to discern on the horizon today. for much of this post - war period, however, wage costs rose at a rapid rate. profitability in swedish business was accordingly under pressure from two fronts : growing competition from the rest of the world and rising wage costs. firms countered the pressure on profits by rationalising in an attempt to cut production costs rather than by investing in new products. the diminishing profits simply did not provide the stimulus that was needed for a prompt renewal of the capital stock in response to the pressure for change. a process of change involves shedding, but development is equally important. most things still looked good to begin with. the 1960s was a fantastic decade for growth. but the strategy proved to be defensive and stagnation set in during the 1970s. rationalisation has its limits as a means for growth. without renewal, growth normally slows sooner or later. measures are called for in periods of growth but it is easy to be deceived and lean back to enjoy the fruits. the long - term growth trend did indeed begin to turn downwards more markedly than in other countries. economic policy responded
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an average share portfolio is equivalent to around thirty times the annual earnings. the ratio in the united states is even higher, around 35 ( fig. 2 ). price - earnings ratio for sweden and usa affarsvarlden general index and s & p 500 s & p 500 average for 1871 - 1999 note : exceptionally high p / e ratios for sweden in 1992 and 1993 are not shown here sources : global financial data and statistics sweden although long series for the stockholm exchange β s p / e ratio are hard to find, it is hardly controversial to say that the present level is well above the historical average. the deviation of share prices from the fundamental conditions that have applied historically is even clearer after a look at the path of real trends in us shares s & p 500, average annual percentage change total real return real share price real earnings / share 1940 - 1981 1982 - 1999 note. averages calculated as geometric mean. somewhat different results may be obtained with an arithmetic mean, an estimated time trend or another base year, but the results still support the conclusion that the earnings trend in recent years is not markedly higher than for the entire post - world war two era. source : global financial data earnings. in the united states the real earnings trend since 1940 has been virtually constant between 2 % and 3 %, while - as i just mentioned - the real return on shares shows a trend break after 1982 ( fig. 3 ). 2 are present share prices fundamentally justifiable? i shall now use a simple model to examine whether the present level of share prices can be justified in fundamental terms. 3 simplifying somewhat, this model equates the value of a share with the present value of the future income the share is expected to generate. a valuation in p / e terms accordingly rests on the assumptions that are made about these future incomes - the future growth of the company β s earnings - and the factor by which these incomes are discounted - the stock market β s expected return. we can insert alternative values for these assumptions to find the combinations that might justify different p / e ratios ( fig. 4 ). it will be seen that a p / e ratio of 14 can be warranted if the expected real return is 6 % and the real growth of earnings averages 2. 5 %. these figures are all approximately in line with the historical trends. p / e ratios with different combinations of earnings growth & expected return earning earnin s growth % gs expected return % 4. 5 4. 0
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existing loans. these funds available to them have served to mitigate the financial difficulties that both households and enterprises faced at the beginning eve of the crises. overall, our estimations suggest that our simulating monetary policy has yielded a positive effect of 3. 7 percentage points on the economic activity during the last four years, by providing a notable contribution to employment and welfare of albanian households. second, the prudential supervision and monitoring of the banking system performance, the intensive and continuous communication with it, and the temporary suspension of profit allocation, have served to maintaining a liquid and well - capitalised banking system with sound practices for risks management. indicators of assets quality, financial result and capital of the banking sector appear at good levels. non - performing loans ratio has remained at low levels and the direct exposure of its activity to market risks remains contained. third, the increase of operational capacities for supplying cash to economy, the guarantee for the uninterrupted functioning of the national payment system and the reduction costs on electronic payments in lek, enabled the smooth functioning of the financial system. last, the intensification of communication with national and international partners and with public at large, helped to reduce the uncertainty and increase confidence in the future. overall, we assess that the albanian economy has the necessary premises for a fast rebound of the economic activity once the epidemiological situation has been normalised. also, this assessment is affirmed by our forecasts, which project an expansion of consumption and investments, growth of the economic activity β s volume, increase of employment and improvement of the financial situation of enterprises and households in the following period. the economic growth will help the strengthening of inflationary pressures and the return of inflation to target within 2022. 2. banking supervision and financial stability notwithstanding the challenges posed by pandemic in albania, the activity of the banking system was stable. the operational measures taken by banks to ensure the continuity of critical functions and the relationships with clients, intertwined with the measures taken by the public authorities to mitigate the pandemic shock, enabled the financial intermediation activity to continue appropriately and the financial indicators of the banking sector remaining at good levels. 3 / 6 bis central bankers'speeches the activity of banking system grew by around 7 %. although the banking sector undertook a considerable part of financial burden during the crisis of 2020, it resulted with a positive financial result, albeit 15 % lower than in the previous year. in parallel, the capitalisation of the system remains
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am convinced that these activation procedures need to be simplified. and the notification and information procedures need to be harmonised and streamlined too. this could be done, for instance, by establishing the esrb as the central information hub for all notifications regarding macroprudential measures in the eu. this would reduce the overall notification burden on national authorities. furthermore, one might think that the authorities were free to choose the tool that they deem best suited to address the risk at hand. well, not quite. with regard to certain macroprudential tools, a rigid sequence has to be followed. you can β t implement certain tools without first having considered using other tools. more specifically, if you want to apply tools such as macroprudential liquidity requirements or risk weights to target asset bubbles, you first have to consider tools such as pillar 2 requirements or various capital buffers. this sequence is known as the β pecking order β of tools. but an effective and efficient macroprudential framework should permit the flexible use of all available tools laid down in eu law to prevent systemic risk. instruments should be chosen on the basis of their effectiveness, not as a result of mandatory sequencing. the conclusion therefore is that the pecking order should be removed and the activation mechanisms should be harmonised and streamlined. now, as i said before, macroprudential policy is a relatively new field in terms of both theory and practice. so, two things will happen over time : the theory will advance, and we will gain practical experience. against this backdrop, the european macroprudential framework should be reviewed on a regular basis. this would help to make it more effective and more efficient. the current situation but the framework is just a means to an end. and that end is to ensure a stable financial system. so, where do we stand on this front? are there any risks to financial stability in the euro area? we at the ecb currently see four major risks. the first risk is a sudden reversal of risk premia. recent events have shown that markets can be subject to corrections even when the macroeconomic environment continues to be supportive. 4 / 6 bis central bankers'speeches so far, the high volatility in the equity market has not spilled over into other markets, which is certainly good news. that said, some market segments need to be closely monitored. residential real estate is one such segment. prices are broadly in line with the average valuations recorded over recent decades.
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observable, we can only estimate it, like the output gap, for instance β monetary policy must take this variable into account and must in fact respect it. given the inflation outlook, the movements of nominal interest rates or policy rates should, in an ideal world, imitate those of the equilibrium rate. or at least they should not deviate much from equilibrium. why? because this interest rate interconnects the future, the present and the past. it puts all three into equilibrium, in terms of savings and investment, current and future labour employed, current and future preferred leisure, etc. if monetary policy does not in broad terms β respect β the evolution of the real interest rate, it can create imbalances one way or the other. if you go too high above the real interest rate and the actual real interest rate is above the natural one, you create recessions, unemployment, falling investment and declining asset prices. and if you go lower or substantially below the equilibrium interest rate, you create overheating, excessive debt and rapidly increasing asset prices. even more importantly, moving the statutory interest rate has fundamental effects on the financial sector. the financial sector is a time - transforming sector β every second, it transforms the present into the future ( short - term liabilities into long - term assets β typically done by banks ) or vice versa ( long - term liabilities into short - term assets β typically done by insurance or pension companies ). whenever you take the policy rate above the equilibrium interest rate, you create a problem out of what happened in the financial sector in the past. whenever you go substantially below, you create problems in the future. i have chosen non - performing loans as an example that is, i believe, quite easy to understand. if you substantially increase rates now, many projects from the past become unviable and non2 / 5 bis central bankers'speeches performing. if you go substantially below, many of the currently new projects will become unviable in the future when rates return to equilibrium. in other words, the financial sector as a time - transforming sector is especially sensitive to the movement of real rates and to discrepancies between the actual real rate and the natural rate. to make all this even more complicated, try to imagine that the equilibrium or natural real rate of interest is not constant, but is itself moving in one direction. then, as a central banker, you have to go down even more than you thought conceivable
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mojmir hampl : monetary policy and the current macroeconomic environment in the developed world speech by mr mojmir hampl, vice governor of the czech national bank, at the deutsche bank prague client conference, prague, 25 october 2016. * * * ladies and gentlemen, good afternoon. thank you very much for inviting me again to your flagship event. it is my utmost pleasure to be here. actually, this is the third time in a row i have had the chance to speak here. in 2014 my topic was, quite expectedly, the exchange rate commitment and its introduction in november 2013. i recently looked at my slides from 2014, and i would not change anything about them. only the timing of the exit has changed β quite radically, i have to admit. the following year, 2015, the obvious topic was a comparison of the czech and swiss cases. this was especially interesting given the abrupt and completely surprising swiss exit from their exchange rate commitment in january 2015. i thought to myself : β what would be a natural candidate for this year? β i put my mind to work and suddenly a topic appeared : our own czech exit, our own way of abandoning the exchange rate commitment, which is almost three years old now. however, i somehow feel that the exit will be a key topic for your questions and comments. so, i eventually decided to speak about something else, something more abstract and may be a bit more general : the constraints on monetary policy in the developed world. as i see the czech republic a part of the developed world, i believe this is a topic that is relevant to the czech national bank. the key constraint or dilemma β or even puzzle, if you will β for us in the central banking community has been one key real variable which we believe is beyond the reach of central bankers. that variable is the real equilibrium, or natural, interest rate. we believe that this variable is absolutely key for the economy and that it is exogenous ( i. e. not in hands of anybody, or at least not central bankers ). at the same time, it critically influences both the financial sector and the real economy. i have tried to depict what i want to say on this very stylised chart ( chart 1 ). chart 1 : the role of the equilibrium interest rate 1 / 5 bis central bankers'speeches it basically shows that if you have got the natural real equilibrium interest rate at a certain level β and, of course, it is not directly
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carefully and analyse them. in the wake of the financial crisis, regulation has altered financial markets and the money market. particular examples that spring to mind are new provisions governing market risks, limitations on proprietary trading, and supervisory regulations effectively making many transactions more expensive. banks are complying with the new regulatory provisions. this means that banks β in particular large banks β are scaling back their activities in the money market. it remains to be seen whether other market participants β for instance, insurers or large mutual funds β gain a role in intermediation. a look at these five areas β the money market, new players, fragmentation, digital innovation and regulation β shows that they have all altered the financial markets β and the changes have been too many to mention here today. but one thing is clear : the new regime in the financial markets has yet to be put to a serious test over a full economic cycle. we do not yet know what further effects and changes lie ahead, even if we closely monitor the processes and circumstances. the β new normal β in the financial markets is, as such, a β work in progress β. resume 2 in conclusion, a central bank β s monetary policy has a direct impact via the financial markets, their structures and their players. this environment β monetary policy β s ecosystem β has changed. and it will go on changing. some of the changes were triggered by the financial crisis and the central banks β and regulatory authorities β crisis policies. other changes have emerged independently and follow major trends, such as digitalisation. to ensure that monetary policy decisions are successfully implemented in the market and in the real economy, it is crucial to understand market structures. we are thus following and analysing these processes carefully. if changes in the financial market are a β work in progress β, this ultimately means that the analysis of how monetary policy is transmitted to the financial markets is a β work in progress β, too. we are convinced that a central bank should be independent and committed solely to its objective of 5 / 6 bis central bankers'speeches ensuring price stability. it should not attempt to reshape financial markets and banking beyond this remit. during the crisis, central banks stepped into the breach with their emergency measures β like it or not. now, with the impending exit, we must engage in lively debate on controversial topics concerning fundamental issues of monetary policy. which strategy is the most fitting? which transmission measures are effective? discussions have been underway in the united states for some time
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points per year, or about $ 4. 5 billion, if interprovincial trade barriers were lowered. this would include harmonizing regulations on all manner of things. in a time of slow economic growth, that is too good an opportunity to pass up. conclusion it is time for me to conclude. clearly, there are challenges in the canadian and global economies that we need to manage. but there are clear signs that canada is adjusting to the challenges. after taking into account the economy β s structural adjustment to lower oil prices that is still going on, we can see many areas of encouraging economic growth. these are both traditional and cutting - edge, and are exportoriented. canada β s portfolio of trade agreements should serve us well as this story unfolds, despite the uncertainties the world faces today. 5 / 6 bis central bankers'speeches that being said, it is clear that the global economy is performing less well than we believed only a few months ago, and canada is feeling the effects. in addition, our housing sector is taking longer than previously expected to digest the combined effects of stricter mortgage guidelines and higher interest rates. that is why we said at our last interest rate announcement in march that the economic outlook continues to warrant a policy interest rate that is below the neutral range, to help the economy work through this downshift in growth and keep inflation close to target. recent economic data have been generally consistent with our expectation that the period of below - potential growth will prove to be temporary. our next interest rate announcement and monetary policy report will be released on april 24, and i can promise a fuller analysis at that time. for now, let me thank you for your kind attention, and for your wonderful hospitality here in iqaluit. 6 / 6 bis central bankers'speeches
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bank of japan β s monthly report of recent economic and financial developments1 bank of japan, communication, 16 / 02 / 99. the bank β s view2 the economic deterioration in japan has become moderate against the background of the increase in public investment. business fixed investment has been declining significantly. as for housing investment, housing starts are bottoming out but remain at a low level. recovery in private consumption has been weak on the whole, although partial improvement in sales of goods has been observed. meanwhile, net exports ( exports minus imports ) basically remain on a gradually increasing trend, and public investment is increasing considerably. reflecting this development of final demand and the continued progress in inventory adjustments, industrial production, which had been on a downtrend, is leveling off. corporate profits continue to decline. employment and household income conditions are still deteriorating as the unemployment rate is at a historically high level, and winter bonuses have decreased significantly. conditions in corporate finance are currently improving, but firms apparently cannot remove their anxiety about the availability of funds in the future. consequently, corporate and household sentiment remains cautious, and a recovery has not yet been observed in private demand. as for the future developments, the increase in public investment is likely to underpin the economy toward the first half of fiscal 1999 with the implementation of the government β s economic measures. furthermore, the bank β s monetary and financial measures and the government β s measures to alleviate the credit crunch will continue to be in effect. nevertheless, an immediate self - sustained recovery in private demand is hardly expected, since corporate profits and household income are still deteriorating and the constraints from corporate finance are likely to persist for some time due to cautious lending attitudes of private banks. moreover, attention should be paid to ( 1 ) the effects of the continued appreciation of the yen since autumn 1998 ; ( 2 ) those of the recent rise in long - term interest rates ; and ( 3 ) the uncertainty in financial and economic developments abroad. to lead japan β s economy into a steady recovery, it is important to prepare an environment where firms and households can regain confidence in japan β s economic future by, for instance, promptly restoring the stability of the financial system. with regard to prices, reflecting the large output gap, domestic wholesale prices are on a downtrend, and corporate service prices are weakening. consumer prices have increased above the previous year β s level due to the rise in prices of perishables. excluding this temporary effect, consumer prices basically remain weak. as for the
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necessary, will make adjustments without hesitation in order to achieve the price stability target. what i would like to emphasize here is our strong commitment to achieving the price stability target of 2 percent. if japan β s economy follows a path toward the 2 percent target as we have projected, we will steadily pursue the current qqe. if not, we will make adjustments so as to achieve the 2 percent. in closing, let me briefly touch on the growth potential of japan β s economy. the bank β s qqe policy aims at escaping from a protracted deflationary equilibrium and achieving an economy in which people act on the assumption of inflation of about 2 percent. what has been happening in japan β s economy for the past 15 years is that declines in product prices led to a decline in firms β sales, which led to a further decline in prices through compressed wages and stagnant consumption, resulting in a vicious cycle. in such a deflationary economy, it is only rational for individual firms or persons to maintain the status quo, or to prefer cash, and therefore they did not consider it worth the risk, relative to the potential rewards, to embark on new business ventures. what we are aiming at is to break through this β coordination failure β and revive people β s animal spirits. this will be an important element in raising growth expectations and the growth potential. however, there is another important element to consider. as mentioned earlier, given that slack in the economy has shrunk, as seen in the tightening of labor market conditions, it also has become clear that it is imperative to strengthen supply capacity in order for japan β s economy to grow in the medium to long term. growth in the aggregate supply capacity of japan β s economy has been declining due partly to a declining trend in population and aging, as well as the slowing accumulation of capital stock under deflation. these trends, however, did not manifest themselves in the form of labor shortages or supply capacity constraints because demand had been weak. yet, in the past year or so, with the increase in demand thanks to large - scale monetary easing, fiscal spending, and the rejuvenation of private - sector activities, the supply capacity constraints that were lurking below the surface have now become apparent. in my view, with the supply capacity constraints having surfaced, this will be a golden opportunity to resolve the medium - to long - term challenges facing japan β s economy. these challenges, of which the public is well aware, include
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the world. 2 / 8 bis central bankers'speeches the first one is psd2, and its related concept of open banking. in the eu, the revised payment services directive ( psd2 ) is an important regulatory framework to clarify payment legislation and make it better suited to a digitalising economy. the directive aims at promoting competition, which will lead to better services and lower prices for consumers. it will open the payments market to third - party providers, and banks will be obliged to provide technical interfaces for accessing bank accounts. for some ears, this may sound daring β but the industry is currently working together with supervisors to make this as safe and secure as possible. psd2 is very much part of the broader trend of open banking. banks all around the world are partnering with start - ups, and financial services are being rebuilt using the latest technology. in practice, it means that the customer experience can be provided by some party other than the bank itself, while the bank is providing the plumbing in the background. 3 / 8 bis central bankers'speeches the second development i would like to highlight is the instant payments system tips, which will be launched by the european central bank this month. tips will enable account - to - account transfers from one bank to another, in real - time, 24 / 7, every day of the year. why do i specifically want to highlight these two developments? because when they work together, in synergy, they will have an impact which is greater than either would have on its own. whereas psd2 will help create a better payment experience for consumers, tips will make sure the money moves instantly. this will make the digital payments as close to cash as possible. 4 / 8 bis central bankers'speeches the second major force is the continuing work to make banks more resilient. this is particularly important as we are also moving towards a normal monetary policy environment, although normalisation does not mean returning to a pre - 2008 world. instead, we are moving towards a new equilibrium. since some global imbalances and vulnerabilities remain, the european economy continues to need a degree of monetary policy support. this is a balancing act, since we must ensure the sustainable convergence of inflation to our definition of price stability, while simultaneously protecting the on - going recovery of employment and the repairing of balance sheets. an important lesson from the financial crisis is that the financial industry, including banks and other financial institutions, are special and have a huge impact on
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. efficiency in producing outputs is vital for maintaining high quality public services, but we must never lose sight of the fact that the ultimate policy objectives are defined in terms of outcomes. in short, we need to do right things and we must do them well. ladies and gentlemen, the euro has been a success to an extent few would have predicted ten years ago. signs are good that this success will continue β that the euro will continue to underpin price stability and to promote economic and financial integration in the euro area and beyond. but to be able to do that, the euro relies on strong political and public support. population ageing will present a challenge for that. if the euro area fails to prepare for ageing appropriately, its economy will suffer, and eventually pressures will mount on monetary policy : monetary policy will be asked to do something it cannot do. and then continuing the success story would become much more difficult. that is why it is so important for us to keep up the momentum in building a public sector that can weather the pressures of population ageing. it β s a long journey, so we have to keep moving. thank you.
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euro area, banks have historically played an important role in financing the real economy. banks loans account for most of household borrowing and around 50 % of nonfinancial firms β external financing, which is very different from the us where around 75 % of firms β financing comes from capital markets ( equity and debt securities ). the importance of bank - based intermediation in the euro area explains the relatively large size of the euro area banking sector compared with the us β at 270 % and 72 % of gdp, respectively. overall, i expect the future of banking to involve some rebalancing away from such high levels of bank - based intermediation and towards more capital market - based intermediation. on the banking side, i anticipate that over time there will be a gradual decline in the size of the euro area banking sector. indeed, such a process of consolidation and resizing has already been on - going since 2008. in net terms the number of credit institutions has fallen by 9 % since 2008, or around 600 institutions, while the total assets of the euro area banking sector have declined by almost 12 %. the second largest reduction in the value of assets was recorded here in ireland. this process has seen euro area banks become significantly less leveraged, with the average loan - to - deposit ratio falling from 144 % in 2008 to 120 % in mid - 2013. i expect that this ratio will continue to fall and converge towards 100 % as banks seek to further consolidate their balance sheets and develop safer, more sustainable business models. and as a natural response to this, firms are likely to pursue new avenues for disintermediation. this brings me to development of capital markets. the crisis has already boosted disintermediation in the euro area, in particular for larger firms and those located in countries with more developed corporate bond markets, such as germany and france. our data shows that these firms have been able to offset reduced access to bank finance with bond issuance in the last 12 months. going forward, we can predict that the european capital markets will develop further. the first area will be the deepening of corporate bond and equity markets. this has obvious advantages in terms of diversifying the financing mix for euro area firms and allowing them bis central bankers β speeches access to a larger pool of non - bank investors. at the end of june 2013 insurers, occupational pension funds, money market funds and investment funds together had assets worth almost 16 trillion euros β that
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are fully aligned with its european financial stability mandate. a second reason why banking union is essential to monetary union is that it supports the implementation of the single monetary policy. the even transmission of monetary policy across all member countries of the euro area requires a level of financial integration that dirk schoenmaker ( 2011 ) β the financial trilemma β in economic letters, 111, pp. 57 β 9. bis central bankers β speeches ensures well - functioning cross - border money markets. yet we have seen during the crisis that without a euro area - wide approach to financial governance, financial markets can end up re - nationalising. a strong banking union can help mitigate several sources of this fragmentation. a single supervisor should enhance transparency and thus increase trust in cross - border lending, while supervisory ring - fencing or national asset - liability matching would no longer be relevant given the ssm β s european focus. in addition, an effective single resolution mechanism would help attenuate the infamous bank - sovereign nexus. sovereigns would have less ability to intervene in failing banks, thus allowing bank risk to be better separated from sovereign risk. the third reason that justifies the banking union has to do with the effects of unsupervised cross - border lending on real economic developments. contrary to the β it β s mostly fiscal β view of the crisis, 2 financial sector developments largely explain the build - up of unsustainable current account and competitiveness positions in peripheral countries before the crisis. the current account deficits in most peripheral countries were in fact led by huge capital inflows implying capital account surpluses. the exposures of banks from core to peripheral countries more than quintupled between 1999 and 2008. competitiveness losses were simply the mechanism that connected the capital surplus and the current account deficit β that is, an appreciation of the real exchange rate caused by economic over - heating. as john williamson explained long ago it is impossible to have β an immaculate transfer β from capital inflows to current account deficits. 3 national supervisors found it impossible to contain these developments because they had to respect the single market rules and lacked the macro - prudential tools to offset the effects of large capital inflows. but by creating supervision at the level of market, banking union offers a possibility to better pre - empt such developments in the future β and therefore to better protect the real economy, growth and employment. the ssm and the practice of banking in europe let me now turn to the
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decision makers within those businesses. this is because we have wanted to very clearly ensure accountability sits with the directors, and also because these individuals are much closer to their day - to - day operations. the importance of open and honest disclosure from insurers is clear. sadly, this openness has proven to not always exist. in cbl, we now have an example of a regulated entity that did not engage with the reserve bank openly. justice courtney β s judgement in the hearing for cbl β s liquidation noted β a lack of candour in dealing with the company β s auditors and the regulator β 4 the reserve bank β s relationship charter5 seeks β in part β to address these kinds of issues in a practical and positive manner. by establishing how we will interact with an institution, we are laying down a clear marker. what does this mean in practical terms? the reserve bank needs to more often positively verify the information and assurances it receives from regulated institutions. we will be intensifying our β show me, don β t just tell me β style of engagement with the industry. and, we will be expecting to see a great deal more of this verification activity happening at the senior management and board level. an example of this new approach being applied is our review of the appointed actuary regime. you will be aware that this review is ongoing, and some of you have received visits from the reserve bank β s team. a sample of 15 insurers were selected for this review, aimed to represent the diversity of the new zealand insurance industry ( e. g., small and large insurers, life and general, branch and locally incorporated, directly employed and external consultant. for those who took part in the interviews or provided us with submissions, we thank you for your time and your open, free and frank discussions. https : / / forms. justice. govt. nz / search / documents / pdf / jdo / cc / alfresco / service / api / node / content / workspace / sp acesstore / 193a6a73 - 1a5b - 436e - af77 - e6ef7173c9fa / 193a6a73 - 1a5b - 436e - af77 - e6ef7173c9fa. pdf https : / / www. rbnz. govt. nz / news / 2018 / 12 / reserve - bank - aims - for - best
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emerging problems. 1. international aspects of the fiscal crisis and recovery of the 1980s in trade, migration and finance, ireland had of course been an exceptionally open economy for a very long time. the large migration flows, especially to the uk and the new world, and the currency and banking links go back to the early 19th century at least, with scarcely any overall interruption. irish banks parked their excess resources in the london money market right up to the 1960s β a pattern familiar to many african countries today. nor is the current crisis the first ( o grada, 2011 ) β indeed the potentially turbocharged nature of the globalized economy is well - illustrated by the rapid recovery from the previous severe crisis of less than a generation ago, whose onset coincided with the decoupling β for the first time since just after the napoleonic wars β of ireland β s currency from sterling. the earlier of the two macroeconomic cycles we look at happened at a point where global capital markets were still just beginning to move into the high gear that we see today. we may think of this as turbocharger mark 1. it allowed the irish government to access foreign capital to some extent without much by way of credit risk premium, but the fear of a sudden stop of this capital flow brought expansion to an end and resulted in a painful and protracted recession through the 1980s. that crisis had its origin in the turbulent macroeconomic years of the 1970s which themselves saw ireland make several severe demand management errors which stifled its capacity to benefit fully from the opportunities offered by eu ( ec ) membership from 1973. new opportunities there were, and especially the higher prices for agricultural produce under the common agricultural policy. but that was not all : eu membership became a major channel for transmitting globalization to ireland. but the expansionist fiscal response to the stagnation of the 1970s created a huge and spiralling government and balance of payment deficit which proved difficult to reverse in the early 1980s. by this stage, membership of the erm of the european monetary system had broken the currency link with sterling, and the irish pound was prone to being realigned against the stronger erm currencies β something that happened about once a year for the first 8 years of the system. it is interesting therefore to contemplate how international factors influenced the fiscal correction of the 1980s. although exchange controls still existed and indeed had been as with many african countries, the tendency for comparative advantage in trade to lead to heavy concentration in exports on just a few commodities is a
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sustained recovery are expected to continue. while the pace of improvement is likely to slow temporarily, partly due to a temporary slowdown of overseas economies and the waning effects of various demand - boosting policy measures, exports are likely to increase, reflecting the high growth in emerging economies such as in china, while business fixed investment and private consumption are expected to recover as corporate profits increase. as noted earlier, a downside risk that might necessitate revision of the above outlook is the growing possibility that the u. s. economy will see protracted low growth. were this to happen, the outlook for the world economy would have to be revised downward. the resulting decrease in exports would adversely affect japan β s economy and probably lead to increased risk aversion, thereby discouraging business fixed investment, new businesses, and household consumption. the deteriorating business and consumer sentiment could lead to prolonged sluggish economic activity. despite the manifest downside risks outlined above, the emerging economies have shown impressive growth. it is true that, for the present, the economies of some asian economies appear to be decelerating, mainly because of china β s economic slowdown. yet this means that the risk is declining that an overheating economy might hurt sustainable economic growth. this might be compared to β speed control, β conducted for a limited period to ensure a higher rate of growth over the long term. if this were the case, it would be an upside risk for japan β s economic outlook, given that japan is strengthening its ties with other asian countries. an upswing in these countries could partly offset the negative effects even if the u. s. economy experiences a period of low growth. d. effects of foreign exchange markets on japan β s economy next, in order to understand the effects foreign exchange markets have on japan β s economy, let me put the activities of foreign exchange markets in context. when prices of goods are stable or falling in a given country, the value of that nation β s currency is stable or rising and, other things being equal, the value of this particular currency should rise against other currencies. this is the basic idea of β purchasing power parity. β so, if we look at the purchasing power parity of the yen against the u. s. dollar ( the ratio between prices in japan and the united states ), we see that the yen has been appreciating fairly consistently against the dollar, reflecting the weakness in japanese prices relative to those in
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the overhead costs, ie the operational or hr costs. and it β s about the time that needs to be devoted to these matters β which is time no longer available to deal with clients, to conduct credit analysis or to develop investment strategies. this means that the problem is not so much the minimum capital or liquidity requirements but instead the high operational burden imposed by implementation and compliance. second, as a result of the complex regulations, it is becoming ever more difficult for new institutions to enter the market. this could significantly impact the competitive dynamics and innovativeness of the bank and savings bank sector. that β s all i want to say for now on the effects of complex rules on institutions. but this complexity affects supervisors, too, of course. one interesting take on the matter comes from a couple of experts at the bank of england. 1 they believe that complexity fails to provide ag haldane and v madouros ( 2012 ), the dog and the frisbee. speech delivered at the federal reserve bank of kansas city β s 366th economic policy symposium in jackson hole, wyoming on 31 august 2012 ; d aikman, m galesic, g gigerenzer, s kapadia, k katsikopoulos, a kothiyal, e murphy and t neumann ( 2014 ), taking uncertainty seriously : simplicity versus complexity in financial regulation. bis central bankers β speeches absolute security, because gaps can always emerge elsewhere. in addition, regulation ties up human resources because of the dense blanket of rules that need to be enforced. in england it is recognised that there is therefore a danger of supervisors following a ticked - box approach rather than carrying out a critical examination. i think this reasoning touches on a rather sore point β it is, of course, true that complexity ties up vast amounts of our regulatory resources. sometimes a simple rule would perhaps be just as effective, but less costly. however, overall i come to a different conclusion. namely, that complex regulation with multiple safety nets β such as the risk - weighted approaches and the debt ratio β are a good alternative to simple rules. at this juncture, schimanski would probably conclude that while the supervisor β s attack was perhaps a little heavy - handed, it wasn β t deadly. and, what β s more, the supervisor β s selfinterest in having complex rules is very limited, so this scarcely cuts the mustard as a motive for murder. inspector schimanski would therefore have to carry out further
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##md will facilitate the growth of government securities by broadening significantly the investor base to retail investors. the second product is m - akiba. this is a critical government initiative, which seeks to increase the public β s participation in government securities through the existing mobile - phone bis central bankers β speeches money transfer services, and with a low minimum investment amount of us $ 30. the first m - akiba infrastructure bond will be launched shortly as the necessary arrangements are in the final stages, and is expected to mobilize ksh. 5 billion ( about us $ 50 million ). retail investors will be able to register, bid and pay for government securities through the existing mobile platforms. this will provide alternative investment options to retail investors who have long been poorly remunerated especially for their deposits held by banks. these products will be transformational β in addition to promoting financial inclusion, they will facilitate a change in the population β s savings culture, and ultimately lead to an increase in national savings. however, as the digital platforms continue to evolve, there are challenges and risks that need to be addressed. it is therefore important that countries continue to share experiences and strengthen partnerships based on best practices to address these challenges. the state of the banking sector in kenya finally, i would be remiss if i did not say a few words about the recent developments in our banking sector. in the main, concerns have been raised following the placing of three banks in receivership, since august 2015. we have underscored that the central bank β s actions were necessitated by unique circumstances in each of these banks, and that these were carried out in the interest of the depositors, creditors, and the wider public interest. we have also indicated that the weaknesses revealed by these cases are not systemic and the banking sector remains strong and stable. the capital - adequacy ratio stood at 18. 8 percent in march 2016, well above the statutory minimum of 14. 5 percent. the average liquidity ratio rose to 39. 8 percent in march 2016, above the statutory minimum of 20 percent and higher than 38. 1 percent in december 2015. nevertheless, some challenges remain. for instance, interest rates spread remain very high : the spread between the average commercial banks β lending rate and deposit rate stood at 10. 3 percent in march 2016. poor liquidity management and distribution remains a key concern, for which remedial actions are being taken. bank supervision is also being strengthened urgently. the central bank remains committed to
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cooperation among regulatory authorities is essential. as regulators, we need to encourage and support transformation and innovation through better regulation instead of looking for avenues of more regulation. as per sir andrew crockett, better regulation is a regime that : can readily identify weaknesses and emerging vulnerabilities ; is capable of analyzing risks and adequately addressing pricing risks ; bis central bankers β speeches provides appropriate incentives ( penalties ) to induce prudent behavior in the market place ; but also to add in our case, the regulator is an agent of market development. better regulation encourages innovation and strong institutions to develop in the economy. cross border banking has its opportunities and challenges. as regulators, it is in our mutual interest to ensure the soundness and stability of our respective financial sectors. we should therefore play our rightful role in ensuring effective supervision of banking entities operating in our respective jurisdictions. we should also ensure that any systemic risk that may be posed by one bank operating in another jurisdiction is mitigated and promptly brought to the attention of the home regulator. the mou which we are signing today will thus enable us share a wide range of supervisory information on a more defined framework. ladies and gentlemen ; both mauritius and kenya are leading international hubs. mauritius is a renowned international financial centre for its offshore financial services. likewise, kenya, because of its leadership in mobile money transfer services, is now referred to as the silicon valley of africa. we can both learn from each other and share our respective experiences so as to increase the competitiveness of our markets as well as our financial institutions. the signing of this mou will therefore set forth a pragmatic approach for cooperation and the sharing of supervisory information. we accordingly look forward to building on the existing good relations between the central bank of kenya and the bank of mauritius and to a future of enhanced supervisory cooperation. i now invite governor bheenick to make some remarks before we proceed to sign the mou. thank you. bis central bankers β speeches
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gone are the days when european citizens had to worry about the purchasing power of their savings. this stability goes beyond the behaviour of prices. inflation expectations themselves have been remarkably stable, including during the recent period when oil prices jumped to new highs. this, by itself, illustrates the credibility achieved by the eurosystem. second, the ecb β s clear priority of price stability has reduced the risk premium incorporated in long term interest rates. bond yields have, consequently, been low by historical standards, a phenomenon which has substantially facilitated private investment. this in turn, will not fail to have a highly positive effect on growth. a third benefit of the euro is the removal of exchange rate risk and transaction costs for intra euro area trade. this has promoted trade integration among euro area countries without diverting trade with other countries. indeed, it appears that business cycles tend to be more and more synchronized over time, an evolution which allows for greater efficiency and sustainability of the common monetary policy. this shows that monetary union is a self sustaining process : real convergence is to some extent a result, as much as a precondition of economic integration. another benefit of the euro is the boost it gives to financial integration in europe. in many segments, european financial markets have reached the depth and liquidity which, up to now, were the preserve of dollar markets. this stimulates productive investment, helps in restructuring and, more generally, allows a better allocation of savings and sharing of risks. the current market turmoil is a clear test for this achievement and while the problems affecting the euro markets have been comparable to those affecting the other major markets, the strength of the euro shows, to some extent, that it has become a safe haven in our globalized financial world. the euro is becoming extremely attractive, as a vehicle, a transaction, an investment and a reserve currency. as you may know, as central bankers, we remain neutral as far as the internationalisation of the euro is concerned. we are neither encouraging, nor discouraging the process. but, as a citizen, i cannot help and feel proud of having one the two main currencies in the world. these achievements are the fruits of a long term process of reforms and credibility building, but they are not carved in marble. looking at the many challenges we are facing we could even wonder if monetary integration is really sustainable in the long run. my answer is positive and i am strongly optimistic about the future for the euro, because we have a clear agenda
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providing both financial means and technological transfer. today privatisation is almost complete and one has to look for new engines pushing forward the catching - up process. currently, i see three main risks that have to be addressed as priorities by policy - makers : ( i ) ( ii ) ( iii ) increased financial vulnerabilities, in relation with fast credit growth and mounting external imbalances ; rising inflation pressures which hurt external competitiveness ; and the challenge of ensuring high future potential growth.. this third challenge belongs to the long - run as future economic developments will need to feed productivity growth beyond the dynamics of catching - up, through technological and production process innovation. it is however a present concern to the extent that recent signs of increasing labour market shortages and decreasing fdi inflows question the capacity to maintain gdp growth at the high levels recorded in the past. addressing these risks and challenges will require the conduct of prudent macroeconomic policies insuring short - term stabilisation, with fiscal authorities avoiding pro - cyclical loosening and generous spending policies, and monetary authorities preserving price stability and guaranteeing financial stability. however, macroeconomic policies alone are not sufficient to improve the long - term growth potential : they are aimed at fostering a stable and transparent business environment, but have to be supplemented by the implementation of structural policies designed to enhance labour market participation, labour mobility, competition in goods market, investment in education, r & d and infrastructure. it appears very clearly that the challenge of a stable and sustainable path for the catching - up process is closely interlinked with the challenge of a successful integration in the euro area. for that purpose, it is in the interest of the new member states themselves to be patient while accelerating structural reforms in order to meet both these challenges. euro area accession will come in due course as the well deserved reward for the efforts of each country in creating the conditions of its own long - term economic prosperity. i look forward to such accessions.
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the government has usually been able to extend the limits on new borrowing β which were, in any case, fairly generous β simply by diagnosing a β disruption of the macroeconomic equilibrium β. the lessons from the european debt crisis have also taught us that, in practice, the binding effect of our rules was not very strong. since the start of monetary union, germany, france and italy have exceeded the deficit limit of 3 % in seven, eight and even nine years respectively. whether the reforms will put real teeth into the stability and growth pact and the fiscal compact in this respect depends heavily on the european commission and how it uses its extra scope for discretion. the first time the commission applied the new rules, it showed itself to be very flexible, granting spain, france, slovenia and cyprus longer deadlines to make adjustments than those actually envisaged in the stability and growth pact. i believe that such exemptions should be made only in well - founded exceptional cases, for this ultimately weakens the structural consolidation requirements and postpones them until a later date. making exceptions for a large number of countries simultaneously undermines the disciplining effect of the fiscal rules. in view of past experience with fiscal rules, in particular, i strongly believe that the euro area can only be maintained as a stability union in the long run if its framework sufficiently embodies a key principle of regulatory policy : the principle of liability. bis central bankers β speeches in the context of public finances, this means that those who make decisions on spending must also take responsibility for them. in other words, there must be a balance between control and liability. in principle, the maastricht framework assigned both liability and control to national governments. during the crisis, the efsf and esm bailout funds stabilised the euro area but also increased the mutualisation of liability for previous national errors. to restore the balance between control and liability, i only see two plausible options : either we shift powers to monitor and intervene to european level by creating a fiscal union, or we strengthen the member states β individual liability and responsibility in a return to the maastricht framework. this also ultimately means that sovereign insolvencies cannot β and must not β be ruled out. they must be possible without also causing the financial system to collapse. the current balancing act between individual responsibility and mutualised liability is likely to lead to new strains in the long run. to exaggerate slightly, as adorn said, β there
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be dislodged now. in an effort to bring down the cost of offering financial services to the kenyan public, central bank together with other stakeholders have put in place a business model aimed at broadening financial inclusion to the majority of kenyans at a lower cost β the agent banking model. it is envisaged that this model will enable banks to leverage on additional cost effective distribution channels to offer financial services. to achieve this, the banking act was amended through the finance act, 2009, to permit banks to contract third parties to provide certain banking services on their behalf. the guidelines to facilitate the rolling out of agency model were issued by the central bank and took effect from may this year. second, the cost of screening and monitoring existing and potential borrowers will decline with the introduction of credit reference bureaus. this is the time to use this screening and monitoring technology to reach the sme in need of support to invest and expand. the budget proposals in the finance bill 2010 have come up with a wonderful proposal on sme to enhance this. the monetary policy committee ( mpc ) has since september 2009 been implementing decisions aimed at signaling to the market the need to expand credit to the private sector at affordable interest rates. this has been achieved by way of lowering central bank rate and cash ratio requirements. i am happy to note that the mpc decisions have started to bear fruit as evidenced by lowering of base rate by a number of major banks in kenya, with the lowest base rate currently standing at 10 %. we have room to do more, commensurate with returns on investment that banks screen and monitor. finally, let me reiterate that central bank and indeed the government of kenya will continue to pursue policies that create conducive environment to allow the growth of the financial sector by encouraging the provision of banking services to majority of the unbanked kenyan population and to support the real sector of the economy. we want to encourage pan african banks like ecobank to have foot prints in kenya to broaden the financial services platform. with these few remarks ladies and gentlemen, it is now my honour and pleasure to declare the rapid money transfer product officially launched. thank you and god bless you all.
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rules to match american tightening ] to raise their rates. tighter credit then contributed to the beginning of a recession that was picked up in the mixed economic indicators of early august and september. these dispelled hopes that earnings would continue to grow at a rapid rate. as the economy faltered, wiser investors began leaving the market. when selling picked up speed, margin calls and delayed information from the ticker ensured a dramatic panic. β white goes on to call the fed β s policies during this period β inappropriate. β he wrote, β instead of allowing the stock market bubble to run its course, the federal reserve β s tighter monetary policy pushed the economy further into recession, rendering it more vulnerable to the shock that came when the bubble finally burst. β new york fed governor harrison and other participants argued after the fact that the problem with their policy was not that they tried to burst the stock - market bubble but that their efforts were too little and too late. this attempt to defend the fed β s policies of the latter 1920s does not hold up. there is little credible evidence of a bubble in the u. s. stock market before march 1928 ( galbraith, 1954 ; white, 1990 ) ; yet, in part because of the workings of the gold standard, u. s. monetary policy had already turned exceptionally tight by late 1927 ( hamilton, 1987 ). tighter policy earlier would have brought the depression on all the more quickly and sharply ( see eichengreen, 1992, p. 214, for further discussion ). the federal reserve went on to make a number of serious additional mistakes that deepened and extended the great depression of the 1930s. besides trying to pop the stock market bubble, the fed made little or no effort to protect the banking system from depositor runs and panics. most seriously, it permitted a severe deflation in the price level, which drove real interest rates sky - high and greatly increased the pressure on debtors. a small compensation for the enormous tragedy of the great depression is that we learned some valuable lessons about central banking. it would be a shame if those lessons were to be forgotten. conclusion understandably, as a society, we would like to find ways to mitigate the potential instabilities associated with asset - price booms and busts. monetary policy is not a useful tool for achieving this objective, however. even putting aside the great difficulty of identifying bubbles in asset prices, monetary policy cannot be directed finely enough to guide asset prices without risking severe collateral
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to assessing the critics β argument, and to get my own views on the table right away, let me briefly sketch a policy framework that i believe is useful for thinking about these issues. before i do so, i will state the usual proviso, that the opinions expressed here are mine alone and not necessarily those of my colleagues at the federal reserve. in particular, i emphasize that my comments today should not be interpreted in any way as representing an official policy position of the board of governors or the federal open market committee. my suggested framework for fed policy regarding asset - market instability can be summarized by the adage, use the right tool for the job. as you know, the fed has two broad sets of responsibilities. first, the fed has a mandate from the congress to promote a healthy economy - specifically, maximum sustainable employment, stable prices, and moderate long - term interest rates. second, since its founding the fed has been entrusted with the responsibility of helping to ensure the stability of the financial system. the fed likewise has two broad sets of policy tools : it makes monetary policy, which today we think of primarily in terms of the setting of the overnight interest rate, the federal funds rate. and, second, the fed has a range of powers with respect to financial institutions, including rule - making powers, supervisory oversight, and a lender - of - last resort function made operational by the fed β s ability to lend through its discount window. by using the right tool for the job, i mean that, as a general rule, the fed will do best by focusing its monetary policy instruments on achieving its macro goals - price stability and maximum sustainable employment - while using its regulatory, supervisory, and lender - of - last resort powers to help ensure financial stability. let me discuss the two parts of this recommendation in a bit more detail. the first part of the prescription implies that the fed should use monetary policy to target the economy, not the asset markets. as i will argue today, i think for the fed to be an β arbiter of security speculation or values β is neither desirable nor feasible. of course, to do its job the fed must monitor financial markets intensively and continuously. the financial markets are vital components of the economic machinery. moreover, asset prices contain an enormous amount of useful and timely information about developments in the broader economy, information that should certainly be taken into account in the setting of monetary policy. for example, to the extent that a stock - market boom
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their capital requirements after an adverse shock. especially in a situation where all banks are hit at the same time, this might amplify an economic recession and increase bank insolvencies rather than prevent them. of course this analysis is based on the assumption that banks can not easily issue new equity and that firms can not simply substitute bank credit with other sources of finance. the effect of capital scarcity leading to a'' credit crunch'' has been observed and investigated by in the literature by bernake and lown ( 1991 ) and calomiris and wilson ( 1998 ) among others. if there is a substantial cost connected to issuing new equity in bad times and if firms can not easily substitute bank finance by other sources, one has automatically a procyclical effect of bank lending no matter whether capital requirements are in place or not. however capital requirements may act as an amplifier. refining risk weights by making capital charges dependent on internal and external ratings may even exacerbate these effects because ratings also vary with the business cycle. preliminary evidence suggests that procyclicality is likely to increase under the new proposal in particular in crises situations ( see segoviano and lowe ( 2002 ) ). having said this, what conclusions shall we draw from this analysis? i don't have a definite answer but i think the concerns that have been raised in the discussion have to be taken seriously and we are challenged to think about approaches that could strengthen countercyclical regulatory instruments that encourage the build up of cushions in booms that can act as buffers when times deteriorate. making progress in this direction requires that we are able to improve the measurement of risk through time and in the assessment of the profile of macroeconomic risks ; an extremely difficult task ( see borio 2002 ). there are efforts to proceed in this direction in particular by work at the bis and at other institutions but there is still much to be done. some authors have argued that the procyclicality concerns are largely exaggerated because there are reasons to believe that a number of other factors can alleviate or even offset these effects. ( see borio 2002 ). i think we don't know the definite answer yet. theoretical arguments and the preliminary evidence combined should alert us that we have to make further progress on this issue. the role of central banks i have argued that there is a need to strengthen the system perspective on financial regulation and financial stability and that the regulatory instruments and objectives have to be complemented
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dollar against the yen in october 1998 as an example for the logic described above. the dollar had been continuously appreciating in the years before the crash. in the summer of 1998 it was expected that the dollar would rise even further to the end of the year. in combination with a large interest rate differential between japan and the us, many traders took advantage of the situation by borrowing yen, buying dollar assets and make profit on the appreciation of the dollar as well as on the interest rate differential. this kind of trading strategy was pursued by banks, hedge funds and even by bigger corporations. when the russian default set in during august 1998 all agents that had participated in the so called yen - carry strategy in the months before were all simultaneously eager to unwind their dollar positions reinforcing the fall of the dollar and thereby deepening the crises. individually these strategies might have all been rational. what individual institutions and the weather paradigm of financial risks fail to take into account is the fact that the behavior of individuals changes the payoff distribution of all other individuals. since this externality is not taken into account by current risk management technology there are reasons to believe that the models will work poorly exactly when needed most : before and in times of crises. what conclusions can we draw from such an insight? i think the arguments put forward above support the point made in the beginning. if we want to design a regulatory framework that is able to act as a safeguard against financial instability a shift of perspective from individual institutions to a system level is essential. the current strong reliance on individual backward looking risk models has to be questioned and we have to think on how we can supplement such an approach by a form of aggregate assessment that takes the endogenous nature of risk into account as far as possible. summarizing these points i want to conclude that we have to ask ourselves whether we are at the moment perhaps relying too much on the use of internal risk models to determine capital charges. as i have argued, these models are rooted in a risk concept that is particularly misleading shortly before and in a crises because the endogenous nature of risk. at the onset of a crisis the process that drives the data on which risk assessments are based undergoes a structural break and changes its nature. if we fail to take these effects into account we are led to flawed and misleading risk assessments. the problem of hidden aggregate risk exposure another tension between the micro - and the macro - perspective exists in the field of banking supervision. current practice is mostly
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governor michelle w. bowman, β news release, october 24, 2023, https : / / www. federalreserve. gov / newsevents / pressreleases / bowmanstatement - 20231024. htm. - 7supervisory process, and in issuing β guidance β that is technically non - binding but often operates as a de facto requirement. the development and implementation of new supervisory approaches and of guidance largely escape rigorous scrutiny due to the lack of formal procedural requirements for its development. this is true even though the expectations created by guidance can be equally or more impactful to banks than rules. for example, the examination process often produces supervisory findings overemphasizing non - core and non - financial risks, highlighting issues like it and operational risk, management, risk management, and internal controls. 7 these issues have filtered down from examinations and findings at the largest banks to the smallest, raising the question of appropriateness of application for smaller firms. in the supervisory process, we should guard against being distracted by less relevant issues. the prevalence of supervisory findings related to nonfinancial metrics is in part driven by the time it may take to remediate certain issues. however, we should also scrutinize whether this trend is indicative of our supervisory focus β beyond financial risk and toward non - financial risks and internal processes β and whether that shift is appropriate. we should also be aware that due to the vast diversity in business models, size, and geographic footprint among banks, we should not expect every firm to follow the same standards and must be careful to prevent forcing uniformity through β grading on a curve. β this risk can be exacerbated through any type of horizontal - like reviews. the supervisory findings made during the examination process inform bank ratings, which can have follow - on effects like limiting options for mergers and acquisitions as noted in the board β s most recent supervision and regulation report, nearly half of the 1, 340 supervisory findings for community banks were cited in these categories, more frequently than credit risk as of the fourth quarter of 2023. see board of governors of the federal reserve system, supervision and regulation report, ( washington : board of governors, may 2024 ) 22, figure 16, https : / / www. federalreserve. gov / publications / files / 202405supervision - and - regulation - report. pdf. - 8 ( m & a ) activity ; raising the cost
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), " the supervisory capital assessment program, " speech delivered at the federal reserve bank of atlanta 2009 financial markets conference, held in jekyll island, ga., may 11. the average tier 1 common ratio as of june 30, 2009, has been adjusted to reflect the completion of citigroup's exchange offer in september 2009. see group of twenty ( 2009 ), " leader's statement : the pittsburgh summit, " press release, september 25. tendency of current capital requirements to promote credit growth in booms and to restrict credit during downturns, the federal reserve has supported international efforts to develop capital standards that would be countercyclical. countercyclical standards would require firms to build larger capital buffers in good times and allow them to be drawn down β but not below prudent levels β during more - stressed periods. we also are working with our domestic and international counterparts to develop capital and prudential requirements that take account of the systemic importance of large, complex firms whose failure would pose a significant threat to overall financial stability. options under consideration include assessing a capital surcharge on these institutions or requiring that a greater share of their capital be in the form of common equity. for additional protection, systemically important institutions could be required to issue contingent capital, such as debt - like securities that convert to common equity in times of macroeconomic stress or when losses erode the institution's capital base. the crisis also highlighted weaknesses in liquidity management by major firms. short - term secured funding of long - term, potentially illiquid assets β through repurchase agreements and asset - backed commercial paper conduits, for example β became unavailable or prohibitively costly during the worst phases of the crisis, both here and abroad. in response, the federal reserve helped lead the basel committee's development of revised principles for sound liquidity risk management, which in the united states are being incorporated into new interagency guidance that reemphasizes the importance of rigorous stress testing to determine adequate liquidity buffers. 6 together with our domestic and international counterparts, we are also considering quantitative standards for liquidity exposures similar to those for capital adequacy, with the goal of ensuring that internationally active firms can fund themselves even during periods of severe market instability. with supervisory encouragement, large banking organizations have, for the most part, already significantly increased their liquidity buffers and are strengthening their management of liquidity risk. in addition to insufficient
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##ary path we experienced in the 1970s and β 80s and which contributed to the recession in the early β 90s, which was the worst for over sixty years. a new direction in economic policy the 1970s and β 80s illustrate how a period of inflation creates an atmosphere of uncertainty and instability, with a speculative climate and β short - termism β in economic decisions. slowly but surely, production β s long - term conditions deteriorate. it was partly in the light of such experiences that swedish economic policy was realigned at the turn of the 1980s. since then, the focus on price stability has gained broad support in our society, including the political parties. however, in view of the severe economic problems in the early 1990s, with inflation expectations based on our historical record and a massive budget deficit, it took time for the new direction of economic policy to acquire credibility. this has been evident, for instance, in the periods of interest and exchange rate unrest. financial market trends particularly in the longer run can be regarded as an indicator of the prevailing degree of confidence in the determination and ability to conduct an economic policy that is consistent and oriented towards stability. with the free movement of capital and the globalisation of financial markets, economic policy decision - makers need to be highly disciplined. in the light of our experience since the policy realignment at the turn of the β 80s, this is a fact that is widely recognised today in sweden. turning the clock back would not be feasible. experience from other countries, where the policy realignment had already been made in the early 1980s, indicates that the creation of confidence in a low inflation regime takes time and a lot of hard work. but it also shows that after a while, such a process does yield its reward in the form of low interest rates, a stable currency and ultimately a favourable economic development. the price stability target following the move to a flexible exchange rate, monetary policy in sweden is directed at a quantified inflation target. in this it resembles the situation for monetary policy in australia, canada, new zealand and the united kingdom, where inflation targets are also used. in sweden the target is formulated as being to limit the increase in the consumer price index to 2 per cent. this target is to be assessed, not in terms of isolated twelve - month change figures but in a somewhat longer, annual, perspective. as monetary policy obviously cannot control price developments exactly, the target is accompanied by a tolerance interval of Β±1 percentage point. this tolerance interval also serves
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with decisions explained ; targeted : made to the right people in governance and management ; consistent : one organisation, one message, one tone ; and timely : communication with no surprises. our relationships need to be built on mutual respect, ethical behaviour, and te whakatopu. we measure and report on our progress against the charter annually, to ensure that the banks and insurers we regulate have the opportunity to provide feedback on how we are living up to the charter β s values. our latest results show that we have continued to build on the positive gains from our survey results from previous years, but that there remains room to improve, especially with the insurance industry where our relationships are less well - established than with the banking industry. 23 capacity, capability, relationships and prioritisation as you can see, we have plenty of mahi ahead of us. to deliver on our approach, we are building our own capacity and the capability of our teams to engage with the sectors we regulate. as part of this, we are documenting best practice frameworks, processes and procedures, and ensuring our systems are up - to - date. this helps us to ensure that we are consistent in how we deliver our approach to regulation and supervision. in the spirit of te whakatopu, we are broadening and deepening our relationships, building on our relationship with the banking industry and expanding our engagement with non - bank deposit takers and insurers. we are also broadening and deepening our relationships with the wider financial sector : beyond industry groups into capital market participants and users. _ _ _ _ _ _ _ _ _ _ _ _ 23 our 2022 relationship charter survey results is available from the rbnz website : https : / / www. rbnz. govt. nz / / media / 7bc93de9d9b34e39a509153e2c7b6e88. ashx our transformation as a prudential regulator unclassified ref # x798971 v1. 2 unclassified as part of this, we are continuing to expand our presence in tamaki makaurau ( auckland ) to be closer to our regulated entities and the populations we serve. we are also integrating climate change and te ao maori into our approaches, recognising the role they play in enabling economic prosperity and wellbeing for all new zealanders. we recently released an issues paper on maori access to capital, 24 which
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may. market analysts β surveys indicate expectations of a slightly delayed lift - off. i don β t want to directly answer this question. but we try to judge if market expectations reflect fundamentals and if market expectations fit with our views. it β s a two way street : we learn from markets and markets learn from us. markets have a certain expectation about the end of the net asset purchase programme ( app ). we try to see if this fits with the narrowing between the inflation objective and market indicators of inflation expectations. for example, i look at the gap between the objective of below, but close to, 2 % and the 5 - year / 5 - year forward swaps - derived inflation rate, which is now at 1. 7 percent. so the gap is narrowing, which is why markets don β t expect us to continue the app much longer. market prices seem to be coherent with the narrowing of the gap between market - based inflation expectations and our objective. it β s a good sign. there is a convergence between market expectations and our intended end date, with the optionality. when approaching the end of our net asset purchases, our forward guidance on policy rates will have to be further specified and calibrated as appropriate to keep inflation on a sustained adjustment path towards our inflation objective. so what happens afterwards? our resilience criterion for inflation is not always understood well. it means that for us to stop net asset purchases, we have to be sure that the financial conditions resulting from that announcement will not compromise the adjustment path of inflation. this path is by itself conditional on easy financial conditions. and financial conditions are the result of three instruments : net purchases, re - investments and our forward guidance on the short - term policy rates. today we say that our policy rates will stay at their present levels well 2 / 4 bis central bankers'speeches past the horizon of our net asset purchases. this indication is an important conditioning variable β together with net purchases and re - investments β behind the convergence path that we project today. as we move forward in time, as is natural, the relative importance of the three policy tools will change, and the main tool for shaping the policy stance will become the path of our key interest rates and the forward guidance about their likely evolution. today, by and large, markets quantify the β well past β interval as β up to next spring β. but at some point that β well past β indication will not be sufficient any longer to give the public enough
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new nairu. economists have been surprised by the fact that the nairu has been continuously revised downwards. the supply of labour has increased more than expected, so there were reservoirs of labour. it could be migration or longer working hours. it is clear that if you believe that the degree of slack is higher, then the process of convergence to below, but close to, 2 % over the medium term would be drawn out. we should not draw implications for policy immediately but it shows you the richness of the discussion at a stage where the economy is booming and we don β t see very strong wage increases and little pass through to prices. however, we still see improvements in the path of inflation, so the bottom line is not bad at all. it means that the economy may have unexploited potential capacity. if slack is bigger, wouldn β t it mean that the path would be shallower? 1 / 4 bis central bankers'speeches well, other things being equal, it would be shallower. another explanation for low wage growth is that there is some backward looking behaviour in the wage - setting mechanism and in inflation expectations. for the time being i take an open view. monetary policy also plays a role. our asset purchases programme has a minimum horizon of end september, or beyond, if necessary, and in any case until we see a sustained adjustment in inflation. it is true that when we communicate about what happens beyond september, we want to have confirmation of data. things are going in the right direction but there are a number of uncertainties. so the message is patience, persistence and prudence. when do you need to communicate what happens beyond september? it can β t be on the very last day, but i argue that it shouldn β t be too early, either. there are not too many governing council meetings between now and then. can you see a scenario that you use the june projections to set up the decision and then take the actual decision in july? the projection exercise is always important. there are four per year and there will be one in june. it β s true that projections in general are useful to guide and structure the discussion. but i would caution against concluding that there is a pattern. we should not put too much weight on the projections. you mentioned earlier that market expects the first rate hike between the first and second quarters of next year. how comfortable with those expectations? the expectation implicit in the forward curve currently fluctuates around april and
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##ration of our instruments are adequate to address the evolving shocks i have described and to achieve our objective of bringing inflation back to our medium - term aim in a sustained manner. if we encounter shocks that compress demand and pose additional threats to price stability, our reaction function is clearly spelled out : a policy response is necessary and forthcoming. the second element of a forward - looking policy response relates to how we assess and react to the balance of risks. in this respect, the governing council β s view is that the risks to growth are currently on the downside. this expression worries me more today β given the sheer size of the downside risks we face β than it would in less extreme times. moreover, given the disinflationary nature of the covid - 19 shock, [ 4 ] the low inflation expectations and the current levels of spare capacity, i consider a surge of inflation in the medium term above our aim just a remote possibility. as an example, even in a very benign scenario such as the β mild β scenario in the latest ecb staff projections β which assumes a rapid evaporation of the pandemic β inflation would reach 1. 8 % in 2022. faced with such a sizeable downward skew, there is a strong case for our reaction function to be asymmetric, as the risks of a policy overreaction are much smaller than the risks of policy being too slow or too shy to react and the worst - case scenarios materialising. against this background, macroeconomic policies β above all monetary and fiscal policies β must remain complementary and the support they provide may be needed for a long time. the credit market provides a clear example. our bank lending survey suggests that banks would tighten credit standards considerably if public loan guarantee schemes are not maintained. since there is evidence that these schemes have significantly suppressed the rate of corporate insolvencies, ending them prematurely at a time when even viable companies may face insurmountable financial barriers could lead to a sharp rise in corporate defaults and the associated adverse effects on banks. similar problems would result, mutatis mutandis, from a premature tightening of financial conditions. for as long as the growth and inflation outlook are at risk, monetary policy support will have to remain substantial, and if those risks to the outlook rise, our policy impulse will have to rise in tandem. eu borrowing in response to the common shock will also be key to avoiding any fiscal cliff effects, through its support to both furlou
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speech asymmetric risks, asymmetric reaction : monetary policy in the pandemic speech by fabio panetta, member of the executive board of the ecb, at the meeting of the ecb money market contact group frankfurt am main, 22 september 2020 it is a pleasure to speak to the money market contact group today. money markets and central banks have an important relationship which, when it is working well, makes monetary policy more effective. money market prices reflect expectations of our policy and the understanding of our reaction function. they are the first stage in the transmission of our policies to financing conditions for the real economy. so i am pleased to talk to you today about how i see current issues related to monetary policy β and to hear your views in return. the ecb β s policy response to the coronavirus ( covid - 19 ) crisis in pursuing our price stability mandate, our policy response to the crisis had three goals. the first was to counter the downward impact of the pandemic on the projected path of inflation. the second was to ensure that all parts of the euro area had access to liquidity, which was crucial for weathering the lockdown. and finally, we sought to avoid damaging feedback loops between financial markets and the real economy, ensuring that other policies could play their full role in addressing the effects of the pandemic, in turn making our own policy more effective. as a result of our policy measures, tail risks have been removed and systemic stress in the euro area has receded ( chart 1 ). we have averted a liquidity and credit crunch, which would have amplified the collapse in activity and caused lasting damage to production capacity. without the ecb β s action, the economic consequences of the pandemic would have been dramatic ; we estimate that more than one million additional jobs would have been lost. chart 1 euro area composite indicator of systemic stress ( index ) source : haver analytics. note : see also hollo, d., kremer, m. and lo duca, m. ( 2012 ), β ciss β a composite indicator of systemic stress in the financial system β, working paper series, no 1426, ecb, march. latest observation : 21 september 2020. after abruptly tightening in march, financial conditions for the euro area as a whole have since eased, as measured for example by the gdp - weighted sovereign yield curve. fragmentation has receded substantially, as the decrease in the dispersion of sovereign
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elvira nabiullina : recent russian economic developments and bank of russia β s forecast statement by ms elvira nabiullina, governor of the bank of russia, in follow - up of board of directors meeting, moscow, 13 march 2015. * * * good afternoon! today the bank of russia board of directors decided to reduce the key rate from 15. 00 % to 14 % per annum. this decision takes into account the following main factors. first, the latest data on the economic situation show that the balance of risks remains shifted towards the weakening of the economy rather than acceleration of inflation. january data and february leading indicators, primarily business sentiment indices, indicate that the economic situation continues to deteriorate and this trend may persist until 2016 q1. seasonally adjusted unemployment fell to 5. 0 %. it should be taken into consideration that the russian labour market traditionally adjusts, at least at the first stage, through wage rates and part - time employment, whose dynamics is indicative of lower demand for labour. at the same time, shrinkage of consumer demand will have a downward pressure on inflation. second, monthly inflation slowed down considerably in february following the surge in late december - january. and weekly march data indicate that this process continues. the current high level of annual price growth is explained by the supply - side factors β decline in the ruble exchange rate and imposed trade restrictions. these are one - time factors, and in case there are no new considerable shocks their impact on monthly and quarterly inflation will decrease over the next months. the annual inflation, which to a large extend reflects past price dynamics, can keep rising up to the middle of the year. however, in a year, i. e. in march 2016, inflation will slow down to the level of about 9 % amid the decrease in the monthly and quarterly price growth. while making the decisions regarding interest rates, we take into consideration not the current inflation that is essentially historical, and cannot be affected by our decision. we rely on inflation forecast. third, we forecast gradual decrease in inflation expectations. surveys already show evident signs of such a decline. in case no new shocks occur, this process will persist facilitated by the slowdown in current inflation. therefore, real interest rates which should be calculated with regard to the expected inflation will stay in the positive range providing for antiinflationary nature of monetary policy. nevertheless, it is persistently high inflation expectations, as well as risks of the upward revision of tariffs of
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natural monopolies, fiscal policy easing, and possible accelerated growth of nominal wages that we consider to be the main risks for our policy and our inflation forecast. i would like to note that, when taking the today β s decision, the board of directors was guided by the goal to decrease inflation to 4 % in 2017 and to further maintain it close to this level as it was stated in the guidelines for the single state monetary policy. we have repeatedly expressed our intention to reach this level step by step taking into account the economic conditions. the rate of inflation decrease will depend on further developments and changes in the economic situation. the attempt to reduce the inflation at any cost would obviously be a short - sighted strategy. when taking a decision on the key rate we always consider the balance of risks of inflation acceleration and slowdown in economic growth. this balance changed considerably at the turn of 2014 β 2015. for most of 2014 the balance of risks was shifted towards inflation acceleration. economic slowdown was primarily of structural nature and did not have considerable impact on prices. meanwhile, inflation expectations were growing. bis central bankers β speeches the situation aggravated in 2014 q4, because the fall in oil prices and the need to make large external debt payments amid almost inaccessible international capital markets led to considerable ruble depreciation. this in its turn resulted in higher inflation expectations. demand of households and businesses for cash and non - cash foreign currency surged up. it threatened to heavily accelerate inflation and destabilise financial sector. it was important to bring these processes to a halt and we decided to raise the key rate dramatically to 17 % p. a. the rise of the key rate was followed by the increase in bank deposit rates that managed to stop the outflow of funds from ruble deposits and pegged down their dollarisation. our foreign currency repo and lending operations also helped normalise the situation in the foreign exchange market. in december - january, we reduced rates on these instruments, introduced new types of operations, and increased the frequency and allotment amount of foreign currency provision. in late 2014, the allotment amount of foreign exchange liquidity provision was about 20 billion us dollars and currently exceeds 30 billion us dollars. in january 2015, despite persistently low oil prices, complicated geopolitical situation, and russia β s downgraded sovereign rating, the exchange rate volatility decreased and inflation expectations showed the first signs of stabilisation. this means that the result we expected when raising the key
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##iayaan kepada perusahaan kecil dan sederhana. perasmian ini amat bermakna kerana yang amat berhormat perdana menteri merupakan peneraju kepada peningkatan sistem penyampaian sektor awam. yang amat berhormat dato'seri juga telah memainkan peranan penting dalam usaha meningkatkan potensi perusahaan kecil dan sederhana sebagai enjin pertumbuhan ekonomi negara kita. ladies and gentlemen, bank negara malaysia has always been in direct contact with the public. the central bank receives walk - in members of the public seeking information in relation to our operations, policies and regulations as well as those who seek redress on financial issues. the sme unit in bank negara malaysia also has direct contact with the smes relating to issues of access to financing. the establishment of bank negara malaysia link is to allow the interface with members of the public as well as the smes to be centralised and conducted in a more efficient and effective manner. the premises of the bank negara malaysia link was previously the kuala lumpur branch of bank negara malaysia. the kuala lumpur branch used to provide retail banking services to the government as part of our role as banker to the government. this role has now been transferred to banking institutions. it was also where currency was processed. this has also now been outsourced to meps currency management sdn. bhd. the branch premises is therefore now being transformed to a centralised service centre. ladies and gentlemen, bank negara malaysia link will also provide support to the bank's sme special unit in a number of areas associated with access to financing. the sme special unit was established within bank negara malaysia almost two years ago. initially, the functions of the sme special unit was to provide information on the various sources of financing available to the smes ; facilitate the loan application process ; and to provide advisory services relating to the financial requirements of smes. the role has subsequently been enhanced to monitor, coordinate and evaluate sme financing across all sectors, to review policies to enhance access to financing and coordinate the implementation of all sme financing policies. in addition, the sme special unit also acts as the secretariat to the small debt resolution committee, which facilitates
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mohd razif bin abd kadir : reaping opportunities as financial advisers keynote address by mr mohd razif bin abd kadir, deputy governor of the central bank of malaysia, at the financial advisers seminar, kuala lumpur, 18 october 2008. * * * it is with great pleasure that i welcome all the participants to the seminar today, which is organised by bank negara malaysia, with the assistance from the malaysian financial planning council, the financial planning association of malaysia and the malaysian association of chartered financial consultants. in this regard, i would like to express my sincere appreciation to the three associations for their commitment and effort in facilitating and ensuring the success of the seminar, for the benefit of the financial planning industry. the chosen theme, β reaping opportunities as financial advisers β, is a fitting indication of the potentials and prospects as a financial adviser and i hope that this seminar would inspire you to achieve your full potential in a career in the financial services industry and for those not already in the industry to be aware of these opportunities. today β s dynamic environment is marked by a more competitive financial services industry, increasing access to financial services, broader range of financial products and services, and more complex financial transactions. in such an environment, the need and demand for sound financial planning will continue to increase. with the proliferation of financial products from basic risk protection to more sophisticated financial products for retirement and asset accumulation, it is important for consumers to have access to professional advice to help them work through the wide range of financial solutions which involve increasingly complex structures, and to avail themselves on solutions that will best suit their needs and capacity. for this purpose, bank negara malaysia has introduced the framework for the licensing of financial advisers in 2005 in response to the increasing demand from malaysian consumers for professional and specialised advisory services to meet their financial needs. the growing affluence and sophistication of consumers have created the demand for more complex financial products and services, specifically insurance products. the introduction of financial advisers, as a new distribution channel for the insurance and takaful industry, will complement the services of the existing professional intermediaries in the financial markets in providing holistic financial advisory services which range from insurance protection, savings for education, investments and retirement planning. in the long term, financial advisory business is only sustainable if its operations are transparent and focused on providing value added services rather than simply selling products. financial advisers must provide the highest service levels and professional standards in order to
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resolve banks without significant economic harm to the economy as a whole β and to see this through if the worst comes to the worst. resolving and closing a bank is by no means a cure - all and it is certainly not an easy task. where possible, things should not be allowed to go that far in the first place. and that is where strict capital requirements, effective supervision and deposit business shielded from riskier business lines come into play. the banking union also needs to be supported by an appropriate regulatory structure. in other words, banks must be required to hold sufficient capital for claims on government and not be allowed to accumulate them on too large a scale in future. it would be dishonest to assert that all these measures will make it impossible for banks to get into difficulties in the future. therefore, if that actually does happen at some time, having a reliable procedure in place that creates planning certainty will be all the more important. with this in mind, the main task of the single resolution mechanism that is currently being developed is to ensure the correct sequence of liability is applied in such a process. if a bank is to be restructured or resolved, equity investors should be the first port of call, followed by the providers of debt capital, and only then the depositors, taking due account of deposit guarantees in the respective member states. national and european taxpayers should only be called upon as a very last resort. if public funds are used, the question arises as to how liability is to be apportioned between the european level and the member states. joint liability of all member states can only exist at eu level for those institutions directly supervised by the ssm. in such a case, it is also appropriate, however. having said that, it is unclear whether the member states are to be discharged of all liability or whether a certain percentage of the costs is still to be apportioned to them. the latter is suggested by fact that, in the current framework of monetary union, member states are still able to exert a perceptible influence on financial stability through their national economic and financial policies β say, encouraging the emergence of a real estate bubble through special tax benefits. this should be kept separate from the treatment of balance - sheet burdens that arose while the various banking systems were still under national supervision. if the unity of liability and control is also taken seriously on this point, too, the member states in question should themselves also be liable for these burdens as well. as the
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jens weidmann : challenges for banking regulation and supervision in the monetary union speech by dr jens weidmann, president of the deutsche bundesbank, at the deutscher sparkassentag 2013, dresden, 24 april 2013. * 1. * * introduction mr fahrenschon mr genscher mr steinbruck ladies and gentlemen it gives me great pleasure to speak to you today at the sparkassentag 2013. for more than three years now, the financial, economic and sovereign debt crisis has been the dominant topic in the european monetary union and, at the same time, its biggest test. dated from the outbreak of the crisis on the us real estate market in the summer of 2007, this is already the fifth year in which we have been in crisis mode. that said, germany is still in relatively good shape β despite undergoing by far its worst postwar slump in 2009 and despite being one of the first countries to be affected by the spillover from the crisis on the us real estate market. germany has had to use considerable financial resources to stabilise the financial system. savings banks, too, felt the effects of the crisis β although they did so directly only in a few cases ; mostly it was through their investments. even so, savings banks had a stabilising effect during the crisis. they were a robust and reliable source of lending. and they strengthened their capital base. that is a major precondition for overcoming the challenges that are on the horizon β such as sustained pressure on margins and increased risk provisioning for the next economic downturn, which is bound to come at some time. the various aspects of the crisis β first, only a financial crisis, then an economic crisis and, finally, the sovereign debt crisis β which is still with us β have prompted a large number of discussions, changes and upheavals. this applies to the role of central banks and to the expectation of what central banks can and should β or cannot and should not β do to help resolve the crisis. it also applies to the financial system and the way it is perceived by the public at large. mr steinbruck will undoubtedly explain in more detail soon how he wishes to β tame the financial markets β. overcoming the crisis requires considerable efforts in many areas. but, as important as the issues of government debt, monetary policy and competitiveness are, i would now like to turn my attention to banking regulation and supervision. 2. reform of financial market regulation β objectives and measures roughly ten
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the reader is personally affected by a story, the harder that becomes. as the chief diplomatic correspondent for europe at the new york times, you, mr erlanger, have the challenging task of bringing europe closer to a predominantly american readership. please allow me to say that, with your engaging as well as informative articles, you accomplish that task with panache. once again, please accept my sincere congratulations on being awarded the karl klasen journalism prize. and to you, the audience, thank you for your attention. 1 deutsche bundesbank ( 2017 ), the danger posed to the global economy by protectionist tendencies, monthly report, july, pp 77 β 91, and the literature cited there. 2 k klasen ( 1970 ), die verwirklichung der wirtschafts - und wahrungsunion in der ewg aus sicht der deutschen bundesbank, in europa - archiv, 13, p 453. 7 / 7 bis central bankers'speeches
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the business models, of such large international banks. since the adoption of the international basel ii framework in 2005, the complexity of these rules has mushroomed. the basel iii reforms launched in response to the last financial crisis β including the final elements of the basel iii package that we are currently negotiating in basel β have made the rules even more detailed and complicated. we have the guiding principle of the reforms to thank for this : risk - oriented governance and 1 / 4 bis central bankers'speeches regulation are there to help banks allocate capital resources as efficiently as possible. but in order to prevent undercapitalisation, this approach needs very specific rules. this increases the compliance workload β that is, the effort associated with meeting the requirements as well as demonstrating that they β ve been met. the basel rules were made for large, internationally active banks β they were not designed with small banks in mind. yet, in europe, we adopted these rules for all european credit institutions alike β including the thousands of small and medium - sized banks with simple business models and regional focus. the motivation for this one - size - fits - all - regulation was to have a single set of rules for the single market. the eu β s primary goal of a common, single market meant that one single set of rules was preferred over differentiated sets of rules. proportionality β the principle that rules must be proportionate to the issue they address β played only a secondary role. while this makes good political sense, it has had serious side effects β as it favours large, internationally active banks over smaller institutions. particularly for credit institutions that are able to strongly optimise their employment of capital in order to benefit from higher returns, this is worth all the effort. and it β s worth it for especially large credit institutions because they can profit from economies of scale where fixed costs per product fall as the volume of business increases. this then also makes it easier to finance a larger compliance department. smaller, regionally based institutions, however, cannot normally rely on these economies of scale or a strong risk appetite as a source of income. seen from a single - entity perspective, the cost of regulation is similar or even higher for these banks, but their ability to take advantage of these complex strategies is somewhat weaker. in other words, the complicated risk - oriented approach favours banks with a large organisation, whose activities are more complex and which take on greater risks. the reason we should be giving this more thought is that the vast majority
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of skewed asset ownership, such myopia can turn out to be very costly. a headlong rush for growth can be the royal road to social instability and economic breakdown. what we need above all is growth that provides for all, a decent house, quality education, health, transport, food, leisure and respite from debt. 19. growth is good ; sustainable growth is better ; sustainable and inclusive growth is best of all β absolute nirvana. is it attainable? here in mauritius, with our population of only 1. 3 million, and a policy environment never trailing too far behind best practice, we could have a stab at it. this is not a goal too far β not for us who have made a habit of punching above our weight. but we must work for it and encourage our policy - makers to press ahead with the reform agenda. and, while they are fixing the policy environment, we must accelerate our corporate social responsibility ( csr ) drive. since january 2012, profitable companies have been required to pay 2 % of their book profit into a csr fund to finance social and environmental activities. this is no doubt a good basis to build on. but isn β t there a better way for corporates to carry and demonstrate their social responsibility? 20. let us draw some inspiration from james wolfensohn, former world bank president. ten years ago, at a function of the world savings bank institute, he remarked : β¦ i want to salute these banks [ wsbi β s members ] and encourage them to continue in their theme of a double bottom line : to think not just of profit, but to think also of social responsibility which savings banks carry so well. 8 21. double bottom line reporting seeks to extend the conventional bottom line, measuring financial profit or loss, with which we are all familiar, by adding a second bottom line to measure their performance in terms of positive social impact. indeed, to address our sustainability concerns, so well encapsulated in the overarching maurice ile durable 9 concept, we can go one better and embrace triple bottom line reporting. this will include the valuation and protection of the rich resources of our beautiful natural environment. 22. laying down more concrete, like guzzling fuel in traffic jams, increases our gdp ; protecting our social and physical environment is better captured by the double and triple bottom lines in quality accounting. rising inequality worldwide, and here in mauritius, raises key issues on the role of monetary policy and
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, chief executives of banks and the chairman and the chief executive of the mauritius bankers association, for joining our efforts for the advancement of the banking sector. finally, i need to express my sincerest appreciation to my two deputy governors, the head of my governor β s office, my heads of division, and the staff of the bank for their support and commitment throughout the past year. bis central bankers β speeches looking ahead there are increasing signs that we are nearing the end of the crisis with visible signs of what looks like a sustainable recovery. i never tire of saying that the best contribution that the central bank can make to the nation is to maintain price and financial stability β this is our raison d β etre. our heightened profile at the international level puts us in a position where we can make a significant contribution to issues of relevance to central banks well beyond our own frontier. over the years, we have transformed our economy to make it more diversified and resilient. had we not engaged in, at times, painful reforms, we would have been hit harder by the crisis. we need to pursue these reforms and develop new drivers of growth that can take our economy out of the middle - income trap to a higher - income - level economy. development, like life itself, is a journey and not a destination. the reforms must continue if we are to maintain our preeminent position in sub - saharan africa. bis central bankers β speeches
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##ll s. c., deputy solicitor general at the attorney general β s office, mauritius, the chief executive of the financial services commission, other eminent experts from in fintech regulation, blockchain as well as artificial intelligence industry and myself. the regulatory committee was tasked to advise on the development of a regulatory framework for fintech in mauritius. the regulatory committee identified priority areas in the fintech space to be considered for regulation in mauritius and recommended the approach to be adopted in regulating this emerging sector of activities. further to the report of the regulatory committee, the financial services commission, mauritius, which is the integrated regulator for the non - bank financial services sector and global business in mauritius, was identified as the most appropriate authority in mauritius to promote the regulatory framework for digital assets in mauritius. in september 2018, the financial services commission issued guidance note on the 3 / 5 bis central bankers'speeches recognition of digital assets as an asset - class for investment by sophisticated and expert investors. subsequently, on 05 november 2018, the financial services commission issued a consultation paper seeking feedback from stakeholders and the public on the proposed regulatory framework for the custodian services ( digital asset ) licence, which allows its holder to provide custody services for digital assets. the consultation paper has now been translated in a set of rules which became effective as from 01 march 2019, thereby positioning the mauritius ifc as the first jurisdiction globally to offer a regulated landscape for the custody of digital assets. the financial services commission has ensured that the distinct regulatory frameworks are in line with international standards set by institutions like the organisation for economic cooperation and development and the fatf. mauritius has participated fully in discussions at the level of the oecd on the governance and regulation of digital financial assets and the regulatory framework for this activity segment has been developed in reference to these international consultations and the fatf recommendations have been fully considered in the regulatory approach taken by mauritius to regulate the custody of digital assets as a business activity. as technology is a constantly evolving affair, we need to be at the forefront of the latest development. this requires specialized skillsets which might not be available in all regulatory bodies, thereby heightening the need for continued upskilling and capacity building. 6. cross - border regulation with the globalisation of financial services, collaboration has always been a requirement for financial services regulators across the globe. the need for cross border cooperation between financial services regulators is becoming even more crucial in relation to fintech. adherence to a common set of standards will foster
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will only enhance the fine reputation that hsbc has so well established in the world of banking. β’ a bank, safe as houses ; qui ne presente, a nous, aucun risque. we look to banks, such as yours, to save us from the contagious risks of the growing, global, credit delinquency of the past decade. this, previously subterranean, force erupted in 2007, sweeping like a terrifying tsunami, across the oceans of the banking and finance world. and we, as bankers, were, frankly, as ill - prepared, as were the tourists and hoteliers, faced with the indian ocean tsunami, at this festive season, just three years ago. and now as a climate change is approaching, i look to you and all our colleagues in banking, to find the courage and leadership to adapt our early warning systems and take corrective action. there are few white knights left to come to our rescue. our destiny is in our own hands. we must never forget, that, despite our splendid buildings, and may i say your kind festive hospitality, despite these smart new surroundings, each bright new dawn, that you will see rising here over the beauties of grand bay, is not the herald of paradise to come, but merely a fresh light on the cold realities of the banking world. banks are fragile institutions. banking is a delicate business. for banks are like pretty girls and roses ; they last, while they last! in the global business sector, hsbc is a market leader. we are all looking to such global leadership to help to move us from the tidal waves of 2007 into calmer waters in 2008. mauritius is at a critical phase in its economic development. the country is undergoing significant reforms. inflation is coming down into single digit, the currency is stronger, tourism and investment are growing. banks, like yours, have a vital role to play with their potential to promote the principles of sustainable development through sounder lending and wiser investment. i trust you will continue to play your undisputable role in promoting the continued social and economic welfare of this country. in mauritius, bank branching, remains an indispensable strategy for banks. customers view nearness to a branch as a determining factor in the choice of their banks. hsbc has thus extended its network and now has 11 branches and 13 atms across the country. today, this new branch is for us, and for the people of mauritius, a
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. the historic statutory separation of banking and insurance was altered in 1999 when the congress enacted the gramm - leach - bliley act ( glb act ) and allowed well - managed and well - capitalized banks to affiliate with insurance underwriters and insurance agencies. that brings the federal reserve and state insurance professionals into the same circle. to date, about 630 bank holding companies have chosen to become financial holding companies, the vehicle under the glb act through which bank, insurance, and securities affiliations may take place. of those, about 165 ( more than 25 percent ) use the new glb act authority to engage in insurance agency activities while only 26 ( fewer than 5 percent ) are engaged in underwriting insurance that is unrelated to credit. all of these companies must comply with state laws governing the sales and underwriting of insurance. the significant interest by banking organizations in selling insurance makes sense. the banking system is still dominated, in number, by small banking organizations. more than 90 percent of the banks in this country have total assets of less than $ 500 million each. banks of all sizes have quite large branch networks - as of the end of last year there were almost 67, 500 branches of the more than 7, 800 commercial banks in this country. entering the insurance market as an agent, not as an underwriter, fits naturally with the nature of banking as an industry dominated by smaller providers. more broadly, banking organizations have developed good networks and systems for delivering financial products to consumers - a business model that does not always require manufacture of the product. insurance is increasingly viewed not just as a product that stands on its own, but as an important item on a menu of financial vehicles that help consumers create a portfolio of financial assets, manage their financial risks, and plan for their financial security. many consumers prefer to make their financial decisions and purchase financial planning products at a single location that offers a full package of financial services. thus, banking organizations are a natural alternative delivery system for insurance underwriters looking to expand their customer base. the affiliation of banks and insurance underwriters has been more modest. one large banking organization has affiliated with a large insurance underwriter, and one large insurance underwriter has acquired a small bank. in addition, several foreign banks with insurance operations abroad have begun to offer both insurance and banking products in the united states. before the glb act, these foreign banking organizations were required to choose between operating as a bank in the united states or engaging in insurance activities
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and an mba earned at night. because the bank was just starting up, there were only 11 employees. with lots of work to be done and not many people to do it, i was able to try my hand at nearly every job at the bank and to see the results of every action that was taken. much of my time as a community banker was spent lending to small businesses. in many banks today, small business lending is an automated process that relies on computers to analyze data and determine a borrower β s creditworthiness. for me, the process was personal. it involved sitting eyeball to eyeball across the table from my customer. more often than not, the customer was someone i knew well and had been lending to for years. occasionally, he or she represented the second or even third generation to run the business. or the business itself was the second or third venture that i had financed for the same borrower. there were financial statements to be gathered and analyzed. usually it was difficult, if not impossible, to separate the business and personal finances. but understanding the borrower β s ability to successfully run a business was just as important as analyzing the numbers. i spent a lot of time talking to business owners about their businesses. in fact, bis central bankers β speeches sometimes i thought they came in looking for a sounding board for their ideas as much as they were looking for money. at times, especially during the economic downturn of the early 1990s, i had to deal with problem loans. some were resolved through restructure and some through foreclosure. now, as a bank regulator in the middle of a financial crisis, this deep personal understanding of the lending and loan collection process strongly influences my policy views. and i have never lost sight of the importance of those small businesses to local economies or the importance of loan availability to small businesses. from community banker to central banker i fully expected to complete my career working as a community banker in my hometown. but in early 2007, i received a call asking if i would be interested in serving as a member of the board of governors of the federal reserve system. i was intrigued, flattered, and more than a little intimidated by the prospect. i had interacted with the fed throughout my banking career and had even served on the board of directors of the federal reserve bank of richmond. so i knew a lot about the federal reserve. but there was no way that i, or anyone else, could have foreseen
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. hong kong is one of the major international financial hubs in the world. it has an open and free business environment, sophisticated financial markets, well - functioning financial infrastructure, a vast talent pool, a sound legal system, and a regulatory system well aligned with international standards. it is the world's largest offshore rmb market. it is also asia's largest asset and wealth management center and 2nd largest center for hedge funds and private equity. the pboc is committed to supporting hong kong's role as an international financial center. we will continue to create an enabling environment for the rmb business in hong kong. we will continue to support hong kong's role as an international asset center and risk management center, and its goal to become a fin - tech and green finance hub in the asia - pacific region. we will continue to support hong kong's financial stability. we believe that, with all its strengths, a favorable policy environment and its talented and hard - working people, hong kong's standing as an international financial center will be further enhanced. finally, before i take up your questions, let me wish this conference a great success! 4 / 4 bis - central bankers'speeches
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purchases since last december β this might encourage a somewhat faster pace. in contrast, if bond yields were to move sharply higher, as was the case last spring, then a more cautious approach might be warranted. in terms of the level of rates over the longer - term, i would expect them to be lower than historical averages for three reasons. first, economic headwinds seem likely to persist for several more years. while the wealth loss following the financial crisis has largely been reversed, the great recession has scarred households and businesses β this is likely to lead to greater precautionary saving and less investment for a long time. also, as noted earlier, headwinds in the housing area seem likely to dissipate only slowly. second, slower growth of the labor force due to the aging of the population and moderate productivity growth imply a lower potential real gdp growth rate as compared to the 1990s and 2000s. because the level of real equilibrium interest rates appears to be positively related to potential real gdp growth, this slower trend implies lower real equilibrium interest rates even after all the current headwinds fully dissipate. it is worth noting that the views of market participants as expressed in the eurodollar futures market and those of fomc participants as expressed in the march summary of economic projections seem consistent with one another and indicate an anticipated lift - off sometime near the middle of next year. bis central bankers β speeches third, changes in bank regulation may also imply a somewhat lower long - term equilibrium rate. consider that, all else equal, higher capital requirements for banks imply somewhat wider intermediation margins. while higher capital requirements are essential in order to make the financial system more robust, this is likely to push down the long - term equilibrium federal funds rate somewhat. putting all these factors together, i expect that the level of the federal funds rate consistent with 2 percent pce inflation over the long run is likely to be well below the 4ΒΌ percent average level that has applied historically when inflation was around 2 percent. precisely how much lower is difficult to say at this point in time. the fact that the equilibrium real federal funds rate is likely to be lower for a long time underscores the need for caution in applying the benchmark taylor rule as a guide to the appropriate stance of monetary policy. as typically applied, the taylor rule assumes an equilibrium real rate of interest of 2 percent. this seems much too high in the current economic environment in which headwinds persist, and somewhat too high
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vital going forward in directing markets and ensuring that withdrawal symptoms are kept to a minimum. however, the very volatile and uncertain environment itself does present communication challenges. the south african reserve bank is committed to transparent monetary policy communication. at the conclusion of every mpc meeting, a statement is issued through a press conference chaired by the governor, with all mpc members in attendance, to explain the monetary policy stance. the monetary policy statements, speeches by the governors and senior officials as well as publications such as the monetary policy review identify and discuss the balance of risks around our central forecasts in such a way that market participants and other stakeholders are in a reasonable position to form a view about our possible reaction to changing circumstances. 4. economic outlook as i draw to a conclusion, let me now very briefly turn to the economic outlook for south africa. south africa β s growth outlook is inextricably linked to the global outlook. although the recovery is somewhat stronger in certain regions, overall global growth prospects remain broadly on the downside. the extraordinary challenge facing policy makers globally is how to roll - out an ambitious programme of ensuring that the global recovery is sustainable and can gain momentum, by simultaneously implementing various initiatives while ensuring that they don β t conflict with each other. there is a need to support growth in the near - term, while also implementing credible medium - term fiscal policies, there is a need to continue the repair work to banking systems by pressing ahead with regulatory reform, which in some instances requires further deleveraging, but at the same time credit needs to flow to ensure that the abundant liquidity made available by central banks actually gets transmitted into the real economy. alongside all these, structural reform needs to be progressed in a growth - friendly way to give us a better foundation for the future. against the backdrop of a still difficult international environment affecting our major trading partners, as well as domestic challenges, at the time of the last mpc meeting the bank revised lower its forecast for 2013 growth from 2. 4 per cent to 2. 0 per cent, while that for 2014 was revised from 3. 5 per cent to 3. 3 per cent. at the same time the bank announced an adjusted cpi forecast, and expected inflation to average slightly higher at 5. 9 per cent for 2013 and 5. 5 per cent for 2014, with a temporary breach of the inflation target range during this quarter ( q3 / 2013 ). as we have indicated before, the challenge remains how best to manage upside inflation risks
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dissaving by government was equal to 3. 1 per cent, and the budget deficit equal to 5. 6 per cent of gross domestic product. the deficit for the current fiscal year is expected to be reduced to 4. 0 per cent of gross domestic product. the government also made an important contribution to the official foreign reserves of the country by way of two bond issues in international capital markets during june 1997. the total proceeds from these two loans amounted to r3. 8 billion. a few smaller and one major privatisation transaction β the sale of an equity stake of 30 per cent in telkom β raised more than r6 billion over the past year. part of these funds was used to contain total government debt to a level of about 56 per cent of gross domestic product. the better harmonisation of monetary and fiscal policies over the past year made a major contribution to the success achieved with the objective of restoring overall financial stability after the foreign exchange market disruption of february last year. financial co - operation in southern africa the committee of governors of the central banks of the twelve members of the southern african development community ( sadc ) met twice during the past twelve months to discuss matters of financial co - operation. the secretariat of the committee within the reserve bank has made good progress in the compilation of a computerised data base of financial statistics of the region and information on the functions and responsibilities of the twelve participating central banks. officials from all the central banks participated in a number of courses presented by the reserve bank β s training institute, and a course was again presented for bank regulators and supervisors in the east and southern africa banking supervisors group ( esaf ). a special study is being undertaken with the support of the world bank on the development of national payment and clearing systems with a view to the eventual establishment of a cross - border payment and settlement system for all sadc countries. over the next year, the co - ordination of financial co - operation in the region will be extended also to include the activities of commercial ( private ) banks and stock exchanges. a need for more flexible monetary policy operations developments over the past year revealed a need for greater flexibility in the market for short - term funds. the transformation in the south african financial markets since 1994, and in particular the further integration into the global financial system, will in future require more prompt action and decisive direction for movements in financial asset prices, interest rates and exchange rates. part of the explanation for the rigidities in the south african money market lies
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bank continuing success. thank you, mr. chairman.
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risks reflecting the global macroeconomic situation β moderate growth, high unemployment, and low indices reflecting consumer confidence and business confidence. these, of course, also have an effect on the domestic macroeconomic risk, which reflects moderate growth. in contrast, the market risk indices, both in israel and globally, are at low levels, which creates a gap β both in israel and abroad β between the real situation and the investors β risk philosophy. this gap is apparently affected by the search for yields in a low interest - rate environment, but it is possible that expectations of an increase in corporate profits that will accompany the recovery also have an effect. bis central bankers β speeches a view of the business sector β s sources of financing indicates that the trend of a decline in the weight of bank credit and an increase in the weight of domestic nonbank credit β through corporate bonds and recently through direct loans from institutional investors as well β that we witnessed since the beginning of the century continues even after the global crisis of 2008 β 9 ( slide 12 ). this is obviously a positive process, in that it increases and variegates the sources of financing to the business sector, creates competition for the banks and acts to reduce the cost of financing, thereby supporting growth. however, the process is also accompanied by the creation of risks that must be addressed. among other things, these reflect the fact that the nonbank credit market has developed rapidly, while its regulation is developing gradually. during the global crisis, most of the negative impact to the financial system in israel was reflected in this market : yields in the market skyrocketed and issuances froze. in total, more than 100 companies have entered debt restructuring proceedings thus far β representing bonds totaling about nis 40 billion. it is important to emphasize that this number does not represent the scope of the loss absorbed by investors, which will naturally be lower ( slide 13 ). since the global crisis, as a lesson from global developments as well as developments in israel, in order to reduce the risks of a crisis and to reduce the damage of a crisis should one take place, many measures are being taken in the field of regulation that are intended to reinforce the durability of the financial institutions and system. regulations have been updated in the field of corporate governance and risk management at the banks ; the basel iii guidelines have been adopted in the area of capital requirements, and rules in the area of liquidity and leverage will be adopted ; the use of stress tests to identify risks in institutions
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jean - pierre roth : review of the swiss economy speech by mr jean - pierre roth, chairman of the governing board of the swiss national bank, at the bank β s annual general meeting, berne, 29 april 2005. * * * dear shareholders dear guests 2004 : the economic upswing continues the economic upswing that began in summer 2003 continued last year. economic growth moved into the positive zone and came close to its potential level once again. while growth was slightly negative in 2003, it reached 1. 7 % for 2004 as a whole. the recovery in switzerland is due in large part to the rebound in global economic growth, which reached its highest level since 1976. swiss companies have benefited from this situation : last year, exports rose by 6. 7 % β a significant increase compared with the 2003 figure. this figure reflects our exporters'continuing wish to adapt to changes in demand, as well as the untiring efforts to streamline swiss industry and maintain switzerland's appeal as a location for business. the swiss economy's strong presence on the international markets has been a reality for a long time. as our direct investments abroad have grown, however, it has taken on a new dimension in recent years. not everyone is aware that while switzerland is a champion in savings, it also boasts a performance in the area of foreign investments that is unrivalled. in 2003, we invested some chf 20 billion abroad β a sum equivalent to almost 20 % of national savings. roughly half of these investments were concentrated in the european continent. over the years, and given switzerland's trade surplus, our companies have thus developed an extremely dense international network of production facilities. in addition to the 4 million jobs within the domestic economy, swiss companies employ a further 1. 8 or so million people abroad. of these, 1 million work in european countries. these figures show that switzerland has by no means resigned itself to low growth, but has seized the opportunities created by the opening - up of borders and markets. these days, a lot of people worry about competition from low - wage countries and the resulting relocations. however, they overlook the fact that our country is a major beneficiary from the more pronounced international division of labour brought about by globalisation. the relocation of certain production stages is inevitable. it allows our companies to stay competitive in the face of high swiss labour costs. in some respects, the jobs created abroad secure those at home with more added value. " one out of
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##udential regulator unclassified ref # x798971 v1. 2 unclassified expectations to be responsible for the prudential regulation of more than just banks. for us, this means we are also responsible for the prudential regulation of non - bank deposit takers, financial market infrastructures, and insurance companies in new zealand. these types of financial institutions serve important roles in new zealanders β lives, and also present different risks to the financial system. expectations to use more than market discipline. while market discipline still plays an important role, there are expectations on us to also apply greater regulatory discipline to have a more intensive approach to supervision. this was highlighted in the international monetary fund β s 2017 financial sector assessment program report of new zealand, and through lessons learned from the failure of cbl insurance. 8, 9 expectations on us to be fully prepared for crisis management. during the global financial crisis, the government established a temporary deposit compensation scheme, which highlighted that our strict approach of disclosure, market discipline, and buyer beware was not enough. the government has announced that it intends to introduce a permanent deposit compensation scheme, to bring us in line with our international peers. 10 expectations on us to recognise the role financial stability plays in enabling financial inclusion and financial innovation. financial stability is the foundation needed to enable financial inclusion and innovation, to help create a diverse and vibrant financial system that serves all new zealanders. expectations on us to take a long - term perspective on issues like climate change. we are recognising the impacts that climate change can have on the financial system. we released our climate change strategy in 2018, which focuses on ways in which we can contribute to efforts to identify, understand and manage the risks of climate change for new zealand's financial system. we are also part of the network for greening the financial system ( ngfs ), a global network of 114 central banks and financial supervisors. 11 expectations on us to work collaboratively with other regulators, both domestically and internationally. we are part of the council of financial regulators ( cofr ), along with the other financial system regulators in new zealand : the financial markets authority ; the commerce commission ; the ministry of business, innovation and employment ; and the treasury. 12 we also maintain relationships with central banks and prudential regulators around the world, including as part of the trans - tasman council on banking supervision. _ _ _ _ _ _ _ _ _ _ _ _ 8 the
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environment that is prone to greater volatility and increased uncertainty, there will be a greater trend to diversify risks. this will also contribute to overall global stability in the international financial system. on our part, the bank is committed to collaborate with the chinese authorities to facilitate the use of renminbi that is anchored on real sector activities for the mutual benefit of our countries. today β s seminar will discuss the issues concerning the use of renminbi in trade and investment. on this note, i wish you all a productive and successful engagement. bis central bankers β speeches
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entered into a currency swap arrangement ( csa ) agreement with the people β s bank of china, which was renewed early this year with an expanded amount of renminbi 180 billion. the objective is to ensure a ready supply of renminbi in the domestic financial markets to meet the demand by businesses. an important piece of the infrastructure that was put in place in 2010 was the provision of direct quotes between renminbi and ringgit in the interbank foreign exchange market on the china foreign exchange trade system ( cfets ). efforts were also made to enhance the transparency in the exchange rate between renminbi and ringgit for the trade - related settlement transactions. in march this year, the real time gross settlement system in malaysia was expanded to include settlement services in renminbi. this serves to provide a safe and efficient clearing and settlement platform that supports trade and investment flows in renminbi. a nationwide awareness program by the banking institutions and the business chambers is also creating greater awareness on renminbi for trade settlement and investment. the bank has also participated in the chinese interbank bond market. in 2011 alone, the size of renminbi trade settlement in malaysia expanded by four times from the level a year ago, reflecting a growing interest in renminbi as a settlement currency. the expansion in renminbi usage has also been underpinned by a diffusion of corporate players, both in size and across the sectors. not only has the number of corporate players increased, but there has been a shift in relative significance in the use of renminbi as a trade settlement currency from the smaller to the larger corporations. there has also been more widespread corporate participation from a larger cross - segment of economic activities, namely the commodity based industries, manufacturing and services sectors that also includes tourism and education. there has also been an increase in the number of financial institutions participating in renminbi trade settlements. there are now 19 financial institutions that facilitated such trade settlements, double the number in 2009. more recently, there has been an increase in the use of the renminbi as an investment and funding currency. in the first seven months of this year, renminbi deposits in the banking system had tripled. also evident is the growing interest in raising financing in renminbi to meet funding requirements, with two issuances of offshore renminbi sukuk out of malaysia and a renminbi bond issuance by malaysian corporations. the progress made thus far, while modest, has significant potential given
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##a. in either case, if emerging economies experience the formation and the burst of a bubble, the influence will also rebound to advanced economies. several years ago, when japan was implementing its quantitative monetary easing policy, there were criticisms from asian colleagues that such a policy was promoting carry trades. there have been similar arguments, expressed even more vigorously, since the federal reserve recently implemented its large - scale asset purchase program. although it is understandable for advanced and emerging economies to have their different views, what is essential for us is to acknowledge that we are all in the same boat when it comes to the globalized economy. there is as yet no clear - cut answer to these difficult issues, but i believe it is important that each jurisdiction embraces the following approach when implementing monetary policy. first, advanced and emerging economies need to rethink the meaning of domestic stability of both prices and economic activity, before actually implementing monetary policy. every central bank aims at ensuring domestic stability for its jurisdiction at any time. however, in order to attain this objective under circumstances of economic and financial globalization, it is becoming important for central banks to take into account the impact that their own monetary easing or lack of flexibility on foreign exchange rates might have overseas, as well as the feedback effects on their jurisdictions. second, it is also important to implement measures from a prudential policy perspective. in this regard, the hong kong monetary authority ( hkma ) has sounded a warning since last year about the rapid increase in real estate prices, implementing a variety of policy measures, such as the lowering of the loan - to - value ( ltv ) ratio. these macro - prudential measures are particularly essential for hong kong, where a fixed foreign exchange rate regime has been adopted. an issue currently of global importance is how to design macroprudential measures appropriate to the situation of each domestic economy and to the degree of development in financial markets. iv. economic development in japan and other asian economies so far, i have expressed my views on the outlook for the global economy. next, in the little time remaining, i would like to change the topic and talk briefly about economic developments in japan, with particular reference to the economic relationship with other asian economies. the japanese economy is facing a number of difficult challenges, as indicated by the declining trend of gdp growth rate. we, japanese people, often tend to be rather selfreflective, which is also considered a virtue, but i feel that this tendency has been going too
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risks. on the other hand, credit demand of private firms continues to lack momentum as the level of corporate expenditures such as business fixed investment remains below firms β cash flow. moreover, firms continue to reduce their debts as part of their balance - sheet restructuring measures. as a result, credit demand in the private sector has continued to be basically stagnant. in view of this, the underlying tone of private banks β lending remains sluggish. meanwhile, the growth rate of amount outstanding of corporate bonds issued is recently rising slightly. the amount outstanding of cp issued is well above that of the previous year and marking the highest level to date, reflecting the favorable environment for issuing cp. the growth rate of money stock ( m2 + cds ) in june was higher than that of the previous month due mainly to the inflow from postal savings. funding costs for firms are on a declining trend reflecting developments in market interest rates. in this financial environment, the lending attitudes of financial institutions and corporate financing conditions remain easy as a whole. for the time being, attention should be paid to the effects of the monetary easing measures taken by the bank, while careful monitoring is required for the effects of stock price developments and corporate profit conditions on the behavior of financial institutions and the fund - raising conditions of firms.
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