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that we concluded in july. the review was prompted by historically low interest rates driven by the trend decline in the equilibrium real interest rate, and the limits on lower interest rates as a result of the implications of the effective lower bound for monetary policy. we concluded that under these circumstances it is essential to build a sufficient inflation buffer. we agreed that a symmetric two per cent inflation target in the medium term suffices to create the monetary policy space required to be effective in tackling negative shocks. we also concluded that, if the economy is close to the effective lower bound, it is vitally important to adopt especially forceful or persistent monetary policy action to avoid negative deviations from the inflation target becoming entrenched. this may also imply a transitory period in which inflation is moderately above target. climate considerations played an important role in the strategy review. the ecb has decided on an action plan with an ambitious roadmap to incorporate climate - related goals into the monetary policy framework. monetary policy has many linkages to payment systems and market infrastructures, where the implementation of monetary policy operations eventually takes place. one such link is the issue of central bank digital currency, cbdc. this will be the theme of the third day of this conference and the topic of the keynote presentation by professor dirk niepelt. the eurosystem is closely following developments in digitalization and changing payment habits. in july 2021, it decided to launch an investigation phase to explore options for issuing a central bank digital currency in the euro area, a digital euro, and possible designs for this. this investigation phase for a digital euro will last 24 months. it will answer key questions on the design and distribution options for a digital euro. a digital euro would not replace cash but would complement it and provide european citizens with a safe form of money in a digital world. going forward, the eurosystem β s work on the digital euro will involve close dialogue with other european authorities and active engagement with stakeholders to ensure that the views of the general public and the private sector are properly considered and taken into account. no actual decision has yet been taken to issue a digital euro. rather, the eurosystem β s investigation phase is all about preparing for what the future may bring and require. after the investigation phase, a multi - year realization phase could then follow, but a decision by the eurosystem about whether or not to issue a digital euro will only come at a later stage. ladies and gentlemen, let me conclude.
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tightening of monetary policy globally, both the extent and pace, has been unprecedented. without doubt, the ecb's rate increases are being transmitted forcefully to euro area financing and monetary conditions. however, the lags and the strength of transmission to the real economy remain uncertain. slide 2 recent events in the financial markets have heightened uncertainty, which may influence the transmission of monetary policy in the euro area, too. however, the euro area banking sector is resilient. the banks have strong capital and liquidity positions, well above the minimum requirements, and far above the levels prevailing before the global financial crisis. but of course we must remain vigilant to identify risks. my final point is on communication and forward guidance. i draw from research suggesting that central banks should never tire of communicating their objectives and outlining the elements of their monetary policy reaction functions. for the bank of japan, the recent decision to do a broad - perspective review of monetary policy will provide an excellent opportunity for such communication. when it comes to the ecb governing council, our communication guidance reflects the prevailing uncertainty. since march we have been providing information on the critical elements that we monitor in determining our data - dependent approach on policy rate decisions going forward. these elements are, firstly, an assessment of the inflation outlook in the light of incoming economic and financial data ; secondly, the dynamics of underlying inflation ; and thirdly, the strength of our monetary policy transmission. in our monetary policy stance, we have recently reached a point where rates are in restrictive territory. in my view, it is essential that we see a steady and sustained decline in underlying inflation before we start considering easing the policy again. the governing council has already made it clear that we will continue to follow this data - dependent approach to determining the appropriate monetary policy stance. the journey is not over yet. on that note, i shall conclude my remarks. i would just β finally β like to express my thanks for this opportunity to share my views with such distinguished fellow panelists. i look forward to our discussion. 2 / 2 bis - central bankers'speeches
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up house prices even further, with mortgage interest tax relief the clearest example of this. schemes that were introduced to give first - time buyers greater opportunities in the housing market are unfortunately mainly having an adverse effect. altogether, this causes spiralling higher house prices and increasing debt levels. lending behaviour developments are generating risks for households and financial institutions. banks, however, do not yet take sufficient account of the systemic risk inherent in the housing market. they are vulnerable to the impact that a price correction on the housing market would have on economic activity, and thus on the quality of their loan portfolios. in order to increase their resilience, we will introduce the previously announced floor for risk weighting of mortgages on 1 january 2022. final remarks now the recovery of the dutch economy is gaining traction, it is important to refocus on structural vulnerabilities. on the housing market, but of course also when it comes to the energy transition and the problem. the formation of a new coalition government offers the perfect opportunity to set out appropriate policies in these areas. this concludes my introductory statement. i would be happy to answer any questions you may have. 2 / 2 bis central bankers'speeches
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. financial markets first, international financial markets. since the unrest of march 2020, risky behaviour among investors has increased sharply again. spurred on by low interest rates, investors are sailing close to the wind and the appetite for risk is high. this is reflected in high price - to - earnings ratios on equity markets, ever - lower risk premiums on risky bonds, and historically high issuance levels of risky corporate debt, which is often also highly leveraged. this risky behaviour is only sustainable at low inflation and interest rates. increasing inflation is making financial markets jittery, fuelled by fears of a tightening in monetary policy and rising 1 / 2 bis central bankers'speeches inflation. and that is precisely what we have been seeing on the stock markets in the past few weeks : sentiment is less exuberant, as inflation is again back on investors β radar. i also still expect that the inflation shock we are currently witnessing is largely temporary. nonetheless, from the perspective of healthy risk management, it is also important to take other scenarios into consideration. also because the 1970s taught us that we do not have an unlimited capacity for envisaging how temporary inflation is. if financial markets fail to take sufficient account of scenarios involving persistently high inflation and its accompanying interest rate environment, it could lead to shock price falls in the future. housing market on to the dutch housing market. it won β t have escaped anyone β s attention that house prices have risen even more steeply this year. over the past five years house prices have on average risen by 8 per cent annually, but we have recently seen nationwide annual rises of over 15 per cent. house prices are also rising faster in the netherlands than elsewhere in europe, so this cannot be ascribed solely to low interest rates. there is a persistent shortage on the supply side of the housing market, and additional housing construction efforts are certainly required. however, housing shortages have always existed and will probably never completely disappear in a densely populated and neatly organised country like the netherlands. the exuberant rise in house prices has more to do with dutch households β borrowing capacity. there is quite simply too much money and too few houses. buyers are stretching the boundaries to place the winning bid, displaying increasingly risky lending behaviour. particularly first - time home buyers are more often borrowing at the limit relative to their income. it is still possible to finance the full value of a property with a mortgage. interest - only mortgages are again becoming popular. the many tax advantages available serve to drive
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, the deterioration in the economic cycle and in borrowers β credit quality has led to increasing provisions against loan losses. second, the plunge in global and, in particular, european stock markets has given rise to greater risk aversion and uncertainty in other financial markets. this has reduced banks β noninterest income from investment banking and trading activities. we also find that, for many large banks, diversification has not generated the desired benefits, as several businesses have deteriorated at the same time. in particular, internationally operating banks have been affected by the adverse capital market behaviour owing to the high proportion of their investment banking and asset management business. banks that focus on retail banking and have a strong franchise in domestic markets have fared best under the prevailing circumstances. in our analysis we have focused, in particular, on banks β heightened credit risks. banks β loan loss provisioning has already accelerated and banks have generally anticipated the increase in loan losses by improving provisioning reserves. the strain on banks β profitability could therefore continue over the short term. nevertheless, the profitability of eu banks at mid - 2002 was not much below the average between1995 and 1999 and the level of provisioning is still in line with what tends to be normal provisioning levels in an economic downturn. eu banks β solvency levels have remained unaffected in all size groups of eu banks, allowing them to withstand the shocks in their operating environment. the aggregated total regulatory capital ratio for the eu banking system as a whole in 2001 stood at 12 %, i. e. well above the required minimum level of 8 %. eu banks have made efforts not only to maintain but also build up capital levels. their resilience in the face of adverse developments owes much to the satisfactory capital buffers that are in place as well as to improved risk management, active cost - cutting efforts and continuous access to wholesale market liquidity. however, attention should be paid to the preservation of adequate capital levels, since a deterioration in profitability reduces banks β ability to withstand further shocks. given the present circumstances, eu banks β lending policies are an issue of particular current relevance. the quantitative and qualitative information collected at the committee level does not provide strong evidence of supply - side constraints in any member state. eu banks seem to have appropriately tightened credit standards - pricing as well as collateral requirements - in line with increased risks, rather than becoming restrictive in lending because of capital shortages. finally, let me try to give an outlook for risks
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process will begin. the fed has said that it will depend on economic conditions, as obviously it must. moreover it will only be a step on what is likely to be a fairly long path back towards β normal β monetary policy. we can be fairly sure, though, that there is ample potential for this shift in direction to reverberate around global markets. that β s what usually occurs when the fed changes course. the anticipation of this has already been a factor affecting markets, including in particular those in some important β emerging market economies β, at various points this year. it is sensible to assume that this will be the case over the period ahead, as β tapering β begins and as market participants try to ascertain its extent and pace. turning to the australian economy, in february we felt that growth had moderated somewhat and would be below trend for a while, within a range of 2 β 3 per cent for 2013. broadly speaking that is what has occurred. our most recent statement on monetary policy, released bis central bankers β speeches in november, put likely gdp growth within that range. the recently released september quarter data don β t cause any material change to that view. this result reflects quite subdued growth in private domestic demand, partly offset by quite strong growth in exports. the very large run - up in mining investment has reached its peak, while non - mining investment remains at a low ebb, and dwelling investment spending is only in the early stages of an upturn. consumer spending has been rising, but at a below average pace, as people adjust to slower growth in income and look to contain or reduce debt. inflation has remained consistent with the 2 β 3 per cent target. for the year to december, it looks as though the consumer price index will have risen by about 2Β½ per cent, with underlying inflation perhaps a little below that. our assessment is that inflation will remain consistent with the target over the next one to two years. looking ahead, resource sector investment will decline β gradually at first but more quickly thereafter. it will most likely fall considerably over the next few years. there is therefore scope for other forms of private demand to grow more quickly, the more so as government spending is scheduled to be subdued. investment in dwellings shows clear signs of a significant increase, and exports of resources will continue to rise strongly. it is likely that capital spending by firms in some sectors outside the resources sector will eventually pick up, but this will take some time yet and it
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quantitative easing and the shock of international oil price caused a destabilizing force to the emerging economies that are fundamentally sustained by domestic demands well - formulated monetary policy. the growth in the capital market has also been challenged by the oil price decline and low interest policy in the advanced market. 7. despite the uncertainty faced by the industry, i am confident that the islamic financial industry could maintain its pace of growth in years to come. there are at least five driving forces to sustain the industrial development including the growth of emerging economies, cross - border financial transactions, innovative islamic financial products, regulatory advancement driven by more advanced and comprehensive regulatory standards, and continuous growth of muslim population. bis central bankers β speeches achieving greater sustainability in the economic development and financial outreach distinguished guests, ladies and gentlemen, 8. the development of islamic finance is expected to provide benefits to wide range of customers. those include the low income society that currently does not have access to the financial system to make their life better. according to some studies, it is found that there are quite many people in oic member countries that still live under poverty line. most of them is unable to upgrade their quality of life and turn themselves into productive society due to the lack of assets in hand and the absence of financial products and services with low cost of funds. 9. moreover, due to lacks of other resources, they are also remote from supportive education program and health facilities that are potential to strengthen the basic necessities to gain quality in human capital. without properly designed poverty alleviation program that particular group of people may be trapped in the poverty for ages. in some occasion, low income society has been perceived as involving high risk and too expensive to manage since it requires an extensive effort to manage highly dispersed customers. as a matter of fact, if proper mechanism and procedures supported by well - developed regulation, microfinance industry can also be highly lucrative. 10. islamic finance with a wider application of equity - based financing and micro - finance products can facilitate greater outreach to medium, small and micro enterprises to promote entrepreneurship and value - creating activities. conceptually, greater access to financial services can be provided by commercial based islamic financial institutions such as islamic banks providing microfinance products or micro takaful provided by takaful institutions. other steps can be formulated such as integrating commercial sector with islamic social sector to come up with financial services that are reachable by the micro entrepreneurs and low income society in general. the program is aimed at improving social welfare
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until the asian crisis hit in 1997, the existing restriction on capital inflows were only applied to foreign borrowings by banks and companies with government - linked projects and net open foreign exchange position ( nop ) on banks as a prudential regulation. prior to the crisis, this system had contributed to sustained high economic growth, thereby promoting our long term development program. foreign capital inflows had also fostered the deepening of domestic financial sector by expanding market liquidity. however, the benefits of capital inflows, in particular in the early 1990s, were undermined by financial market imperfection stemming from lax regulation and supervision and moral hazard due to implicit guarantees. these problems were reflected in the inefficient allocation of capital, unhedged foreign liabilities, and inflated asset prices. as market confidence in the prospect of the economy of the emerging market in asia faltered, reversal of capital outflows could not be arrested, thereby leading to capital account crisis. with the hindsight of the asian crisis, the central bank has sought to strengthen the monitoring on the capital movement and minimize speculative transactions. to this end, in 2001 bank indonesia issued a regulation on the non - internationalization of the rupiah. subsequently, when a wave of capital reversal and speculation against the rupiah triggered by rising world oil prices heightened in 2005, we issued a series of micro policies addressing the imbalances in the demand and supply in the forex market. furthermore, prudential regulation in the banking sector was also strengthened through a tighter ruling on the nop and particular transactions in forex trading. indonesian floating exchange rate regime needless to say to fellow governors that the choice of an exchange rate system depends to a great extent on the condition of a country at a given time. in the current context of indonesia, under a free capital mobility and limited amount of international reserves, we believe that our floating exchange rate system adopted on august 14, 1997 is an optimal choice. the system, we believe, provides a built - in discipline in a market whereby all other infrastructures are not sufficiently strong. this float will in part create a break on imprudent overseas borrowing, because in doing so market participants will have to factor in the cost of possible movements of rupiah. we are fully aware that in the case of domestic financial markets with imperfections, such as the thin forex market and limited availability of hedging instruments, a floating rate system often leads to high vol
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benoit cΕure : productivity and growth - innovation and diffusion introductory statement by mr benoit cΕure, member of the executive board of the european central bank, at the session " revitalizing the global economy ", world economic forum, davos, 20 january 2017. * * * the panel β s main theme is the question of how can we boost productivity and economic growth in the long - term. this is a topic that matters for central banks. long - term growth rates are important for interest - rate setting since they influence and define equilibrium real interest rates in the economy. and policymakers taking the question seriously will help dispel misplaced expectations that monetary policy can create sustainable long - term growth. when it comes to economic growth, it is always useful to go back to the textbook and conduct simple growth accounting decompositions. by definition, growth in output per capita equals growth in labour productivity plus growth in hours worked per capita. in many advanced economies and in the euro area in particular, growth in hours worked per capita looks set to shrink, in the long run, due to adverse demographics and a falling working age population. using oecd population projections and holding labour productivity constant, by 2050 the decline in output per head induced by ageing would be 14 % in germany, 16 % in italy and 22 % in spain. a continuation of current rates of labour productivity growth in the euro area would just about offset that scenario. but this would mean running just to stand still. if we are to raise living standards within ageing societies, productivity growth must accelerate. and yet what we see today is sluggish labour productivity growth relative to twenty years ago in most advanced economies. this is in part because so - called capital deepening has slowed β the amount of capital per worker β as investment has fallen during the crisis. but it also reflects weak trends in total factor productivity, which captures increases in efficiency from new technologies or more efficient business processes, and which is thought to be the main contributor to long - term economic growth. raising total factor productivity is about two main things : innovation and diffusion. the former is about the creation of new technologies at the global frontier, and the latter about their spread to other countries and non - frontier firms, that is, firms that are less productive than those at the frontier. to lift aggregate productivity both mechanisms need to be working β and we are not seeing that sufficiently in the euro area at the moment. regarding innovation or technology creation, we
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β structural reforms : learning the right lessons from the crisis β, speech at the bank of latvia economic conference 2014, riga, 17 october 2014. 3 / 3 bis central bankers'speeches
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earlier. however, we have been, and will continue to work closely with apra. we continuously update one another on our prudential regulations, we maintain a strong working relationship, and we also respect each other β s objectives as regulators aiming to protect our respective financial systems. conclusion with new zealand β s macroeconomic policy framework and strong financial sector soundness, investors can have long - term confidence in new zealand as an investor destination. the prospects of sustainable and productive growth are enhanced through predictable macroeconomic policy settings and avoidance of financial crises. economic and other shocks have constrained new zealand β s economic performance historically. although our macroeconomic stability has improved in recent decades, we remain vulnerable to external and domestic disturbances. overall debt levels remain high while the concentration and persistence of high - leverage within segments of the household and agricultural sectors questions the quality of banks β lending standards. the more enduring that low interest rates are, and the more successful they are in promoting borrowing and investment, the more they are likely to pose challenges to the reserve bank β s financial stability objectives. the reserve bank has a number of tools it applies to manage financial stability risks, and its lvr policies have a role in limiting the risks that could arise from increasing leverage through inadequate lending standards. more capital is a key part of building new zealand β s economic resilience for when severe shocks do occur. we are in the process of weighing up the costs and benefits of how much more and the type of capital that is appropriate for the desired level of resilience, and the timeframe to achieve it. decisions on the capital review are expected to be released in the first week of december.
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supporting sustainable economic growth through financial stability policy speech delivered to citi australia and new zealand investment conference on 16 october 2019, in sydney by geoff bascand, deputy governor and general manager of financial stability good morning everyone, my thanks to citi for the invitation for me to come here today and speak with you all - it β s a pleasure to be here. today i β m going to start by setting the scene to give you an understanding of where the reserve bank of new zealand is currently at in achieving both price and financial stability, and i β m also going to outline the risks that new zealand is exposed to in a local and global environment. setting the scene the reserve bank of new zealand β s purpose is to promote the prosperity and wellbeing of new zealanders, and contribute to a sustainable and productive economy. for this speech i want to mostly focus on how we promote sustainability by delivering on our objectives : price stability, maximum sustainable employment, and financial stability, and the tools we apply to help keep the economy productive. over the past thirty years, we have seen economic volatility decline following the introduction of inflation targeting, with prices becoming more stable and remaining at relatively lower levels ( figure 1 ). figure 1 : the decline in inflation volatility during the inflation targeting era in new zealand source : stats nz, rbnz calculations. over this same period we have also seen improvements in economic growth, as well as less volatility in this growth ( figure 2 ). figure 2 : quarterly real gdp growth before and during the inflation targeting era source : stats nz, rbnz calculations. with monetary policy maintaining price stability and supporting maximum sustainable employment, other policies we have are aimed at maintaining financial stability. what we mean by β financial stability β is having a financial system that can withstand severe, yet plausible, shocks and avoid financial crises. these crises can destabilise economic activity and severely impact business and household income. indeed, evidence from a wide range of countries over many decades shows us that when crises do happen, they are immensely damaging and can have long - lasting effects. 1 usually our price stability and financial stability policies are complementary. however, the low interest rate world we live in complicates achieving both of our objectives, encouraging a build - up of leverage in the financial system. the persistent decline in long - term and shortterm interest rates has supported very high levels of private sector leverage. see the discussion of economic and social costs in bascan
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##ably in all our interests to make a sound diagnosis of the health of our banking system. now let β s take a closer look at the survey. the check - up covers three areas. first, it analyses profitability on the basis of business figures β here, we look not only at the institutions β planning and forecasts up until 2021, but also at how the annual results would change under the assumption of different interest rate levels in the future. we supplemented these quantitative analyses with qualitative questions, whereby the banks and savings banks gave a uniform assessment of the future of their institution and the banking sector. the second area is stress testing. in this context, we analysed what would happen to the capital base of the institutions if they had to cope with particular external stress events. for the first time, in addition to the classic stress factors of interest rate, market and credit risk, we also stress tested residential real estate. residential real estate also formed part of the third area of analysis, in which we examined other 1 / 6 bis central bankers'speeches key risks. besides risks in the residential real estate sector, we performed a detailed analysis of lending standards and the position of building and loan associations. our examination centres on the question of how the low - interest - rate environment is affecting the resilience of banks and savings banks. in order to grasp the effects of possible future interest rate levels on credit institutions, we calculated how the profitability of the institutions would change if the interest rate level were to move in one direction or the other. what were the underlying scenarios we used? for the first area, the analysis of profitability, we first asked the institutions to provide their threeyears plans using a uniform template and requested forecasts for a further two years. in addition to this, we examined supervisory interest rate scenarios : a sustained low - interest - rate environment, a positive interest rate shock of 200 basis points, a negative interest rate shock of 100 basis points, and a turn in the yield curve of + 200 basis points at the short end and β 60 basis points at the long end, each at the beginning of this year. the institutions β balance sheets could be altered for some scenarios, and not for others. for the stress test, the impact of a positive interest rate shock of 200 basis points was compared with that of a continued low - interest - rate environment. the scenario also assumes a 200 basis point increase in the probability of default and a 20 % increase in the
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andreas dombret : results of the low - interest - rate survey conducted by the bundesbank and bafin opening statement by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the press conference presenting the results of the low - interest - rate survey conducted by the bundesbank and bafin, frankfurt am main, 30 august 2017. * * * 1. introduction ladies and gentlemen are you familiar with the german smartphone app β app zum arzt β? it advises the user on which medical check - ups they should have. i can only recommend it to everyone, given that prevention is clearly the best cure. despite all the fintech mania, however, we banking supervisors have not yet morphed into app developers β though for us, too, prevention is a high priority. and it was precautionary motives that led us to once again conduct the low - interest - rate survey. in this third instance, after our surveys in 2013 and 2015, we want to establish exactly how healthy the german banks and savings banks are at this moment in time, and how susceptible they are to future ailments. that is why we gave the small and medium - sized credit institutions overseen by the bundesbank and bafin a comprehensive check - up ; the large institutions that are directly overseen by the ecb are excluded from this survey. over the past few months, we asked 1, 555 institutions about their profitability and resilience β in numerical terms, that β s 88 % of all german institutions. with aggregate total assets of around β¬3, 000 billion, they represent roughly 41 % of the entire german banking sector. thanks to the results of the survey, we can provide an exclusive insight into the current and future risk situation facing german banks and savings banks. the survey was based both on assumptions made by the institutions and on stress scenarios defined by the supervisors. before mr roseler and i present the results, let me begin by saying one thing. without a doubt, the low - interest - rate survey consumed a great deal of time and money. i would therefore like to take this opportunity to thank the participating banks and savings banks as well as their associations and it service providers. you all deserve a huge thank you, because without your cooperation, a survey like this would not be possible. but i am certain that the insights to be gained from this check - up justify the effort β after all, it is unquestion
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authorities themselves to manage the boundaries between their responsibilities and identify the necessary forms of coordination and information sharing. i have described the steps already taken in this respect and the initiatives under way. apart from any technical improvements required, this model appears to be decidedly preferable to the creation of complex and rigid entities. it makes it possible to perform coordination more efficiently, to adapt the latter β s forms and content to the evolution of the market with the necessary rapidity, and not to impinge on the authorities technical independence. the introduction into the banking industry of the system for legislating and providing supervisory coordination and cooperation known as the lamfalussy system, 19 with the creation of the european banking committee and the committee of european banking supervisors, has eroded the scope for autonomous regulation by the member states and shifted both legislative choices and the process of establishing uniform supervisory practices to community level. there thus appears to be a decline in the importance of the interministerial committee for credit and savings, whose function of providing legislative guidelines has shrunk considerably as a consequence of the integration of european financial regulation, not infrequently by way of maximum harmonization solutions, in both primary and secondary legislation. articles 9 and 10 of law 262 / 2005. commission decisions of 5 november 2003, 2004 / 5 / ec and 2004 / 10 / ec. on the other hand new coordination needs are emerging that involve the political as well as the technical sphere and make it desirable to find ways of linking up the ministry for the economy and finance and the supervisory authorities. these needs primarily concern the prevention and management of financial crises with potentially systemic effects. the problem has not only a national but also a european dimension. the necessity of tackling it was referred to in the proposals put forward by the eu economic and financial committee in march 2006 on the basis of the indications expressed by the informal scheveningen ecofin meeting. the minister for the economy and finance also mentioned this point when he reported to parliament on the ministry β s policy guidelines. these matters need to be studied, including by reference to the best solutions adopted in other legal systems and the experience being gained with crisis simulations coordinated at european level. it is necessary to find forms and methods of coordination that distinguish properly between the responsibilities of the regulatory and political authorities. the former include the identification, on the basis of technical evaluations, of a state of crisis. on the other hand, the management of crises that have been declared, when they are of a systemic
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one could expect that the chinese authorities will have both the will and the capacity to respond, the more so now that inflation has moderated. china will have cycles like other economies, but it seems likely that the chinese economy will grow pretty strongly on average for a while yet. it will be a very large economy. even at the new growth target of 7Β½ per cent, a lower target than in the past five years ( all of which were, of course, exceeded ), chinese gdp will equal that of the united states, in purchasing power parity terms, in about a decade. it will exceed that of the euro area within the next few years. there are issues of rebalancing the sources of growth in asia, to which i shall return shortly. but the main point for now is that the global economy is faced at present with a year of subtrend growth in 2012, according to international forecasters. this is a subdued but not disastrous outcome. and asia in particular is well - placed to do fairly well, given sensible policies. downside risks certainly do remain, and are easier at this point to imagine than upside ones. at this point though they remain risks, rather than outcomes. what then about australia? at the moment, the viewpoints of those inside australia differ somewhat from those of people outside australia. viewed from abroad, judging by what people say, observers see an economy that experienced only a relatively mild downturn in 2008 β 2009, that made up the decline in output within a few months, and that has continued to expand, albeit at only moderate pace, since then. they see an economy that has not experienced a significant recession for 20 years, that has strong banks and little government debt β and that debt remains aaa - rated. some observers worry about high levels of housing prices and household debt. this is understandable given the problems that have occurred in some other countries. but then others point out that the arrears rate on mortgages, at 60 basis points, is quite low, and that the rate of new construction of dwellings in recent years has been low relative to population needs. bis central bankers β speeches foreign investors see a country that remains quite open to them, and that, reflecting its economic circumstances, offers rates of return that are high by international standards, even though they are low by australian historical standards. they understand the potential returns on the mineral and energy wealth stored in or around the australian continent, and that our terms of trade have over
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both positive and negative. but in general, the theories, practice and experiences are driven by isolated events instead of a systematic plan. there is no theoretical conclusion made from the strategic perspective of constructing a harmonious socialist society, and no practice under the guidance thereof. because of the absence of a systematic financial theory, institutional and policy system to guide and push ahead the construction of a harmonious society, it is difficult to display the synergy of the entire financial sector in this cause. in the new century, especially since the 16th cpc national congress, we have clarified the strategic importance of building a socialist harmonious society for the socialist society construction drive. in addition, the just concluded 6th plenary session of the 16th cpc national congress adopted the decisions on major issues concerning the construction of a harmonious socialist society. as the center of the modern economy, finance should and is able to play an important role in the construction of a socialist harmonious society. so far, the financial sector has not fully adapted to the endeavors to build a harmonious socialist society. we need to make major breakthroughs in financial reform in the future. one of the major tasks is to conduct theoretical analysis on how to utilize the financial sector to support the building of a harmonious socialist society, and find a way for the sector to do so.. since structural imbalance is a major strain, finance should make its due contribution to solving the structural imbalances. to be specific, the financial sector should move away from the concept of β favoring the rich over the poor β, and provide, based on the market principle, necessary support to industrial sectors, regions and groups that are short of funding and lag behind in economic and social development. this is not only a requirement for the financial sector to support the harmonious economic development, but also a responsibility. as such, i believe it necessary to put forward the concept of β developing the financial system for the disadvantaged β to fully display the functions of the financial sector in the construction of a harmonious socialist society. 2. definition of the concept β finance for the disadvantaged β refers to the financing activities for the underdeveloped areas and groups. so far in china, it is meant to be the support rendered to the disadvantaged sectors with agriculture as the primary one, less - developed regions mainly in central and western china, and disadvantaged groups of farmers and laid - off workers in urban areas. it is fair to say that finance for the disadvantaged represents a revision to traditional finance
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the local investment environment. in one word, this perception has marked a sharp difference from the past. many people used to hold the view that banking credit was actually confined to local use and the credit risks of the national commercial banks could be transferred to the government. now i am pleased to see some positive changes. from the perspective of the commercial banks, they are able to move credit fund from the high - risk areas to areas with low risks. they can also float the lending rate to reflect the financial risk difference among various regions. form the point of the local governments, they now care about not only the local financial environment, but also the quality of the local customers of the financial institutions. that is to say, they stress much about the creation of a sound local credit system under which businesses in the region must fulfill their fiduciary and debt obligation. apart from that, public listing companies in the region are also encouraged to timely disclose reliable and quality information so as to lay a solid reputation for other companies in the region seeking public offering. in my view, these are important and positive progress which owes much to the efforts of both the local governments and the commercial banks. however, we must recognize that these efforts only mark the beginning of a long process, and the remaining regional risk difference means the internal risk rating will continue to be applied in the foreseeable future. as the final note, i would like to point out that, despite the above progress, much remains to be done to eliminate the regional financial risk difference in china. regional segregation and disparity once has been a major obstacle to china β s economic reform. but i believe the market forces will finally prevail. with the implementation of the basle capital accord ii and the irb, better microeconomic fundamentals will gradually emerge as the local governments strive to improve the regional financial ecological environment and the interactions between the financial institutions and the local governments further strengthen in a positive way. i wish the seminar a great success, thank you all.
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growth for hong kong. in financial services, hong kong has long been the largest offshore rmb centre and this role will continue to grow as the rmb is used more widely in international trade and investment. to develop capacity and maintain its position as the leading offshore rmb business hub, hong kong is working hard on three fronts : liquidity, products, and infrastructure. hong kong already hosts the biggest offshore rmb liquidity pool. the enhanced currency swap agreement with the people's bank of china provides further liquidity support to the offshore market through the rmb liquidity facilities set up by the hkma, to meet the growing business demand. as regards products, hong kong will continue to upgrade and expand the family of connect schemes between mainland china and hong kong. our unique advantages of physical proximity to the mainland, the common law system and world - class infrastructure make us the perfect " testing ground " for china's journey towards capital account liberalisation. at the same time, we are constantly working to widen the spectrum of rmb products and tools for cross - boundary investment, asset allocation and risk management. on infrastructure, the central moneymarkets unit, which is hong kong's central securities depository, is undergoing a major overhaul to upgrade its operational capacity and product offerings, to better support the growth of rmb bond issuance and associated custodian services. our mbridge project, which is a collaboration with the bis and a number of central banks including the people's bank of china is also pressing ahead. our latest pilot test has demonstrated that this wholesale central bank digital currency platform can speed up cross - border payments at reduced cost and with better transparency. we are expecting to welcome more fellow central banks to join this open platform. and very soon we will launch what we call a minimum viable product, 3 / 4 bis - central bankers'speeches with the aim of paving the way for the gradual commercialisation of mbridge. hopefully this new innovative platform will help resolve longstanding pain points in cross - border payments and enhance the efficiency of the global value chain. meanwhile, hong kong will stay at the forefront of the latest global trends such as digitalisation, innovation and esg. as examples, we recently published our new fintech promotion roadmap to accelerate fintech adoption in the financial services industry. hong kong's green financing platform also offers an excellent way for asian corporates to tap sustainable financing and enhance their esg performance. hong kong recently issued the world '
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expectations. similarly, the net effect of fiscal policy on spending may have been weak given that policy measures were probably perceived as temporary, potentially inducing savings in view of higher taxes expected in the near future to finance them. in any case, regardless of their actual effectiveness, the presence of highly expansionary fiscal and monetary stances suggests that the unsatisfactory recovery in advanced economies does not reflect a lack of stimulus measures. 2 on the other hand, recent negative supply shocks have affected the performance of the world economy and particularly that of the united states. these shocks included bad weather, high oil prices which have partly reversed course, and the tragic events in japan during the first quarter of 2011. yet, independently of their importance, these events have been transitory and, therefore, the extent to which they explain the sluggish rebound of advanced countries since 2009 is necessarily limited. the previous observations suggest the need to search for the existence of possible fundamental obstacles to a stronger economic recovery in industrialized countries. while in the current complex economic situation many factors certainly interact, some features stand out. in particular, in the united states, there seem to be two important sources of growth - limiting factors. one is the sequel to the financial crisis summarized by the consumer debt overhang, slow debt restructuring and foreclosed home sales, and high risk aversion and contingent questions about the effects of monetary policy on aggregate demand are found in frederic s. mishkin, β monetary policy strategy : lessons from the crisis, β nber working paper no. 16755, february 2011. for a discussion of the possible limitations of fiscal stimulus, see robert j. barro and charles j. redlick, β macroeconomic effects from government purchases and taxes, β quarterly journal of economics 126 ( 1 ) : 51 β 102, february 2011. bis central bankers β speeches reserve provisioning by banks. the resolution of the problematic debt and credit legacy from the previous asset price bubble, as illustrated by the large number of households with negative home equity, is taking a long time, as seems to be the case in the aftermath of any big financial crisis. this impasse contributes to an explanation of the virtual stagnation of mortgage lending and residential construction in the united states. 3 a second source of obstacles in the united states appears to be the unintended consequences from the corrective measures after the crisis, which might have resulted in heightened uncertainty. these actions include the discussions of eventual fiscal consolidation in terms of future higher
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##e will no longer be necessary. we are not there yet β and that timing is a monetary policy decision that will depend on economic developments. when we get there, we will stop increasing the size of our holdings of government of canada bonds. the monetary stimulus we have injected through our balance sheet will remain, but we will no longer be incrementally adding to it. to keep our holdings of bonds relatively stable, we will need to purchase enough bonds to replace those that are maturing. essentially, we will be reinvesting the proceeds of maturities, so we call this the reinvestment phase. today, i want to update you on the evolution of the economy with a focus on developments over the summer. i will also review yesterday β s policy decision. finally, i want to look ahead to the shift from qe to reinvestment. in particular, i will take the opportunity to fill in some of the details of what this reinvestment phase will look like when we reach it. afterward, i look forward to taking some questions and hearing your thoughts. economic update since july 1 / 5 bis central bankers'speeches let β s review economic developments since the july monetary policy report ( mpr ) because it is progress toward recovery that guides adjustments to our qe purchases. globally, the economic recovery continued through the second quarter, led by strong us growth. while global economic activity is showing solid momentum heading into the third quarter, supply chain disruptions are holding things back in some goods sectors. these disruptions, and the rising number of covid - 19 cases in many regions, pose a risk to the strength of the global recovery. here at home, we expected growth to moderate in the second quarter as canadians grappled with the third wave of the virus. but the slowdown was more pronounced than we anticipated. economic activity contracted by about 1 percent. the decline in gdp reflected a sharp drop in exports, combined with a pullback in housing activity. but consumption, business investment and government spending all contributed to growth, with total domestic demand growing at more than 3 percent. growth in the second quarter was affected by disruptions to global supply chains as well as the impact of necessary public health measures. the global shortage of computer chips is affecting automobile production in many countries, including in canada. this was an important factor contributing to the decline in our exports. and it restrained consumer and business purchases of motor vehicles. shipping bottlenecks are also leading to longer delivery times
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no longer be counted on to support potential output growth in the face of poor trend labour productivity. and, while canada benefits from abundant natural resources, one cannot necessarily count on commodity prices to provide the same boost to income growth in the future as they have in the recent past. here in winnipeg you have reasons for confidence, with a productive and skilled workforce, diverse industry, healthy investment in research and development, and an unemployment rate that is consistently among the lowest in canada. your province has the necessary tools to build productivity and prosperity. as we journey forward, the bank of canada will continue its efforts to understand the trends affecting canada β s economy and sharing what we learn with business leaders like you. we will also maintain our firm commitment to keeping inflation low, predictable, and stable. while there are many variables at play, the 2 per cent inflation target is a constant at the bank of canada, and an essential part of our role to promote the financial and economic welfare of canada. thank you very much. bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches
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lessons can be drawn from this crisis in our efforts to strengthen further the islamic financial infrastructure for a more resilient and stable financial system. in 2009, a task force on islamic finance and global financial stability was formed by the idb and the ifsb to undertake an assessment of islamic finance during the global financial crisis and to identify the further building blocks that are necessary to further strengthen the foundations of the islamic financial system. the report examines the conceptual elements inherent in islamic finance and their effects on financial stability and considers eight further areas of development in the islamic financial architecture to enhance its ability to deal with a more challenging future operating environment. this report completed in april this year aims to support the international efforts towards providing a strong foundation for financial stability in the global financial system. the eight areas for strengthening the financial infrastructure of islamic finance address the institutional capacity both at the national and international level with the aim of contributing to global financial stability. these building blocks which address the core foundations for the development of islamic finance include, first, ensuring the effective implementation of the prudential standards ; second, the development of systemic liquidity management infrastructure ; third, the establishment of strong financial safety nets ; fourth, putting in place an effective crisis management and resolution frameworks ; fifth, strengthen further the accounting, auditing and disclosure standards ; sixth, having an effective macro prudential surveillance in place ; seventh, having credible credit rating institutions and processes ; and finally eighth, enhancing close international cooperation and coordination among countries including in capacity building and talent development to support efforts at the national level to ensure financial stability. islamic finance does not exist in isolation and as it becomes an increasingly important component of the global financial system, it will inevitably be impacted by the changing global landscape of financial regulation. this is particularly important as its growth gains momentum both in terms of number of service providers and in terms of business volume and as the internationalisation process continues. the global call for improved regulation and increased oversight in an international financial environment that is fundamentally different will thus also require us to intensify the efforts that have already been undertaken to strengthen the financial regulation for islamic finance. the financial reforms in islamic finance to support sustainable and responsible innovation, in particular, need to leverage on its inbuilt strengths that set islamic finance apart in performing its role in the mobilisation and allocation of resources to generate real economic activities. in islamic finance, innovation is key in pushing the frontier of market development to generate the range of products and services, processes and
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##ha served as india β s ambassador to the united states and as governor of jammu and kashmir. he was also a member of the widely acclaimed brandt commission which made a persuasive case for north - south cooperation. global cooperation, which is now so much a part of our daily discourse, draws its intellectual origins from the brandt commission report of the 1970s to which dr. jha contributed. this lecture series in his name honours dr. jha β s outstanding service to the nation and his leadership of the reserve bank during a very critical period. so far, there have been 12 lectures. the last one was given by prof. maurice obstfeld of the university of california last year, in december 2011. the lecture by hon β ble mr. shanmugaratnam this evening will be the 13th in the series. the distinguished speaker β mr. shanmugaratnam hon β ble mr. shanmugaratnam is the deputy prime minister of singapore, of course. but he is also the chairman of the international monetary and financial committee, the imfc, a position which puts him in the top echelons of global leadership in the field of finance and economics β a leadership that is playing an important role in steering us through the biggest financial crisis of our generation. bis central bankers β speeches mr. shanmugaratnam has impressive academic credentials β an ms in economics from the london school of economics followed by a masters in public administration from harvard. at harvard, he also received the lucius n. littauer fellowship for outstanding performance and leadership potential, a potential that he fully demonstrated in later career. tharman started his career with the monetary authority of singapore ( mas ) rising to the position of chief executive of that prestigious institution. he quit that job in 2001 to join politics, and has held cabinet appointments variously for education, economic administration and manpower. currently, he is deputy prime minister and minister for finance. i have had the privilege of watching mr. shamugaratnam perform in various international forums including the g - 20 and the imf - world bank meetings. he is widely respected for his intelligence and wisdom and for his uncommon ability to see the big picture even as we grapple with the pressures of immediacy. globally, he is seen as the principal interlocutor on asian economic values and aspirations. achieving inclusive growth : the challenge of a new era mr. shanmugaratnam will be speaking to us this evening on : β
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wider band. on the other hand, malta β s dependence on foreign trade and investment, the country β s track record with a fixed peg as well as the central bank β s commitment to price stability would seem to justify the adoption of a narrow band. as real convergence is progressively achieved and as structural reforms proceed, the case for a narrow band would also become stronger. should this latter path be followed, the burden of adjustment to external shocks would, of course, have to be borne by the real economy. in the first instance, this means pursuing a prudent fiscal policy. the current aim of fiscal policy is indeed to reduce the deficit to gdp ratio to around 2. 5 % by 2004, from 5. 3 % last year and over 10 % in the late 1990s. by restraining domestic absorption, tighter fiscal policy should enhance the credibility of the exchange rate peg. moreover, a smaller borrowing requirement also frees up resources for the private sector and helps to contain upward pressure on interest rates, thereby stimulating economic growth. finally, bringing the budget deficit closer to balance will then give fiscal policy the leeway to respond in the event of adverse shocks or cyclical downturns. the response to shocks will also depend on the degree of flexibility in the economy as a whole. unlike most accession countries, malta has a long experience of a functioning market economy, driven by private ownership of productive assets and with much of it exposed to international competition. in general, therefore, the private sector has already proved that it can cope with adverse shocks. in this regard, the flexibility of the labour market has been especially important. this flexibility must, however, be enhanced in order to safeguard competitiveness. as is the case with any exchange rate strategy, the sustainability of the central rate and, with that, the fulfilment of the maastricht criteria, will hinge on whether that rate is compatible with economic fundamentals. fulfilling this criterion requires an unconditional willingness to defend the external value of the currency. for policy makers that means a commitment to abstain from practices that could be in conflict with the objectives of exchange rate policy. for participants in foreign exchange markets, including the central bank, it implies the need to intervene in the market without hesitation. within this context, the importance which the acquis assigns to the independence of central banks is understandable. whereas the central bank of malta has been formulating monetary policy independently since 1994, there is no doubt that the recent amendments to
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##m ii is thus of particular interest to central bankers. against this background, i will now review some issues which eventual participation in erm ii, and later in emu, raises for policy makers in malta. no significant change in the parameters governing monetary and exchange rate policy emu entails the adoption of the euro and the surrender of autonomy in the area of monetary policy to the european central bank ( ecb ). at this point, however, it is relevant to mention that the additional loss of independence which emu would represent for the formulation of monetary policy in malta is minimal. this is so because the central bank of malta already has limited freedom of action since it operates a fixed exchange rate regime and exchange controls have been almost entirely removed. this means that the bank must adjust domestic interest rates in response to movements in capital flows in a way which is consistent with the peg. too low an interest rate would encourage investors to move out of domestic assets, creating downward pressures on the currency, whereas too high a rate could attract interest - sensitive capital flows which could create upward pressures on the exchange rate. to a large extent, these conditions already govern monetary policy and reserves management in malta. while the monetary policy advisory council does take domestic economic conditions into account, decisions on official interest rates are, in fact, primarily conditioned by trends in the official reserves and in the interest rates on the currencies which make up the basket to which the maltese lira is pegged. malta β s eventual participation in emu, therefore, would not involve any significant departure from the current situation in terms of the degree of autonomy enjoyed by the central bank of malta in setting interest rates. in view of the incompatibility of monetary policy autonomy, full capital account liberalisation and a fixed exchange rate, emu participants have given up independent national monetary polices in favour of the free movement of capital and the adoption of a single currency. the main driving force behind this decision was the desire to overcome the obstacles to the completion of the single market and to progress towards monetary and, eventually, economic union. a single currency was a logical step in this regard. given the constraints which the adoption of the single currency entails, the emphasis which the treaty puts on containing fiscal deficits and on labour mobility is understandable. in this set - up, in fact, the adjustment to asymmetric shocks has to take place through fiscal policy and the labour market. since labour mobility within the union is still weak, however
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communication technologies ( ict ). 3. the european central bank let me now turn to the euro and the european central bank itself, its mandate and its strategy. given the importance of credibility for central banking it is crucial for the success of emu that the treaty establishing the european community β which i will refer to as the " treaty " β provides a sound institutional framework for an effective monetary policy. it is not my intention to review the provisions of the treaty in any detail, but it is worth recalling that the treaty clearly establishes the maintenance of price stability in the euro area - i. e. the internal stability of the euro - as the primary objective for the single monetary policy. this takes into account that the best contribution that the ecb can make to the economic and social wellbeing of the euro area is to focus on maintaining price stability. without prejudice to its primary objective, the single monetary policy shall also support the general economic policies of the european community. however, the means and the responsibility for ensuring other objectives, such as a high level of employment and output growth, lie primarily at the national level and, to some extent, at the level of eu institutions. the allocation of tasks and objectives to different policy - makers in the euro area is thus very clear, which in turn ensures efficiency, transparency and accountability in economic governance. furthermore, the treaty ensures the independence of the ecb. in this way, potential political pressures must be resisted and european citizens can be assured that the ecb will take a long - term, euro area - wide perspective in pursuing its mandate of maintaining price stability. the design of the monetary policy strategy of the ecb was guided by the recognition that monetary policy will always have to cope with a changing and imperfectly known world. in addition, it had to be borne in mind that the creation of emu and the establishment of the ecb marked a historical discontinuity, with potentially profound implications for economic behaviour and measured structural relationships. in these circumstances, the governing council of the ecb chose to announce a quantitative definition of price stability and to equip itself with an internally consistent and at the same time comprehensive and suitably flexible approach to policy analysis. the definition of price stability as " a year - on - year increase in the harmonised index of consumer prices of below 2 % ", along with the emphasis on the medium term, is designed to enhance clarity, to anchor expectations and to provide a yardstick against which the new independent institution
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, after 1. 8 % in july. annual growth in m3 continues to be supported by its most liquid components, with the narrow monetary aggregate m1 growing at an annual rate of 5. 8 % in august. the annual rate of change of loans to non - financial corporations ( adjusted for loan sales and securitisation ) remained negative at β 2. 0 % in august, after β 2. 2 % in the previous month. on average over recent months, net redemptions have moderated from the historically high levels recorded a year ago. lending to non - financial corporations continues to reflect the lagged relationship with the business cycle, credit risk, credit supply factors and the ongoing adjustment of financial and non - financial sector balance sheets. the annual growth rate of loans to households ( adjusted for loan sales and securitisation ) was 0. 5 % in august, broadly unchanged since the beginning of 2013. against the background of weak credit growth, the ecb is now close to finalising the comprehensive assessment of banks β balance sheets, which is of key importance to overcome credit supply constraints. to sum up, a cross - check of the outcome of the economic analysis with the signals coming from the monetary analysis confirms the recent decisions taken by the governing council to provide further monetary policy accommodation and to support lending to the real economy. monetary policy is focused on maintaining price stability over the medium term and its accommodative stance contributes to supporting economic activity. however, in order to strengthen investment activity, job creation and potential growth, other policy areas need to contribute decisively. in particular, the legislation and implementation of structural reforms clearly need to gain momentum in several countries. this applies to product and labour markets as well as to actions to improve the business environment for firms. as regards fiscal policies, euro area countries should not unravel the progress already made and should proceed in line with the rules of the stability and growth pact. this should be reflected in the draft budgetary plans for 2015 that governments will now deliver, in which they will address the relevant country - specific recommendations. the pact should remain the anchor for confidence in sustainable public finances, and the existing flexibility within the rules should allow governments to address the budgetary costs of major structural reforms, to support demand and to achieve a more growth - friendly composition of fiscal policies. a full and consistent implementation of the euro area β s existing fiscal and macroeconomic surveillance bis central bankers β speeches framework is key to bringing down high public debt ratios,
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1. 1 % relative to the previous quarter. on the production side, we estimate that y - o - y growth in gdp was driven by the rising activity in trade, industry and construction, with other services sectors also yielding a positive contribution. in terms of use, growth was driven by domestic demand, where private consumption and fixed investments gave the largest contributions. 5 of 10 faster than expected gdp growth in q1 boosted the likelihood that this year β s economic growth rate will be closer to the central value of the 3 β 4 % forecast range from the previous report, therefore we now estimate gdp growth at the rate of 3. 5 %. other relevant international institutions share similar expectations of economic growth for this year, including the international monetary fund, world bank and consensus economics, and they estimate growth to be among the highest in the central and southeast european region. we expect an additional pick - up in economic activity, to the range of 4 β 5 % over the next two years, which will be facilitated by the realisation of investments planned as part of the β leap into the future β serbia expo 2027 β programme, alleviated global inflationary pressures and more favourable financing conditions. growth will be driven by domestic demand, with a positive contribution of all components. private consumption will increase owing to the continued growth in employment and wages, notably in the private sector, but without major inflationary effects given that wage growth will be largely a result of increased productivity. chart 11 gdp growth projection chart 12 contributions to real gdp growth ( y - o - y rates, in % ) ( in pp ) change in inventories net exports government consumption gross fixed capital formation household consumption gdp ( in % ) - 2 - 2 i ii source : nbs. iii iv i ii iii iv i ii iii iv i ii iii iv i - 4 2017 2018 2019 2020 2021 2022 2023 2024 * 2025 * 2026 * sources : sors and nbs calculation. * nbs estimate. considering that in the past months we heard comments that inflation has eaten up citizens β living standard, i would like to stress that wage and pension growth and decelerating inflation have pushed y - o - y real wage growth in january and february to 9. 2 %, and pension growth to 14. 2 %. that the living standard is improving is attested to by the increase in the coverage of the average consumer basket by the average wage and increase in the coverage of the minimum basket with the minimum wage to around
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nbs will continue to keep a close eye on all key factors affecting inflation movements and react additionally, if needed. our future decisions will depend on the anticipated movements of key inflation factors, i. e. on incoming data, taking into account the time needed for the full effects of past monetary tightening to play out. according to the preliminary estimates of the serbian statistical office, y - o - y gdp growth in q2 picked up to 1. 7 %. in our estimate, on the production side, growth was driven by the recovery in construction, as well as stepped - up activity in the services sectors, agriculture and industry. on the expenditure side, just as in q1, growth was driven by net exports owing to real growth of goods and services export and a decline in import, as well as fixed investments, while consumption and inventories gave a negative contribution. the same movements were recorded by our regional peers as well. with production costs subsiding and investment and consumer confidence being restored, we expect economic activity growth in the international environment to accelerate. these factors will also speed up the pace of serbia β s economic growth relative to the first two quarters. at the year level, we still expect gdp rate growth in the 2. 0 % β 3. 0 % range, though we now estimate that the growth rate will be closer to the lower bound of the projected band. weaker performance in the production sectors of our key trade partners, notably germany, is mirrored by our somewhat lower perception of the additional acceleration in manufacturing and net export growth in the remainder of the year. nonetheless, we estimate that this year net 5 of 10 exports will contribute to economic growth more than we anticipated in may, primarily due to the results achieved in the year to date. a positive contribution is also expected from fixed investments, thanks to increased profitability of the economy and a high inflow on account of fdi, as well as government investments in road infrastructure. household consumption will continue to increase, propped by higher employment and wages, though to a lesser extent than what we expected in may. chart 7 gdp growth projection chart 8 contributions to real gdp growth, expenditure side ( y - o - y rates, in % ) ( in pp ) - 2 - 4 - 6 - 2 ii iii change in inventories net exports government consumption gross fixed capital formation household consumption gdp ( in % ) - 8 iv i ii iii iv i ii iii source : nbs. iv i ii iii iv i ii 2023 *
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expanding remunerative savings vehicles, or on providing easy - to - obtain insurance against crop failures. in the emerging financial inclusion paradigm, the government and the rbi are trying to expand inclusion by encouraging these other products, allowing credit to follow them rather than lead. indeed, many successful organisations working with the poorest of the poor try to get them to put aside some money as savings, no matter how little, before giving them loans. some of our self - help groups ( shgs ) work on this principle. not only does the savings habit, once inculcated, allow the customer to handle the burden of repayment better, it may also lead to better credit allocation. easy payments and cash out will make formal savings more attractive. today, a villager who puts money into a bank has to either trudge the β last miles β to the bank branch to take out her money, or wait for an itinerant banking correspondent to come by. we are engaged in strengthening the network of banking correspondents ; by creating a registry of banking correspondents, giving them the ability to take and give cash on behalf of any bank through the aadhaar enabled payment system ( which will also give them adequate remuneration ), and requiring that they are adequately trained in providing financial services. cash - in - cashout points will expand soon as the postal payment bank and telecom affiliated payment banks make post offices and telephone kiosks entry points into the financial system. perhaps most interestingly, transfers from bank account to bank account will become easier in a few bis central bankers β speeches weeks via mobile through the unified payment interface. a villager needing to pay a shopkeeper only needs to know the latter β s alias β say ram @ xyzbank. psp. he feeds that into his mobile app, writes the payment amount, puts in his password, and presses β send β and the payment is made, with both getting messages to that effect. neither needs to visit the bank to take out or deposit money, no point of sale machine is needed. with the price of smartphones falling sharply, we are on the verge of solving the last mile problem. with the power of information technology, perhaps the analysis of the savings and payment patterns of a client can indicate which one of them is ready to use credit well. small businesses, which use the services of an on - line internet platform to sell, can establish a verifiable record of revenues that can form the basis for
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of associating myself with the willard group of the bank for international settlements ( bis ) constituted by g 10 countries to look into these aspects. the group has come out with recommendations which call for close coordination amongst central banks and governments of the world, as well as the international financial institutions like the imf and world bank, in promoting stability, accountability and transparency in the financial systems. adoption of core principles and uniform accounting standards the core principles for effective banking supervision ( 1997 ) evolved by the basle committee on banking supervision ( bcbs ) have been accepted for adoption by the rbi. the core principles seek to promote and enhance the standards of supervision. incidentally, i may add that the international accounting standards committee ( iasc ) is also working closely with the bcbs on reducing differences in supervisory approaches to loan valuation and credit loss provisioning. in many areas of banking supervision and securities regulation, international consensus has been reached and principles or standards have been established. in other areas there still is a need to define best practices and develop standards. the lack of international consensus on sound practices for loan valuation, loan - loss provisioning and credit risk disclosure seriously impairs the ability of market analysts as well as regulators to understand and assess the risk inherent in a financial institution β s activities. supervision of non bank financial institutions i would like to specifically mention the far - reaching supervisory initiatives on the part of the rbi which has now brought all indian development finance institutions and non banking financial companies under an intensive supervisory framework through both on - site inspection and off - site monitoring procedures. development finance institutions the rbi set up an exclusive supervisory division in august 1990 for monitoring the operations of select all indian development financial institutions ( fis ). currently, 12 such fis are being monitored. of them, the term lending and refinance institutions, viz. industrial development bank of india ( idbi ), industrial credit & investment corporation of india ltd. ( icici ), industrial finance corporation of india ltd. ( ifci ), industrial investment bank of india ltd. ( iibi ), exim bank, tourism finance corporation of india ltd. ( tfci ), national bank for agriculture and rural development ( nabard ), national housing bank ( nhb ) and small industries development bank of india ( sidbi ) are also subject to the on - site supervision process of the rbi. prudential norms relating to income recognition, asset classification, provisioning and capital adequacy have also been prescribed, for
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right way to respond to the increasing volume and volatility of international capital flows, and especially attitudes to capital controls. many emerging economies point to the need for a policy mix that is tailored bis central bankers β speeches to their country β s specific economic and financial structures in order to protect internal price stability and financial stability against the consequences of large capital inflows and sudden stops. the range of measures deployed is correspondingly broad. some countries intervene on the foreign exchange markets, others resort to interest rate cuts in order to discourage capital inflows, another group focuses mainly on macroprudential measures in a bid to strengthen the ability of their domestic financial systems to absorb inflows, while yet other nations mainly or partly employ capital controls. this broad variety of national responses inevitably begs the question of whether and to what extent they are consistent with global financial stability. greater cooperation, for instance through a ( non - binding ) framework or guidelines both at the national and the global level, might be a more effective way of safeguarding financial stability. moreover, it has to be further clarified whether an incorporation of capital flow management into the surveillance mandate of the international monetary fund could contribute to better outcomes on the global level. as jaques de larosiere recently highlighted : an international monetary system worthy of the name should ensure that national interests and measures lead to globally stable solutions. in my view, this is much the same way that, in a market economy, the sum of individual decisions should add up to a rational macroeconomic whole. it is well known that germany is a firm proponent of a free movement of capital. this position is not anchored in its general belief in a market economy but also reflects its own past experience with capital controls. as an export nation, germany was particularly interested in rapidly achieving full convertibility of its own currency. it has completely liberalised its capital exports back in the early 1960s. however, it proved impossible to sustainably liberalise capital imports in the same way. operating within a fixed exchange rate regime, germany on several occasions imposed temporary restrictions on capital imports in response to large speculative capital inflows during the 1960s and early 1970s. this measures aim of assuring the effectiveness of the bundesbank β s monetary policy with its primary objective of safeguarding domestic price stability. several emerging market economies are currently in a comparable situation to that of germany in the 1960s and early 1970s, in particular in terms of the state of development of their financial markets. however, looking back at
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conflict. whereas, given inflation, creditors make arbitrary and unearned gains, it is the recipients of transfer income and the owners of monetary assets who are the losers. i am thinking, in particular, of the small savers who wish to make additional provision for old age. given 3 % inflation over a period of ten years, their monetary assets lose no less than one quarter of their purchasing power, for example. thus, looked at over a longer period of time, attempts to moderate a high standard of stability are not at all worthwhile. internal stability is and remains the sole genuine seal of approval for a good currency. that is the sole basis on which confidence in the monetary system will grow, on which millions of efficient processes of exchange in the goods, factor and financial markets can be organised every day, and on which economic relationships that are sustainable in the long term can be established. for that reason, monetary stability is - and will remain - a perpetual challenge even in the age of moderate rates of inflation. iii that applies quite particularly with a view to european monetary union. if the euro is not given the stability seal of approval by the financial markets and the general public from the outset, the project of monetary union will be standing - economically and politically on feet of clay. but how can the euro be given stability from the start, apart from the future ecb pursuing a consistent and stability - oriented monetary policy? i wish to highlight three aspects. 1. fiscal policy in the participating countries must regain its room for manoeuvre. a glance at the public sector budgets in the majority of member states shows how narrow the financial scope has become everywhere following the many years of accumulating debt and the expansion of the public sector. the vicious circle of growing indebtedness and of ever - higher interest burdens pushes other tasks into the background and calls for higher and higher taxes and levies. that is especially the case in those countries with retirement provision and health care based on the β pay as you go β principle, and which are faced with considerable demographic challenges. in a large number of european countries, the government ratio and the taxes and social security ratio have now reached such orders of magnitude that they are threatening to strangle the economy β s power of innovation, and putting more and more jobs at risk. this process must be corrected if prospects for growth and employment are to be improved on a lasting basis. for that reason - irrespective of monetary union - sustained consolidation
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β the impact of sovereign credit risk on bank funding conditions β, bis, cgfs papers, no. 43. lanotte, m., g. manzelli, a. m. rinaldi, m. taboga and p. tommasino ( 2016 ), β easier said than done? reforming the prudential treatment of banks β sovereign exposures β, banca d β italia, questioni di economia e finanza ( occasional papers ), 326. angelini p., g. grande and f. panetta ( 2014 ), β the negative feedback loop between banks and sovereigns β, questioni di economia e finanza ( occasional papers ), 213, banca d β italia. bis central bankers β speeches markets are prone to self - fulfilling crises : if investors believe a sovereign faces fiscal problems, required yields will be higher, which can exacerbate, or even create, the fiscal problems. 9 probably the clearest recent example of this pattern is the surge in β redenomination risk β in the euro area, connected with undue fears of a break - up of the monetary union. to the extent that banks act as contrarian investors ( selling assets when markets overheat and buying when they are excessively bearish ), purchases of sovereign debt when the sovereign experiences difficulties notwithstanding relatively solid economic fundamentals are actually beneficial to financial stability. there is clear evidence that domestic investors played such contrarian role during the eu sovereign debt crisis, buying sovereign bonds as foreign investors were fleeing ( fig. 2 again for the italian case ; similar patterns have been documented for spain ). 10 imposing risk weights or setting large exposure limits on domestic sovereign exposures would impair this shock - absorption ability. exposure limits, in particular, could act as a coordinating device for speculative attacks. since a change in banking regulation would likely herald a similar change in other parts of the financial system ( most notably the insurance sector ), the entire domestic financial sector could be affected. finally, a system which differentiates the risk weights according to the sovereign β s credit risk could end up relying upon ratings issued by the credit rating agencies ( cra ). even advocates of a change in the prudential treatment of sovereign exposures admit that credit ratings of sovereigns have serious shortcomings. in particular, they tend to be backwardlooking and to foster herd behaviour. as such, they could exacerbate pro - cyclic
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the financial system to fully recover and adapt to the important set of reforms implemented since the onset of the crisis, before making further changes. this would be consistent with the approach chosen by the governors and heads of supervision in their recent statement that new regulatory reforms should β not significantly increase overall capital requirements β. european commission, directorate general for economic and financial affairs ( 2012 ), fiscal sustainability report, european economy, no. 8 ; imf ( 2014 ), fiscal monitor, april ; lanotte et al ( 2016 ), cit. bis central bankers β speeches note : foreign holders, alternative definition : foreign holders excluding eurosystem and round - trip foreign portfolios and funds, i. e. securities held by foreign investors net of those held by the eurosystem ( excluding the bank of italy ) and those held by foreign individually managed portfolios and investment funds but attributable to italian investors. bis central bankers β speeches
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simply underscores the need for congress to modify u. s. banking laws and permit the regulatory environment to catch up with market events. meanwhile, bank supervisors and regulators should remain focused on their principal tasks. first, to ensure that the banking system remains sufficiently safe and sound, posing little risk to the federal safety net and adequately protected against systemic risk. second, to ensure that the industry continues to provide the american public with a full range of competitively priced banking services and conforms to legislative standards of competitiveness. perhaps more than before, achieving these goals requires us to adapt our practices to changing circumstances within the banking industry and to take full advantage of the technologies that exist. clearly, as the industry has changed, so has bank supervision. as banks expanded nationwide, state and federal supervisors worked together, producing the interstate supervisory protocol that provides a more seamless oversight process for state chartered banks. as banks grew larger and more complex, we focused more on risk management practices and controls and less on a bank β s condition at a point in time. we also became more risk focused in our overall supervisory approach, emphasizing those activities that presented the greatest risks. as financial innovation and capital arbitrage took hold, we also became more aware of the need to update regulatory capital standards and to make greater use of market discipline. we are pursuing our objectives both domestically among ourselves and abroad through the basel committee on bank supervision, under the auspices of the bank for international settlements in basel, switzerland. we are designing a way forward, building upon the β three pillars β approach outlined in a consultative document released today by the basel committee, a subject i will return to in a moment. this approach encompasses ( 1 ) a strong, risk - sensitive regulatory capital standard ; an active supervisory program ; and ( 3 ) improved bank disclosures that allow the marketplace to evaluate an institution β s risk posture and to reward or discipline it appropriately. in my remarks today, i would like to address many of these and other points, with particular emphasis on the supervisory process and how we at the federal reserve are adapting to change. at the outset, i would emphasize that bank supervision is, by its nature, a dynamic process. our practices must constantly improve or they will become quickly outdated. supervisors must also be flexible, both in their application of supervisory techniques to banks and in their expectations regarding what practices individual banks should follow. perhaps more so than any other, the u. s. banking system is highly diverse, with its thousands of
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banking supervision. 1 / 3 bis - central bankers'speeches let me now turn to our immediate challenge, that of inflation. while still in the process of recovering from the pandemic, we were hit by an unusual confluence of supply shocks. we were hit, for example, by a spike in global prices of fertilizer β so not just food prices and not just oil prices.. this was due, of course, to the sanctions on [ shipping from ] belarus and russia. in response, we tightened monetary policy and we tightened aggressively, the way an inflation - targetting central bank would. we worried about expectations, and we worried about second - round effects. today, we're beginning to see tantalizing fruits of our efforts. headline inflation seems to have peaked and looks to be on its way to our target range of 2 to 4 percent. our monetary board, our deputy governor francis dakila and his team are to be thanked for this. nonetheless, it's too soon to declare victory. core inflation remains high. there are still upside risks to inflation β for example, risks in the form of el nino and further supply shocks. we will wait and see. we will analyze the data as they arrive, and that analysis will decide monetary policy down the road. the next challenge is the payments system. for the sake of efficiency, we seek the magic of digitalization. we want this magic to also help with financial inclusion. we're making some progress. at last count, 42 percent of retail payments were in digital form. this is up from just 1 percent ten years ago. that proportion should hit our target of 50 percent this year. at this stage, we've given licenses to 258 digital payment providers. over time, we expect competition and network effects to result in a system where the most innovative, efficient and responsible providers truly respond to the needs of customers. this digitalization has been a pathway to financial inclusion. more filipinos are now part of the formal financial system. in our financial inclusion survey in 2021, 56 percent of [ adults ] in the country had a bank account, a significant increase from just 23 percent in 2017. we're confident we will reach our target of 70 percent by this year. we're not stopping here. these accounts should provide the opportunity for people to build savings buffers, invest in their future and more actively participate in the digital economy. programs like paleng - qr help digitalize crucial value
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ben s bernanke : current economic and financial conditions and the federal budget testimony by mr ben s bernanke, chairman of the board of governors of the us federal reserve system, before the committee on the budget, us house of representatives, washington dc, 3 june 2009. * * * chairman spratt, ranking member ryan, and other members of the committee, i am pleased to have this opportunity to offer my views on current economic and financial conditions and on issues pertaining to the federal budget. economic developments and outlook the u. s. economy has contracted sharply since last fall, with real gross domestic product ( gdp ) having dropped at an average annual rate of about 6 percent during the fourth quarter of 2008 and the first quarter of this year. among the enormous costs of the downturn is the loss of nearly 6 million jobs since the beginning of 2008. the most recent information on the labor market β the number of new and continuing claims for unemployment insurance through late may β suggests that sizable job losses and further increases in unemployment are likely over the next few months. however, the recent data also suggest that the pace of economic contraction may be slowing. notably, consumer spending, which dropped sharply in the second half of last year, has been roughly flat since the turn of the year, and consumer sentiment has improved. in coming months, households'spending power will be boosted by the fiscal stimulus program. nonetheless, a number of factors are likely to continue to weigh on consumer spending, among them the weak labor market, the declines in equity and housing wealth that households have experienced over the past two years, and still - tight credit conditions. activity in the housing market, after a long period of decline, has also shown some signs of bottoming. sales of existing homes have been fairly stable since late last year, and sales of new homes seem to have flattened out in the past couple of monthly readings, though both remain at depressed levels. meanwhile, construction of new homes has been sufficiently restrained to allow the backlog of unsold new homes to decline β a precondition for any recovery in homebuilding. businesses remain very cautious and continue to reduce their workforces and capital investments. on a more positive note, firms are making progress in shedding the unwanted inventories that they accumulated following last fall's sharp downturn in sales. the commerce department estimates that the pace of inventory liquidation quickened in the first quarter, accounting for a sizable portion of the reported decline in real gdp in that
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kevin m warsh : the promise and peril of the new financial architecture speech by mr kevin m warsh, member of the board of governors of the us federal reserve system, at the money marketeers of new york university, new york, 6 november 2008. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system β s website. * * * overview the financial markets did not observe the august anniversary of the onset of turmoil with even a hint of fondness. 1 instead, market participants seemed to mark the occasion as a kind of coming - of - age opportunity to act out. the subsequent despair among market participants, disrepair in credit markets, and disregard for proper market functioning was more pronounced than witnessed in generations. significant market dislocations disrupted credit flows to households and firms and impaired economic growth. all and all, these conditions demanded β and received β a forceful response from monetary, fiscal, and financial policymakers. there are some notable signs of improvement. short - term funding spreads are retreating from extremely elevated levels. funding maturities are being extended beyond the very near term. money market funds and commercial paper markets are showing signs of stabilization. and credit default swap spreads of banking institutions are narrowing significantly. nonetheless, financial markets overall remain strained. risk spreads remain quite high and lending standards appear strict. indications of economic activity in the united states have turned decidedly negative. the economy contracted slightly in the third quarter, and the recent data on sales and production suggest that the fourth quarter will be weak. still, the depth and duration of this period of weak economic activity remain highly uncertain. the financial turmoil revealed that the old financial architecture is broken. but its successor is not yet established. 2 in my view, the prospects for robust economic growth over the intermediate term are likely to be determined, not principally by the trajectory of housing prices, but by the speed with which a new financial architecture emerges and the form that it takes. this challenge of creating a new financial architecture is hardly unique to the united states. the difficult choices made by policymakers and market participants around the globe will have real implications for future growth prospects. what do i mean by a new financial architecture? recent travails contributed to a consensus that the financial regulatory framework requires fundamental reform. but, in my view, the financial architecture is necessarily broader than the government's regulatory and supervisory response. the new financial architecture, properly understood, must account for the dynamic relationship between private
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bank of japan β s october report of recent economic and financial developments1 bank of japan, 15 october 2001 * the bank β s view * * adjustments in economic activity are becoming more severe, as the substantial decline in production has a negative influence on employment and income conditions. in addition, the terrorist attacks in the u. s. have further heightened uncertainty in japan β s economy. with regard to final demand, net exports ( real exports minus real imports ) continue to decline, reflecting not only a slowdown in overseas economies but also sluggish demand for it - related goods. business fixed investment is also decreasing noticeably while exporting conditions continue to deteriorate. housing investment remains sluggish and public investment is declining. meanwhile, private consumption remains almost flat on the whole, although somewhat weak indicators are increasing recently. industrial production continues to decline considerably, reflecting these developments in final demand and also strong excessiveness in inventories of electronic parts and materials. the decrease in corporate profits, particularly in manufacturing, has become evident and household income weakens gradually. moreover, while such perception is becoming widespread that a further deceleration in overseas economies is inevitable due to the terrorist attacks in the u. s., precautions against the business outlook are intensifying among japanese exporting firms. turning to the outlook, as for exporting conditions, although inventory adjustments in it - related goods worldwide are expected to continue for the time being, the prevailing view is that the adjustments will be basically completed by around next spring. however, there exists a risk that the prolonged downturn in u. s. private consumption affected by the terrorist attacks would induce another round of adjustments in the japanese economy, starting from the decline in exports such as of consumer goods. under these circumstances for exports, uncertainty toward the economy is growing further. meanwhile, with respect to domestic demand, business fixed investment is expected to follow a downward trend judged not only from the continuous decline in corporate profits, but also from the successive downward revisions of firms β investment plans in the it - related sector. private consumption is likely to weaken gradually along with the deteriorating employment and income conditions. thus, the income - generating mechanism from corporate profits to employment and wages is starting to work adversely, and at the same time government spending is projected to follow a downward trend. consequently, it may take quite a while for overall production activity to stop declining, although the decrease in the production of it - related goods may eventually come to an end. overall, adjustments in
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high credit ratings and government bonds remain mostly unchanged, those between bonds with low credit ratings and government bonds seem to be expanding somewhat. stock prices are recently starting to recover slightly. in the foreign exchange market, the yen is currently being traded in the range of 120 - 122 yen to the u. s. dollar. with regard to corporate finance, private banks continue to be more active in extending loans, mainly to blue - chip companies, while carefully evaluating the credit risks involved. however, the lending attitudes of financial institutions as perceived by small firms are becoming slightly more cautious. in corporate bonds and cp markets, the fund - raising conditions for firms continue to be generally favorable. on the other hand, credit demand in the private sector is declining faster mainly because firms are decreasing their business fixed investment while continuously reducing their debts. in view of this, private banks β lending is following a downward trend. the amount outstanding of corporate bonds issued is growing at about 2 percent on a year - on - year basis. meanwhile, the amount outstanding of cp issued continues to be at a high level, significantly exceeding that of the previous year, due to the favorable environment for issuing cp. the growth rate of money stock ( m2 + cds ) in september was higher than that of the previous month. funding costs for firms continue to be at extremely low levels. overall, the recent financial environment remains extremely easy : witness the permeation of easiness in money market conditions, stably low interest rates, higher growth in monetary indicators, and the generally favorable conditions in corporate bonds and cp markets. however, against the background of deteriorating corporate earnings and the more cautious lending attitudes of financial institutions, fund - raising conditions of small firms are apparently becoming more severe. hence, the developments in the behavior of financial institutions and corporate financing need closer monitoring. in addition, it is necessary to carefully monitor the effects of the terrorist attacks in the u. s. and the subsequent developments on global financial markets and economic activity.
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will need to address how potential uncovered liquidity shortfalls or credit losses would be allocated, and how the fmi would replenish any financial resources it uses in a stress event so that it can continue to operate in a safe and sound manner. the principles also introduce a number of new requirements. some of these address shortcomings that were observed during the crisis. for example, the principles require ccps to have segregation and portability arrangements that protect customer positions and collateral. an fmi will also be required to manage the risks it bears from and poses to, not only its participants and their customers, but also to other entities with which it does business such as linked fmis, settlement banks, custody banks, and liquidity providers. furthermore, the principles will require fmis to establish a dedicated financial cushion that could absorb unanticipated general business losses. this is to ensure that an fmi can continue to provide its critical services. the principles also require that fmis have plans for their recapitalization or orderly wind down, if that were to prove to be necessary. finally, the coverage of the international standards has been expanded to trade repositories as a new category of fmi, to further complement the g - 20 otc derivatives initiative for mandatory trade reporting. the principles that address trade repositories focus on their transparency and the disclosure of market data. this reflects the important and unique role they will play in disseminating information both to regulators and to the market more broadly. the second major goal is to promote consistent global enforcement of the standards. toward this end, the principles unify and harmonize three existing sets of standards β core principles for systemically important payment systems ; recommendations for securities settlement systems ; and recommendations for central counterparties. as part of this effort, the principles strengthen the β responsibilities of authorities. β this includes a new framework for cooperation among financial authorities. it calls for central banks, market regulators, and other relevant authorities to cooperate with each other, both domestically and internationally, and to support each other in fulfilling their respective mandates to promote the safety and efficiency of fmis. this builds upon existing frameworks that have already been used successfully by cpss and iosco for effective cooperation in the oversight of global institutions. such cooperation can facilitate more comprehensive oversight, improve efficiency and effectiveness, reduce or eliminate any gaps in regulation, supervision, and oversight, and minimize potential duplication of effort and burden on both the fmis and the
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that might lend to a ccp in extremis will be repaid. to help ensure that these safeguards are met, a major part of the reform effort is to establish a strong set of principles for financial market infrastructures. these principles must embody the four safeguards and ensure that the infrastructure can withstand any stresses that could plausibly occur. the process of developing such a set of principles began about two years ago and is now nearing completion. so why the new principles and what do they embody? during the crisis, financial market infrastructures performed very well. in fact, fmis were actually a source of strength. they enabled market participants to settle obligations when they came due in a timely way. also, their robustness gave confidence to market participants that they could continue to trade, knowing that the transactions would almost certainly be settled and cleared without difficulty. despite this excellent record of performance during a period of unprecedented stress, there still is room for improvement. first, future stresses could be more severe or might come in different forms. this could expose vulnerabilities in fmis that have, up to now, not been visible. also, extraordinary interventions in the crisis to backstop market function or rescue key financial intermediaries may have prevented the stress level from reaching the point where fmis couldn β t perform their functions. because there can be no assurance that such interventions will necessarily occur in the future, it is important that the stability of the fmi architecture not depend on timely extraordinary interventions. second, under the new regime of central clearing for standardized otc derivatives trades, the role of fmis will become even more important in the future. moreover, the new regime will lead to the development of new types of fmis. ccps for otc derivatives will become widespread β and trade repositories will be established. principles are needed to underpin these new institutional arrangements. third, for fmis to be resilient they would undoubtedly need to have some ability to access central bank services, including the lender of last resort function. but, if fmis had access to such services, this would create moral hazard. the best way to address this conundrum is to hold the fmis to tougher global standards. fourth, a stronger and better system of fmi governance and oversight can help to ensure that those systems that support a global market are subject to consistent standards regardless of the jurisdiction where they operate. relying solely on a patchwork of differing national
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deepak mohanty : changing inflation dynamics in india speech by mr deepak mohanty, executive director of the reserve bank of india, at the motilal nehru national institute of technology ( mnnit ), allahabad, 13 august 2011. * * * the assistance provided by abhiman das, sanjib bordoloi and manjusha senapati is acknowledged. i thank the motilal nehru national institute of technology ( mnnit ) for giving me this opportunity to address this distinguished gathering. i propose to speak on inflation which is a matter of concern to all of us. what is inflation? simply put, inflation is the sustained increase in the overall price level. relative change in prices of goods and services is a desirable attribute of market economy as it reflects productivity changes as well as demand and supply conditions. however, when this process transforms into an acceleration of the overall price level, we need to worry as inflation imposes many socio - economic costs. the headline wholesale price index ( wpi ) inflation averaged 9. 6 per cent in 2010 β 11 as compared with 5. 3 per cent per annum in the previous decade. similarly, the average consumer price inflation, measured by the consumer price index for industrial workers ( cpi - iw ), was even higher at 10. 5 per cent in 2010 β 11 as compared with 5. 9 per cent per annum in the previous decade. moreover, this elevated level of inflation also persisted through the first quarter of 2011 β 12. in response to inflationary pressures, the reserve bank has raised the policy repo rate 11 times bringing it up from a low of 4. 75 per cent in march 2010 to 8. 00 per cent by july 2011. it is expected that inflation should come down towards the later part of this year. why has inflation been so high and persisted for so long? this is the theme of my talk today. in my presentation, i propose to address the following questions : is india an outlier among major countries in terms of recent inflation performance? has the inflation process changed? what are the causal factors β global and domestic as well as supply and demand? i will conclude with some thoughts on managing the inflation dynamics on the way forward. is india an outlier in the inflation performance among major countries? it is important to appreciate the global backdrop in which we are experiencing a resurgence of inflation now. in the last decade, inflation was low, both in advanced countries as well as in emerging and
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, financial flows to commodity funds typically increase with higher commodity prices further accentuating price pressures. bis central bankers β speeches from global factors, domestic factors have had a significant influence on the inflation trajectory in india. has the inflation process changed? in india, we have multiple price indices β 6 consumer price indices and a wholesale price index ( wpi ). while the reserve bank examines all the price indices both at aggregate and disaggregated levels, changes in the wpi is taken as the headline inflation for policy articulation. within the wpi, non - food manufactured products inflation is considered the core inflation3. going by any measure of inflation, india comes out as a moderate inflation country, though occasionally inflation crossed the double digit mark. the historical average long - term inflation rate was around 7. 5 per cent. but significantly, there was substantial moderation in inflation in the 2000s. the annual average inflation rate was around 5. 5 per cent irrespective of the inflation indices taken, whether wpi or cpi. this raises the question : did the inflation dynamics change in the 2000s? monthly wpi inflation data suggest that there was a structural break4 around the mid - 2000s with the inflation rate during the latter half being higher ( chart 1 ). average wpi inflation increased from 5. 2 per cent in the first half of 2000s to 5. 5 per cent in the second half. this was largely contributed by primary food inflation. in fact, the core nonfood manufactured products inflation moderated from 4. 2 per cent to 3. 9 per cent. what did cause the structural break in the mid - 2000s? a disaggregated assessment suggests that protein items largely contributed to this change in trend ( table 3 ). core inflation is generally estimated by excluding volatile food and fuel components from the headline inflation, though there are various statistical methods of estimation of core inflation. analytically, core inflation is considered as an indicator of demand conditions. estimated by bai - perron test. bis central bankers β speeches not only did the average food prices rise during the second half of 2000s but they were more volatile ( table 4 ). structural food inflation food prices being subject to supply shocks tend to be volatile. for example, the performance of monsoon has a significant bearing on the trend of domestic foodgrain prices. spikes in food prices normally subside as they are transitory. however, empirical analysis suggests that inflation in protein items has become persistent. 5 this suggests that
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lucas papademos : on the road to the euro - progress and prospects of the new member states speech by mr lucas papademos, vice - president of the european central bank, at a panel discussion at the conference : the ecb and its watchers viii, frankfurt am main, 5 may 2006. slides to the speech can be found on the ecb β s website. * * * i. introduction the progress and prospects of the new member states on the road to the euro is obviously a very topical issue. as you know, slovenia and lithuania have asked the european commission and the ecb to prepare reports as part of an examination of whether they have achieved β a high degree of sustainable convergence β in accordance with the treaty. the convergence reports on these two countries will be published on 16 may. of course, i cannot discuss the substance of our convergence assessment of these two countries now, only days before the publication of our reports. however, there are many important and pertinent issues related to the general theme of this session that could, and should, be usefully discussed at this juncture. let me start by recalling that all of the new member states that joined the eu in 2004 are committed to adopting the euro, as soon as they fulfil the conditions set out in the treaty. none of them has an optout clause, as is the case with denmark and the united kingdom. indeed, all of the new member states aim to adopt the euro over the next few years because of the expected benefits and opportunities that it will entail. the envisaged time schedules for entry into the euro area, as announced by the new member states, are somewhat diverse, but they all currently plan to introduce the euro by the end of the decade, at the latest ( see slide 3 ). a number of them have set concrete target dates in the years to come, while others have stated their envisaged euro adoption dates in more vague terms. in this context, let me emphasise that revising a target date in a pragmatic manner β as estonia recently did β should not be perceived as a sign of failure. rather, it should be seen as a sign of political realism and economic prudence in the light of the latest facts and assessments of current circumstances and likely prospects. what are the prospects for euro adoption by the envisaged target dates? what are the main pertinent policy issues and challenges for the new member states? with regard to the first
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after a gradual winding - down of our net asset purchases. accordingly, at its last monetary policy meeting the governing council confirmed that it continues to expect the key ecb interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 % over the medium term. the governing council also decided to reduce the monthly pace of the net purchases under the asset purchase programme ( app ) to β¬15 billion from october until the end of december 2018 and anticipated that, subject to incoming data confirming our medium - term inflation outlook, net purchases will then end. finally, the governing council also confirmed its intention to reinvest the principal payments from maturing securities purchased under the app for an extended period of time after the end of our net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. significant monetary policy stimulus is still needed to support the further build - up of domestic price pressures and headline inflation developments over the medium term. this support will continue to be provided by the net asset purchases until the end of the year, by the sizeable stock of acquired assets and the associated reinvestments, and by our enhanced forward guidance on the key ecb interest rates. in any event, the governing council stands ready to 1 / 3 bis central bankers'speeches adjust all of its instruments as appropriate to ensure that inflation continues to move towards the governing council β s inflation aim in a sustained manner. the financial health of the euro area banking sector has continued to improve. although showing a slight decrease from 14. 6 % at the end of 2017, the aggregate common equity tier 1 ratio of euro area significant institutions stood at 14. 1 % at the end of the first quarter of 2018. banks have made progress in reducing their stocks of non - performing loans ( npls ). in the first quarter of 2018, the npl ratio for euro area significant institutions dropped further, to 4. 8 %, compared with 5. 9 % a year earlier. however, euro area banks β profitability remains subdued. the average return on equity of euro area significant institutions declined to 6. 6 % in the first quarter of 2018, from 7. 1 % a year earlier. in this context, eu and national authorities are still following up on a comprehensive action plan for dealing with legacy asset quality issues
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would start to accept other types of hard currencies like the us dollar. if there is a shortage of those hard currencies, people would invent their own currencies. in germany, with that hyper - inflation in which prices rose by 2 % every minute, german mark ceased to function as money. instead, people started to use cigarettes, chocolate bars or empty bottles as the medium of exchange. then, there is the story of those two brothers who inherited a sizeable wealth from their father. one being a reputed investor used his endowment to build a substantially large portfolio of investments. the other was a drunkard and used the entire amount for drinking. thus, he ended up with a houseful of empty bottles. the story goes on saying that germany was hit by hyper - inflation reducing the value of the entire investment of the son who adopted prudential policies to zero. but, the drunkard became a millionaire overnight, because his empty bottles now became money. a similar amusing story relating to bolivian inflation in mid 1980s takes a different form. since prices are rising at such a high rate, it became necessary to negotiate and agree on a price before undertaking even a very simple transaction. the story says that before a person takes a haircut, he would agree a price with the barber. but, halfway through, the barber would stop cutting the hair and renegotiate the price. that was because by that time, hyper inflation has raised the prices to a still higher level. as a result, the original contract price no longer becomes valid. economic costs of inflation the above stories, though invented to amuse people, teach us some very valuable lessons. first, uncontrolled inflations erode the confidence of people in the domestic currency. as a result, governments lose the control over money and fail to use monetary policy to curb inflation. second, people move away from long term contracts and would be concerned only about the passing moment. salaries, earlier paid monthly would become payable first fortnightly, then weekly and daily and finally hourly. it would entail a tremendous cost on the employers to meet the demand for paying salaries every hour. similarly, all other contracts would also be very short term contracts. people would not think of the future, but only on the passing moments. this type of short - term behavior on the part of people would cause the economy concerned to collapse on itself due to a lack of long term commitments. inflation normally brings in several other
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w a wijewardena : why worry about inflation? speech by mr w a wijewardena, deputy governor of the central bank of sri lanka, at the central bank of sri lanka, colombo, 25 may 2007. * * * inflation, a continuous and steady rise in the general price level, is, by any standard, the public enemy number one. by the same token, hyper - inflation, an increase in the general price level to a very high level within a very short period of time, is a killer, akin to a mass destruction weapon. mr. gideon gono, governor of the reserve bank of zimbabwe, a country with an inflation rate of more than 3700 %, equated his country β s inflation to an economic hiv, a situation where people would die en masse. this reference eloquently amplifies the gravity of the cost of inflation which a country has to bear. why public enemy number one? from the point of view of economics, there are usually two declared public enemies : inflation and unemployment. of the two, inflation ranks higher. this is because inflation hurts everyone alike : bankers, businessmen, workers, consumers and so forth. you cannot escape it unless you are smart enough to beat it by raising your income faster than inflation. in contrast, unemployment which is also a serious problem, disadvantages only the unemployed. that category is only a segment of the society. hence, inflation is a bigger public enemy than the unemployment. when one compares it with other public enemies like drug abuse or terrorism, one would still find that those issues would also affect only a segment of the society at any given time. since inflation affects everyone and people have limited prospects of escaping it, it is considered as the public enemy number one. some amusing stories about inflation in the recent history, there have been many countries which have been hit by hyper inflation. of them, the most prominent case has been the hyper - inflation in germany after the first world war, where inflation accelerated to 1, 000, 000 % per annum. other noteworthy examples are bolivia ( 25000 % p. a. ) ; russia ( 2000 % ) ; israel ( 1500 % ) ; turkey ( again 1500 % ) and currently zimbabwe ( 3700 % and still rising ). when prices rise at these high rates, the first casualty would be the currency of the country. no one would like to accept the domestic currency, because its value would fall by the minute. instead, people
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issued in larger volumes and are placed internationally. there are three developments which increase the german bond markets β attractiveness for both issuers and investors : Β· a higher turnover and therefore increased liquidity, Β· many new issuances and therefore more opportunities to diversify, and Β· a wider range of products, and therefore more chances to satisfy the needs of investors. vii as in the bond markets, investors in the equity markets have shifted their perspective from country benchmarks to pan - european sector benchmarks. european equity markets are still small compared with those in the usa. the market capitalisation of domestic shares, as a ratio of gdp, reaches about 90 per cent. the matching figures for the usa and japan are 152 per cent and 68 per cent, respectively. however, equity markets in the euro area are growing fast. the ratio of new issuance to market capitalisation averages over 4 per cent. this is twice as much as has been achieved in the usa or japan. germany has outperformed within the euro area in terms of the number of listed companies, of new stock issues, and of market capitalisation. the most impressive feature, however, is the ongoing growth of the capital markets and the potential to continue growing. market capitalisation as a ratio to gdp in germany is about 60 per cent. this reflects our bankdominated financial system. however, market capitalisation of domestic stocks grew over the last decade by 17 per cent per year. the turnover growth of the german equity markets is also reflected in a rising importance of investment funds and their assets. in germany some 6, 800 funds manage assets of more than 800 billion euro. over the last decade the number of funds almost tripled, while their assets rose by 18 per cent per year. the german capital market has been able to provide the bulk of start - up financing in europe. more than 200 venture capital companies operate in our country. they serve as a catalyst for new companies and β in the event of success β as a pacemaker for initial public offerings ( ipos ), especially on the β neuer markt β, which is the high - tech and innovative segment of the german stock exchange. germany benefits from a high degree of international attractiveness of its capital markets. about 235 foreign companies have their stocks listed in germany, a number which is topped only by the usa and the uk. germany is, of course, among the leading centres for central and east european business. in comparison to equity markets of other leading
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jorgovanka tabakovic : financial system and economy β responses to the challenges of the crisis inaugural speech by ms jorgovanka tabakovic, governor of the national bank of serbia, at the conference β financial system and economy β responses to the challenges of the crisis β, belgrade, 2 november 2012. * * * ladies and gentlemen, the on - going sovereign debt crisis in the euro area, most acute in central and eastern europe has shown that no country can remain an isolated island in a global environment of strong economic and financial ties. the adverse effects of the sovereign debt crisis in euro area countries spilled over to the region of central and eastern europe, mainly via dampened external demand, the consequent weakening of economic activity and smaller inflow of foreign direct investments. this went hand in hand with limited access to foreign sources of funding, as country risk premiums and costs of borrowing went up. in an environment of shrinking foreign capital inflows and exports - generated inflow of foreign exchange, the first line of defence against the crisis is the maintenance and improvement of competitiveness. the price aspect of competitiveness can be improved via exchange rate or by restrictive income policy. the managed floating exchange rate regime significantly buffered the external shock which serbia experienced in the last quarter of 2008, when the first wave of the global financial crisis spilled over to our country. in 2009, compared to other countries in central and eastern europe, serbia β s gdp shrunk the least ( 3. 5 % ). at the same time, countries running the fixed exchange rate regime suffered greater economic turbulences. for example, the baltic countries estonia and lithuania had to resort to adjustments through wage reductions, ending the year with a 15 % fall in gdp. as for serbia, the flexible exchange rate regime also paved the way out of the crisis. on the one hand, the adjustment did not have to take place through sudden and drastic wage reductions and on the other, net exports gave a positive contribution to gdp growth. in this way, the dinar exchange rate was also the β engine β of serbia β s subsequent recovery, which will facilitate our shift to a new, sustainable model of investment - and exports - driven economic growth. it is true that apart from numerous positive effects, the depreciation may also have a negative bearing on financial stability, especially in countries with a substantial share of external and domestic debt in foreign currency or foreign - currency indexed, and in highly euroised economies such as
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these actions themselves have further promoted the very globalization that, interacting with advancing technology, spurred the deregulatory initiatives in the first place. the result of this process has been an advance and diffusion of technical change that has raised living standards in much of the world. the conceptual battleground has moved far from the stark terms of the earlier capitalist - socialist confrontations. the failed experiment in central planning in eastern europe and the soviet union after world war ii has largely muted the arguments of most ardent socialist planners. the debate has now shifted to the nature and extent of actions appropriate for governments to take in order to ameliorate some of the less desirable characteristics that are perceived to accompany unfettered competition. but unlike in much of the nineteenth century, little unfettered competition is actually practiced in today β s world. in large part, driven by the value standards of our societies that developed out of the great depression, some government regulation is practiced virtually everywhere. nonetheless, it has become generally understood that governmental actions often hinder incentives to investment by increasing uncertainties, boosting risk premiums, and raising costs. even among those who deride the more unbridled forms of capitalism, there is a growing awareness that many attempts to tame such regimes are not without cost in terms of economic growth and the average living standards of a nation. a recent manifestation of these costs can be seen in the lower level of high - tech capital investment in continental europe, on average, and in japan, relative to that in the united states. arguably, this outcome has resulted to an important degree from the particular legal structures and customs that govern labor relations in much of europe and asia. by choice over the decades, europe, for example, has endeavored to protect its workers from some of the presumed harsher aspects of free - market competition. to discourage layoffs, discharging employees was made a difficult and costly process in comparison with that in the united states. by law and by custom, american employers have faced many fewer impediments in recent years to releasing employees. this difference is important in our new high - tech world because much, if not most, of the rate of return from the newer technologies results from cost reduction, which on a consolidated basis largely means the reduction of labor costs. consequently, legal restraints on the ability of firms to readily implement such cost reductions lower the prospective rates of return on the newer technologies and, thus, the incentives to apply them. as a result, even though
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inflation pressures have edged up. as the economy recovers further, and supported by our monetary policy measures, we expect underlying inflation to rise over the medium term. this increase is expected to be only gradual, since it will take time for the economy to return to operating at full capacity, and therefore wages are expected to grow only moderately. measures of longer - term inflation expectations have continued to increase, but these remain some distance from our two per cent target. the new staff projections foresee annual inflation at 2. 2 per cent in 2021, 1. 7 per cent in 2022 and 1. 5 per cent in 2023, being revised up compared with the previous projections in june. inflation excluding food and energy price inflation is projected to average 1. 3 per cent in 2021, 1. 4 per cent in 2022 and 1. 5 per cent in 2023, also being revised up from the june projections. risk assessment we see the risks to the economic outlook as broadly balanced. economic activity could outperform our expectations if consumers become more confident and save less than currently expected. a faster improvement in the pandemic situation could also lead to a stronger expansion than currently envisaged. if supply bottlenecks last longer and feed through into higher than anticipated wage rises, price pressures could be more persistent. at the same time, the economic outlook could deteriorate if the pandemic worsens, which could delay the further reopening of the economy, or if supply shortages turn out to be more persistent than currently expected and hold back production. financial and monetary conditions the recovery of growth and inflation still depends on favourable financing conditions for all sectors of the economy. market interest rates have eased over the summer, but reversed recently. overall, financing conditions for the economy remain favourable. 2 / 3 bis central bankers'speeches bank lending rates for firms and households are at historically low levels. lending to households is holding up, especially for house purchases. the somewhat slower growth of lending to firms is mainly due to the fact that firms are still well funded, because they borrowed heavily in the first wave of the pandemic. they have high cash holdings and are increasingly retaining earnings, which reduces the need for external funding. for larger firms, issuing bonds is an attractive alternative to bank loans. solid bank balance sheets continue to ensure that sufficient credit is available. however, many firms and households have taken on more debt during the pandemic. a deterioration in the economic outlook could threaten their financial
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meet their obligations as primary dealers to participate in u. s. treasury auctions and the federal reserve β s open market operations. many argue that the ability and willingness of dealers to a clob protocol aggregates all executable bids and offers across participating liquidity providers in a single order book that is available to all market participants. in a liquid market, the continuous visibility of quotes and the interaction of multiple bids and offers are likely to enhance the price discovery process and market transparency. in contrast, a request - for - quote protocol, where a request for liquidity typically is submitted to only a limited set of providers, by its nature imposes a degree of market segmentation that may impede the price discovery process as compared with a clob protocol, but is arguably better suited to handle large block trades and illiquid securities. momentum detection is a strategy that attempts to predict short - run price changes based on patterns in realtime market data. statistical arbitrage is a trading strategy that typically relies on identifying mean reversion from historical relative pricing relationships between correlated assets. spread trading seeks to profit from a simultaneous purchase and sale of two closely related fixed - income assets. bis central bankers β speeches deploy their balance sheets for holding treasury securities and other fixed - income assets allows them to serve as shock absorbers, particularly during times of volatility. automated trading firms, on the other hand, typically do not end the day with significant long or short net exposure, despite the fact that they often conduct a substantial volume of gross transactions. 9 as a result, automated trading firms do not face the same level of capital constraints under the traditional way of thinking about capital requirements. 10 however, for the same reason, they also may not be capable of serving as shock absorbers during periods of heightened volatility, as traditional market makers are thought to do. thus, while the market may have come to rely on automated trading firms as suppliers of very - short - term intraday liquidity, market participants still rely on traditional market makers with balance sheet capacity to supply liquidity over longer - term horizons. electronic trading, including automated and high - frequency trading, has likely had a number of benefits. for one, technological advances have supported market efficiency by increasing the pace at which price discovery is disseminated across financial markets. it may also have reduced transaction costs, both through the economies of scale that large technology investments produce, and perhaps through the maintenance of narrow bid - offer spreads that automated
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pacific region. the cpc shanghai committee, shanghai municipal government, financial regulatory institutions in shanghai, and policy and commercial financial institutions have always supported the pbc in carrying out its work, which guaranteed the effective operation of the institutions of the pbc in shanghai. the newly founded pbc shanghai head office will also need attention and support from all of you. by making continued efforts to improve financial services, the pbc will seek to make new contributions to economic development and financial stability. thank you!
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that tools were available to choke off the stock market boom, but those tools would only have been effective if they undermined market participants'confidence in future stability. market participants, however, read the resilience of the economy and stock prices in the face of monetary tightening as an indication of undiscounted market strength. by the late 1990s, it appeared to us that very aggressive action would have been required to counteract the euphoria that developed in the wake of extraordinary gains in productivity growth spawned by technological change. in short, we would have needed to risk precipitating a significant recession, with unknown consequences. the alternative was to wait for the eventual exhaustion of the forces of boom. we concluded that the latter course was by far the safer. whether that judgment continues to hold up through time has yet to be determined. * * * flexibility is most readily achieved by fostering an environment of maximum competition. a key element in creating this environment is flexible labor markets. many working people equate labor market flexibility with job insecurity. despite that perception, flexible labor policies appear to promote job creation. an increased capacity of management to discharge workers without excessive cost, for example, apparently increases companies'willingness to hire without fear of unremediable mistakes. the net effect, to the surprise of most, has been what appears to be a decline in the structural unemployment rate in the united states. protectionism in all its guises, both domestic and international, does not contribute to the welfare of american workers. at best, it is a short - term fix at a cost of lower standards of living for the nation as a whole. we need increased education and training for those displaced by creative destruction, not a stifling of competition. moving forward, i trust that we have learned durable lessons about the benefits of fostering and preserving a flexible economy. that flexibility has been the product of the economic dynamism of our workers and firms that was unleashed, in part, by the efforts of policymakers to remove rigidities and promote competition. although the business cycle has not disappeared, flexibility has made the economy more resilient to shocks and more stable overall during the past couple of decades. to be sure, that stability has created some new challenges for policymakers. but more fundamentally, an environment of greater economic stability has been key to the impressive growth in the standards of living and economic welfare so evident in the united states. 4 / 5 5 / 5
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in this situation, due attention should be paid to the fact that there are downside risks to economic activity depending on developments in global financial markets and overseas economies. in addition, if financial conditions in japan, as reflected in lending attitudes of financial institutions and issuing conditions in the cp and corporate bond markets, should increase in severity, pressures acting to depress economic activity from the financial side might become more marked. turning to prices, there is a possibility that the inflation rate will decline further if downside risks to economic activity materialize or commodity prices fall further. ii. conduct of monetary policy as i have explained, the outlook for economic activity and prices is uncertain at present. in this situation, the bank will carefully assess the future outlook for economic activity and prices, closely considering the likelihood of its projections as well as factors posing upside or downside risks, and will implement monetary policy appropriately. for the time being, it is particularly important to pay attention to downside risks to economic activity, such as those that may arise from developments in the u. s. and european financial systems and in global financial markets and the consequent downward pressure. since early autumn, when the turmoil in global financial markets and in the u. s. and european financial systems increased in severity, the bank has continued to make efforts, by employing various measures, to ensure market stability and maintain accommodative financial conditions. specifically, against the background of the worldwide decline in u. s. dollar liquidity, the bank introduced u. s. dollar funds - supplying operations as part of the coordinated measures of central banks in september and thereafter expanded such operations. as for yen funds, the bank has introduced a complementary deposit facility to further facilitate the provision of sufficient liquidity, and has been providing funds for over the year - end with more frequency and in larger amounts than last year. in addition, the bank has been actively purchasing cp and japanese government securities under repurchase agreements, thereby ensuring market stability. furthermore, with a view to facilitating corporate financing, the bank has expanded the range of corporate bonds and loans on deeds it accepts as eligible collateral and has decided to introduce a new operation through which financial institutions can borrow low - interest funds from the bank against corporate debt. under this new operation, there will be no explicit ceiling on the total funds available, although the maximum loans available will not exceed the value of the corporate debt pledged as collateral. the bank will continue to make efforts to ensure market stability by conducting appropriate
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heads. we have also organized a β seminar on liquidity management in rtgs environment β to apprise you of the challenges that you may face on the operationalisation of the rtgs system and the manner in which you have to control and co - ordinate your liquidity management measures to derive optimal benefits from the rtgs system. it cannot be disputed that that the technological innovations, in general, have been at the core of the reform process in the services sector globally and the financial sector, in particular. for the last so many decades, it has been driving the business re - engineering process in our banking industry. we, at the rbi, have been actively studying these developments and readying ourselves to provide for a technology framework and operating environment, conducive to the banks. let me share with you some of the initiatives that we have undertaken. a reliable communication backbone to facilitate improvement in financial services, the reserve bank of india has, through idrbt, set up the infinet - a β closed user group β network as the exclusive domain for the applications of the entities in the banking and financial sector. as you all know, the infinet is a blend of vsat technology and terrestrial leased line technology based wide area network. infinet provides for the robust and reliable communication backbone for the implementation of all the systemically important payment system applications. reserve bank β s concerns and focused attention on the twin issues of security over the infinet and message standards for intra / inter - bank applications have led to the development and implementation of the structured financial messaging system ( sfms ), a standard messaging protocol, which would be riding on the infinet communication backbone. sfms has adequate in - built security and with public key infrastructure ( pki ), provides for a security solution of international standards. sfms will also act as an alternative for accelerating the integration of the branches of the banks. secondly, a state - of - the - art, robust and secure platform - ibm s - 390 system with a complete standby installation - has been made operational in mumbai centre to ensure the availability of the requisite technical infrastructure, capable of robustness, operational resilience and redundancies to ensure business continuity. the disaster recovery site is being set up at a geographically distanced location from mumbai. you will all agree that these efforts are incomplete without the total involvement and participation of the end - users of the payment and settlement system. the proverbial β
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niklaus blattner : current economic situation and monetary policy summary of a speech by mr niklaus blattner, vice - chairman of the governing board of the swiss national bank, at the 1st basel economic talks of the national bank, basel, 5 may 2006. the complete speech can be found in german on the swiss national bank β s website ( www. snb. ch ). * * * switzerland β s economy clearly picked up pace last year. exports were the main engine for growth, while construction and consumer expenditure also buoyed up economic activity. companies were nevertheless reluctant to invest or hire new staff. the recovery was thus still patchy, and inflation risks were accordingly low. since the beginning of the year, there has been a stream of positive news from switzerland and abroad. the us and asia are still enjoying a high level of economic momentum, and in europe, too, the recovery is becoming more firmly entrenched. benefiting from the favourable international environment, the upswing in switzerland has gained a broader footing. the investment environment in particular seems much more attractive now than last year. this applies especially to northwestern switzerland. many companies in this region have stated that they now want to implement investment plans that have been put on hold for a long time. the swiss national bank expects switzerland β s gdp to expand by just over 2 % this year. the economic upturn does not jeopardise price stability, at least not in the short term. in the long term, however, the current low level of interest rates is not compatible with price stability. if the economy performs as expected, the national bank will further pursue the gradual adjustment of its monetary policy that has already been initiated.
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the best possible solution at the time. no, national accounts were not harmonised. and yes, the data were patchy and incomplete at first. but as imperfect a measure as it was, it enabled progress and was a fundamental step towards lifting economies out of the great depression. fast forward 90 years β and you will find us here, today, facing an even greater challenge than the great depression : climate change. we have got better at collecting information on the consequences of climate change. as patchy as those data may be for now, it will enable progress in climate issues too. and in any case, banks do already have access to enough information to start making real progress. climate change and banking supervision let me give you some background. 1 / 4 bis central bankers'speeches the ecb has identified climate change as a key risk factor for the european banking sector in 2021. the latest edition of our financial stability review1 suggests that around 80 % of european banks are already exposed to climate - related physical risks. in november of last year, ecb banking supervision published a guide on climate - related and environmental risks. 2 in that guide, we make it clear that we expect banks to take a comprehensive, strategic and forward - looking approach to disclosing and managing all climaterelated and environmental risks β which also include, for example, the risks of biodiversity loss and pollution. 3 we then asked banks to conduct a self - assessment relating to the expectations we set out in that guide, and to draw up action plans for how they intend to comply with them. this supervisory exercise will begin with, but not be limited to, taking stock of banks β self - assessments β and it will have important consequences for banks. we are now in the process of benchmarking the banks β self - assessments and action plans, and will then challenge them as part of our ongoing supervision. next year, we will conduct a full supervisory review of banks β practices for incorporating climate risks into their risk frameworks, as we gradually roll out a dedicated supervisory review and evaluation process ( srep ) methodology that will eventually influence banks β pillar 2 requirements. let me clarify that in the context of next year β s stress test exercise the reflection of its outcomes will be of a qualitative nature. a possible impact β if any β will be indirect, via the srep scores on pillar 2 requirements. but let me stress as well that this is not the end game. gradually we will start treating climate related risks
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fixed - rate full allotment policy is probably the most significant non - standard measure the ecb is implementing. at its latest meeting on 6th october the governing council, in response to a worsening of liquidity tensions in the market, has committed to maintaining the fixed - rate full allotment policy until the middle of july 2012. the fixed - rate full allotment policy has been complemented by 6 - month and 12 - month operations. these operations serve to further reduce the funding risk faced by the banking system over a longer time horizon. they were an important tool following the lehman collapse. whilst in late 2009 it had been decided to phase them out, in august of this year the governing council decided to re - introduce such operations by conducting one 6 - month operation and more recently to allot one operation of approximately 12 - months and one of approximately 13 - months which will reach the beginning of 2013. as a third element of our non - standard measures, the international cooperation of the major central banks has been crucial : especially the swap arrangements with the us federal reserve which have allowed us to conduct fixed - rate full allotment tenders in us dollars which are aimed at repairing impaired money markets in foreign currency. these operations have been instrumental following the collapse of lehman, while during the course of 2010 demand in these operations petered out. as a precautionary measure, the ecb has nonetheless recently decided to re - establish 84 - day fixed - rate full allotment tenders in us dollar, in addition to the 7 - days tenders. finally, our response to the crisis has included an extension of our eligible collateral list. the main aspects of the eurosystem β s collateral framework are the following : that we accept a very broad range of eligible assets ; that a broad range of counterparties can participate in our refinancing operations ; that the same type of collateral is accepted in all refinancing operations ; and that we have common eligibility criteria across the euro area, with losssharing in case of a counterparty default. having a framework that already accepted a wide range of collateral before the crisis, which in the case of the euro area is due to the original need to accommodate a very diverse financial system, has served as a key crisis - mitigation tool. especially important is the possibility to increase the liquidity of assets and counterparties in times of stress. it is worth noting that the financial crisis led other major central banks to
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practically no changes in the interest rates paid on these deposits. in terms of loan rates, deposit - taking institution's weighted average loan rates actually declined by 14 bps during the period september 2021 aβ¬ β october 2022. to facilitate greater transparency around the issue of deposit rates, the bank recently began publishing in the newspapers, detailed data on interest rates paid by all commercial banks on savings accounts, demand deposits and time deposits. the publication of this data is an initiative of bank of jamaica aimedat encouraging the public to act in an informed manner by moving their deposits to the commercial banks where they can benefit from higher deposit rates. notwithstanding the slow responses to date, but appreciating that it takes time for policy signals to have an effect, the monetary policy committee of bank of jamaica judged that it might be appropriate at this time to pause further rate increases. this pause is conditional on : 2 / 3 bis - central bankers'speeches commercial banks deposit rates and loan rates moving higher ; core inflation not continuing to increase ; and the us federal reserve not exceeding its projected rate increases for 2022 and 2023. looking ahead, bank of jamaica expects that, consistent with consensus forecast for a fall in commodity prices and the bank's overall monetary policy stance, inflation is projected to decline to single digits in early 2023 and return to the 4 % to 6 % target range by december 2023. bank of jamaica recognizes that our monetary policy actions to bring inflation back to its target will not be painless to all jamaicans. however, the bank is cognizant that the greatest pain of all is the adverse impact of high and unpredictable inflation on the ability of our working population and the most vulnerable members of society to afford the basic necessities of food, transportation and housing and on stable long - term economic growth. in this regard, bank of jamaica reaffirms its commitment to doing all it can to achieve its primary mandate of returning inflation to the 4 % - 6 % corridor without causing undue harm to employment and economic growth. again, i thank you for the opportunity to report on the monetary policy mandate and actions of the central bank. 1 over the period 01 july to 09 december 2022, the exchange rate appreciated by 0. 8 per cent ( $ 1. 28 ) to j $ 154. 34 = us $ 1. 00. this was in contrast to a depreciation of 7. 4 per cent ( $ 10. 67 ) over the corresponding period of
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government or boj to " do something ", meaning " sell more us dollars " or " stabilise the rate ". predictably, the exchange rate went above j $ 131. 00 again despite increases in bank of jamaica's preannounced interventions, the government's one - month notice to prepay us $ 500 million in bonds to the local market and, similar to the may episode, indications that us dollar supply was in fact adequate. yet again, someone paid a heavy price for their bad decisions as the exchange rate has once more fallen below j $ 129. 00. how has the economy changed? given jamaica's history of prolonged and sustained foreign currency shortages, we have become accustomed to the " dollar slide " rhetoric even in a context where, for the 12 months to 13 october this year, the exchange rate appreciated by 0. 4 per cent, compared with a depreciation of 7. 7 per cent for the same period a year before. as of yesterday, the exchange rate, at j $ 127. 97, has in fact strengthened by 0. 5 per cent for the fiscal year to date. some slide. in the first half of fy2017 / 18, the jamaican dollar depreciated on 60 days and appreciated on 66 days. over the same period in the last fiscal year, the currency 2 / 4 bis - central bankers'speeches depreciated on 104 days and appreciated on only 25 days. clearly, we have moved away from a chronic one - way market to a more normal and more flexible market characterised by two way movements. for nearly two years now, the bank has steadfastly explained to a sceptical public that the jamaican dollar is fairly valued but the dollar slide rhetoric, dogma and fearmongering have drowned out this message. i would like to be quite clear about this : whenever the exchange rate is in a zone that is consistent with our overall economic performance relative to our trading partners, and particularly when our national earnings in foreign currency approximate our national spending, then the exchange rate is fairly valued. it will, however, fluctuate around this level as demand and supply change from day to day and from month to month. this will include changes in perception as well as real changes that are happening on the ground. signs that our foreign currency earnings are adequate have been evident for the last two fiscal years during which the current account of the balance of payments has recorded a deficit of less than
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so certainly the new part of this job is the inner machinery of the ecb. but the monetary policy decisions and the related decisions were part of my knowledge even before, because we shared decisions that were taken in the past. wsj : your first months saw a lot of activity. is there much more the ecb can do when it comes to financial stability and economic growth? has it done about as much as it can? draghi : what i am going to say doesn β t imply anything as far as future monetary policy decisions are concerned. within its primary mandate the ecb will do its utmost to ensure price stability in the medium term and within the remit of the treaty to foster financial stability. wsj : what β s the first statistic you look at in the morning? draghi : stock markets. wsj : do you look at the euro exchange rate? draghi : not in the early morning. bis central bankers β speeches
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has been closely involved in the european construction and european unity. he has been an outstanding ecb chief economist. he is one of the greatest champions of the european union that i know. when, after serving the euro for many years, such a person, who has been totally loyal to the institution, announces his resignation for personal reasons, one has to fully respect his decision. according to opinion polls, a majority of germans now want the deutsche mark back. is the euro at risk of losing its backing in europe β s largest economy? there are different opinion polls! in early september die welt published the results of a survey in which two thirds of respondents in germany called for β more common policies in europe β. the citizens of germany know how important european unification is for their country ; the fall of the iron curtain would not have been possible without a united western europe. bis central bankers β speeches in that case, how do you explain the growing mistrust? i believe there is a problem of communication. contrary to how things are often portrayed, we do not have a crisis of the euro as a currency. the euro is a credible, stable currency. in spite of the global crisis, its external value today is significantly higher than when it began. for 13 years the ecb has provided for stable prices. and observers and markets are anticipating the same stable prices for the next ten years. this achievement in particular is not valued highly enough by some commentators in germany, and i do not understand why that is. of course, there are shortcomings in the financial sector, in fiscal policies, and as regards financial stability : the financial markets are too unstable, some euro area countries are uncompetitive, and reliable fiscal policy is lacking in several countries. however, none of these problems have to do with the currency. they are the responsibility of the governments of the euro area. do you have the impression that the heads of government have understood what is at stake? i believe they are conscious of their extraordinary responsibility. they all have to make decisions in the context of democracies which, in the advanced economies, are very inwardlooking, which is a real problem at the time of the worst global crisis for the last 66 years. what will happen if the european heads of government do not get the crisis under control? my working assumption is that the heads of state and government will overcome the crisis. europe must realign its fiscal policy, as other large developed economies must also do
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and september, once the vat effect had disappeared. the twelve - month increase stood at 1. 5 % to 1. o % in november and the latest forecasts predict a price rise of close to 1. 5 % for the end of 1996. the twelve - month price increase thus resumed its pre - august 1995 trend and will be less than 2 % at the end of 1996, in line with the objective set by the monetary policy council. the objective of a stable external value of the french franc vis - a - vis the most credible currencies in the european exchange rate mechanism was met. since the beginning of 1996, the franc has continued to move gradually closer to its central rates against the other currencies in the european exchange rate mechanism. this firmness of the franc has gone hand in hand with the continuing overall competitiveness of the french economy. the real effective exchange rate of the french franc has improved and exports, as in previous years, helped to boost activity. the seasonally - adjusted current account surplus for the first nine months of 1996 stood at almost frf 84 billion. this was much greater than the frf 64 billion surplus posted for the same period of 1995. on the basis of current forecasts, france will record the third largest current account surplus in the world for 1996. growth in the m3 reference aggregate, which is the reference for our internal intermediate objective, showed a reversal in its trend. the expansion of m3 at the end of the third quarter of 1995 was close to its medium - term growth target path of 5 %, but subsequently slowed sharply. the twelve - month increase of 4 % in december 1995 gave way to a contraction of 0. 4 % in october 1996, the last month for which figures are available. this reversal in the growth of m3 was to a very great extent the result of a large - scale reallocation of investment flows stemming from the fall in short - term interest rates since autumn 1995, which has been of unprecedented magnitude and rapidity. the m3 - m2 aggregate, which includes assets paying money market rates of interest, posted a twelve - month fall of 10. 1 % at the end of october 1996. in response to the fall in short - term interest rates and also a heavier tax burden on money market mutual funds, economic agents reallocated their portfolios towards assets covered by the investment aggregates, and particularly the pl aggregate covering contractual savings products, including housing saving plans. year - on -
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rapidly to fight inflation. in a world of spillovers and global linkages, all of us have our unique responsibilities. at the federal reserve, we are responsible for getting u. s. inflation down to our target. and in doing so, we are aware that we are affected by and have effects on the world around us. conferences like this one help to explore and understand our common interests and common connections and to spark ideas for addressing the challenges that confront all of us. thank you. references ahmed, shaghil, ozge akinci, and albert queralto ( 2021 ). " u. s. monetary policy spillovers to emerging markets : both shocks and vulnerabilities matter, " international finance discussion papers 1321. washington : board of governors of the federal reserve system, july. ammer, john, michiel de pooter, christopher erceg, and steven kamin ( 2016 ). " international spillovers of monetary policy, " ifdp notes. washington : board of governors of the federal reserve system, february 8. caldara, dario, francesco ferrante, matteo iacoviello, andrea prestipino, and albert queralto ( 2023 ). " the international spillovers of synchronous monetary tightening, " paper presented at the 100th carnegie - rochester - nyu conference on public policy, held at the university of rochester, rochester, n. y., april 29. 5 / 6 bis - central bankers'speeches curcuru, stephanie e., michiel de pooter, and george eckerd ( 2018 ). " measuring monetary policy spillovers between u. s. and german bond yields, " international finance discussion papers 1226. washington : board of governors of the federal reserve system, april. hoek, jasper, steve kamin, and emre yoldas ( 2022 ). " are higher u. s. interest rates always bad news for emerging markets? " journal of international economics, vol. 137 ( july ), 103585. iacoviello, matteo, and gaston navarro ( 2019 ). " foreign effects of higher u. s. interest rates, " journal of international money and finance, vol. 95 ( july ), pp. 232 β 50. rey, helene ( 2013 ). " dilemma not trilemma : the global financial cycle and monetary policy independence ( pdf ), " paper presented at " global dimensions of unconventional monetary
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##ilience of our economy during the global financial crisis. far be it for me to trumpet this, but let us never forget that this happy state of affairs is the result of the strong regulatory and supervisory framework put in place by the bank of mauritius. let me say a word about our relations with kenya. last year, i was in nairobi to sign a memorandum of understanding with governor ndung β u of the central bank of kenya to enhance mutual co - operation in the supervision of our financial institutions. it is a little - known fact that our relations with kenya in the financial sphere go back to preindependence days. the kenya - based jubilee insurance invested then in an operation in mauritius, which is still present today. more recently, i & m bank of kenya joined forces with a mauritian conglomerate, with diversified interests in agriculture, hotels, tourism and manufacturing to take over a local bank. in the other direction, another large mauritian multinational conglomerate, involved in diverse activities ranging from insurance and leasing to banking and distribution, invested as a minority partner in one of the rapidly - growing kenyan banks, equity bank. the same conglomerate ended the year with another joint venture in kenya, this time in the furniture retail business. so kenya and mauritius are living examples of increased south - south cooperation and south - south investment, which mean more fdi flows among the southern countries. it seems that the wish i had expressed at the signing ceremony with my kenyan counterpart that the relations between mauritius and kenya tighten further, is fast being fulfilled. conclusion let me now conclude. this financing and investment package that we are celebrating this evening has allowed us to tick so many boxes on the long to - do list on our financial sector bis central bankers β speeches development agenda. we are slowly but surely moving forward. the road ahead is long, bumpy, and certainly not risk - free. but i have no doubt that the notes issue by omnicane will prove to be a milestone in this long journey. it would be remiss of me to conclude without giving some good marks to standard bank for taking the lead in this initiative. since the bank set up shop here in 2001, its business has expanded significantly. during the last five years, the bank β s total assets have increased three - fold. it now ranks 6th in terms of total assets of the banking sector. the bank β s previous ceo, chris clarkson, was constantly fighting for financial deepening and the development of the domestic debt
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% equity stake in a large uk - based non - refining distributor of sugar in europe. omnicane clearly has the wind in its sails. it is hardly surprising that investors and lenders are rewarding it by subscribing to this second issue of notes of rs920 million, bringing the total bis central bankers β speeches issue to - date to rs2 billion β and doing so with a fixed rate coupon which is 145 basis points lower than the first issue. this brings me neatly to my next point. third, growing regional interest part of the proceeds of this second notes issue will finance omnicane β s domestic investment in the next stage of the flexi - factory. the remainder will support their ventures overseas, especially in the region. and this is where the us $ 120 - million loan package comes in. omnicane has a 25 % equity stake in kwale international sugar company limited near mombasa in kenya, with an option to increase its participation to 50 %. omnicane will operate and manage the complex which will produce ethanol, electricity and cane sugar, on the lines of what it does in mauritius. this is the latest chapter in successful mauritian involvement in the sugar industry in africa, which has a long and respectable history. in a previous capacity, i was involved in a lenders β meeting to mount a financing package for the first major investment from mauritius into mozambique β the marromeu sugar project. this followed in the wake of the sucrivore project in the ivory coast, to be followed later by the tpc project in tanzania. let me salute the boldness of the different sugar groups concerned which did not hesitate to invest in africa at a time of negative perception about the continent and its prospects. besides the co - arrangers, standard bank and the east and southern african trade and development bank, known as the pta bank, five other banks have participated in this loan, including two kenyan banks, kenya commercial bank and cooperative bank of kenya. i note that three mauritian banks are also participating in the financing, namely state bank of mauritius, mauritius commercial bank and afrasia bank. which gives me an extra reason for satisfaction. our banks are increasingly playing an important role by extending their footprints in the region and accompanying our investors in their overseas ventures. the latest ranking of the african banker shows that seven mauritian banks now figure among the top 100 african banks. our banks are robust and have undoubtedly contributed to the res
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, pre - crisis, constituted almost 75 per cent of the total capital held by banks in developed countries. these were essentially capital market instruments with some optionalities attached to them. income composition 14. the overall balance sheet transformation was clearly evident in the increased reliance on nontraditional business activities that generated fee income, trading revenue, and other types of noninterest income. a significant proportion of bank revenues came from such activities and there was a view that this diversification of income streams was healthier for bank profits. consequently, there was conscious shift towards larger proprietary books and greater investment in β owning, investing in and sponsoring β hedge funds and private equity ventures. banks were effectively working as leverage - providing conduits for hedge funds and like entities which ran huge positions across all markets. 15. there was an entire set of market microstructure which facilitated the above transition β the rating agencies, accounting standards, legal documentation practices. the role of rating agencies was particularly critical as they, blessed by the regulators, provided the requisite comfort and legitimacy to riskier instruments and enabled deployment of a substantial chunk of institutional funds into such securities. the accounting standards, while aiming at reflecting the β true and fair β picture of the balance sheets, made the balance sheets much more procyclical and market skewed. the legal documentation, particularly related to bilateral contracts on the otc markets, by reinforcing the collateralization discipline, also exposed the entities to contagion effect from extraneous developments. additional margin calls and liquidation of securities kept as collaterals added to the negative feedback loop. 16. the end result of the banks β increasing reliance on capital markets and capital market intermediaries was an explosion in the total size of financial markets. based on the leverage provided by bank balance sheets, the market volumes and liquidity increased tremendously. this trend also put the banks at the centre of the entire financial market. a slightest problem with these banks and the entire financial system could come unstuck β this is what precisely happened during the crisis. 17. the next section deals with the numerous implicit support systems provided by banks for a well - functioning capital market. capital markets β linkage with banks 18. market based financial systems were supposed to have reduced the dependence of the financial system on banks. however, with increased market - orientation of bank balance sheets, banks emerged as the proverbial guerilla in the room. their presence was everywhere, implicit or explicit β as
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a wide spectrum of stakeholders. this corroborates the importance and complexities of the issues around ownership, control, and corporate structure of private banks. it is precisely for these reasons, we have decided that some of the recommendations of the iw g need wider stakeholder consultation, deeper examination from various angles, including legalities, and may also require engagement with various other agencies and regulators. let me now discuss on the important issue in current milieu β corporate governance. importance of governance in financial institutions 12. a sound, efficient and robust financial intermediation structure facilitates optimal allocation of financial resources in the economy. for this, the trust of all stakeholders, especially of depositors in case of banks, is a pre - requisite. while legal and regulatory architectures provide a broad framework to maintain this trust, the trust needs to be grounded in good governance and ethical conduct of the institutions and their functionaries. the banks tend to be well regulated and are intensively supervised but any erosion of public trust in financial institutions cannot be countered with regulatory prescriptions or supervisory rigours alone. therefore, to mitigate the β risk of failure β emanating from governance issues, the standards expected of banks are always higher than those from other entities. the same principle would apply to other regulated entities engaged in financial intermediation, albeit in varying degrees. 13. for ensuring sound corporate governance, we need to be mindful of two key challenges. first, dominant shareholders exercising relatively more control may not optimise the interest of all stakeholders. second, a self - serving management may have perverse incentives to take advantage of the diversified, diffused, or passive nature of other stakeholders. while separation of ownership from control must be a dominant response to address the first challenge, in order 3 / 6 bis central bankers'speeches to address the second challenge, it is important to ensure that the incentives of the management are aligned with the interest of depositors and other stakeholders. 14. in the domestic context, growing size and complexity of india β s financial system highlights the need to strengthen the governance standards in banks by increasing scrutiny of the role of promoter ( s ), major shareholder ( s ) and senior management vis - a - vis the role of the board. to this end, reserve bank issued a discussion paper on β governance in commercial banks in india β in june 2020, the intention of this discussion paper was to enhance governance standards in banks and to align the current regulatory framework with global best practices albeit
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roger w ferguson, jr : the new england economic adventure remarks by mr roger w ferguson, jr, vice - chairman of the board of governors of the us federal reserve system, at the opening of the new england economic adventure at the federal reserve bank of boston, boston, 8 october 2003. * * * it is a pleasure to participate in the opening of the new england economic adventure at the federal reserve bank of boston. the educational possibilities presented by the adventure are truly exciting. the federal reserve system has a long history of involvement in economic education. an understanding of economic principles, especially the workings of markets, is fundamental to good decisionmaking - whether by workers, or employers, or public policymakers. i also confess to some self - interest in this regard. a better understanding of economics by the public makes the task of the federal reserve system easier. people may disagree with our policies - some may have different objectives and others may think different approaches to achieving those objectives would be more effective - but at least we are speaking the same language. they know what we are trying to do, and they know why. historically, much of our education effort has focused on increasing public understanding of the federal reserve system itself : how we are structured, the nature and scope of our mission, the monetary policy and supervisory tools at our disposal. providing information about the fed remains a key part of our programs. for the past ten or so years, we have been running the fed challenge, a competition in which teams of high school students engage in mock federal open market committee discussions and make recommendations regarding monetary policy. the quality of the analysis and the sophistication of the presentations have been impressive. by comparison, our own fomc deliberations seem a little dry ; for example, we on the fomc tend to be a little more low tech than the students, who come armed with very colorful computer - driven graphics to support their analysis and arguments. but teaching general economic principles has also been a recurring theme. a number of federal reserve banks work closely with the national council on economic education ( ncee ), which has a host of fascinating programs that make teaching and learning economics fun. gary stern, the president of the federal reserve bank of minneapolis, currently chairs the ncee, and i was privileged to address that group in may, 2002. in recent years, the federal reserve has increased its attention to financial literacy, an area that might be seen as the more practical, personal side of economic education.
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- educated population and has relatively good airline and telecommunications connections. an ofc can also have a positive impact on the resident financial sector, through better access to international capital markets and more financial expertise. however, despite these advantages, many ofcs realise that they cannot ignore the growing concerns regarding their role in the international financial system. let me elaborate on the importance of ofcs for international financial stability. note that in our definition, we defined a stable financial system as a system that prevents shocks from having a disruptive effect on the real economy, but also on other financial systems. the latter part of this definition has become more relevant as financial systems have become more interrelated. the importance of ofcs for international financial stability can be illustrated by a few figures. in the first quarter of this year, bis reporting banks β claims against ofcs comprised almost ten percent of their total cross - border claims, creating a total risk exposure of almost 400 billion us dollars. these exposures are larger if off - balance - sheet activities are taken into account. in addition, insurance corporations and investment funds also use ofcs. unfortunately, information on these off - balance and non - bank exposures is scarce. two years ago, the financial stability forum identified ofcs as a weak spot in the international financial system. in particular, ofcs were spurred to strengthen their supervision and regulation frameworks and co - operate more intensively with the onshore authorities. subsequently, the imf has been asked to monitor the progress in this area, by carrying out offshore financial sector assessments. for aruba, this assessment was completed in june of this year, and looks very encouraging. after all, only two years ago aruba was classified by the financial stability forum as one of the ofcs with legal structure and supervisory practices of a lower quality. compared to other ofcs, offshore banks and insurance corporations are relatively unimportant in aruba. by contrast, the large number of small, corporate vehicles is of particular interest. actually, almost 5000 offshore corporate entities are registered on the island. up to now, these were not supervised and not very transparent, and therefore represented a potential risk from a financial stability point of view. following the imf β s recommendation, however, the central bank of aruba will probably be appointed as regulator of this sector. in particular, the bank will supervise company service providers, which act as legal representatives of the offshore corporate entities. as a motivation for recommending the central bank of ar
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imbalances in demand. however, the situation in euro area labour markets is not uniformly bad. some countries, particularly those with more flexible labour markets, more moderate wage increases and less discouraging tax and social security policies, have managed to avoid the trend of ever - rising unemployment. for example, the netherlands, ireland, portugal, austria and luxembourg all currently show unemployment rates well below the euro area average. there are also examples of other countries with higher unemployment rates, such as spain, that have begun to take steps to reform their labour markets and are now beginning to see tangible results. we can also look at some of the non - participating member states, such as denmark and the united kingdom, to see that high unemployment can be reduced through structural reforms. the need for structural reform is widely recognised, for instance in the oecd jobs study and at the november 1997 luxembourg european council meeting, and some progress with new policy measures is already being made. first, there are β active labour market measures β to provide education, training and work experience β particularly targeted at the long - term unemployed. second, there are reforms to ensure that tax and social security systems make people significantly better off in work than out of it. third, there are measures to ensure that low - productivity workers are not forced out of the labour market. these include reducing the burden of taxes and non - wage labour costs and making sure that minimum wage schemes and collectively bargained wage agreements take account of the need to preserve such jobs. i would also wish to add that, contrary to some suggestions, such policies do not amount to β competitive devaluations β, and structural reforms and wage moderation are no β zero sum game β. they can help generate net increases in average employment and should not be criticised as β wage or social dumping β. the second long - term economic issue i should like to address today is the need to prepare for the substantial financial consequences of the ageing of european populations. on the basis of current trends in birth rates and life expectancy, unfunded public pension and healthcare schemes generate very high implicit government liabilities in most euro area countries. indeed, in many cases these implicit liabilities appear to be of such magnitude that they dwarf even the large official government debt levels. unless action is taken quickly, these financial burdens will fall on future generations of taxpayers and may also threaten the soundness of government finances. therefore, to prepare for the ageing of the population, substantial
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of maintaining price stability. erm ii is explicitly designed to foster convergence to the euro area of countries that have not yet adopted the euro. for all these reasons, stable exchange rates of the euro are best served by stability - oriented policies that are consistent with economic fundamentals. in particular, exchange rate targets or objectives would be neither a substitute for a credible and stability - oriented macroeconomic policy stance nor a surrogate for a flexible response on the part of domestic markets. nevertheless, exchange rates affect the maintenance of price stability as they influence import prices and activity, and thereby consumer prices, in the euro area. moreover, they reflect market expectations about future economic developments and policies. furthermore, due consideration has to be given to the exchange rate of the euro against the background of the importance of the euro area in the international monetary and financial system. therefore, the ecb monitors exchange rate movements on an ongoing basis within its broadly based assessment of the outlook for price developments. the euro exchange rate is an integral part of the broad range of variables used by the eurosystem to take its monetary policy decisions. the exchange rate is also monitored as it may be a channel for monetary policy transmission. clear exchange rate misalignments, although difficult to identify, would be a cause of concern for the eurosystem. if prolonged, they might affect inflation expectations and distort economic activity as well as hamper the efficient allocation of financial resources. although in the euro area these negative effects will be mitigated, as a result of the low degree of openness of the economy, they cannot be ignored altogether. according to the maastricht treaty, the ecofin council may formulate so - called general orientations for exchange rate policy. these orientations β and this is consistent with the above β shall be without prejudice to the primary objective of the eurosystem of maintaining price stability. therefore, the eu finance ministers, who are ultimately responsible for the exchange rate policy of the euro, agreed in december 1997 that they would only issue these general orientations for the euro exchange rate in exceptional circumstances, such as in the case of clear and persistent misalignments of the euro. successful and credible stability - oriented policies should help prevent the emergence of misalignments in the future. the ecb β s view on the dollar exchange rate let me now share with you our views on the exchange rate of the euro against the dollar. the weakening of the euro vis - a - vis the
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with only 5 % that had implemented measures to return production to the company β s home country. at the same time, companies were shifting from just - in - time to just - in - case supply chain management systems. similarly, the european investment bank β s investment survey 9 found that half of us companies and one - third of eu ones have reacted to the recent trade disruptions by focusing more on the domestic market. meanwhile, the mckinsey survey of supply chain leaders worldwide10 found that, last year, 81 % of firms adopted dual - sourcing strategies for raw materials ( up from 55 % in 2021 ). in other words, the response seems to be moving more in the direction of increased diversification β in terms of suppliers and final demand, and both internally and externally rather than reshoring, at least for the time being. this diversification may, in fact, generate greater macroeconomic stability and less volatility. second, and linked to the above, countries ( including china and the united states ) have started to prioritise safety over efficiency. lagarde, c. ( 2022 ). β a new glo bal map : euro pean resilience in a changing wo rld β. keyno te speech at the peterson institute fo r internatio nal eco nomics, april. euro pean investment bank investment survey, 2022. alicke, k., e. barriball, t. fo ster, j. mauho urat and v. trautwein ( 2022 ). taking the puls e of s hifting s upply chains. mckinsey. a case in point is the β friend - shoring β concept as a strategic objective in the united states, while europe aims to double its share of global semiconductor production to 20 % by 2030. companies are also reacting. for example, according to the european investment bank investment survey, the share of eu firms putting effort into shortening their supply chain increased from 10 % in 2021 to 20 % in 2022, while that increase was from 20 % to 30 % in the us. and around 40 % of german companies are trying to reduce their dependence on chinese inputs. this increased security is likely to lead to less risk - sharing capacity between countries and higher transaction costs. third, to the extent that international trade is negatively affected by geopolitical factors, a trend towards regionalisation will also emerge, as
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are still at the early, founding stages of the ssm. and foreseeably for some time, even for some years, adjustments and changes will have to be made to the different components of our supervisory arrangements, both in terms of organisation and of working procedures and staffing levels. thank you. bis central bankers β speeches
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time. 5 to manage these concerns, the mpc set out a transparent strategy for normalising monetary policy centred on its plan to run down the stock of assets accumulated through qe in a gradual and predictable manner. 6 this plan has governed the quantitative tightening ( qt ) programme over the past year. addressing new inflationary shocks but monetary policy cannot be put on an autopilot. any plan has to be conditional on economic conditions, and responsive to economic shocks and disturbances. 7 the mpc has flagged that it will use bank rate as its active instrument to address new shocks as they emerge, leaving the qt programme to run β in the background β as long as market conditions permit. bank of england that naturally brings me to the second rationale for the substantial tightening of the monetary policy stance over the past year : the incidence of new inflationary shocks. two shocks in particular stand out : the very sharp rise in wholesale european gas prices over the past year ; and the decline in participation in the uk labour market ( against a backdrop of sagging market competition in the goods market ). the rise in gas prices has four important characteristics. first, it genuinely was a shock. looking back at the first speech i gave as an mpc member this time last year, 8 gas prices barely featured. rather the focus was on supply chain disruptions and the potential threat of the omicron variant, which had just started to emerge as i spoke in newcastle. second, the shock was large. although it has eased somewhat in recent months, the january european wholesale gas price future β most relevant for next year β s household energy bills that enter the cpi basket β rose more than ten times to its august peak. third, these gas price rises passed - through to the cpi inflation that the mpc targets relatively quickly : in a matter of months β certainly at a shorter horizon than the 18 - 24 months typically associated with the lagged pass - through of monetary policy actions to inflation developments. and fourth, higher gas prices exerted an adverse supply - side effect on the uk economy, and thus induced a difficult trade - off for monetary policy : inflationary pressures rose at a time when economic activity weakened. taken together, these characteristics implied that gas price driven volatility in cpi inflation was inevitable. given the famous β long and variable lags β in the transmission of monetary policy, an immediate policy response to the gas price shock could not have prevented some rise in headline inflation. 9 in line
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tends to be more acute ). since october 2014, 59 % of the nominal principal amount of total issuances has included these enhanced cacs for countries such as mexico, armenia, bulgaria, croatia and egypt. 16 but as the september 2015 g20 communique 17 highlighted, there is a need to further explore market - based ways to speed up the incorporation of such clauses to the outstanding stock of debt. ( iii ) reducing large cross - border exposures a commitment to bail - in rather than bail - out creditors of sovereigns can only be credible if losses can be absorbed safely without significant spillovers across borders. sovereign exposures receive special and in some cases preferential treatment in prudential regulation, with low or even zero capital requirements and exemptions from large exposure limits. it is hardly surprising then that they make up an important part of banks β balance sheets. claims on foreign public sectors reported by bis - reporting banks as a share of their total foreign claims have risen from 17 % in 2004 to 25 % at end - 2014. 18 the basel committee has recently started a review of the treatment of sovereign exposures in the basel standards. this is an important part of the resolution agenda β reducing international spillovers from sovereign debt restructurings will make it more feasible to implement them when needed. conclusion promoting cross border capital flows as a means of allowing resources to flow to where they will be best used is a logical extension of the arguments david hume first put forward in favour of free trade more than 250 years ago. however, such flows leave nations exposed to a β capital stop β, in much the same way that banks can experience a run on their deposits. the mix of self - and multi - lateral insurance arrangements that have arisen in response to recent events and liquidity pressures appears suboptimal β resembling more of a patchwork than a safety net. we need a better global financial safety net with the imf at its heart and three key additional elements that will make the safety net more effective. β’ first, a more reliable and flexible source of funding for the imf and greater clarity on coordination with regional financial arrangements. β’ second, a stronger mandate for imf surveillance and stress testing to reduce the likelihood that countries might need recourse to the safety net, and possible prequalification to reduce stigma when liquidity is needed. see briefing for g20 meeting, september 4, 2015, inclusion of enhanced contractual provisions in international sovereign bond contracts. https : / / g
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should they be expected to. we can lean against house prices by increasing the cost and restricting the availability of credit, but we cannot alter the supply of land or buildings, and should not be held responsible for the housing market. our job ( and capability ) is to limit financial stability risks and keep overall inflation under control. when in doubt, a bias towards prudence is probably a good thing. you might expect a conservative central banker to say that, but i think there is a good deal of evidence in favour of optimism bias amongst borrowers and lenders ( or perhaps simply an expectation of being rescued if things go sour ). 2 there is a long tradition to this view, all the way back to adam smith :'the over - weening conceit which the greater part of men have of their own abilities is an ancient evil remarked by the philosophers and moralists of all ages. their absurd presumption in their own good fortune has been less taken notice of. it is, however, if possible, still more universal. there is no man living who, when in tolerable health and spirits, has not some share of it. the chance of gain is by every man more or less overvalued, and the chance of loss is by most men 1 / 6 bis central bankers'speeches undervalued, and by scarce any man, who is in tolerable health and spirits, valued more than it is worth.'adam smith low inflation was our monetary policy challenge for the 4 to 5 years prior to the covid - 19 pandemic, driven by high international savings, a greater than 70 percent fall in oil prices, the international flow of labour, digitisation, and global competition keeping downward pressures on prices. however, just when we thought we had things back to about an even keel in terms full employment and inflation at target at the end of 2019, the global pandemic came and knocked everything for six. anticipating a very deep and prolonged recession, monetary and fiscal policies went into emergency over - drive. fortunately, the combination of these policies, health restrictions and sound private sector balance sheets avoided an economic crash and supported a fairly quick and strong recovery. 3 what do i take from these experiences of economic trends, cycles, and shocks? firstly, smooth sailing is rare : the economy at equilibrium ( sailing on calms seas with neutral policy settings ) is as much the outlier in the distribution of economic circumstances as is the rare instability we wished
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to this stacking of leverage may be exacerbated by interconnections within intermediation chains. those could include overlapping management of private credit and private equity, private credit being provided to businesses sponsored by private equity, and unobserved provision of leverage to private credit funds by other financial intermediaries. moreover, few private credit providers have experienced a complete credit cycle, which makes it difficult to predict how the industry might respond to a negative shock. i will now move to a discussion of stablecoins, which are digital assets that seek to maintain a stable value relative to a reference asset such as a national currency. they may also be accepted in different parts of the payment system. with assets under management of around $ 170 billion, stablecoins have a relatively small footprint in the u. s. 5 they are not widely used as a cash - management vehicle or for transactions for real economic activity but are generally used for digital asset investments. stablecoins lack a comprehensive federal regulatory framework, and many u. s. dollar - denominated see figure 4. 5 in board of governors of the federal reserve system ( 2024 ), financial stability report ( washington : board of governors, november ), p. 41, https : / / www. federalreserve. gov / publications / files / financial - stability - report - 20241122. pdf. - 10 stablecoins operate abroad. stablecoins could scale quickly, particularly if the stablecoin is supported by access to an existing customer base. the fact that stablecoins are pegged to a reference asset makes them structurally vulnerable to runs. if a run on a large stablecoin were to occur, liquidation of the assets backing the stablecoin could be disruptive, especially if those assets were linked to other funding markets, like commercial paper or certificates of deposit. some stablecoins have restrictions on redemptions, which can help reduce vulnerabilities, assuming that investors alter their expectations to reflect such restrictions. questions have emerged about the role of stablecoins in intermediation chains, including the use of leverage by stablecoin investors and the use of stablecoins to obtain leverage β for example, by serving as loan collateral. i will continue to monitor developments in these areas. now, i would like to move to cyberattacks and similar events β such as hardware or software failures β which are becoming more common. the number of cyberattacks on financial
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university of massachusetts, amherst, mass., september 24. bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches
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to the development level of the country and calibrated according to domestic conditions. second, international standards pose a minimum of requirements, leaving it at the discretion of individual countries to undertake more stringent requirements. the model of global integration is the economic model that has been adopted by most of the transition countries, such as albania. under this guidance, the albanian banking market has demonstrated clear willingness and objectives for a swift harmonization with the legal framework of the european union β s banking system, as well as with its significant changes since 2008. although there are no cases of bank failures in the history of the albanian banking sector, we have identified in our banking legislation the same loopholes found in other european economies. the development of hypothetical scenarios for coping with a potential exposure of the albanian economy to the greek sovereign debt crisis evidenced that the bank of albania β as the supervisory authority of the banking sector β did not have all the necessary legal instruments to manage insolvency situations in systemically - important banks. this need for a new legal framework is addressed in both national and cross - border aspects, by the bank recovery and resolution directive. in fact, the initial efforts to prepare and present the first recovery plan to the bank of albania started in 2012. the relevant regulation was approved by the supervisory council of the bank of albania in 2014. but, of course, these efforts were made within the supervisory legal authority and, as such, they were not sufficient. for this reason, during 2015, with the support of world bank β s finsac project, the bank of albania started the difficult but necessary work of harmonizing the european directive into a new albanian law. the law β'on the recovery and resolution of banks in the republic of albania'β entered into force 3 / 5 bis central bankers'speeches in july 2017, vesting the bank of albania with a new attribute, i. e. the resolution authority. this attribute completes the financial security mechanism of the banking sector, with the bank of albania responsible for regulating and supervising the banking sector, drafting macro - prudential policies, performing the function of the lender of last resort as well as the implementation of banks β resolution. together with the deposit insurance scheme provided by the deposit insurance agency since 2002, the financial safety net framework in albania is complete. for the purposes of this law, the resolution fund was created with contributions from the banking sector. this fund aims to reach all 6. 3 billion within 2027. the implementation of the albanian
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yield changes on the daily average surprise in the variables within the economic surprise indicators. the diamond shows the regression coefficient and the bars indicate plus or minus two standard deviations. bis central bankers β speeches chart 9 : composite pmi and spread between 2 - year swap and overnight rates net balance percentage points 2. 0 1. 5 1. 0 0. 5 0. 0 - 0. 5 composite pmi ( left - hand scale ) - 1. 0 spread between 2 - year swap and ( a ) overnight rates ( right - hand scale ) - 1. 5 ( b ) - 2. 0 sources : bloomberg, markit economics, ons and bank calculations. ( a ) three - month moving average of the end - month spread between the 2 - year swap rate and the sonia rate. ( b ) based on the markit / cips manufacturing and services pmis. bis central bankers β speeches
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##ability at what would be a time of great uncertainty. we need to know how we will work with and communicate with public authorities and with the private sector. there is a different set of factors which impact our decisions in this area. first, our β must do β roles are dependent on crisis preparation and an adequate general understanding of how the financial system operates, with all the complexities entailed. second, while each national authority has its specific responsibilities to fulfil, the speed with which decisions would then need to be made and actions implemented make it also essential to act effectively as a single operational unit. in the uk the fsa, hmt and the bank have developed mechanisms designed to turn this into reality and to provide necessary confidence to the market. and third through testing programmes, we can obtain feedback as to whether our efforts are likely to prove successful and to refine preparation as we go along. the costs to the economy of failure would be high and the expectation is that we would be well prepared. this puts a strong onus on collecting in advance up to date information on firms and markets, or being confident of its availability and source. and also of regular and exacting testing programmes β working with other authorities and with the private sector. 6. conclusion so in conclusion, the field of financial stability oversight presents us with plenty of challenges. not only is the world more complex, but we need to devote real thought as to how best to operate and organise ourselves so as to contain risks. defining the resources you need, and how to deploy them is challenging in itself. my prediction is that as the system β s complexity increases we will all find ourselves asking the same questions : just what should we do? why? and what effect will it have?
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y v reddy : central bank communications : some random thoughts keynote address delivered by dr y v reddy, governor of the reserve bank of india, at the regional seminar on central bank communications sponsored by the international monetary fund, mumbai, 23 january 2006. * * * ms. wanda tseng, mr. ariyoshi, distinguished fellow central bankers and friends, at the outset, i would like to extend a hearty welcome to all our guests to india. i hope you will find the weather outside as well as the intellectual stimulation in the seminar pleasant and productive. i am thankful to the organisers for inviting me to participate in the seminar. the subject is close to our head and heart and we, in the rbi, had organized a saarcfin sponsored seminar last year on this subject, and we learnt a lot from each others β experience in south asia. today β s seminar is different, and may perhaps prove to be specially rewarding for several reasons : it covers a wider range of central banks, and has the benefit of participation by multi - lateral institution as well as the media representation, in addition to a private sector bank. the organisers need to be complimented on an excellent structuring of the seminar in terms of issues, classification and participation. i find the key questions for consideration listed in the programme very pertinent, and so, perhaps it is ideal for the keynote address to outline some random thoughts on the questions, based on our experience in the reserve bank of india ( rbi ). in the past, central banking was shrouded in secrecy with some β mystique β surrounding it. in the recent years, however, there has been greater visibility, transparency and communication. what are the reasons? first, increased independence of central banks warranting publicly accountable conduct ; second, adoption of inflation - targeting β whether through a legal sanction or otherwise ; third, a mandate to the central banks, either explicit or implicit, for maintaining financial stability in a world where the financial markets and their expectation matter. it is interesting to note that even in the uk, where there is a financial services authority, it is the bank of england which publishes the financial stability report, periodically. what are the theoretical perspectives in this regard? the academic and policy literature recognises the role of communication for the effectiveness of monetary policy, and has broadly focused on four aspects of policy, namely, efficiency, time - consistency, optimality of communications, and institutionalcum - decision making processes. efficiency issues
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associations, through standing advisory committees, and informal / ad hoc committees, technical reports, working groups, etc. at this stage, i must share with you one concern about the credibility bonus earned by the effective communications policy. is it possible that such β hands on β and β very successful β communications by the central banks in the world to maintain financial stability have resulted in under - pricing of risks by the private sector, or in distinct lowering of aversion to financial risks? is it possible that this credibility bonus is partly responsible for the upward movement of the housing and equity prices becoming a global phenomenon? the issue of financial stability is of great significance and enormous complexity for central bankers in the emerging market economies ( emes ). the emes vary considerably in their fiscal, current account, openness to external sector, and dependence on oil - earnings or oil - imports. yet, the analysts in the financial markets often treat them as a group, presumably because the emes are perceived to be to be high - risk and high - reward destination for financial capital. that characteristic lends them to vulnerability in capital flows, sometimes for reasons other than economic fundamentals in the country concerned. as the title implies, the emes are emerging from one state to another, namely, from less market orientation to greater market orientation, and are thus, in a state of transition. the central banks in the emes, in their pursuit of financial stability, have two additional challenges. first, to mange the transition in their own economies, which has socio - economic as well as political dimensions ; second, to keep a watch on the sentiment of foreign capital flows β which could change for reasons other than domestic. while for a particular foreign investor it may be a small portfolio shift from an eme to an industrialised country, it may be one of large magnitude for the eme concerned. the challenges for communication policy are considerably more complex for the central banks in the emes for another reason, namely, the asymmetrical response of the financial markets to the developments in the emes. for instance, the market reaction to an increase of, say, us dollar five billion in the forex reserves of an eme would be comparatively subdued vis - a - vis the response to a decline in reserves by a like amount. in india, several measures, monetary as well as administrative, were undertaken to meet the threats to financial stability while complementary or parallel recourse was taken to communications. some illustrations are :
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fifth, the non - performing loans ( npl ) problem proved more difficult that initially anticipated. it was mainly the outcome of economic contraction, but it was also propagated by legislative changes such as the blanket moratorium on auctions and the abuse of protection law 3869 / 2010. several other legal and judicial impediments exacerbated the npl problem 4. a more forceful reaction during the first years of the crisis by implementing the required legislative changes much earlier and introducing a centralised asset management framework for npes as other member states had done could have reduced the problem we are facing today. the bank of greece believes that there is still ample scope for introducing such a systemic solution now and has recently presented a scheme to deal with the high volume of npes, in addition to banks β endogenous efforts, in order to achieve a rapid convergence of the greek npe ratios to the european average. sixth, certain reforms fell behind the agreed time schedule due to several factors, including : insufficient ownership of the necessary reforms ; populist rhetoric, rivalry and failure to reach an understanding among political parties ; and the various β small and large β vested interests that resist reform. seventh, at the same time, political economy deliberations in the euro area have played their part in delaying the recovery of the greek economy. the eurogroup decision of november 2012 to grant further debt relief was put off for several years and was actually implemented only in june 2018. this was partly due to delays and to mixed signals occasionally received from greek political parties on the commitment to reform. however, and rather more importantly, it also reflects forthcoming elections and populist voices in a number of euro area member states. overall, this development undermined the growth prospects of the greek economy and extended the duration of the crisis. eighth, at the start of the greek sovereign debt crisis in 2010 the euro area authorities objected to any type of intervention to contain the rapidly rising greek government debt. instead, emphasis 4 / 8 bis central bankers'speeches was placed on drastically correcting fiscal imbalances. hence, on account of all this, the much larger than initially anticipated recession over the programme years and the rather unorthodox negotiations of the first half of 2015 that led to the third economic adjustment programme, the greek debt rose to 176. 1 % of gdp at the end of 2017 from 126. 7 % of gdp in 2009, thus requiring further debt relief, which was actually provided in june 2018
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of the crisis. β’ labour cost competitiveness has been fully restored and price competitiveness has recorded substantial gains since 2009. this outcome was mainly driven by labour market reforms, which liberalised employment protection legislation and facilitated a more flexible and decentralised wage bargaining system. β’ a bold programme of structural reforms and privatisations has also been implemented. reforms cover various areas, such as the pension system, the health system, goods and services markets, the business environment, the tax system, the budgetary framework and public sector transparency. as a consequence of the above, openness has improved substantially and the economy has started to rebalance towards tradable, export - oriented sectors. the share of total exports in gdp increased from 19. 0 % in 2009 to 34. 2 % in 2017. exports of goods and services excluding the 1 / 8 bis central bankers'speeches shipping sector have increased by 54 % in real terms since their trough in 2009, outperforming euro area exports as a whole. the share of tradable goods and services in the economy has increased by 10 % relative to non - tradables in terms of real gross value added since 2010. on account of improving economic conditions and the reforms implemented, the unemployment rate, although still quite elevated, declined to 19. 0 % in the second quarter of 2018from 27. 8 % at the end of 2013. the banking system has been restructured and recapitalised and its corporate governance has been enhanced. following three rounds of recapitalisation, greek banks have capital ratios above the euro area average and maintain buffers sufficient to absorb additional credit losses, as the recently completed pan - european stress test indicated. they have also markedly improved their liquidity position, regaining access to the interbank market and issuing covered bonds ; as a consequence, they have reduced their reliance on central bank funding. however, nonperforming exposures ( npes ), one of the most important legacies of the crisis, remain banks β most significant challenge. a number of important reforms have been implemented, aiming to provide banks with a variety of tools to meet this challenge. these reforms include, among other things, the establishment of a secondary market for non - performing loans ( npls ) and the subsequent licensing of fourteen credit servicing firms, the operation of an electronic platform for out - of - court settlement, and electronic auctions of real estate collateral. these efforts have started to bear fruit : according to end - september
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deepak mohanty : what should be the framework for monetary policy in future? vote of thanks by mr deepak mohanty, executive director of the reserve bank of india, at the 15th c d deshmukh memorial lecture on β a revolution in monetary policy β lessons in the wake of the global financial crisis β delivered by prof joseph stiglitz, mumbai, 3 january 2013. * * * honourable professor joseph stiglitz, governor dr. subbarao, distinguished guests and colleagues from the reserve bank. central banks have come under severe intellectual scrutiny ever since the global crisis, even as they have crossed all conventional barriers in responding to the crisis. monetary policy was partly blamed for the genesis of the crisis, and it continues to be blamed for ineffectiveness in giving us a durable recovery. we need nothing short of a revolution to make monetary policy more relevant. two major forces playing out since the crisis could aid this revolution : first, the innovative response of advanced country central banks to ensure that this time it should be different from the great depression. second, the animated academic debate amongst the best minds in economics and finance, led by nobel laureates like prof stiglitz, to recommend what should be the framework for monetary policy in future? in his opening remarks, governor dr. subbarao discussed the first dimension, which included extensive reliance of advanced country central banks on quantitative and credit easing measures, operation twist and forward guidance, to escape the theoretical limits posed to the conventional conduct of monetary policy by the zero lower bound ( zlb ). he noted the far reaching changes emerging in the recent period in monetary policy frameworks of advanced country central banks, with the fed announcing an explicit target for unemployment ; the bank of england examining possible replacement of inflation targeting with nominal income targeting, and the bank of japan being expected to respond to prolonged deflation by accepting a higher explicit inflation target. emerging market central banks, despite the pre - crisis best practices, generally preferred to continue with multiple objectives, which included financial stability, and also tried to manage the impossible trinity, with country specific approach to exchange rate regimes and capital account. after the global crisis, the spillovers form ultra - accommodative monetary policies in advanced economies have amplified the challenge from the impossible trinity, besides increasing commodity price pressures. governor, dr. subbarao, encapsulated in his remarks the complex nature of the issues involved in the recent innovations in the conduct of monetary policy, most of which could be
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a post - world war ii australia, when ensuring economic stability and high levels of employment were very much top of mind. establishing such a broad mandate for the central bank ran against the conventional wisdom of the time, which was that central banking was about just currency and banking. indeed, in his book on the history of the reserve bank, boris schedvin was moved to write : β this bold declaration of responsibility was a landmark in the history of central banking. β it was a landmark in the sense that the australian parliament recognised that central banking was not only about money and finance, but it was also about jobs and the welfare of our society. as the current governor of the reserve bank of australia, i very much share this perspective. ultimately, central banking is not only about finance and money ; rather, it is about enhancing the economic welfare of the people we serve, primarily through achieving price and financial stability and maximum sustainable employment. melville had an important hand in setting this direction. his contribution goes back to at least 1936, when he made a lengthy submission to the royal commission on the monetary and banking systems in australia. the first sentence of that submission reads : β the ultimate purpose of monetary policy is to enable the economic system to achieve the optimum use of available resources as far as this is possible β. [ 4 ] it was then 23 years later that this idea β in different words β found expression in the reserve bank act 1959. it is worth recalling that melville had less success in his quest for full employment to be incorporated into the charters of global economic institutions that were set up after world war ii, including the international monetary fund. this was not for want of trying β at all the major international economic conferences at the end of the war, he was a strong advocate for what became known as the β full employment approach β. but back to the world of central banking. since the early 1990s, the conventional wisdom has been that the best contribution a central bank can make to full employment and economic welfare is to maintain low and stable inflation. this is because by keeping inflation under control and within a narrow range, the central bank can https : / / www. rba. gov. au / speeches / 2019 / sp - gov - 2019 - 10 - 29. html 2 / 18 10 / 30 / 2019 some echoes of melville | speeches | rba reduce uncertainty and economic distortions and, in so doing, provide a stable foundation for people to make decisions about savings and investment. in turn
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the stability and growth of the korean economy. thank you.
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uncertainties through policy coordination among countries at international forums including the g20. now then, what are the challenges facing the korean economy? the growth outlook for the korean economy this year is clouded by the existence of several downside risks, among them the political unrest in the middle east and north africa, and resultant rise in international oil prices, and domestically, the damage caused by foot - andmouth disease. on the other hand, there are also upside risks, such as the strengthening of the economic recoveries in the us and other major advanced economies. and as the effects of these downside and upside risks are likely to be of similar magnitude, we at the bank of korea expect the korean economy to achieve favorable growth at the originally - forecast level of around 4. 5 % this year, with balanced contributions from exports and domestic demand. employment has exhibited a trend of recovery since 2010, led by the private sector, with the unemployment rate holding steady at the mid - 3 % level, while a solid trend of surplus has been maintained in the current account, albeit at a declining ratio to gdp. for this year as well, we foresee outcomes similar to those of last year both in employment and in the current account balance. given such prospects, i believe price stability to thus now be the greatest challenge facing the korean economy. amid the build - up in demand pressures from our swift recovery from the global crisis and economic upswing, consumer price inflation, after recording 4. 1 % in january, marked 4. 5 % in february, exceeding the upper bound of the bank of korea β s medium - term inflation target. this is due mainly to three factors. first are the run - ups in oil and other international commodity prices, and the surge in prices of agricultural, livestock and fisheries products owing mostly to the abnormal cold wave experienced this winter and to the outbreak of footand - mouth disease. second is the demand - side pressure, as measured by the positive output gap. and the third factor is the rising inflation expectations. roughly speaking, the supply - side factors account for half of the price inflation that we are seeing. bis central bankers β speeches in the coming months, consumer price inflation may remain elevated at a high level for some time. having said that, i expect inflationary pressures to be concentrated more in the first half of this year than in the second half, and particularly those stemming from supply - side factors like international commodity prices to ease in the second half relative to the first. given
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similar, although interest rates have been β and still are β higher than in larger industrialised countries. this is quite at odds with what could be expected based on some of the discussion taking place in iceland. the fact is that long - term real rates in iceland are currently at their lowest for this entire period, apart from a short time in the midst of the economic crisis, when the real policy rate was held very low so as to stimulate the economy and presumably pulled longer - term rates downwards for a while. i have said that monetary policy had little to do with these developments. this does not change the fact that these developments have affected monetary policy, as they reflect in part the decline in short - term equilibrium real interest rates. monetary policy has therefore responded to this with lower nominal interest rates than would otherwise have been appropriate. nominal rates have fallen even further during this period, for three reasons. first of all, inflation and inflation expectations were brought to target levels in major industrialised countries in the last two decades of the 20th century ; therefore, it was not necessary to keep nominal and real rates as high as before. it could be said that the same development has taken place here in iceland in the recent term. second, global deflationary tendencies have been strong in recent years, following the inclusion of china and russia in the global trading system and due to technological advances and developments in international production and value chains. third, a pronounced economic slack in major industrialised countries after the financial crisis has led to much more accommodative monetary policy than would otherwise have prevailed in those countries. all of these factors combined have contributed to the current situation, where nominal central bank rates in leading industrialised economies are extremely low in historical terms. actually, many observers consider them dangerously low as regards their potential impact on financial stability and the efficacy of the financial system. what about iceland in this context? the central bank β s key rate is the interest rate that determines short - term market rates at any given time. in the recent past, this has been the rate on seven - day term deposits, which is now 5. 25 %, as chart 2 indicates. it is far below the average for the period since the adoption of the inflation target in late march 2001, in spite of the significant tension in the economy. this is a reflection of the progress made in the recent term in bringing inflation expectations to target. the bank β s key rate has been slightly lower on two occasions since the adoption of the
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away by the government sector, it has vital implications for ensuring stability in the financial markets because the demand for funds from the non - government productive sectors of the economy has to be met simultaneously. fourth, india is still a bank - dominated system and about 70 per cent of our banks ( in terms of business ) are owned by the government. thus, we could have a situation when the objective of monetary policy and the objective of broader public policy dealings with banking converge, in which case the monetary policy could be very effective. sometimes, it could happen that the objective of monetary policy and the objective of broader public policy may not converge, in which case monetary policy may not be that effective. in other words, the effectiveness of the monetary policy depends not only on the actions of the monetary authority, but also on other public policy postures. this certainly complicates monetary management. of course, the issue of conflict of interest in public sector banking and government ownership is yet another issue. the issue of conflict of interest in private sector banks arises when the owner of the bank borrows from his own bank. the single largest source of borrowing for the government being the government - owned banks themselves, this conflict is rather apparent. fifth, one of the factors imparting rigidity to the interest rate structure in india is the administered interest rates, particularly on small savings instruments. in this context, administered interest rates fixed by the government on a number of small saving schemes and provident funds are of special relevance as they have generally offered a rate different from those on corresponding instruments available in the market, in some cases along with tax incentives. the administered interest rates significantly impact the level and allocation of savings. on the lending side also, there are some administrative prescriptions for banks. depending on how it is calculated, on both the savings and the lending sides, the administered structure of interest rate would apply to about 25 to 40 per cent. in this context, it is pertinent to note that the monetary policy mainly operates through interest rates and interest rate signals, and constraints posed by administered interest rates have to be duly recognized while dealing with issues relating to monetary policy transmission mechanisms. sixth, theoretically it is well recognised that monetary policy is generally a more effective counter - cyclical policy instrument than fiscal policy because interest rate changes can be made and reversed quickly. however, monetary policy adjustments may take longer than fiscal policy adjustments to affect aggregate demand. it is also recognized that fiscal policy contributes to broader - based stabilization through
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information electronically rather than mailing paper copies to a reserve bank. through these efforts, the federal reserve aims to strike an appropriate balance between off - site and on - site supervisory activities to ensure that community banks are subject to supervision that is both high - quality and resource - efficient. fourth, our supervisory oversight of community banks is itself grounded in the traditional relationship banking model of funding local lending with customer deposits. there are risks in this model, of course, since geographic and portfolio concentration can make community banks vulnerable to local economic downturns, as we have witnessed during and after the great recession. even though the number of banks on the federal deposit insurance corporation β s β problem list β has fallen from a peak of 888 at the end of the first quarter of 2011 to 291 at the end of 2014, this number is still nearly three times the historical average. but these risks are understood by supervisors and bankers. traditional regulatory and supervisory methods are well suited to deal with them. indeed, it is noteworthy that most community banks adhering to this model continued to thrive even during the worst years of the financial crisis. 3 see, e. g., r. alton gilbert, andrew p. meyer, and james w. fuchs ( 2013 ), β the future of community banks : lessons from banks that thrived during the recent financial crisis ( pdf ), β federal reserve bank of st. louis review, vol. 95 ( march / april ), pp. 115 β 143 ; and dean f. amel and robin a. prager ( 2014 ), β community bank performance : how important are managers? ( pdf ) β finance and economics discussion series 2014 β 26 ( washington : board of governors of the federal reserve system, march 18 ). for a study finding relationship lending benefits in an international context, see franco fiordelisi, stefano monferra, and bis central bankers β speeches in contrast, community banks that moved beyond their traditional business model and entered unfamiliar or more complex lines or markets experienced difficulties. for example, small banks that turned to a more transactional model and funded construction loans, often outside of their local markets, with borrowings rather than core deposits were more likely to fail. this experience helps explain why our supervisory intensity will often increase for banks, including community banks, that embark upon unfamiliar activities. a similar pattern obtains in the federal reserve β s supervision of consumer compliance in community banks. it is axiomatic that all financial consumers deserve the same protection
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lessons ; i will pick three : β’ first, the inadequate assessment of counterparty risk, a task fundamental to lending and investment decisions, was in many ways at the core of the problem. key market participants were allowed to grow through greater leverage and alter market terms in crucial ways, largely unchecked by traditional disciplines. commercial banks, for whom judging credit risk is their life blood, were as guilty as any other institutions. traditional practices of creditors of covering their exposures by requiring collateral that was marked - to - market proved insufficient as market values fell, creating a circular and expanding effect. β’ second, market participants shared an insufficient recognition of the role of market liquidity in risk management. an important point here is the link between credit and market risk, and the fact that market prices can change sharply when key market participants pull out. in the proverbial β race for the door, β nearly everyone gets trampled. β’ the last point i will note relates to the over - reliance by practitioners on quantitative tools. sophisticated measurement techniques can help greatly in providing insights about the dimensions of risk and sources of possible problems. but, like chains, models are only as strong as their weakest links. every model has assumptions that must be tested, and its limitations must be understood. during periods of market stress nearly β all bets are off β. business practices change, otherwise stable and expected correlations in market rates and prices disappear, and sometimes panic ensues. well thought out and designed contingency plans and scenario analysis tailored to specific strategies and portfolios are necessary to prepare for these events and to evaluate an institution β s risks. that point was brought home last year. measuring market and credit risk in banks fortunately, progress is being made as banking organizations - typically the largest us and foreign institutions - find better ways to quantify their risks. with market risk - the β easy β one - the federal reserve and other regulators built on industry practices for measuring a bank β s β value at risk β when implementing a new regulatory capital standard for the banking system last year. basing capital requirements on a bank β s internal calculations of its largest expected daily trading loss at a 99 % confidence level was an important step, we thought. it produced a standard far more sensitive to changing levels of risk than was the earlier approach. it provided a reasonably consistent standard among banks and also was compatible with current management practice of the world β s more progressive banks. last year β s events have not changed our view
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extreme complications the world economy is suffering from the see levine, r. ( 2005 ), β finance and growth : theory and evidence β, in p. aghion and s. durlauf ( eds. ), handbook of economic growth, edition 1, volume 1, chapter 12, p. p 865 β 934, the netherlands : north holland. commercial bank credit to the non - financial private sector as a proportion of gdp was 30. 4 percent in december 1994 and 13. 9 percent in september 2011. as of august 2011, the number of commercial bank branches was 11, 552, while the number of banking agents was 12, 260 ; a total of 41 percent of municipalities, accounting for 5. 4 percent of the total population, still did not have bank branches, atms or banking agents ; mexico counted 96. 4 million mobile phones and 19. 2 million fixed telephone lines. bis central bankers β speeches financial excesses that led to the global financial crisis. at the same time, regulation should not inhibit the innovation and flexibility necessary for the banking system to accomplish its mission. as i said, mexico has made substantial improvements on regulation and supervision. however, the agenda for financial authorities needs to embrace the further enhancement of micro - prudential standards for banks, such as capitalization and liquidity requirements ; macro - prudential measures to detect early systemic risk factors and counteract them ; and the design of an expedient bank resolution mechanism. 6 economic outlook during the third quarter of 2011, the mexican economy continued the process of recovery that began two years earlier. in particular, during july and august, the latest months for which full production data are available, the general indicator of economic activity ( igae ), a monthly gdp proxy, exhibited a year - on - year average rate of growth of 3. 8 percent, slightly higher than the corresponding figure in the previous quarter. even though in august the level of the igae surpassed that of june, different economic indicators suggest that the rebound is losing steam. for example, the increase in activity in july was followed by a contraction in august. this fall occurred both in the industrial and service sectors, which account for approximately 95 percent of total output. the lower activity was partly compensated for by a significant rise in agricultural production, mainly as a result of government support programs for re - sowing land after harvest losses due to bad weather in the first quarter of 2011. deceleration was clearer in
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created that limits the governing council β s involvement in supervisory decisions. time will tell whether this structure truly helps to avoid conflicts of interest between monetary policy and banking supervision or whether it might have been better to create an independent banking supervisor. 4. conclusion ladies and gentlemen european banking supervision certainly represents the biggest step towards financial integration in europe since the launch of the euro. and, to me, it is the most logical step to bis central bankers β speeches take. single monetary policy requires integrated financial markets β which includes, without doubt, european - level banking supervision. and for anyone who has gained the impression that we have transferred responsibility for banking supervision to an institution with no previous experience of supervising banks, rest assured : that is not the case. national supervisors will continue to play an important role in supervision within the new system. for us, as national supervisors, this is an extremely exciting challenge. since colleagues from the bundesbank began taking part in the joint supervisory teams, our tasks and perspectives have been broadened substantially. i am sure that our national supervision will also benefit from the experience we gain by working in the joint european teams. and i firmly believe that european banking supervision will benefit from the involvement of national supervisors. thank you. bis central bankers β speeches
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recently - licensed credit bureaus started issuing credit reports last month. i am pleased to report that the other licensee is expecting to commence operations soon. but financial inclusion is only possible when individuals and households are able to make informed choices about how they can use financial services to save, borrow, and invest. financial literacy, therefore, is the second of the twin pillars of financial deepening. it stimulates demand for financial services by making people aware of what services are available, and how they can be used by them to improve their lives. at the same time, the benefits of financial inclusion are predicated on financial stability. much work is being done to maintain this bedrock for successful financial inclusion and financial literacy initiatives. amendments to the bank of jamaica act are being prepared which will, once approved, assign formal responsibility to bank of jamaica for overseeing financial stability. the amendments will, among other things, facilitate effective coordination bis central bankers β speeches amongst financial sector regulators, and provide a statutory basis for macro - prudential surveillance aimed at the early identification of systemic risks to financial stability. in addition, we are preparing legislation that will consolidate into one the various statutes covering deposit - taking institutions ( mainly banks and building societies ), and eliminate inconsistencies and opportunities for regulatory arbitrage. the proposed legislation is expected to include provisions to permit some banking services to be provided through agents, which will facilitate the orderly and safe expansion of mobile money services. we are also including an enforceable code of conduct for deposit - taking institutions, which is aimed at advancing consumer protection in this area. these two innovations, i believe, are relevant to the topic that you will discuss today. in closing, i wish for the jdic a successful event and many more years of service to our nation. thank you. bis central bankers β speeches
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zeti akhtar aziz : transforming the east asian insurers β time for action now keynote speech by dr zeti akhtar aziz, governor of the central bank of malaysia, at the 26th east asian insurance congress β transforming the east asian insurers β time for action now β, kuala lumpur, 30 october 2012. * * * it is my great pleasure to join you this morning at this 26th east asian insurance congress. it was almost 24 years ago in 1988 that malaysia hosted this event. since that time, the global and regional financial and economic landscape has been dramatically transformed. during this period the world has also experienced more than a hundred financial crises, with the recent global financial crisis being the most severe. this has prompted wide ranging financial reforms by the international community to strengthen the resilience of the financial sector. the enhancements to the regulatory and supervisory frameworks have also had a far reaching and fundamental impact on how insurers manage risks in their businesses. in this highly dynamic and more challenging global environment, the insurance industry has continued to evolve and develop with the broadening of the product range and greater diversification of the distribution system. in malaysia, the insurance industry, including the takaful sector has also progressed significantly during this period, both in terms of growth and development. in this more recent decade, the penetration rate, as measured by the number of life policies to total population, increased significantly to 55 percent, from 31 percent in 2000. total premiums to gdp increased from 4. 1 percent to 4. 5 percent over the same period. structural reforms undertaken has also transitioned the industry towards more market - based pricing mechanisms in key market segments, improved efficiencies in the insurance eco - system, and a strengthened framework for consumer protection. these trends have also been reinforced by liberalisation measures which aim to support and catalyse the further development of the industry. a proposed new legislation for our financial sector is also now well advanced and will provide a solid foundation for the insurance industry going forward. this event is taking place at a time of significant change and in a period of transition into a new era for the financial services industry. we can reflect on these developments in the industry and take the opportunity to learn from the different experiences in the region. while we face different challenges and priorities, the insurance industry in the east asian economies share three important common goals β sustaining growth and performance under more challenging economic and financial conditions, strengthening the capacity to support and drive economic
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s s mundra : strong financial services sector β imperative for sustainable growth keynote address by mr s s mundra, deputy governor of the reserve bank of india, at the icai international conference β accountancy profession : spearheading excellence β, indore, 9 august 2015. * * * assistance provided by shri sanjeev prakash is gratefully acknowledged. good morning to you all! 1. i am pleased to be here this morning to speak to the delegates of this international conference and i thank icai for providing me this opportunity. as you all know, the theme of this morning β s session is β financial services sector - agenda for sustainable growth β and as somebody who has spent his entire professional life in the banking sector β first as a commercial banker and now as a central banker, i would speak with a particular emphasis on banking sector. introduction 2. let me begin by taking you back to south korea of the year 1997. the β grey - haired β amongst you would recall that in the period leading up to 1997, the korean economy as also the other β tiger β economies in the south east asian region had expanded by 6 % to 10 % on an annual basis. buoyed by expectations of rapid growth and expansion, the chaebols ( family - owned business conglomerates ) in korea had raised significant amounts of foreign funds for investment in building industrial capacity. however, as the economic growth slowed down, the debt problem started to accentuate and one of the chaebols, hanbo collapsed under a $ 6 billion debt load. the company had decided in 1993 to build the world β s fifth largest steel plant and there was cost escalation of the project from won 2, 700 bn to won 5, 700 bn while the steel demand had turned sluggish. the situation deteriorated further in july 1997 when kia, korea β s third largest car company asked for an emergency bank loan to avoid bankruptcy. these events prompted international credit agencies to downgrade the ratings of korean banks with heavy exposure to the chaebols and thus, began the financial meltdown in korea. 3. of course what is widely known as the β asian financial crisis β had begun earlier on february 5th, 1997 in thailand when a thai property developer failed to make a scheduled interest payment on its eurobond loan. the business model of financial institutions in thailand was built around issuing eurobonds denominated in us dollars to benefit from the interest rate differential between dollar denominated debt and thai debt
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obligations to current and prospective borrowers is that they remain profitable and solvent. it is in this context that following regulatory actions have been launched in recent past which are a fair mix of both, prudent regulation and right incentives to support growth with proper risk management : β’ guidelines on β early recognition of financial distress, prompt steps for resolution and fair recovery for lenders : framework for revitalizing distressed assets in the economy covering formation of joint lenders β forum ( jlf ), corrective action plan ( cap ), β refinancing of project loans β, β sale of npas by banks β to facilitate early recognition / resolution of financial distress β’ banks permitted to grant an extended debt repayment period to their borrowers in long - gestation projects ( β 5 / 25 β scheme ) β’ enabled banks to take steps for strategic debt conversion ( sdr ) giving them right to convert their outstanding loans into a majority equity stake if the borrower fails to meet conditions stipulated under the restructuring package β’ enhanced fraud monitoring framework β’ issuance of long term infrastructure bonds to facilitate financing of long term infra projects β’ revoking forbearance on restructuring certain other regulatory measures like revision of the single / group borrower exposure limits and identification of d - sibs, etc. have also been initiated. role of the auditor community in promoting sustainable growth 18. let me now turn to some messages that i would like to give the auditor community present here. first of all let me compliment you for the very critical role that you play in keeping the banking sector healthy by auditing the balance sheets of banks and that of the borrowers to whom the banks lend. i would, however, begin on a light - hearted note. i quote former aig vice chairman jacob frenkel, who, in the aftermath of the financial crisis, once bis central bankers β speeches quipped, β the left side of the balance sheet has nothing right and the right side of the balance sheet has nothing left. but they are equal to each other. so accounting - wise, we are fine. β i am sure we don β t want our accounting system to be fine like this. 19. external auditors play a vital role in maintaining market confidence in audited financial statements. in the case of the banking industry, this role is particularly relevant to financial stability given banks β financial intermediation function within the economy as a whole. core principle 27 of the basel committee β s core principles for effective banking
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is the basis for the initial conditions when we use nemo and when we make our policy decisions β and hence of core importance to monetary policy. theory and experience suggest that a weighted average of forecasts from different models is often more accurate than forecasts provided by individual models. norges bank β s short - term forecasts are based on combinations of statistical and econometric models, where each model is assigned a probability depending on past density forecasting performances. currently, we are working on how to incorporate mechanically density predictions from sam into nemo. the few examples that i have just described show how research on macro modeling and forecasting is important for our work. we are well aware that there will always be ample room for improvement in our toolbox, and we are fortunate to have such prominent speakers with us here today. this workshop is a great opportunity for us to become familiar with recent advances in bayesian econometrics. in addition to the pleasure of the scholarly discourse, i also hope you will have the opportunity to enjoy oslo. bis central bankers β speeches
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jan f qvigstad : seminar on bayesian econometrics ( esobe ) β opening remarks opening remarks by mr jan f qvigstad, deputy governor of norges bank ( central bank of norway ), at the fourth annual meeting of the european seminar on bayesian econometrics ( esobe ), norges bank, oslo, 22 august 2013. * * * good morning everyone! it is a privilege for me to welcome you to this year β s european seminar on bayesian econometrics, which has attracted the interest of such a distinguished group of international scholars. i would like to extend a special welcome to those of you who have traveled far in order to be here today. as a practitioner of economic policy, i have experienced the use of economic models for almost half a century. back in the late 1970s, the norwegian ministry of finance used a large input - output model to calculate the effects of fiscal policy. somewhat contrary to common sense β even then β the model suggested that an increase in government spending would reduce inflation. to remedy this obvious mistake, we calibrated a new model β using our priors on critical parameters β to get results that were more consistent with our experience. the lesson i take away from this is the following : to be useful, models need to be consistent with the view of the world that we apply to policy. this consistency principle, in my view, lies at the heart of the progress made possible by bayesian modeling. advances in the last two decades have made bayesian econometrics a key tool for central banks. norges bank has benefited greatly from this, and two of our most important policy tools are results of such advances. nemo ( norwegian economy model ) is our estimated dsge model. the model is based on international research and model development over the past 20 years. we use it to produce forecasts and guide monetary policy analysis. this year, the hype is β forward guidance β. the fed does it, the bank of england does it, and the ecb also. we have done it since 2005. we publish forecasts of the key policy interest rate and nemo has been essential for the construction and, above all, explanation. when i describe norges bank β s policy decision at press conferences, i often refer to nemo equations in order to explain our decisions. our second key policy tool is our system of averaging models, sam. the short - term forecast from sam
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also been hindered by the steep descent of house prices. to date, house prices have fallen by nearly one - third from their peak ( chart 23 ), pushing home equity as a share of personal income to its lowest level on record ( chart 24 ) and wiping out $ 7 trillion of housing equity. further, this decline in housing wealth β and the associated hit to consumer confidence β has not only been a meaningful and persistent drag on overall consumer spending, it has also been enough to push nearly 12 million homeowners underwater on their mortgages, that is their houses are now worth less than their mortgage balances ( chart 25 ). without equity in their homes, many households who have suffered hardships such as unemployment or unexpected illness have been unable to resolve mortgage payment problems through refinancing their mortgages or selling their homes. the resulting mortgage delinquencies have ended in all too many cases in foreclosure, dislocation, and personal hardship. neighborhoods and communities have also suffered profoundly from the onslaught of foreclosures, as the neglect and deterioration that frequently accompany vacant properties makes neighborhoods less desirable places to live and may put further downward pressure on house prices. 2 the problems that led to the mortgage crisis and the potential policy solutions to those problems are numerous and varied. even though time does not permit a full discussion of them here, i do believe that forceful and effective housing policies have the potential to significantly influence the speed and strength of our economic recovery. the federal see, for example, john y. campbell, stefano giglio, and parag pathak ( 2011 ), β forced sales and house prices, β american economic review, vol. 101 ( 15 ), pp. 2108 β 31 ; and john p. harding, eric rosenblatt, and vincent w. yao ( 2009 ), β the contagion effect of foreclosed properties, β journal of urban economics, vol. 66 ( 3 ), pp. 164 β 78. bis central bankers β speeches reserve has already acted to reduce mortgage rates by purchasing longer - term assets, in particular through the purchase of agency mortgage - backed securities. indeed, low rates combined with falling house prices have contributed to historically high levels of housing affordability ( chart 26 ). at the same time, rents have been rising, which should make homeownership a more attractive option relative to rental housing ( chart 27 ). despite this record affordability, home purchase and mortgage refinancing
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mismatch at financial intermediaries, and we look at asset valuations, underwriting standards for loans, and credit growth for signs of a credit - induced buildup of systemic risk. we also monitor various systemic risk measures for the largest banking firms. these measures capture financial market perceptions of the risk such a firm could impose on the broader financial system were it to become stressed. such measures are based on firms β stock prices, credit default swap premiums, and stock price volatility, as well as the correlation in asset prices across firms. in addition, we use regular stress tests of the nation β s largest banking organizations to evaluate the ability of these firms to withstand worse - than - expected outcomes for the economy. these tests are based on detailed confidential data about the balance sheets of the large banks and provide a comprehensive and rigorous assessment of how their financial conditions would evolve over a multiyear period if economic and financial conditions were to deteriorate. the stress tests started in 2009 with the supervisory capital assessment program ( scap ), and they continued with the comprehensive capital analysis and review ( ccar ) in late 2010 and early 2011, in which we evaluated the capital planning processes of the firms and responded to requests to resume or increase shareholder payouts. in a couple of weeks, we will begin ccar 2012, building on the previous ccar, and roughly a year from now, we will conduct the annual supervisory stress tests mandated by the dodd - frank act. the dodd - frank tests will involve a larger group of banking organizations than the 19 firms covered in the scap and will be extended to include any financial institution the fsoc designates as systemically important. as additional data are collected on significant credit exposures, stress tests may evolve into an effective way to identify linkages across systemically important institutions that could lead them to fall into financial distress at the same time. another important element in identifying financial - sector vulnerabilities is the continued vigilance to the financial risks that might emerge in parts of the financial sector for which data are very scarce or that have developed more recently and are thus less well understood. the regulatory community has been working hard to fill these knowledge gaps. for example, in response to the need to improve the monitoring of leverage, particularly outside of the traditional banking system, the federal reserve instituted in 2010 a quarterly survey on dealer financing terms ( the senior credit officer opinion survey on dealer financing terms ). 3 this survey collects qualitative information
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takahide kiuchi : recent developments in economic activity, prices and monetary policy speech by mr takahide kiuchi, member of the policy board of the bank of japan, at a meeting with business leaders, yamanashi, 23 february 2017. * * * i. economic activity and prices in japan a. current situation of economic activity and prices and the baseline scenario of the outlook the bank of japan explains the current situation of japan β s economic activity and prices and the baseline scenario of the outlook in the statement on monetary policy, which is released after each monetary policy meeting ( mpm ), and in the outlook for economic activity and prices ( the outlook report ), which is published quarterly. next, i will provide an overview of the current developments in and outlook for economic activity and prices based on the latest outlook report released in january 2017. japan β s economy has continued its moderate recovery trend. as for the outlook, it is likely to continue growing at a pace above the potential growth rate through the projection period β that is, through fiscal 2018 β on the back of highly accommodative financial conditions and the effects of the government β s large - scale stimulus measures, with the growth rates in overseas economies increasing moderately. comparing the current projections with the previous ones, the projected growth rates are somewhat higher, mainly reflecting improvement in overseas economies and the yen β s depreciation, in addition to an upward revision to the gdp due to the comprehensive revision to gdp statistics. the year - on - year rate of change in the consumer price index ( cpi ) for all items less fresh food has been about 0 percent. regarding the outlook, it is likely to increase from about 0 percent and become slightly positive, reflecting developments in energy prices. thereafter, it is expected to increase toward 2 percent as the aggregate supply and demand balance ( the output gap ) improves and medium - to long - term inflation expectations rise. comparing the current projections with the previous ones, the projected rates of increase in the cpi ( all items less fresh food ) are more or less unchanged. the timing of the year - on - year rate of change in the cpi ( all items less fresh food ) reaching around 2 percent will likely be at the end of the projection period β that is, around fiscal 2018. b. my outlook i believe that japan β s current growth rate and inflation rate are generally stable, in light of the economy β s growth potential, and that there is a high probability of this stable
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the trend of stable asset formation - - through the investment of surplus funds in financial assets focusing on the long term, on risk diversification, and on regular contributions - - gains traction, it will bring dynamism to household financial assets. this development will give more depth to disposable income in japan and as a result, japan's economy can expect more robust private consumption to help close the macroeconomic output gap and further boost corporate activities. with institutional support already available, such as the nippon individual savings account ( nisa ) and ideco pension plans, there is growing interest in investment trusts, especially among young people. moreover, the japanese government's council of new form of capitalism realization has announced its intention to formulate a plan to double asset income in japan. i look forward to these developments gaining momentum. as has been illustrated, i expect the virtuous cycle of income and prices to be reinforced as the dynamism of firms and employment spurs corporate growth, while the dynamism of employment and household financial assets stimulates a rise in household income. by providing accommodative financial conditions to persistently support these developments, i believe japan's economy will approach the realization of the 2 percent price stability target, which will in turn lead to its sound development. thank you. economic activity, prices, and monetary policy in japan speech at a meeting with local leaders in fukuoka august 25, 2022 nakamura toyoaki member of the policy board bank of japan chart 1 imf projections in the world economic outlook ( july 2022 ) y / y % chg. imf projections - 2 - 4 japan united states - 6 china world output euro area - 8 cy 80 source : international monetary fund ( imf ). chart 2 cpi ( less fresh food ) 3. 0 y / y % chg. 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 - 0. 5 - 1. 0 - 1. 5 mobile phone charges - 2. 0 effects of the consumption tax hike and free education policies excluding the above factors - 2. 5 - 3. 0 effects of the " go to travel " campaign energy cpi ( less fresh food ) - 3. 5 cy 17 notes : 1. figures for energy are those for petroleum products, electricity, and manufactured and piped gas charges. 2. figures for the " effects of the consumption tax hike and free education policies " from april 2020 onward are bank staff
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, can unravel in ways that reduce asset values and increase volatility, and are often sustained by accumulating indebtedness. in the face of ultimately unsustainable macroeconomic imbalances, whether domestically or internationally, the financial system therefore needs to be more resilient than otherwise. that was badly neglected around the western world in the years running up to the current crisis. ( and it remains a risk going forward. ) resilience sounds, and is, highly desirable. but it is not a free good. there are trade - offs. and here lies an important contrast with monetary policy. no one seriously believes that there is a trade off in the long run between, on the one hand, inflation and, on the other hand, growth and employment. while a monetary authority can pump up nominal demand to enhance output and employment in the short run, in the long term the impulse is dissipated in a higher price level, with the economy β s real equilibrium determined by real factors alone. but in the financial stability arena, there is a long - run trade off. an economy with a repressed financial system is unlikely to experience financial instability, but it would have plenty of other problems. in consequence, the authorities have to set standards of resilience suited to tail events without impairing the wider functioning of the economy. but we also need to be equipped to raise the required standard of resilience in the light of changing circumstances, notably if we judge the world to have become more threatening than previously foreseen. that is the basis for macroprudential policymakers, such as the uk β s fpc, being able to deploy β cyclical β instruments, as i shall describe later. bis central bankers β speeches firms, markets and infrastructure the resilience of the system depends on that of its component parts and on how they are connected. in the real world, that means firms, markets and infrastructure. it means looking for and addressing vulnerabilities or faultlines in all three. and it entails choices, trade offs, about how far to make individual firms robust and how far to strengthen the system by reducing spillovers from a distressed firm to other firms and markets. amongst firms, plainly banks are a priority. as monetary institutions, they are special. their deposit - liabilities are money. and that enables them to provide committed, on - demand lines of credit, ie liquidity, to households and firms in the
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the uk of two key developments. first, the continuing financial crisis in advanced financial markets which has been triggered by the slump in the us housing market ; and second, the renewed build up in global inflationary pressures, associated with soaring energy and food prices. these developments are symptomatic of profound changes in the global economy, as world growth has increasingly been powered by resource hungry emerging markets, and as financial markets in developed countries have taken off and, in the process, become more tightly linked to one another. i will talk about both developments, before coming back to discuss the outlook for inflation and growth in the uk, and the implications for policy. financial crisis the crisis in financial markets last august was triggered by a slump in the us housing market. this, of course, is acting as a direct drag on us activity. any slowing in the us economy stands to affect the uk in the traditional way, through influencing trade flows. the size of this effect will depend on how other trading partners are affected and how policymakers react. but the really striking feature of recent experience has been how the us housing crisis has reverberated through the highly integrated and sophisticated financial markets of north america and western europe. six months after global securitisation markets seized up, in response to uncertainties about the scale and location of losses arising from rising defaults on us sub prime mortgages, some credit markets are still not trading at all, and others remain very illiquid. and each week seems to highlight some new dimension of the ensuing disruption to core financial markets. the crucial task of valuing and disclosing the impact of losses on core banking institutions is still work in progress : important announcements are being made almost daily, and beyond them lies the equally important task of repairing banks β balance sheets. the current shortage of liquidity makes the pricing of complex assets even more difficult. at the very least, this reinforces the need for transparency in providing estimates of losses, and descriptions of the best - efforts processes used to produce these estimates. the process of price discovery for many complex asset classes is unlikely to be completed quickly. for assets directly related to us sub - prime, this is unlikely to be before the us housing market stabilises. other structured credit markets are likely to remain illiquid until confidence in the banking sector has been restored, and large financial institutions are willing to take more risk. clearly the situation is still developing. and its impact on the wider economic outlook β global and
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central banks are financial markets in particular and the public in general. when communicating we try to make our messages simple and straightforward. however this is easy said than done. again this is the art side of monetary policy. ladies and gentlemen, before concluding, i would like to note that the existence of independent and autonomous institutions along with the practice of good governance principles is vital for turkey. an independent central bank has constituted and will continue to constitute a cornerstone for structural transformation towards good governance and good institutions in turkey. the central bank of turkey aims to fulfill expectations by operating as a sound institution through its independent, transparent and accountable status, by policy implementations focused on its sole mandate of price stability and by practices to increase efficiency in institutional design. hence, it is a great honor for me to be here with all the executives and former governors who have made the central bank of turkey what it is today throughout this period. i would like to extend my thanks to them all again for all their valuable contributions to this important institution. thank you.
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investors. what is necessary for the jgb market to achieve the global standard? needless to say, policy decisions that might impair confidence in jgbs must be avoided. in this regard, budget policy of the government should be constrained in the long run. it would also be significant to improve the safety and user friendliness of the jgb market from the viewpoint of such aspects as the usability of futures and repo markets, the tax treatment of jgbs, and the standardization of trading and settlement customs. in my speech today, i have touched upon three conditions for a currency to be internationally used, namely, confidence in the currency, high degree of user friendliness, and an international network. i believe that these conditions coincide with the direction that japan should move in the coming century. let me add that every time i refer to the β internationalization of the yen β, it carries my strong hope that japan will adjust to the new global economic order and contribute to international rule making and the foundation for sustainable economic and financial development in the asian region.
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. similarly, borrowing hk dollars to fund the deficit would involve a shift in ownership of those dollars around the economy, but no net increase in quantity. the mechanics of financing the deficit ought not therefore raise any concerns in hong kong in the context of monetary stability. nevertheless, in practice the markets do appear to exhibit a degree of negative reaction to the deficit. why? a number of possible explanations come to mind. β’ first, and rather obviously, there is hong kong β s basic law, which indicates that deficits should be avoided. it β s understandable for markets to become nervous if they suspect that the law might be infringed. β’ second, many people, whether in hong kong or elsewhere, anyway have a gut feeling that getting into debt is imprudent. this does not stop them individually from borrowing money, or from being tolerant of their government being in debt, but they may nevertheless be uncomfortable about it. the underlying rationale for holding this view may not be well articulated, but it does not need to be β if the view exists, that is enough for it to have an impact. and the impact may be reinforced if the government β s record appears to run counter to what it has itself been preaching. β’ this leads to the third point, which is that hong kong has boasted since long ago about its budget surpluses and the absence of government debt. this makes it intellectually difficult to deny the significance of the deficit. not that anyone is trying to downplay it β the expressions of concern from government officials have been numerous, sincere and unambiguous. but in some ways this serves to highlight the difference. the present position is seen to represent a sea - change in the financial circumstances of hong kong, whereas other economies more familiar with deficits might be able to take a deterioration in public finances more easily into their stride. β’ fourth, there is the more specific concern, that either of the two available means for financing the deficit - by, as now, realising foreign currency investments or by government borrowing β would impact adversely on hong kong's financial standing in the eyes of rating agencies and others. of course, it is by no means obvious that these financing activities would necessarily endanger monetary stability or weaken the exchange rate. indeed, there are plenty of examples of economies with low foreign reserves or high government borrowing having enjoyed firm currencies and strong credit standings, and it's hard to see why, for example, the act of the hong
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howard lee : opening remarks - project sela report launch conference opening remarks by mr howard lee, deputy chief executive of the hong kong monetary authority, at the project sela report launch conference, tel aviv, 12 september 2023. * * * andrew ( deputy governor of the bank of israel andrew abir ), benedicte ( head of the bank for international settlements ( bis ) innovation hub hong kong centre benedicte nolens ), ladies and gentlemen, good morning. opening firstly, i would like to extend a heartfelt thanks to the bank of israel for hosting this event and for their warm hospitality. we're in the conference center of the tel aviv stock exchange, and i must say, it is a privilege to announce the successful completion of the first joint research project between the hkma and the bank of israel from such an iconic venue in front of a high - profile audience. as you have already heard, the name " sela " was chosen to symbolise the collaborative efforts between the hkma and the bank of israel because, besides indicating an ancient israeli coin, it means " rock " in hebrew, thereby referring to the hkma's legacy in central bank digital currency research, which began in 2017 with project lionrock. for those of you who are not familiar with hong kong, the lionrock is the most recognisable mountain in hong kong. this mountain, as you can probably guess, is shaped like a lion. but it's neither its shape nor its height that made it famous, but the folklore over the past decades that today make it the symbol of the " can - do " spirit of hong kong and of its ability to turn complex challenges into opportunities for growth and development. after several months of enthusiastic collaboration and this visit, i can confidently say that this is the same spirit that i can find in this " start - up nation ". hkma's cbdc research besides having a relevant name, project sela also focused on a highly relevant subject for central banks : central bank digital currencies, or cbdcs. the research into cbdcs is a priority for many central banks worldwide, and for a good reason. the digitalisation of currency has the potential to revolutionise financial systems, redefine transaction processes, and even reshape economies. given these profound implications, at the hkma we have been extensively involved in cbdc research at both the wholesale and the retail level, in order to future - proof our
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just a single regional economy, but rather many different local economies. let me talk a bit about how the different parts of our region have been doing. regional economic conditions since our last briefing in november, the economic recovery has been variable across the region β strong in some places but weaker in others. let me begin with the area that has struggled the most. puerto rico β s economy has, unfortunately, been in a deep economic slump that has lasted for nearly a decade. over the past few years, public sector job losses have continued to weigh against modest job gains in the island β s private sector. and ongoing difficulties in the island β s labor market continue, with labor force participation still alarmingly low, and unemployment stubbornly high at a rate well above the mainland β s. the good news is that we are finally beginning to see some firming in economic conditions on the island. at the other end of the spectrum, new york city has been experiencing a robust recovery. while the great recession was clearly the worst post - war downturn in u. s. history, new york city was not as badly affected as the rest of the country. as of april, almost five years since the end of the recession, the nation has recovered nearly all of the jobs that were lost. bis central bankers β speeches by contrast, new york city reached this milestone more than two years ago. and, as we β ve highlighted in previous press briefings, this rebound has occurred despite the lack of any significant recovery in employment on wall street. the recovery has generally progressed at a more moderate pace in the other parts of our region. consistent with historical patterns, upstate new york as a whole has been growing modestly, with buffalo and rochester doing a little bit better than their upstate peers. binghamton, on the other hand, has really been struggling with no signs yet of any meaningful recovery. meanwhile, northern new jersey β s economy had been growing fairly steadily until this past winter when activity softened, probably due at least in part to the unusually harsh weather. now that spring is finally upon us, we hope to see economic conditions improve more significantly. what kinds of jobs have been created during the recovery? let me turn to the topic of today β s press briefing : how the types of jobs in the region have changed over the last business cycle. firms often change the way they utilize workers and the mix of skills they employ during recessions and recoveries. the weakening demand during recessions forces firms to look
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the world. turning to the outlook for prices, according to eurostat β s latest flash estimate, hicp inflation in september was 2. 1 %. this was unchanged from august. for the remainder of this year, hicp inflation should hover at around 2 %. exchange rate developments help to contain short - term upward pressure on prices, while higher unprocessed food prices related to the hot and dry weather conditions in some euro area countries could imply some limited upward risk over the next few months. for early 2004, there is still some uncertainty about the precise impact on hicp inflation of planned increases in indirect taxes and administered prices in a number of euro area countries. looking beyond the short term, however, we continue to expect inflation to fall below 2 % in 2004 and to remain in line with price stability thereafter. this expectation is based on the assumption of moderate wage developments in the context of a gradual economic recovery. in this respect, we note that inflation expectations in the euro area are anchored at levels below but close to 2 % over the medium to long term. turning to the monetary analysis, the strong monetary growth over the past two years has been fuelled by past portfolio shifts, precautionary saving and the low level of interest rates. the latter factor also provided a counterweight to the negative impact of weak economic growth on loan developments. in fact, there are signs of a pick - up in the growth rates of loans to the private sector. at the current juncture, the accumulation of excess liquidity is not a cause for concern given the subdued economic growth in the euro area. however, if it were to persist in conjunction with a significant strengthening of economic activity, it could lead to inflationary pressures in the medium term. summing up and cross - checking the information from the two pillars, our economic analysis continues to confirm the expectation that price pressures will remain subdued in the coming years, in the context of a gradual economic recovery and moderate import price and wage developments. in view of the economic situation, the strong monetary expansion should not be seen as adversely affecting this outlook for the time being. overall, therefore, the medium - term outlook for price stability remains favourable. as regards fiscal policy, we would like to reiterate our serious concerns. there is growing evidence that most countries will miss their budgetary targets for 2003 by a significant margin and, in a number of cases, budgetary plans for 2004 are not reassuring. while the deterioration of budgetary
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ravi menon : singapore as convenor, catalyst and contributor for climate action speech by mr ravi menon, managing director of the monetary authority of singapore, at the launch of the cop - 27 singapore pavilion, sharm el - sheikh, 6 november 2022. * * * ladies and gentlemen, good evening. welcome to the launch of the singapore pavilion at cop27. as we gather in beautiful sharm el - sheikh, let us remind ourselves of the task before us : to reduce global greenhouse gas emissions to net zero by 2050 in an orderly and inclusive way. singapore is committed to the net - zero by 2050 target and has laid out our plans and strategies to get there. this pavilion is not just about singapore's plans to get to net - zero. after all, singapore's contribution to global emissions is just 0. 1 %. but as a global city, technology hub, and financial centre, we can play a larger role in the fight against climate change. singapore wants to be a convenor, a catalyst, and a contributor of solutions for global climate action. this is the broader purpose of this pavilion. as a convenor, we will bring together partners in industry, finance, academia, civil society and the government, to spark new ideas and forge new collaborations for effective climate action. as a catalyst, we will work with partners to step up the pace of transition in this critical decade, which will substantially determine whether the world gets to netzero by 2050. as a contributor, we will share with others the climate solutions that we have developed and may be of relevance to them. let me highlight three key themes at the singapore pavilion : decarbonisation technologies transition finance carbon markets first, innovating decarbonisation technologies. the transition to net - zero will require us to transform how we live and work. it will transform how we power our homes and offices, travel, grow our food, and construct our cities. as a densely populated metropolis in the tropics, singapore is a living lab to develop, testbed, and commercialise green solutions for urban living. let me highlight two areas. one, decarbonising land transport. 1 / 3 bis - central bankers'speeches in many cities, land transport accounts for a substantial portion of carbon emissions ; in singapore, it is about 15 %. the solution lies in electrifying transportation. this is why, from 2030, singapore will allow only registrations of cleaner - energy
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##mensurate with their expected returns. we need catalytic capital to improve project bankability and crowd in private sector capital. blended finance is also about combining financing with capacity building, technology transfer, and institutional support, to reduce risk and enhance bankability. 1 / 4 bis - central bankers'speeches blended finance is not new but scaling it requires a fresh approach. about a month ago, the monetary authority of singapore ( mas ) held the inaugural transition finance towards net zero conference conference. the conference saw more than 500 leaders and experts from across the world β from industry, academia, governments, and multilateral development banks - discuss the nuts - and - bolts of what it takes for blended finance to scale. what were their key take - aways? one, greater capacity and expertise to prepare projects. this is critical at the early stages of project development, especially in developing economies. transition projects need to be well designed with clear targets and transparent metrics to draw private capital. two, better risk mitigation and risk transfer mechanisms. we need catalytic and concessional funding from the public sector, multilateral development banks, and philanthropic sources, to improve project bankability and crowd in additional multiples of private sector funding. this will mean re - looking the financing models and incentive structures of multilateral development banks. three, a more synergistic financial ecosystem. we need to recycle capital by taking loans off bank balance sheets and structuring them in a form that institutional investors can participate in. singapore is taking active steps to scale transition and blended finance. infrastructure asia, launched by mas and enterprise singapore, provides expertise in project scoping, shares best practices in project development, and facilitates infrastructure financing deals in the region. clifford capital, whose borrowings are guaranteed by the singapore government, provides debt financing to crowd in equity participation for infrastructure projects. pentagreen capital, a partnership between hsbc and temasek holdings, will deploy blended finance at scale to unlock marginally bankable projects in southeast asia. convergence, a global network for blended finance, has launched a s $ 5 million grant scheme supported by mas, which will fund feasibility studies and proof of concept work on innovative blended finance solutions in target sectors that are under - capitalised in asia. singapore is also partnering global efforts to promote transition and blended finance. the network of central banks and supervisors for greening the financial system ( ngfs ) has established a blended finance initiative, that will identify best practices and lessons from past case
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political resolve. as a result, investment is not well diversified and may not be optimally matched with savings, and the financial system is fragmented along national lines, severely limiting the potential benefits of the single market. in principle, the problem is not one of scarce resources. in fact, the euro area runs a significant current account surplus, meaning that there are savings that could be channeled towards worthwhile investment opportunities. but more ambition is required to achieve welldeveloped and integrated capital markets in europe. the lack of specific alternative funding channels or sources can hinder investment particularly in higher - risk projects - startups, intangibles and innovation - which depend on venture capital or other specialised sources of market - based financing in their early stages. small and medium - sized enterprises generally also encounter problems in tapping capital, owing to reduced access to market finance. there are several obstacles contributing to fragmentation. first, an investor seeking to diversify its portfolio by having exposures to companies in different countries must deal with legal barriers. the most telling example is the lack of harmonisation of insolvency regimes, which vary widely across jurisdictions for financial and non - financial corporations, as a result of different cultural traditions and legal frameworks. second, this investor might face different regulations, as the process of strengthening the pan - european regulators is still incomplete. this is a more pressing question as markets become more integrated and technologically complex. brexit entails a significant risk of further fragmentation, as some companies and transactions may relocate to several different financial centres, while others may remain in the uk. third, there are also inconsistencies in capital taxation. this is not only a problem of tax rates : tax bases are also different across countries, and there is enormous diversity and complexity in terms of legal requirements and forms, as in the case of withholding taxes. in addition, the so - called debt bias due to the favourable tax treatment of debt relative to equity distorts incentives in favour of the former. the limited development of equity markets and sizeable home bias in portfolios have significant consequences for the appropriate functioning of the monetary union. indeed, they set a limit to the capacity of risk - sharing mechanisms in the euro area, compared for instance to the united states. conceptually, risk - sharing is closely linked to the capacity of emu to withstand shocks. it can be seen as the ability of countries to diversify the impact of idiosyncratic shocks among other member states
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tharman shanmugaratnam : enterprise innovation - improving lives in singapore and technological speech by mr tharman shanmugaratnam, chairman of the monetary authority of singapore, at the fintech awards, singapore, 17 november 2016. * * * mr wee ee cheong, chairman, abs and ceo, uob distinguished guests, ladies and gentlemen, 1 thank you for joining us here at our inaugural fintech awards prize presentation ceremony. 2 let me begin by thanking the participating teams, as well as the international cast of judges who helped evaluate the entries, for their time and inspiring work. 3 this evening, we are honouring winners from two competitions organised as part of the inaugural singapore fintech festival : the global fintech hackcelerator and the fintech awards. the global fintech hackcelerator attracted a total of 655 submissions from more than 50 countries. they produced solutions to address some of the 100 problem statements that the financial sector had put out. the fintech awards recognises innovative fintech solutions that have actually been implemented by financial sector players and technology companies. we received 210 entries, running the gamut from cyber security to payments. 4 we celebrate the winning entries this evening. but equally, we are celebrating the spirit of innovation that each of the participants in these competitions demonstrated. they represent the passion to make things better, to create value for firms in a way that gives customers value, and ultimately, to find innovative ways to improve everyday life. that is the fintech spirit. 5 these last four days of the fintech festival, there has been much discussion about technology, regulation, infrastructure, markets, funding. 6 tonight, i would like to speak briefly on the critical people factor β not just for success in fintech but more broadly in the innovation - driven economy of tomorrow : people having that spirit of enterprise and a willingness to be different ; and people developing deep skills, skills relevant to the market, and a keenness to learn continuously. 7 that β s at the heart of what it takes for us to sustain and grow the fintech movement β the entrepreneurial desire to find new ways, even disruptive ways, and the deep skills and continuous learning that we need to power innovation. enterprise and innovation 8 we are already seeing successes, and we want to provide a fertile ground for more new ideas and solutions to keep cropping up. mas has a regulatory sandbox framework to make it easier for fintech start - ups to test their business
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in the global financial crisis, may not necessarily contribute to better risk management of banks and overall financial stability. recognizing this inherent risk, the hkma, in seeking to nurture the universal banking model in hong kong, must continue with its long standing conservative supervisory approach with even greater emphasis on prudence under - pinned by proactive and forward looking supervision. 20. ladies and gentlemen, this is a rather long speech and i thank you for your kind attention. thank you! bis central bankers β speeches
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of international banks to leverage on the capital of their parents would limit their lending in many emerging market economies. this may in turn have negative impact on the trade, investment and other economic activities of these emerging market economies. besides, liquidity management would likely be more efficient for a branch than for a subsidiary as funds can flow more freely within the same legal entity. on resolution, it is true that the insolvency proceedings for a subsidiary would normally be simpler than for a branch, but in practice there could be many complications such as : linkages to other group entities through intragroup guarantees and exposures, service reliance and shared management, to name but a few issues, which would affect the ultimate resolvability of a subsidiary when it actually happens. 15. after the global financial crisis, the subsidiarisation model has actually gained greater support in some jurisdictions. this is because some home supervisors of internationally active banks feel that it might be easier for these international banks to undertake β de - risking β operations should trouble occur in overseas subsidiaries than in branches. 16. from hong kong β s perspective, we believe that subsidiaries and branches of overseas banks can and do play different roles in servicing the real economy. the hkma bis central bankers β speeches takes the view that an overseas bank that wishes to undertake retail business in hong kong should operate in the form of a locally incorporated subsidiary. this is to offer appropriate protection to the retail depositors in hong kong and to do that the hkma needs to have an effective supervisory handle on every aspect of a retail bank β s operation, especially its capital adequacy ratio. we cannot achieve this if the bank operates as a branch in hong kong. 17. however, we also recognise that subsidiaries may not necessarily be an efficient model of operation if an overseas bank intends to undertake only corporate or private banking in hong kong. for example, a branch can leverage on the capital of the entire bank to finance a loan for a large corporate, which would otherwise be impossible if it operated as a subsidiary with rather limited capital in hong kong. likewise, some private banking clients may prefer to deal with or book their investments with a branch of an overseas private bank rather than a subsidiary of that bank. so the hkma keeps an open mind on whether an overseas bank operating in hong kong should take the form of a subsidiary or a branch. it all depends on the business model of the bank concerned. to take it one step further, we are prepared to
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about what is probably the most discussed payments topic in the world : stablecoins and the challenge called β libra β. fintechs and bigtechs : new actors in the payments markets on many fronts, the digitalisation of payments is being driven by new players β fintech and bigtech firms. fintech players β that is, fledgling start - ups offering innovative technology - enabled financial services β also feel very much at home in the payments market. these newcomers start out β on the greenfield β and are able to build their systems from the ground up in a way that lets them leverage the opportunities offered by the platform economy and digitalisation. one example of this is smartphone banks or neobanks such as n26, which is a highly successful newcomer in germany β s banking market. another feature of these banks is that they no longer endeavour to β produce β everything themselves. on the contrary, they regard themselves more as digital platforms that seamlessly integrate the services of third parties β including those of other fintech players. in most cases, though, fintech firms ( still ) cannot pose a serious challenge to market incumbents. unsurprisingly, then, we are seeing more and more cooperative ventures between credit institutions and fintech players. these allow the former β the banks β to provide their customers with convenient, innovative services within a short space of time. examples in germany include customer identity verification by video, or services that make switching accounts more straightforward. the latter β the fintech businesses β get to tap into a large customer base and benefit from the confidence shown in them and from regulatory expertise, amongst other things. so the end result, more often than not, is a win - win situation for both the incumbents and the newcomers. by contrast, bigtech firms are a different kettle of fish altogether. these are the global tech businesses and platforms such as apple, amazon, google and facebook from the united states, as well as alibaba and tencent from china. bigtech players are transforming the financial sector and particularly the world of payments far more radically than the up - and - coming fintech firms ever could. you see, they can leverage a large existing customer base, technological expertise and sizeable financial resources. for instance, apple pay and google pay were launched last year at the point - of - sale in germany. the dominant force in e - commerce in germany has, for a long time now, been the us group amazon β which also offers a
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/ press / pr / stats / paysec / html / ecb. pis2018 ~ c758d7e773. en. html 4. article from the nikkei asian review dated 27 october 2017 : https : / / asia. nikkei. com / economy / japan - dabbles - with - mobile - payments - but - cash - stillking2 5. article from the japan times dated 29 march 2019 : https : / / www. japantimes. co. jp / news / 2019 / 03 / 29 / business / cash - obsessed - japan - slowlybuying - digital - payment - systems / 6. article from heise online dated 26 february 2019 : https : / / www. heise. de / newsticker / meldung / springt - japan - vom - bargeld - direkt - zurblockchain - 4317729. html 7. world bank ( 2017 ) : global findex database. online : https : / / globalfindex. worldbank. org /
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. this would effectively tighten financial conditions not only by changing the expected path of short - term interest rates, but also by bringing forward the expected start of balance sheet normalization. to sum up, i see substantial advantages in behaving in as systematic fashion as possible in setting monetary policy. but that should be done in a way that fully accounts for any constraints on policy imposed by the economic environment, the presence of asymmetric risks, and allows us to learn as we go. the fact is that the economy is recovering after an unusually deep recession and a severe financial crisis. we don β t have much experience with this type of episode and how the economy is likely to perform. what we need to focus on is not what interest rate a given rule generates, but what policy setting can be expected to deliver the appropriate return path to the dual mandate objectives β the type of return path that standard taylor rule formulations achieved in different economic circumstances in the past. thank you very much for your kind attention. i would be happy to take a few questions. bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches
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as a whole. the ecb β s monetary policy response to these developments was twofold. first, to ensure that banks had access to longer - term funding, two three - year refinancing operations were undertaken at the end of 2011 and beginning of 2012. second, in the summer of 2012, the announcement of outright monetary transactions served as a powerful circuit breaker. however, by then, the sovereign debt crisis had already left a trail of destruction in its wake, paving the way for the third phase of the crisis. in the third phase, banks in many parts of the euro area started to deleverage, substantially reducing their lending to the private sector. towards the end of 2013 lending was falling by more than 2 % per year and another credit crunch was looming. by mid - 2014, the economic recovery was losing momentum and the weakness in aggregate demand was starting to depress inflation expectations. additional policy accommodation was needed to maintain price stability, but the rate on the ecb deposit facility had already been reduced to zero in july 2012. to address this challenge, the ecb sought to affect the whole range of interest rates that are relevant for private sector financing conditions through a strategy consisting of three elements. the first was the launch of a negative interest rate policy, which began with a cut in the deposit interest rate to β 0. 1 % in june 2014. this provided additional stimulus, as it extended the scope of conventional monetary policy. the second element was the introduction of a credit easing package, which included targeted longer - term refinancing operations designed to support bank lending to the private sector, a third covered bond purchase programme and an asset - backed securities purchase programme. these measures improved the pass - through of liquidity injected into the financial system to private sector borrowing costs. the third was the addition of a public sector purchase programme to the ecb β s asset purchase programme ( app ) to reinforce the accommodative monetary policy stance, further compressing term premia all along the yield curve. these instruments were complemented by the use of forward guidance, through which we started to communicate our expectations of future policy, along with the conditions that would warrant a change in the policy stance. forward guidance was intended to make our measures 2 / 4 bis central bankers'speeches as effective as possible, in particular by ensuring that the impact of asset purchases on term premia was not counteracted by false expectations of interest rate increases. over time, our measures have boosted the
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prize - winning architectural offices which participated in the revision phase of the competition. over the past 11 months, they have gone into substantial depth to elaborate the details of their design proposals. the high quality and professionalism of the work done in the revision phase was very much appreciated by the governing council. the governing council β s decision on the design of the ecb β s premises was reached after extensive discussion and careful evaluation of the prize - winning designs. as a public institution, we are committed to performing our tasks effectively and to using our financial resources prudently. therefore, it was essential to have a thorough and comprehensive assessment - even if that prolonged the process somewhat - so as to make the right decision on a matter of such symbolic and financial importance. let me now explain briefly the main reasons why the governing council chose coop himmelb ( l ) au β s design. i am delighted that the architect, prof. wolf prix, and his colleagues, mr dreibholz and mr halm, have joined us for this press briefing today. the design chosen the governing council judged the revised design concept of coop himmelb ( l ) au not only to be superior from an overall aesthetic and urban planning perspective, but also to be the one that best met the functional and technical requirements specified by the ecb. it was felt that this expressive, dynamic and appealing design would serve as a unique landmark, and result in the ecb β s new premises having a strong identity. in the governing council β s view, this design concept had features that reflected the ecb β s values - in particular, unity and transparency - and translated them into architectural language. furthermore, the way in which the three elements of the design - the high - rise building of a twisted shape, the β groundscraper β and the grossmarkthalle - formed a harmonious and well - proportioned ensemble was assessed very positively. we also considered that the integration of the grossmarkthalle into this ensemble was addressed in an excellent way, while at the same time respecting the fundamental appearance of this historic building. the design concept also met, in principle, the ecb β s functional and spatial requirements. the governing council appreciated especially the good connection of the different functional areas and the excellent workplace quality, guaranteeing natural light for all members of staff. using the atrium as a large communicative zone within the two tower buildings was also welcomed. the governing council noted that all requirements for the energy
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supply cannot meet demand. which brings me to another question : is it even possible to have adequate monetary policy in the euro area when the differences between countries are so big? if we look at inflation for example, the last six months, in the netherlands it was 2. 6 % while the european average was 1. 4 %. so is it possible? it β s the rule of the game. when the euro area was set up, when the euro was chosen, when we see that people support the euro and like the euro as much as they do, we have to find the tools and put in place the instruments to strengthen the euro area. why are we short of banking union? why are we short of capital markets union, so that if i have a small enterprise in france, i can actually borrow the funding that is available in the netherlands and we can have a consistent and deeper system of financing our enterprises. these are tools that we have to use to bring more harmony, more consistency between the markets. it cannot be only about the monetary union. it has to go beyond that to be solid and to be more efficient. does the weak economy in europe worry you? 3 / 6 bis central bankers'speeches clearly, growth is not at potential and hopefully by 2022 β this is in our forecast β we will be close to potential, at 1. 4 % growth. we have to use all the tools. we will do what we have to do, but i think that some fiscal policies should be applied and i β m very pleased to see that the netherlands are deploying fiscal policies in a very sensible and wise way in order to respond to the situation and to use the space that is available without even touching the special reserve fund that has been set up. but others should follow suit and should be inspired by the dutch example. about the dutch budget surplus, as imf managing director you always said that it would be good if the dutch government spent more. do you think the same, as the ecb president? this is happening because what i understand from the forecast for the next two years is that they will develop spending on education, on infrastructure, on fighting climate change. this is exactly what those countries that have fiscal space should do, and i think this is very, very welcome. you still say the same, but our minister of finance β¦ no, i said that i admire what is being considered. yes, because our minister of finance, wopke hoekstra
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njuguna ndung β u : investing differently in women speech by prof njuguna ndung β u, governor of the central bank of kenya, at the african women β s economic summit, nairobi, 18 β 20 march 2010. * * * the right hon. raila odinga, prime minister of the republic of kenya ; hon. uhuru kenyatta, deputy prime minister and minister for finance of the republic of kenya ; mrs. graca machel, founder, new faces, new voices network ; dr. donald kaberuka, president, african development bank ; distinguished guests ; ladies and gentlemen : first, rt. hon. prime minister, may i take this opportunity to thank you most sincerely for finding time from your busy schedule to grace this important forum whose theme is investing differently in women. your presence demonstrates the seriousness with which the government of kenya embraces the role of women and participation in the development process and more importantly their role in the financial sector. may i also heartily thank the new faces, new voices network ( nfnv ), the founder madame graca machel and the african development bank ( afdb ) represented by the president, dr. donald kaberuka for choosing to host the inaugural african women β s economic summit ( awes ) in nairobi. this is a great honour to us in kenya. i also warmly welcome all international delegates represented here including fellow central bankers from the region. the rt. hon. prime minister, the central bank of kenya is delighted to partner with afdb and nfvn in this summit especially when the central bank and indeed the government of kenya is in the process of promoting more inclusive financial policies. in the recent past, the government has introduced new institutions to support, shape and deepen the financial sector. examples include : licensing and supervision of deposit taking microfinance institutions ; savings and credit co - operatives ( saccos ) and the saccos regulatory authority ; amendment of the banking act to allow shariah - compliant banking products ; licensing of credit reference bureaus to facilitate credit information sharing ; agent banking for cost effective financial outreach. since we have seen commercial bank branch expansion by over 100 branches in three years, deposits have increased from ksh. 800 billion on to ksh. 1. 01 trillion and accounts from 2. 4m to 8. 4m in the same period. the rt. hon. prime minister, as we commence deliberations at this important summit, it is
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and reporting practices, and building adequate capacity among the regulators. this requires moving swiftly to develop smart β standardized, measurable, actionable, reliable and transparent regulatory and supervisory frameworks β surveillance supervisory approaches, and assessment tools. this would effectively safeguard the soundness, integrity, efficiency, and stability of the financial system in kenya and the region. i believe smart regulation is the way to go because its very architecture minimises regulatory burden, focuses on outcomes rather that processes, and applies regulatory measures in proportion to the risk profile of individual institutions. smart regulations allow regulators to enforce more efficiently and allow regulated entities to comply cheaply and reliably. 3. stress testing : stress testing has become a cornerstone of prudential supervision and risk assessment across the world. the central bank has strengthened its capacity and has conducted banking system stress testing exercise using the cihak framework since january 2015. we have drawn important lessons from the results of these exercises and i bis central bankers β speeches urge other regulators to adopt similar tools, which clearly demonstrate the value of forwardlooking assessments of risks and vulnerabilities to the financial system. 4. financial innovations and consumer protection : new technologies have expanded the possibilities of financial services and products some of which have brought tremendous benefits to consumers, and resulted in measurable improvements in financial and greater access to the mainstream banking system. however, along with the rapid growth of these financial services is the emergence of complex financial products requiring enhanced consumer protection measures. i see the need to prioritise consumer protection in ways that will reduce if not eliminate consumer susceptibility to abuse or fraudulent activities. an effective consumer protection regime is essential and should broadly entail : β’ transparency and accountability in pricing ; β’ clarity on charges and terms of financial products and services ; β’ avoiding reckless and fraudulent lending practices ; β’ protection of financial service consumers against over - indebtedness ; β’ fair debt collections and transparent marketing practices ; β’ privacy of client data including credit information sharing arrangement amongst all credit providers through credit reference bureaus ; β’ ethical standards and staff behaviour in credit lending and screening practices ; and β’ alternative dispute resolution mechanism. in this regard, we should engage with our stakeholders to promote effective financial services consumer protection mechanisms through innovate financial education programmes and regulatory reforms. 5. recovery, crisis management and resolution frameworks : the global financial crisis that has affected us all since 2007, offers important lessons in crisis management and resolution frameworks. an important lesson from that experience is the central
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15th east afritac steering committee meeting officially open. thank you all and enjoy the rest of the evening. bis central bankers β speeches
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to be modified to reflect the changes in risks. in some cases, the controls failed with respect to newer risk exposures that were not identified, or growth put strains on existing control processes that were not suitable for a larger organization. don't assume that what was acceptable in the past is good enough for the future. remember that there is a tendency for an organization to go on autopilot if the compliance officer is not vigilant. you should view this as an opportunity to convince the board and management to adopt a rigorous selfassessment process for compliance controls. further, use this as an opportunity to improve your own quality assurance process. are you surprised by exceptions? do you find your staff coming to different findings for compliance reviews that have similar fact patterns? are you harder on some managers in your findings, and " trust " others to improve without citing the weaknesses? when you do not have a consistent quality for the work of the compliance function you send mixed messages to employees and officers. further, you weaken your credibility. and more importantly in the current environment, you are not part of the process to strengthen corporate governance. now, certainly, we must know which way the ethical compass of the organization is pointing. are the product designs, marketing practices, and disclosures communicating a solid image of trust and integrity that your organization is targeting? conclusion my objective today was to exhort you to take a stand and make a difference for the better in the corporate governance of your company. you should help lead the dialogue on corporate governance. although i recognize that some of you are compliance officers of companies that are not subject to sarbanes - oxley, i believe the act is a wake - up call more generally for everyone who is part of designing and testing a system of internal controls. the events of the past two years demonstrate how quickly a corporation's reputation can be tainted by accusations of inappropriate activities or lack of attention to regulations. success in banking still is heavily dependent on winning and keeping the trust of customers, employees, and communities. when corporate reputations are tainted, it can take a considerable time to rebuild customer and community relationships.
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macroeconomic stability helped contain india β s external vulnerabilities, a close monitoring of external sector is required, given the sharp movements in global crude oil prices and global financial market volatility. these are the two global shocks that have implications for our cad and financial flows. another challenge that indian companies may face pertains to developments around brexit. indian companies and policy makers need to suitably weigh all opportunities and challenges, and accordingly re - strategise to respond appropriately. 21. let me conclude by saying that at the rbi, we are committed to play our role as the monetary authority for maintaining mandated price stability objective while keeping in mind the objective of growth ; and as the regulator and supervisor of the banking sector and payment systems. we will take necessary steps to maintain financial stability and to facilitate enabling conditions for sustainable and robust growth. 22. in october 2018, when i had absolutely no clue that i would be landing up in the reserve bank in december 2018, i had tweeted, β central banks across countries have a very critical role at the current juncture. the challenge is to try and read the situation and take decisive steps in pursuit of their multiple responsibilities. β as governor of the reserve bank of india, it would be my endeavour to act according to these principles. thank you. 1 financial stability report, december 2018. 5 / 5 bis central bankers'speeches
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within member states. recently, the european court of justice has confirmed that the ecb can deploy any available instrument, unless explicitly ruled out by the statute, to ensure price stability. if risks to price stability arise, we have to use all the tools that are legally available to us. indeed, the clearest demonstration of the determination of the governing council to act when necessary was provided precisely by the decision, taken by the majority of the council members, to proceed with the asset purchase programme. today, like before, we are not constrained in our capacity to intervene ; we have many instruments at our disposal. we are confronting a situation in which price dynamics are very weak and the macroeconomic picture remains uncertain. that is why the governing council is committed to re - examining the degree of monetary policy accommodation at its next meeting in december. the programme so far has without doubt been effective. but we must assess whether, with the weakening of the economy, the current stance is still sufficient to counter the headwinds which could obstruct a return to medium - term price stability. should we believe this not to be the case, we will examine how it can be enhanced to achieve our policy objective. bis central bankers β speeches emergency liquidity assistance for greek banks in its decisions the ecb is bound both by the statute and by the other provisions of the treaty. the choices of the governing council concerning greece were another example of strict adherence to the letter and spirit of both. this was apparent a few months ago when, amid a worsening economic and political situation, the government and the greek banks lost access to market funding and depositors started to withdraw their money from the banks. the banks became completely dependent on emergency liquidity assistance, a form of β lending of last resort β, from the eurosystem. ela became the sole channel through which greek banks could continue to function and make payments, and through which deposits could continue to flow to other parts of the euro area. at the peak we were lending β¬127 billion euro to the greek banking system, or 71 % of the country β s gdp. in keeping with article 123 of the treaty which prohibits the ecb from monetary financing, the governing council imposed strict limits on the use of government securities as collateral for loans that the greek banks received from the ecb. otherwise the government would have obtained refinancing from domestic banks which would have in turn used the government securities to obtain our funding. we nevertheless continued to supply the
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are not exposed to too many dangers? if we want growth and job creation to be sustainable, thanks to price stability, interest rates themselves have to move. borrowers know that interest rates can go up as well as down. greek citizens are paying considerably higher interest rates than other euro countries citizens. why do you think this is happening? is competition not working in the banking system? we in the governing council, including lucas papademos, our vice - president, and nicolas garganas, the governor of the bank of greece, are calling for financial integration to be as complete as possible. in certain domains we can be reasonably satisfied, in others progress has to be made. it is clear that in retail banking progress must be made. we see that, even with the same currency and monetary policy, there are differences in the level of interest rates. but you also have to take into consideration that these interest rates are incorporating the credit risks of the loans. so one can understand that there might be some remaining differences. the competitiveness of the greek economy is low. what measures would you suggest to improve it? in many respects the whole of the euro area has exactly the same characteristics and can receive the same recommendation as greece itself : structural reforms are necessary. we need reforms that permit goods and services markets to be more flexible, to function better and to be more fully integrated in this vast continental economy which is the euro area. flexibility is also needed in the financial markets. financial integration should be completed and it is very important for the efficient functioning of the euro area. labour market improvements also have to be taken into account if we want the whole economy to be competitive. i would draw particular attention β and i am not talking particularly of greece, but of the entire euro area - to fiscal policy which has to respect fully not only the letter but also the spirit of the stability and growth pact. meaning that in good times one should save money for the bad times. we also have to follow the unit labour cost carefully. because unit labour cost is one of the important indicators to measure overall competitiveness. what is your comment on the rapid decrease of the german deficit level? it is very good that the german government has expressed its full commitment to strictly fulfil the stability and growth pact. this resolute commitment is very positive for germany and for europe as a whole. has the new government made a difference? as you know, we are issuing the currency and preserving price stability for all, for
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both the forest and trees β 7 effectively ; there is a need to have a wide range of measures and tools covering different aspects of systemic risks. the objective is to develop a diagnostic tool that simultaneously traces the development of macro - financial conditions which pose risks to financial stability and identifies point in time risk conditions, while also assessing the joint impact of all these risk factors on systemic stability. a host of quantitative models attempting to incorporate one or more of these elements have emerged in the policy and the academic arena since the crisis. the models variously attempt to quantify the contagion risks in the financial system, to capture distress dependencies amongst financial institutions or to measure the systemic importance of financial institutions. others attempt to develop early warning indicators while yet another class of models aim to utilize aggregate information from segments of the financial system to develop coincident indicators of systemic stress. yet another set of models β the macro stress tests β try to measure the resilience of the financial system or its key components to various stress factors by quantifying the link between macroeconomic variables and the health of either individual financial institutions or the financial sector as a whole. the emerging models vary in statistical techniques used as well as in the type of available information used. they range from general equilibrium to game - theoretic models and can be either comparative static models or dynamic models. some models attempt to assess systemic risks using credit risk conditions while others rely on data from financial markets. the development of these models is in a nascent stage and the learning curve is very steep. identifying and assessing systemic risks requires a broad and deep information basis and a wide range of tools to process the relevant information as well as analytical tools and techniques. while fertile research on these issues is underway, especially since the crisis, the progress has been slow given the large mass of uncertainties β both β known β and β unknown β. let me briefly highlight some of these. first, while the notion of systemic risks is clear, there is, as yet, as elucidated earlier, no universally accepted definition of systemic risk. further, there is little agreement amongst regulators and academicians about the best way to operationalise a framework for the identification and measurement of systemic risks. the associated issues are further complicated by the fact that systemic risks are inherently unobservable. the main factors resulting in systemic risks β contagion risks, imbalances, etc., are also difficult to observe and / or quantify. adding to the difficulties are the
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over time as new information becomes available. ultimately, the bank of canada's commitment to canadians about monetary policy boils down to this : we will continue to work at maintaining a rough balance between demand and supply in the economy, in order to keep inflation low, stable, and predictable. and as we pursue this objective, we will continue to explain the reasons behind our policy actions, and our view of the outlook for inflation and for economic growth in canada.
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of responsibility, and in a good number of financial and non - financial businesses, disregarded these cardinal guiding principles of good corporate governance and conveniently forgot that what is legal is not necessarily ethical. in the end, the financial and economic structure could not bear the weight of accumulated lapses ; so, it collapsed. while all this is now water under the bridge, it has been recognised in some quarters that the international accounting standards contributed more than their fair share to the financial crisis. it is pointed out that one new standard abandoned the traditional prudent principle of historical asset valuation and replaced it with a highly subjective and pro - cyclical β fair value β concept. as a result, brokers, analysts and investment bankers abused the standard. the upward movement of stock prices immediately inflated balance sheets which, in turn, further inflated the asset price and, when the economic downturn set in, the bubble eventually burst. it was known that the paper profits resulting from inflated asset book values could not be realised ; and yet banks and other non - bank institutions took inordinate debt issuance risks. in addition, the β fair - value β principle was not much understood by the market, and was not transparent. in the event, balance sheets were hardly a useful basis for decision - making by economic agents. the far reaching economic and social consequences of this accounting practice are now a matter of record. distinguished ladies and gentlemen, it has been said that war is too serious a business to be left to the generals only. likewise, it is now widely recognised that accounting is too important a profession to be left to accountants only. indeed the united states of america and the european union recently took measures to β soften β or dilute, as it were, the deleterious effects of β fair - value β accounting practice in financial institutions. another emerging change is the call for more disclosures in accounting standards with which those of us outside the profession are grappling, obviously with the helping hand of accountants. long gone are the days when accountants confined themselves to the boring ivory tower of β number crunching β or, as at times pejoratively referred to, β bean counting β. in fact, it has been said that accounting has now entered a golden age ; an age of the changing role of the accountant ; an age of wide - ranging roles that include professional business advice, planning, reporting, identification of value drivers and risk mitigation. in particular, it is increasingly desirable that the
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in books. today β s high - school graduates will be confronted with a breadth of ideas never contemplated by an eighteen year old in the 1860s. the world into which you graduate will require far greater conceptual skills than was required of your parents and grandparents. productive and satisfying manual labor that engaged previous generations will become increasingly less available as technology substitutes for so many of those earlier skills. your future incomes will depend on your conceptual abilities. just as important, because the complexity of our economic system continues to increase, the skill level that you reach in your twenties will surely be inadequate for the needs of our economy when you reach forty. so education must be ongoing. but education alone will not guarantee a successful life. in this regard, let me leave you with some challenges i left with a graduating class at harvard a few years ago. decades from now, as you begin to contemplate retirement, you will want to be able to say that whatever success you achieved was the result of honest and productive work and that you dealt with people the way you would want them to deal with you. it is decidedly not true that β nice guys finish last, β as that highly original american baseball philosopher, leo durocher, was alleged to have said. i do not deny that many appear to have succeeded in a material way by cutting corners and by manipulating associates, both in their professional and in their personal lives. but material success is possible in this world and far more satisfying when it comes without exploiting others. the true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake. i cannot speak for others whose psyches i may not be able to comprehend. but in my working life, i have found no greater satisfaction than achieving success through honest dealing and strict adherence to the view that, for you to gain, those you deal with should gain as well. human relations be they personal or professional - are not, and should not be treated as, zero - sum games.
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alan greenspan : financial literacy remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, at the federal reserve bank of chicago β s money smart conference, chicago, illinois ( via videoconference ), 13 may 2004. * * * this morning i should like to broaden the focus of financial literacy to the education you are going to need more generally in the years ahead. within the next several years the vast majority of you will have completed your formal schooling and begun careers in private business, government, or the nonprofit sector. i suspect most of you have not as yet figured out what career you would like to pursue. but as with all the generations of teenagers that have gone before you, something will grab your interest and engage you. with me it was music. i was entranced with sound and visualized myself playing with the likes of the glenn miller orchestra or becoming another benny goodman. i practiced clarinet and saxophone three to five hours a day and, following graduation from high school, toured the country for a couple of years with a dance band. i was a good amateur but only an average professional. i soon realized that there was a limit to how far i could rise in the music business, so i left the band and enrolled at new york university. during my dance band years i spent the twenty - minute breaks from playing in reading. i became intrigued by books on finance, and, hence, at nyu i majored first in finance and, as my interest broadened, in economics and in what was then called mathematical statistics and now econometrics. in retrospect, that choice probably was not surprising since math was my most engaging course in high school. i graduated and joined an economic research organization. but my education did not stop. i earned a masters degree and went on to further studies at night at columbia university. at the age of twenty - seven i joined a very small wall street firm as a partner and was essentially in charge of making it grow. it did, and i eventually became the senior partner. but twelve hours a day at work left little time for school, and my aspirations to earn a ph. d. faded, at least for a time. however, the pursuit of my profession as an economist and the head of a consulting firm required that i broaden my knowledge, and i proceeded to read books, not only on economics and mathematics but also on philosophy, history, physics, and astronomy. i was
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mario draghi : ecb press conference - introductory statement introductory statement by mr mario draghi, president of the european central bank, and mr vitor constancio, vice - president of the european central bank, frankfurt am main, 25 january 2018. * * * ladies and gentlemen, first of all let me wish you a happy new year. the vice - president and i are very pleased to welcome you to our press conference. we will now report on the outcome of today β s meeting of the governing council, which was also attended by the commission vicepresident, mr dombrovskis. based on our regular economic and monetary analyses, we decided to keep the key ecb interest rates unchanged. we continue to expect them to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases. regarding non - standard monetary policy measures, we confirm that our net asset purchases, at the new monthly pace of β¬30 billion, are intended to run until the end of september 2018, or beyond, if necessary, and in any case until the governing council sees a sustained adjustment in the path of inflation consistent with its inflation aim. if the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, we stand ready to increase the asset purchase programme ( app ) in terms of size and / or duration. the eurosystem will reinvest the principal payments from maturing securities purchased under the app for an extended period of time after the end of its net asset purchases, and in any case for as long as necessary. this will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance. incoming information confirms a robust pace of economic expansion, which accelerated more than expected in the second half of 2017. the strong cyclical momentum, the ongoing reduction of economic slack and increasing capacity utilisation strengthen further our confidence that inflation will converge towards our inflation aim of below, but close to, 2 %. at the same time, domestic price pressures remain muted overall and have yet to show convincing signs of a sustained upward trend. against this background, the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium - term outlook for price stability. overall, an ample degree of monetary stimulus remains necessary for underlying inflation pressures to continue to build up and support headline inflation developments over the medium term. this continued
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october. the recovery in the growth of loans to the private sector observed since the beginning of 2014 is proceeding. the annual growth rate of loans to non - financial corporations increased to 3. 1 % in november 2017, after 2. 9 % in october, while the annual growth rate of loans to households stood at 2. 8 % in november, compared with 2. 7 % in october. the euro area bank lending survey for the fourth quarter of 2017 indicates that loan growth continues to be supported by increasing demand and a further easing in overall lending conditions. the pass - through of the monetary policy measures put in place since june 2014 continues to significantly support borrowing conditions for firms and households, access to financing β notably for small and medium - sized enterprises β and credit flows across the euro area. to sum up, a cross - check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need for an ample degree of monetary accommodation to secure a sustained return of inflation rates towards levels that are below, but close to, 2 %. in order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively to strengthening the longer - term growth potential and reducing vulnerabilities. the implementation of structural reforms in euro area countries needs to be substantially stepped up to increase resilience, reduce structural unemployment and boost euro area productivity and growth potential. regarding fiscal policies, the increasingly solid and broad - based expansion strengthens the case for rebuilding fiscal buffers. this is particularly important in countries where government debt remains high. all countries would benefit from intensifying efforts towards achieving a more growth - friendly composition of public finances. a full, transparent and consistent implementation of the stability and growth pact and of the macroeconomic imbalance procedure over time and across countries remains essential to increase the resilience of the euro area economy. strengthening economic and monetary union remains a priority. the governing council welcomes the ongoing discussions on completing the banking union and the capital markets union, and on further deepening economic and monetary union. we are now at your disposal for questions. 2 / 2 bis central bankers'speeches
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wisdom was that price stability would ensure financial stability. the crisis has shown that financial stability should be seen as a separate objective, and a number of central banks have been given explicit financial stability mandates. the bank has also been given a mandate to take a leading role in maintaining financial stability. to this end, the bank β s financial stability committee ( fsc ) has been reconstituted and given responsibility for macroprudential oversight and policy implementation. this is unchartered territory, and work is being undertaken both globally and domestically to determine the exact nature of such oversight as well as what appropriate policy instruments could be. without being complacent, our view is that at this stage there are no obvious threats to domestic financial stability : credit extension by banks is subdued and there is no evidence of incipient asset market bubbles. however, we remain vigilant as to the possible impact of any global financial stability or systemic banking matters that might arise. bis central bankers β speeches the bank β s microprudential responsibilities have also been impacted by global developments with respect to the regulatory and supervisory environment. the bank, as a member of the basel committee on banking supervision ( basel committee ), has been an active participant in the deliberations on banking regulatory reform. meetings of the committee have culminated in the publication of the global regulatory framework for more resilient banks and banking systems, known as basel iii, which incorporates the details of global regulatory standards on bank capital adequacy and liquidity. the changes should not have a material impact on south african banks which remain well capitalised and characterised by low leverage ratios. the proposals regarding liquidity are likely to pose a greater challenge, and it is important to recognise that it is not only south africa that faces this hurdle. given the relatively long phasing - in period allowed, these challenges are not viewed as being insurmountable. capital flows to a number of emerging markets moderated in the final quarter of 2010 and early 2011. a similar pattern was observed in south africa, and between november 2010 and march 2011 there were cumulative net sales of bonds and equities by non - residents. more recently, renewed net purchases have been experienced and year to date the net purchase of bonds and equities stands at approximately r27 billion. despite this relatively volatile pattern of capital flows the bank, with the assistance of national treasury, has continued with its policy of foreign - exchange reserve accumulation. in the 2010 / 11 financial
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to accept excessive inflation, or to threaten the recovery. and the second on their instruments as 4 / 5 bis central bankers'speeches they would take the risk of cliff edge effects by exiting their covid - crisis instruments. these two views are largely wrong according to me, and i tried to explain why in the case of the ecb. based on the successful conclusion of our strategy review and forward guidance, we can be patient in navigating through a significant but temporary surge of inflation ; besides, we have beyond pepp a broad spectrum of possibilities to further run an accommodative monetary policy, thanks to our quartet of non conventional, or β new conventional β instruments. thank you for your attention. i lane ( p. r. ), β the monetary policy toolbox and the effective lower bound β, speech, 11 october ii schnabel ( i. ), β prospects for inflation : sneezes and breezes β, speech, 7 october 2021 iii see paragraph 8 of ecb β s monetary policy strategy statement 5 / 5 bis central bankers'speeches
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- based counterfactual exercises. the impact of the march 2016 measures and the impact of the december 2016 measures are assessed via modelbased counterfactual exercises. lending rates refer to rates to nfcs. * changes in lending rates are based on monthly data, the reference period for which is may 2014 to august 2017. latest observation : 4 october 2017. 2 notes : hicp inflation and real gdp growth are based on the september 2017 mpe ; the median and range reflect estimates of hicp inflation and real gdp growth over the projection horizon in the absence of monetary policy support ; these estimates are obtained from three different exercises : bmes, the sapi task force and the expert group. latest observation : 2017 q2 for real gdp and 2017 q3 for hicp. 3 see remarks by v. constancio, β growth, adjustment and resilience in the euro area β at the forum villa d β este, cernobbio, 1 september 2017. 4 bayoumi, t. and b. eichengreen ( 2017 ), β aftershocks of monetary unification : hysteresis with a financial twist β, imf working paper no. 17 / 55. 5 notes : the dynamic factor model ( u2 core ) is based on the full 93 hicp items from each of 12 countries. super - core is based only on those items in hicp excluding food and energy that are sensitive to slack as measured by the output gap. the range includes exclusion - based measures, trimmed means and a weighted median. latest observation : august 2017 and september 2017 for hicp excluding food and energy. latest observation : august 2017 and september 2017 for hicp excluding food and energy. 6 for more details see remarks by v. constancio, β understanding and overcoming low inflation β at the ecb conference on β understanding inflation : lessons from the past, lessons for the future? β, frankfurt am main, 21 and 22 september 2017 6 / 7 bis central bankers'speeches 7 ibid, for a detailed discussion 7 / 7 bis central bankers'speeches
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vitor constancio : growth in a more resilient euro area remarks by mr vitor constancio, vice - president of the european central bank, on a panel entitled " the global economy : prospects for broad - based growth ", at the 32nd annual g30 international banking seminar, washington dc, 15 october 2017. * * * ladies and gentlemen, it is a great pleasure to be part of such a distinguished panel. in my remarks today, i would like to reflect on the euro area β s recent economic developments and prospects. in doing so, i will outline the role monetary policy has played β and will continue to play β in supporting the recovery, while also touching upon some of the additional policies required to firmly secure a self - sustained recovery. the main message i would like to convey is that the euro area economy is experiencing a broadbased, robust and resilient recovery, which is underpinned by the monetary policy measures introduced by the ecb since june 2014. despite this favourable growth dynamics, inflation developments have been subdued. we remain confident that the continued closing of the output gap will lead inflation to return to our medium - term objective, yet this return remains conditional on a very substantial degree of monetary accommodation. looking beyond monetary policy, considerable reforms have been implemented and institutional progress has been achieved since the crisis, but supply - side policies are still required at the national level to boost potential growth, while at the euro area level, further institutional reforms are needed to enhance the functioning of emu. recent economic developments and prospects in the second quarter of 2017, euro area real gdp expanded for the 17th consecutive quarter, growing by 2. 3 % year - on - year and exceeding our expectations from earlier in the year. growth is also becoming more broad - based across euro area countries, showing the lowest dispersion since the beginning of the monetary union. the flow of survey data in the third quarter has been encouraging and bodes well for continued growth momentum in the period ahead. robust economic activity is also being translated into a substantial amount of job creation. almost 7 million more people are now employed in the euro area than in mid - 2013, which implies that all of the employment losses recorded during the crisis have been offset. the improving labour market combined with increasing household wealth, strong consumer confidence and favourable financing conditions should all support continued robust private consumption. investment prospects also look promising, which reflects both the need to make up for forgone investment in previous years as
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daniel k tarullo : confronting β too big to fail β speech by mr daniel k tarullo, member of the board of governors of the us federal reserve system, at the exchequer club, washington dc, 21 october 2009. * * * the far - reaching financial crisis that has afflicted our country in the past two years has drawn attention to a raft of problems β from the concentration of commercial real estate exposures in some regional and community banks, to the risks associated with some forms of derivatives, to the need for more vigorous financial services consumer protection. proposals for administrative and congressional responses are thus appropriately diverse. i would suggest, however, that the reform process cannot be judged a success unless it substantially reduces systemic risk generally and, in particular, the too - big - to - fail problem. this afternoon i will address my remarks specifically to the task of forging an effective response to this problem. 1 the current form of the too - big - to - fail problem the concern is hardly a new one. in one manifestation, too big to fail was an extension of the classic problem of bank runs and panics. if a large bank failed β whether because it was illiquid after a deposit run or insolvent after severe losses β the entire banking system might be endangered. in cases in which other banks held significant deposits in the distressed institution, the failure of a large bank might lead directly to the illiquidity or insolvency of other banks. the result could be a domino effect in the interbank lending market, with one bank's failure toppling the next. even where direct losses to other banks were thought manageable, the failure of a large bank might strike panic into depositors, especially uninsured depositors, of other large institutions. the result might be a far - reaching run on the entire banking system that could, in a worst case such as occurred in early 1933, freeze the financial system completely. faced with either variant of such a devastating impact on the system, government authorities often believe they have little choice but to intervene. the government may provide funds or guarantees to the bank in order to keep it functioning. alternatively, the government may allow the bank to fail, but shield some or all of its depositors from loss, even those not covered by existing insurance programs. in 1984, for example, the federal deposit insurance corporation protected the uninsured depositors of continental illinois bank, then the nation's seventh largest depository
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β what we are doing here β is a vital component. we must develop clear guidelines on green finance. the temptation would be to be loose with definition and regulation, in order to ensure that nairobi is the entrepot in this new, and essential, field of finance. however, the entrepot model can have its drawbacks. we must remember that sometimes these may bring the detritus of trade, much as they could bring in high quality commerce. we cannot accept, or afford, to give cover to those who only wish to burnish their greenwashing credentials. thus, we must look at the highest quality of green bond issuance. the guidelines that we are launching today should be guided by the green bond principles, which outline clearly how projects are selected, and how proceeds are managed and used ; as well as which information is disclosed to investors and how. we must also position nairobi to be a global centre for the green assessment of bonds. issues such as verification, consultant review and ratings can be refined here, and we should develop and attract global experts in these fields. it is my hope that when we look back a decade or two hence, we will recall this morning fondly, saying to each other that'we were there ', when we set nairobi on the path to being a capital of green bonds and green finance. and, incidentally, finding me will be fairly easy. i will be the retired old man reading a book under a tree in uhuru park! thank you for your attention.
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and financial issues at universities, in central banks and in international institutions such as the imf and the bis. by debating and discussing and, yes, disagreeing, we can over time generate much more clarity about what path we need to follow in enhancing monetary and financial stability in asia and elsewhere. some may wonder why i include academic economists in that list. i do so for three important reasons. first, research undertaken in universities very frequently serves as a starting point for work undertaken in central banks. one of you may just have written a very good paper on the sensitivity of the new zealand economy to international business cycles or the determination of capital flows between thailand and the rest of the world. it may well be that this paper, unknown to the author, triggers research at the hong kong monetary authority on how sensitive our economy is to external factors or on the determination of capital flows in and out of hong kong. secondly, academic research undertaken in a free and open manner, and presented at conferences such as this, serves to improve the quality of research in central banks. there is a strong presumption in my mind that competition, no matter whether it be in the market for airline tickets or in econometric models of exchange rates, are beneficial to consumers - and central banks are large consumers of economic research. more directly, i know that some of the hkma β s research staff will present papers here, and i am sure that your comments on the papers will trigger ideas for how they could be improved. next time, they will be better. thirdly, universities are the source of staff for central banks. we do hire your students and sometimes we are even able to hire academic researchers. in sum, the asia - pacific region needs more co - operation and exchange of ideas in the monetary and financial sphere, and to achieve that it needs stronger links between economists working in this area in central banks, international institutions and universities. this is exactly what the australasian macroeconomics workshop is all about, and i am delighted that we could tempt you to come to hong kong for this year β s meeting. thank you and let the fun begin.
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come cheaply but it is the price that people know that they have to pay for the protection of their physical properties. 3. in the cyber world, just like the real world, there are plenty of risks and dangers. financial crimes will occur whenever there is money to be made and for sure criminals and hackers alike will use their best endeavours to penetrate the defence of the cyber world to rob or steal. the strength of the cyber world also lies its main weakness. hackers can choose to attack customers and financial firms any time and anywhere because the virtual world is highly interconnected. cyber attacks can take many different forms. a frequently used method is to make phishing attempts to trick customers into divulging their account information and passwords, or to plant malwares into customers β computers and mobile phones to steal their access credentials. then the hackers transfer moneys from the victims β accounts. sometimes the hackers would do something unusual, such as the recent example in bis central bankers β speeches hong kong in which some customers β bank accounts had been used by hackers to conduct unauthorized stock trading without stealing money from the victims β accounts. at the bank level, the usual form of attacks would be distributed denial of services ( ddos ), whether they are motivated by blackmail, revenge or activism of some sort. there is a worrying trend that this form of attacks is rising very fast in recent years. cybersecurity fortification initiative 4. rather than harbouring the hope that you are lucky enough not to be targeted, it is more prudent and productive to take the necessary pre - emptive steps to protect yourself or your customers from cyber attacks. cybersecurity is the very foundation of modern banking and without it there is no point for us to boast hong kong as a world class international financial centre. while banks in hong kong have so far had very few incidents of serious cyber attacks, there is no place for complacency if we wish to maintain hong kong β s competitive edge as the preferred financial hub in asia. in this connection, the hkma has earlier this year set up a new fintech facilitation office, which has taken cybersecurity as its top priority mission. having worked very closely with the banking industry and other stakeholders, i am very pleased to announce today that the hkma has decided to launch for the banking system a β cybersecurity fortification initiative β, which is known as β cfi β in
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situated at the very heart of europe but remaining outside the european union ( eu ) has benefited from the continued process of european integration. there are a host of examples to illustrate this. the bilateral agreements switzerland concluded with the eu in 1999 and 2004 would have been very difficult to reach with 27 individual nations. among other things, this has led to greater immigration from the eu. despite initial fears here in switzerland, open and integrated labor markets between the eu and switzerland have clearly given the swiss economy a welcome boost in recent years. indeed, private swiss firms and even semi - public sectors like health care have reaped substantial benefits by drawing on the supply of large numbers of highly skilled immigrants from the eu member states and in particular from germany. moreover, this has not come at the expense of swiss workers. recent research actually suggests that the immigration from the eu during the last couple of years has narrowed the wage differential. 1 immigrants have also been an important source of demand during the financial crisis. they are clearly one of the reasons why switzerland β s economy has weathered the financial crisis relatively well. indeed, switzerland is one of the very few developed countries where private consumption remained a steady source of growth virtually throughout the entire financial crisis. 2 a particularly relevant benefit directly linked to the introduction of the euro pertains to exchange rate volatility. after the introduction of the euro and before the peak of the financial crisis in 2008, the average euro β swiss franc volatility was roughly 30 % lower than the prevailing deutsche mark β swiss franc volatility in the 1990. the compression in exchange rate volatility is significantly larger if one takes the lira or the peseta or any of the other peripheral european currencies as a reference point. with the mounting concerns in financial markets over the ability of several, mainly peripheral european countries to handle their public debt level, the situation has evolved significantly. exchange rate developments became a challenge for the swiss national bank ( snb ). with interest rates at zero and limited means to further expand monetary policy through other quantitative easing channels, exchange rate interventions were a necessary unconventional monetary policy tool. the snb made it clear that it would fight off β safe haven β flows out of the euro in accordance with its objective to prevent deflationary risks from materializing by way of an excessive appreciation of the swiss franc. this strategy of fighting off deflation risks has yielded the intended results. the deflationary risk in switzerland has largely disappeared and the
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jean - pierre roth : the position of the swiss franc exchange rate in the swiss national bank monetary policy strategy summary of a speech by mr jean - pierre roth, chairman of the governing board of the swiss national bank and chairman of the board of directors of the bank for international settlements, at the university of st. gallen, st. gallen, 19 december 2007. the complete speech can be found in german on the swiss national bank β s website ( www. snb. ch ). * * * the exchange rate is an important factor in determining the domestic price level in switzerland. nevertheless, it is not a monetary policy goal for the swiss national bank and is only relevant insofar as it has an impact on future inflation. our concerns about our currency's weakness should not be read as a hidden form of exchange rate policy but rather as genuine concern about future price stability. a sustained tendency to weakness on the part of the swiss franc could trigger inflationary effects that β sooner or later β would have to be countered with monetary policy instruments taking the form of interest rate measures. in the medium - term, this could lead to a reduction in the interest spread between the swiss franc and the euro.
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unit ( base 100 in 1987 ). a fall in the indicator means lower costs and thus better competitiveness. this remarkable trend in our production costs - made possible by long - run low inflation - is a major achievement of the cross - party economic and monetary strategy pursued by the french government and central bank over a long period. it is important for france and the euro area to maintain and consolidate this strong cost - competitiveness position. since the introduction of the single currency, it is more important than ever that we very closely monitor the indicator for unit production costs as it determines the competitiveness of the goods manufactured in our economy and therefore the current level of employment. this indicator also determines future employment because it dictates the attractiveness of an investment in our economy compared to elsewhere, particularly outside the euro area. allow me to lastly make a general remark about our strategic approach to growth. under the notable influence of new information and communication technologies, a change is underway in the overall attitude of europeans in general and french people in particular concerning the motors of economic growth and job creation. persistent mass unemployment, the structural causes of which were poorly understood, had for a long time led to the adoption of certain malthusian attitudes : wariness towards technical progress as it could potentially destroy jobs, the avoidance of productivity - enhancing investments thought to contribute to higher unemployment and, lastly, efforts to reduce the available work force with a view to sharing the same number of jobs between a smaller number of people. having thus sought to limit technical progress, the available work force and the capital stock, it is not surprising that, despite the considerable progress in recent years, europe and france have seen that their non - inflationary growth potential was still not as high as would have been desirable. in europe and in france, we are seeing a profound change in perspective and are moving away from malthusian attitudes. the banque de france and the entire eurosystem can be counted upon to support this change. this is why the monetary policy council continues to make the following recommendations : in the interest of currency and price stability and therefore of robust growth, sustainable because it is non - inflationary and effective in combating unemployment, it is now more than ever the time to : β invest and ease the constraints on capital. investment is essential in our economy, in which the capacity utilisation rate currently stands at about 87 % and 31 % of firms are experiencing production bottlenecks. an increase in the capital stock is necessary to
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be relatively limited. second, i think the framework we have set, results in something very different from what we had before. having decided that we refinance at fixed rates for unlimited quantities, and with a large corridor between the deposit facility and lending rate means, the lending rate has become the ceiling and the deposit facility rate is the floor and markets tend to move the money market rates in between, with overnight rates at a very low level and the three month rate at a level which can be below the refinancing rate. as a consequence, the rates effectively paid by borrowers are much closer to the situation in the us or the uk than most people would imagine. ft : what does that mean in practice? that the main policy rate need not go any lower, or can β t go any lower? cn : i didn β t say that. ft : or that the deposit facility rate can β t go any lower? cn : i didn β t say that either. but it is clear that the room for manoeuvre on the deposit facility is limited. what i mean is that if we keep the present framework, we cannot move much. that β s obvious. if we want to move more, we have to change the framework, which could cause inconvenience. ft : so there is not much room for manoeuvre and very soon you are going to have to think about other non - standard measures? cn : if we feel we need more β¦ we are in a process where three month rates lose a few basis points every day. market and lending rates are continuing to move nicely downwards. the process has been fuelled by the 275 basis points cut that the ecb has decided. the process is not finished. we need some time for all that to feed through into the economy. ft : so no rate cut in april? cn : we will see. we have proved that we were always ready to act when we felt it was necessary. but we act on the basis of facts and figures, not only macro - economic facts and forecasts, but also on the actual developments in the financial markets. ft : do this week β s french industrial production figures means things in france are going to get a lot worse than expected by the banque de france and the government? cn : the figures were bad and i must say that they probably makes our own forecast of a decline of growth of 0. 6 per cent during the first quarter maybe a little
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experienced the same difficulties. danmarks nationalbank cannot provide liquidity facilities to cover borrowing requirements in foreign exchange since its role is primarily linked to kronedenominated liquidity. banks with large business volumes in foreign exchange must themselves ensure adequate contingency funding plans in the relevant currencies. overall, the danish money market has navigated fairly successfully through these rough waters, which ultimately shows that the danish financial system is in good shape. nevertheless, denmark has been affected by the international turmoil. financial statements for the 3rd quarter showed that danish banks were also exposed to investment vehicles, liquidity lines and structured credit products. the exposures and losses were, however, relatively small in size. lending by danish banks has increased substantially in recent years, and some have seen growth rates in excess of 30 per cent. earnings have been high and losses low. particularly mortgage loans to homeowners have grown significantly. growth in lending has been so strong that a large deposit - loan gap of more than kr. 400 billion has accumulated. this is the amount by which the banks'lending exceeds the deposits from customers. consequently, the danish banks have to rely on the financial and money markets as sources of financing. developments abroad over the summer have shown that it can be risky to base one's business on such financing. the price of market financing may change rapidly, and the markets may " dry up ". the international liquidity crisis has provided an opportunity to test the contingency funding plans and review the business strategy in the light of the findings. it is not as easy as it used to be for the danish banks to finance their growth via the financial and money markets. financing has become more expensive, and the rising costs of financing will undoubtedly be reflected in the banks'earnings and the prices charged to customers. growth in lending remains high, but declining. some banks have adopted a less aggressive business strategy and put their expansion plans on hold. others have expressed intentions to reduce their commitments to international investment vehicles, liquidity lines and structured credit products due to reputational risk. developments have shown that strategies based on double - digit growth rates cannot simply be extended. the strong growth in lending to the corporate sector entails a greater risk of losses to the banks. this risk is rising, but from a very low level. unpleasant surprises can never be ruled out, but the economy is still favourable. and the financial statements for the 3rd quarter also showed that the banks'earnings remain high. solvency
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nils bernstein : recent economic and financial developments in denmark speech by mr nils bernstein, governor of the national bank of denmark, at the annual meeting of the danish bankers association, copenhagen, 5 december 2007. * * * for some years, the global financial system has been characterised by high growth and increasing business volumes. there has been considerable innovation, many new products and business concepts have emerged. earnings have been high. the largest global banks'return on equity has been steadily increasing for a number of years and exceeded 20 per cent on average in the 1st half of 2007. a sudden setback came over a few days in the summer. for a while the us housing market had been regarded as vulnerable. losses on subprime mortgages were increasing, but this market was not assessed to be sufficiently large to have an impact on global financial stability. moreover, the launch of new financial instruments seemed to have helped to spread the subprime risk among many different investors. this assessment proved to be wrong. via structured credit products, investment vehicles had invested in subprime mortgages. to finance these investments, they had issued short - term securities. it turned out that large banks were closely linked to these investment vehicles via liquidity lines and / or ownership. consequently, it was also difficult to assess the banks'potential losses on subprime mortgages, and uncertainty arose as to who ultimately bore the subprime risk. in next to no time, some of the most liquid markets with the highest ratings came to a standstill and it became difficult to issue short - term securities guaranteed by gilt - edged banks. throughout most of the world, banks concentrated on securing their own liquidity and were hesitant to lend excess liquidity to other banks β especially if the maturities exceeded a few days. two german banks experienced difficulties as a result of exposures to investment vehicles. one uk bank was brought to its knees, not by subprime mortgages, but because its business model was based on regular access to financing in the financial and money markets. we even saw the unusual sight of depositors queuing outside a bank to withdraw their deposits! this marked the beginning of the liquidity crisis that has β to varying degrees β characterised the financial and money markets in large parts of the world since july. over the last four months, the central banks in the usa, the euro area and the uk have regularly provided collateralised liquidity to the market in order to stabilise short - term interest rates
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vitor constancio : presentation of the ecb annual report 2014 to the committee on economic and monetary affairs of the european parliament introductory remarks by mr vitor constancio, vice - president of the european central bank, to the committee on economic and monetary affairs of the european parliament, brussels, 20 april 2015. * * * mr chairman, honourable members of the committee on economic and monetary affairs, ladies and gentlemen, i am honoured and pleased to be back in this committee to present the ecb β s annual report 2014 today. this event underlines once again the importance of the dialogue with the european parliament to ensure the accountability and transparency of the ecb β s activities. and it is precisely because the ecb considers transparency to be such a vital aspect of accountability and effectiveness that we have this year started to publish accounts of our monetary policy meetings. the publication of the annual report complements our efforts towards greater transparency by describing the actions that the ecb undertook in 2014 with a view to fulfilling its mandate in a challenging environment. forceful action by the ecb was needed to respond to the impairment of the transmission channels of our monetary policy and to the low inflation environment. our monetary policy action was complemented by another major achievement in 2014 : the preparations for and start of operations of the single supervisory mechanism. the specific regime foreseen by the inter - institutional agreement between the ecb and your institution takes into account the need for enhanced accountability for this new task for the ecb. today, i will first look back at the measures taken by the ecb since the beginning of last year to fulfil its mandate. i would then like to discuss the capital markets union project, which, if pursued with sufficient ambition, could unleash the benefits of more robust financial integration and improve the transmission of our monetary policy. the ecb β s monetary policy from a monetary policy perspective, the environment we faced in 2014 was very complex and demanding. the muted recovery that had begun in 2013 did not accelerate as initially expected. for the year as a whole, we saw gdp growing by 0. 9 % in the euro area. money growth remained subdued and credit continued to contract, albeit at a gradually declining pace. tight credit standards, combined with elevated and sticky bank lending rates in a large part of the euro area, were viewed as one of the principal causes of the persistent economic slack at the euro area level and, indirectly, as a major source of ongoing disinflation. in
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requirements and the capital buffers. over and above supervisory requirements, banks also use equity financing to protect themselves from risk. losses put banks β capital ratios under pressure. a bank then has two options to stabilise the ratio required by the market or by supervisors. the first option is to stabilise the capital ratio by granting fewer loans or not prolonging credit lines. however, creditworthy enterprises might then no longer be adequately funded. the second option is to use capital buffers to stabilise lending. this flexible use of buffers is a key improvement in banking regulation since the global financial crisis : during periods of stress, banks should make use of their capital in order to absorb losses and maintain the supply of credit. this reduces the procyclicality of supervisory capital requirements. however, dividends and bonus payments must be temporarily curtailed in order to maintain resilience. supervisors have responded in order to create this very scope for lending : since march 2020, banks have been able to make full use of two supervisory buffers β the capital conservation buffer and the pillar 2 guidance β with no obligation to replenish those buffers rapidly. as in many other countries, the countercyclical capital buffer in germany was lowered to 0 %. in return, however, supervisors also expect banks to temporarily suspend dividend payments. banks, public authorities and policymakers need to be well - prepared now to cope with a rise in the number of insolvencies. thanks to sound economic developments over the past decade, insolvencies fell to historical lows. we should now check our preparedness for a rise in insolvencies : are experienced staff available? can insolvency proceedings be simplified? are any organisational adjustments necessary? thorough preparations can help banks to distinguish β good β risks from β bad β ones and continue to lend to firms with a sustainable business model. phase 3 : facilitating structural change, limiting vulnerabilities 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. 3
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the downward inflation pressures. we are convinced that the steps we have taken will bring inflation back to our 3 % target, in the medium term. we have managed to anchor the economic agents β expectations on inflation. this has enhanced the effectiveness of the monetary policy and contributed to maintaining confidence in the national currency and the albanian financial system. the continuous liquidity injection through transparent and time consistent operations has managed to relieve pressures in financial markets. the key interest rate cut was followed by an overall decline of interest rates in the financial market. bank lending costs, government borrowing costs, and business and consumer borrowing costs have dropped rapidly. all these factors have laid a sound foundation for economic and financial stability in albania. stability is a precondition for sustainable and long - term growth, financial system development, functioning market economy that generates growth, employment and welfare for the country. i take this opportunity to emphasise that this philosophy of prudence and bis central bankers β speeches stability will guide our decision - making in the future, as well. the businesses, consumers and financial system will find in the bank of albania an institution determined to maintain economic balances of the country, uphold the value of the national currency, encourage financial markets and support sustainable and long - term development for the country. however, the monetary policy has not been transmitted in full to the real sector of the economy. we are aware of the causes of this phenomenon, which is not an isolated case in albania, but a global - wide one. economic agents β uncertainties, economic and financial problems in the euro area, and problems with the balance sheets that characterise a part of the economy are objective obstacles to the monetary stimulus transmission to the economy. nevertheless, we are aware that within this reality, there is room for a more positive approach to consumption and investments, and more lending. uncertainties and reluctance are the main problems standing in the way of the albanian economy. the purpose of this forum is to identify, together, ways to overcome this situation. in this context, i would like to quote president roosevelt : the only thing we have to fear is fear itself. 2. decision - making on banking supervision and financial stability recently, non - performing loans have been mentioned frequently. i will take this opportunity to make the following necessary clarification : first, i would like to underline that we have identified this problem at an early stage and have been very scrupulous with the banking system to evidence every penny of a loan that is not being rep
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ardian fullani : recent regulatory amendments in albania β causes and expectations speech by mr ardian fullani, governor of the bank of albania, at the forum with the albanian banking system on β recent regulatory amendments : causes and expectations β, tirana, 28 february 2014. * * * dear bank executives, dear participants, i would like to welcome you to this discussion forum between the bank of albania and the banking system. the topic of discussion for this roundtable is to inform you on the recent decisions of the supervisory council of the bank of albania in more details. we are on the last day of the second month of 2014 and we are all witnessing an intensive period of discussion and suggestions between albanian authorities on the one side and international institutions on the other. recovery of economic activity, potential structural reforms, lending to the economy, and financial soundness have been at the core of the discussions. taking into account its role and significance in decision - making, the bank of albania has been an important part of them, materialising its contribution with a number of decisions relating to both macroeconomic and banking supervision. following, i would like to share with you in brief the reasons, expectations and the way we will monitor this decision - making. 1. decision - making on monetary policy and money market operations as we have constantly informed, the albanian economy is facing cyclical weakness. in response to the weak demand, the albanian economy is growing below its potential, inflation is low, public and private balance sheets show difficulties, and the banking system has been facing upward non - performing loans. these problems have been detected at an early stage by the bank of albania and we have, therefore, taken relevant measures to tackle them. the monetary policy of the bank of albania has been constantly on the easing cycle. the key interest rate reached the record low 2. 75 % last wednesday, from 5. 25 % in 2011. in line with the best practices of central banking, we have adopted a forward - looking communication strategy. i am convinced that not only the financial market, but also the real economy has received our message that the monetary policy is and will continue to be on the easing side in the quarters ahead. moreover, we have intensified our liquidity injection operations, which have succeeded in meeting all the market liquidity needs, by extending the horizon for injection and facilitating access to liquidity by broadening the collateral base. time has proven our monetary and operational policies successful. the bank of albania has managed to contain and control
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steadystate benefits of all these developments, the potential side effects and transition problems are more difficult to assess. as a result, a holistic assessment of their impacts on systemic stability and economic efficiency is needed. but that is beyond the scope of my remarks today. what i would like to focus on is one issue in particular, namely the impact of recent policy interventions on market functioning. specifically, i would like to discuss three areas : the impact of unconventional monetary policy measures ; the impact of regulatory developments ; and the role of private β public partnerships in financial market reform. 1. the impact of unconventional monetary policies starting with monetary policy, the key issue is as follows. efficient price formation requires that large transactions can be rapidly executed at low cost with limited price impact β i. e. that markets are liquid. but are unconventional measures, such as negative interest rates and asset purchases, positively or negatively affecting market liquidity conditions and thereby that price formation mechanism? it is of course difficult to disentangle the individual effects of each of the policy measures we have taken in the recent years, as they have all been introduced as bis central bankers β speeches part of wider policy packages. still, there are some points that can be made about the tools in isolation. first, negative interest rates on our deposit facility. beyond some initial hesitation, the transition to negative rates has happened smoothly in both capital and money markets. the technical challenges related to the implementation of negative rates, notably in terms of market infrastructures, have been well anticipated and addressed by market participants, and we now have proof that market functioning below zero does not imply different logics and mechanisms. or as i said elsewhere, there is life below zero. 1 in particular, possible adverse effects of negative rates on general trading activities seem to have been limited. while volumes in the euro money markets have been declining, 2 they have been also impacted by the significant increase in excess liquidity as well as regulatory developments. a case in point is the volumes traded in the eonia market, which did fall substantially after the deposit facility rate was cut below zero in 2014, but are up 60 % since the beginning of this year. in addition, negative rates have been accompanied by receding fragmentation in the unsecured overnight money market, at least for the higher - rated counterparties. for example, the spread between rates paid by banks with an investment grade credit rating in formerly stressed and non - stressed jurisdictions is close to its pre - lehman level and significantly improved
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information on activity in the third quarter β coming from various confidence surveys and indicatorbased estimates β continues to support the assessment that economic activity will grow robustly while possibly moderating somewhat. looking ahead to the remainder of 2006 and 2007, the conditions remain in place for the euro area economy to grow at solid rates around potential, with some volatility in the quarterly growth rates likely to emerge around the turn of the year. global economic activity has become more balanced across regions and is still robust, thereby providing ongoing support for euro area exports. investment is expected to remain strong, benefiting from an extended period of very favourable financing conditions, balance sheet restructuring, accumulated and ongoing strong earnings, and gains in business efficiency. consumption growth in the euro area should also strengthen further over time, in line with developments in real disposable income, as employment conditions continue to improve. risks to the outlook for economic growth are broadly balanced over the shorter term, although the recent fall in oil prices β if it were to prove lasting β has the potential to lead to somewhat stronger demand and output growth than embodied in our baseline scenario for activity in the coming quarters. over the longer term, risks to growth lie on balance on the downside, and relate mainly to the possibility of a renewed increase in oil prices, fears of a rise in protectionist pressures, especially after the suspension of the doha round of trade talks, and possible disorderly developments owing to global imbalances. as regards price developments, according to eurostat β s flash estimate, annual hicp inflation fell to 1. 8 % in september 2006, from 2. 3 % in august. although no detailed breakdown is available as yet, this relatively sharp decline seems to be the combined result of favourable base effects, given in particular the strong rise in oil prices a year ago, and the recent significant fall in oil prices. while the outlook for energy prices is uncertain, on the basis of current energy prices and the higher quotations on futures markets, overall inflation rates are likely to increase again towards the end of the year and in early 2007. as a consequence, we expect a considerable degree of short - term volatility in the annual hicp inflation rate, while the overall inflation rate will remain elevated at levels above 2 % on average in 2006 and is likely to remain so in 2007. in addition, risks to the outlook for price developments remain clearly on the upside. they continue to include a stronger pass - through of past oil price rises into
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scams has exposed consumers to increasingly sophisticated fraud schemes that can be difficult to detect and prevent. this is why individual firms must be proactive, ensuring they incorporate security by design when developing new payment solutions. innovation is required to keep pace with criminal elements seeking to disrupt the payments ecosystem, thereby undermining public trust in the broader financial system. the fight against fraud is not limited to any individual firm - the entire ecosystem, including both financial and non - financial stakeholders, must work together to meet the challenge of evolving fraud techniques and typologies. this is why β at the central bank - we have been engaging with a number of large tech firms since the start of the year, including google, encouraging them to do more to ensure they are not facilitating consumer harm. i am pleased that progress has been made in this regard and welcome google's announcement last week that they will introduce a verification process for financial services advertisers. an effective financial services verification policy is a key disruptive tool in the fight against online financial scams. for that reason, in particular, i want to welcome the establishment of the anti - fraud forum under the strategy. this forum will seek to enhance the formal cooperation between the financial sector, telecoms, and social media companies, whose networks and platforms are often utilised to propagate fraudulent activity. let me conclude. as minister chambers outlined, the overarching objective of the national payments strategy is to build and enhance public trust in the payment system, by ensuring that it works in the best interests of all consumers and businesses. ultimately, the success of the national payments strategy will be largely determined by the organisations in attendance today, and the degree to which we all engage in and support this multi - year programme of work. the department of finance has set out the roadmap for the future of the irish payments ecosystem, and it is now up to us, as a collective, to put our words into action. i would like to thank you all again for attending the event today. we have arranged a small reception which i hope some of you will be able to stay to attend. 2 / 3 bis - central bankers'speeches thank you. 3 / 3 bis - central bankers'speeches
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5 percentage points, and the swiss franc has appreciated significantly since mid - 2021. this tightening of monetary conditions was necessary to bring inflation back within the price stability range. inflation has been below 2 % again since june this year. at 1. 4 % in november it was even lower than we had expected in september. inflation is likely to increase again somewhat in the coming months. nevertheless, underlying inflationary pressure has continued to decrease slightly compared with september, and our conditional inflation forecast is now within the price stability range over the entire forecast horizon for the first time in some time. we have decided today to leave the snb policy rate unchanged. at the same time, we are no longer focusing on foreign currency sales. this reflects that monetary conditions are currently appropriate. page 3 / 6 berne, 14 december 2023 thomas jordan, martin schlegel and thomas moser news conference however, uncertainty about the development of inflation going forward remains high. on the one hand, there are still upside risks, although these have abated somewhat of late. for example, there could still be second - round effects in many domestic goods and services. on the other hand, there are also downside risks with regard to inflation. it could, for example, decrease more strongly than expected in the wake of the economic slowdown. at present, our assessment is that the upside and downside risks for inflation are approximately balanced. against this backdrop, we will monitor the ongoing development of inflation closely. if necessary we will adjust our monetary policy and in this context we are also prepared to be active in the foreign exchange market. our goal remains to keep inflation within the range consistent with price stability on a sustainable basis over the medium term. ladies and gentlemen, thank you for your attention. i will now hand over to martin schlegel. ensuring the supply and distribution of cash i would like to inform you today about the snb β s current efforts in the area of cash. according to our payment methods survey, more than 95 % of the population would like to retain the option of using cash as a means of payment in the future. consumers want to be able to choose whether to pay with cash or electronic payment methods. it is true that this freedom of choice is largely a given nowadays. however it is not to be taken for granted, especially when less and less is paid for with cash. in order to retain cash as a payment method in the future, it must remain readily accessible, e.
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collective interests, and, on the other hand, a means to avoid mass litigations that hinder the normal functioning of courts and compromise citizens'access to justice. i must commend the organisers for not only selecting diverse topics but also bringing together speakers from the academia, legal practice, and regulatory bodies. i wish you a successful event, interactive presentations, and continued collaboration after this conference. i believe that while working, you will always keep in mind that you should strive for justice β strive for it because it exists, even if imperfect, and because it must be our ideal and our goal. i hope our guests will enjoy serbia and belgrade, and if this is their first time staying here, i hope that this will be just one of the first meetings in a series, right here in belgrade. thank you for your patience. our expectations from gatherings of this type are such that they should not burden you, but encourage you to achieve concrete results. 2 / 2 bis - central bankers'speeches
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##economic fundamentals and a high level of foreign exchange reserves. we rarely have an opportunity to repeatedly revise our economic projections upward, therefore we are particularly pleased that the past 18 months were chiefly marked by such successive upward revisions. in the period ahead, the national bank of serbia will continue to closely monitor and analyse developments in the international financial and commodity markets, and make its future decisions on those grounds with the aim of preserving the stability that it has achieved. last but not least, having recognised the importance of communication with the public for the success of the bank β s policy, we are aspiring to improve it further. as the number of central banks using social networks as a communication channel is increasing, last week the national bank of serbia created profiles on twitter and facebook. i am inviting you to join our twitter and facebook pages to keep abreast of our activities by following us on these networks. thank you for your attention. bis central bankers β speeches
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posting of collateral abroad β are all under examination to enable participants to move to global margining standards. 5. irda, sebi and pfrda too could help development of interest rate markets. for instance, short selling activity could benefit if a wider pool of securities lenders can be developed. insurance and pension funds, mutual funds have significant holdings of government securities that could be used to lent to short sellers. this would avoid short - squeeze incident we saw a couple of years back, apart from generating income for these entities. we are working with regulators to develop a securities lending product that could enable these entities to participate in securities lending. 6. on a more general note, one of fimmda β s important function has been to organize market feedback on policy initiatives. this is a great help for regulators to assess the impact of regulations, especially at the proposal stage. while this should continue, i would be really happy if fimmda and its members make efforts to identify market development initiatives and bring it to the notice of the regulators. on a lighter vein, market is known to run ahead of regulators while the latter try to catch up. while this is not what i can encourage you to do, i do appreciate that market alone can foster innovative ideas and shall expect you to engage with regulators in regard to the steps that we can jointly take. 7. ordinarily, in so far as the trades are between informed participants who are capable of comprehending and defending their interests, the regulator should not be concerned about the fairness of pricing. nevertheless, fair pricing is a sound principle in any market, often threatened by the fact that there are few sellers. i expect fimmda, with its expertise in valuation and role as a market developer will keep a close eye on this. 8. there have been discussions about market timings of various segments of financial markets. taking into account the representations received from the market, we are examining current market timings with respect to trading, clearing and settlement cycles of financial markets regulated by the reserve bank to improve market efficiency. 9. financial market infrastructures play a critical role in the financial system and the broader economy. these infrastructures facilitate the clearing and settlement of monetary and other financial transactions, such as payments, securities, and derivative contracts ( including derivatives contracts for commodities ). the central bank of any country is usually the driving force in the development of national payment systems. the reserve bank of india has been playing this developmental role and has taken several initiatives
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shaktikanta das : south asia's current macroeconomic challenges and policy priorities keynote address by mr shaktikanta das, governor of the reserve bank of india, at the high - level conference co - organised by the international monetary fund ( imf ) asia and pacific department ( apd ) and the imf south asia regional training and technical assistance centre ( sarttac ), new delhi, 6 january 2023. * * * i am delighted to have been invited by the imf to join this distinguished gathering here today to discuss pathways to resilient, sustainable and inclusive growth in south asia. i am happy to note that the conference proceedings will be anchored by the research findings and policy recommendations of the book titled " south asia's path to resilient growth ". in the current international setting, global trade and growth outlook appear uninspiring, and policies have to be conducted amid a whirlwind of uncertainty. at such critical times, conferences of this nature can help us better understand the evolving scenarios and policy trade - offs. in my address today, i shall briefly cover some of my thoughts on south asia's current macroeconomic challenges and policy priorities. 2. looking back into history, the south asian region has been a key hub of ideas, commerce, art and culture, etc. the indus valley civilisation was among the three earliest civilisations on earth and was the most extensive. in the so called middle ages, trade and commerce flourished in a variety of commodities such as spices, precious metals and other minerals, handicrafts and food items. overall, the south asian region has had an outsized influence on the progress of civilisation and trade in the world. currently, the region accounts for about 25 per cent of world population. with a median age of 27 years, it is one of the youngest regions in the world. the average growth rate of the region has accelerated from 3 per cent in the 1970s to about 7 per cent in the latest decade ( pre - pandemic ). consequently, per - capita income levels have risen alongside notable progress on key development parameters. as per the imf estimates, south asia contributes nearly 15 per cent to global growth, led by india and bangladesh. the region also receives one - fifth of total remittance flows in the world. 3. the south asian region has grown, responding to formidable global challenges in the past. following the food crisis of the 1960s, the region successfully
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and safety nets in foreign currency such as deposit insurance can all be evaluated under this framework. due to those imperfections, moral hazard problems arise and this in turn results in a larger demand for foreign currency. as the studies 3 have showed, the low quality of legal and political institutions and the lack of legal protection for domestic creditor provide incentives for dollarization. dear guests, now, the question is why we should care about dollarization. before anything else, it increases a country β s vulnerability to shocks. let me also mention the vulnerabilities of two major sectors in an economy : one arising from dollarization in private sector and the other one having to do with dollarized public debt dynamics. beginning with the private sector, the dollarized financial systems and the companies β balance sheets are obviously exposed to solvency risks, due to currency mismatch problem. keeping in mind that the risks for both financial and real sectors are interrelated, the banks that lend in foreign currency to firms, which earn revenues in domestic currency, are also indirectly affected. in such cases, the whole economy becomes more vulnerable to shocks due to amplified risks resulting from dollarization. a recent strand of literature and country cases such as the asian meltdown of 1997 and the 2000 - 2001 banking crisis in turkey, have all emphasized the importance of such vulnerabilities brought about by dollarization. moreover, firms adjust their prices more frequently in a dollarized economic environment where depreciation of national currency is perceived as permanent. thus, dollarization leads to higher pass through effect from exchange rates to prices via deteriorating pricing behaviour of firms. ultimately, from the public sector β s point of view, the issue of debt sustainability is highly influenced by dollarization. in fact, public sector is exposed to problems similar to that of non - trading firms indebted in foreign currency 4. there is no doubt that dollarized debt adversely affects government β s solvency as its assets are in domestic currency. in this sense, given the high level of dollarization, the fluctuations in real exchange rate might turn an apparently sustainable fiscal situation into an unsustainable one. furthermore, public sector insolvency can immediately lead to banking sector insolvency if domestic banking system holds large claims against government. dear guests, before continuing with the turkish experience, i have to add that dollarization deserves a special attention from a central banker β s perspective. as we all know, the choice of exchange rate regime is
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hafize gaye erkan : recent economic and financial developments in turkey speech by dr hafize gaye erkan, governor of the central bank of the republic of turkey, at the briefing on inflation report 2023 - iii, ankara, 27 july 2023. * * * distinguished members of the press, esteemed participants, welcome to our third inflation report briefing of 2023. i would like to extend my respect and greetings to you, who joined our meeting today, and all our online participants. before starting my presentation, i would like to emphasize that the primary objective of the central bank is price stability. we embarked on a monetary tightening process to bring inflation down permanently. we will further strengthen monetary tightening as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved. we are closely monitoring indicators for inflation and underlying trend of inflation. we will continue to decisively use all our tools in line with the main objective of price stability. accordingly, in addition to the rate hike, we have taken decisions on selective credit tightening and quantitative tightening to support the monetary tightening process, and will continue to do so. therefore, my speech and the following q & a session will focus solely on inflation and monetary policy. we are in a transition heading towards the disinflation and stabilization periods we have envisaged. during this transition, markets are being stabilized within their own internal dynamics. inflation will rise temporarily in the short run in response to the correction in exchange rates and the measures regarding fiscal discipline. in the meantime, we are carefully laying the groundwork for a sustainable start of disinflation in 2024. we will begin to feel some of the cumulative positive effects of our rate hike decisions, along with our quantitative and selective tightening decisions in late 2023 and particularly in the underlying trend of inflation in the second quarter of 2024. once we enter the period of disinflation process, temporary corrections in relative prices will be replaced by exchange rate stability, improved current account balance, fiscal discipline, permanent strengthening in capital flows and increased reserves. as a result, underlying trend of inflation and expectations will improve consistently. 1 / 11 bis - central bankers'speeches we see post - 2025 as the beginning of a period of stability. during this period, disinflation will accelerate and predictability will increase. permanent disinflation will be accompanied by investments and qualified growth. in my briefing, i will first share with you
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comes with hardly any unwanted implications. rather, it is easy to implement, because there would be no need to upgrade the existing and established t2 system. that is the good news from the wholesale side. now i would like to focus on the retail project. 2 why we need a digital euro the digital euro is currently in the " preparation phase ", as it is called. in this phase, which is scheduled to run until october 2025, our experts are preparing for the possible implementation of a retail digital euro in the euro area. the ecb's governing council will take a decision after this phase and following adoption of the necessary legislation. i am aware that some people have their reservations about the digital euro project. we need to take these reservations seriously and counter people's concerns with compelling arguments. one of the main arguments against a digital euro is that we do not need it at all. in my view, that argument is flawed. our lives are turning increasingly digital. in shops, more and more people prefer to pay with cashless means of payment. and when it comes to online shopping, which is becoming ever more important, we as customers have no choice but to pay electronically. both of these factors mean that cash use is lower than it once was. however, the electronic payment options currently available to euro area households have their deficiencies. some payment cards work only in specific countries. and all the cross - border payment options are currently non - european, which limits our strategic autonomy in a critical infrastructure. that's why, as a service provider to society, we are thinking about offering a digital form of central bank money for the general public. 3 results from a public survey on the digital euro if i could see you now, i would see a group of experts who know exactly what makes cbdc special. and what sets it apart from other digital assets. however, if we look at the digital euro's main target group, the general public, we see significant gaps in their knowledge and understanding. 2 / 4 bis - central bankers'speeches a recent representative survey for the bundesbank showed that this is the case for the german population. 1 only 41 percent of respondents said they had already heard, read or seen anything about the digital euro. by contrast, 59 percent said they knew nothing about it yet. that doesn't come as much of a surprise, though. as long as the final decision on the digital euro has not been taken, it makes little
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both papers covered by the panel provide useful thoughts on the trade - off between data use and data protection. 2 data are considered the most valuable commodity of the 21st century. and, in principle, there is nothing wrong with people paying for services with their personal data. provided they know who is using which data for what purpose and they explicitly accept those uses. however, many people aren't happy about their data being used commercially. they don't want people to be tracking their consumption behaviour. and they are perfectly entitled to have their data protected. so if you were to go to a winery in eltville to buy some bottles of riesling and pay with the digital euro, only the bank that operates your wallet would have full visibility of the transaction. but it is not allowed to use that information commercially without your consent. the eurosystem will not be able to assign the transaction to you personally. and if you pay offline, no personal information whatsoever is shared with anyone else. like with cash. 3 5 conclusion ladies and gentlemen, there is still a long way to go before we can issue the digital euro. exchanging views and opinions with experts from outside the eurosystem is very important and valuable in this regard. 1 deutsche bundesbank ( 2024 ), bundesbank survey : widespread acceptance of digital euro among general public, press release, 4 june. 2 agur, i., a. ari & g. dell'ariccia ( 2023 ), bank competition and household privacy in a digital payment monopoly, imf working paper wp 23 / 121 ; tinn, k. & c. dubach ( 2024 ), ( central bank ) digital currency with asymmetric privacy - theory model, mimeo. 3 european central bank ( 2024 ), progress on the preparation phase of a digital euro - first progress report ( europa. eu ). 4 / 4 bis - central bankers'speeches
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between quarterly average overnight call rate and interest rate obtained from the taylor rule, and inflation gap as the difference between quarterly average inflation rate and target inflation ( chart 6 ). it showed statistically significant inverse correlation which implies that higher the deviation of policy rate from that implied by the simple taylor rule, higher is the deviation of inflation from its desired level. 9 correlation coefficient of β 0. 78 which was statistically significant at 1 per cent. bis central bankers β speeches chart 6 : interest rate gap mirrored inflation gap moreover, in the crisis period, the gap had widened which has since narrowed in 2012 β 13. additional diagnostics suggested bi - directional causality between the interest rate gap and inflation gap. it is noteworthy that this gap was narrower during the high growth phase of 2003 β 08. conclusion let me conclude. the taylor rule has been extensively used to understand the interest rate setting behaviour of central banks across the world. recent empirical work including the simple characterisation i have presented here suggests that a taylor - type rule could be a useful additional tool in understanding the interrelationship among growth, inflation and policy interest rate as the interest rate channel of monetary transmission strengthens. at the same time, it should be emphasised that taylor rule has its limitations as exclusive emphasis on interest rates with the neglect of other variables may not be optimal for an emerging market economy like india. in my presentation if i have raised more questions than provide answers, i would have succeeded in my intention. there is a need for further research to enhance our understanding of appropriate interest rate structure which is conducive to price stability in the medium - to long - term. thank you. bis central bankers β speeches
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in order to return to sound fiscal positions are credible, respecting fully the provisions of the stability and growth pact. this is essential to maintain the public's trust in the sustainability of public finances, which is important both for the economy to recover and for supporting long - term growth. countries subject to the excessive deficit procedure need to comply strictly with the ecofin council recommendations for correcting their deficits. many countries will need to specify further credible consolidation measures for 2010 and beyond. full and consistent implementation of the eu's legal provisions for sound fiscal policies is a prerequisite for the maintenance of their credibility as one of the pillars of the institutional framework of economic and monetary union. turning to structural reforms, the governing council welcomes the commitment of the spring european council to make full use of the renewed lisbon strategy for growth and jobs in the current situation. the updated recommendations for the euro area countries call for an accelerated implementation of reforms to support the economy, facilitate necessary adjustments and ensure a high level of growth potential. it remains essential that government support measures do not distort competition or delay necessary structural adjustment processes and that governments remain firmly committed to avoiding protectionism. we are now at your disposal for questions.
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##iciencies in a firm β s capital planning process, as well as because one or more relevant capital ratios would fall below required levels under the assumptions of stress and planned capital distributions. likewise, the stress test is relevant not only for its role in the capital planning process. as noted earlier, it also serves other important purposes, not least of which is increased transparency of both bank holding company balance sheets and the supervisory process of the federal reserve. enhanced liquidity standards as with capital, the financial crisis also brought attention to defects in the liquidity riskmanagement practices of large financial firms. as seen during the crisis, a financial firm β particularly one with significant amounts of short - term funding β can become illiquid before it becomes insolvent, as creditors run in the face of uncertainty about the firm β s viability. while higher levels and quality of capital can mitigate some of this risk, it was widely agreed that quantitative liquidity requirements should be developed. the basel committee generated two liquidity standards : one, a liquidity coverage ratio ( lcr ) with a 30 - day time horizon ; the bis central bankers β speeches other, a net stable funding ratio ( nsfr ) with a one - year time horizon. however, insofar as this was the first - ever effort to specify such requirements, the governors and heads of supervision of the countries represented on the basel committee determined that implementation of both frameworks should be delayed while they are subject to further examination and possible revision. as is the case with enhanced capital standards for the largest banking firms, the basel committee β s liquidity initiatives are consistent with the federal reserve β s obligation under section 165 of the dodd - frank act to impose more stringent liquidity standards on the largest bank holding companies as well as other systemically important nonbank financial firms. the lcr has been actively reconsidered within the basel committee over the last year or so. as this work proceeds, four types of changes appear particularly ripe for consideration. first, the lcr β s definition of high - quality liquid assets should be broadened. in this regard, we support efforts to move away from the current credit risk - based approach and toward a quantitative liquidity - based approach. second, some of the assumptions embedded in the lcr about run rates of liabilities and the liquidity of assets might be grounded more firmly in actual experience during the crisis, as the lcr may overstate in particular the liquidity risks of commercial banking activities
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β in its capacity as consolidated supervisor of the bank holding company β is working with the occ, the regulator of the national bank, to review the firm β s response and remedial actions. in particular, the federal reserve has been assisting in the oversight of jpmorgan β s efforts to manage and de - risk the portfolio in question. as this process proceeds, we anticipate also working with the occ and fdic to identify the changes in risk measurement, management and governance that will be necessary to improve riskcontrol practices surrounding the firm β s trading activities and to address trading strategies that led to these losses. in addition, the federal reserve has been looking at other parts of the holding company to determine if governance, risk management and control weaknesses β similar to those exposed by this incident β are present elsewhere. while we have, to date, found no evidence that they are, this review is not yet complete. conclusion the recent financial crisis disrupted the financial system and the broader economy on a scale and scope not seen since the 1930s. some of the world β s largest financial firms collapsed or required government assistance to stay afloat, sending shock waves through the highly interconnected global financial system. asset prices fell sharply, flows of credit to american families and businesses slowed dramatically, and millions of people lost their jobs. extraordinary actions by governments around the world helped to provide stability, but more than four years after the onset of the crisis, the recovery is far from complete. it is critical that we complete the implementation of capital and other prudential measures to prevent another crisis and protect taxpayers from having again to recapitalize financial firms. thank you very much for your attention. i would be pleased to answer any questions you may have. bis central bankers β speeches
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amplified through a variety of channels, including through accounting standards for both mark - to - market assets and held - to - maturity loans, margining practices and through the build up and release of leverage among the financial institutions, firms and consumers. failure to capture major on - and off - balance sheet risks as well as derivative related exposures, was also a key destabilising factor. the provisions of ias 39 - financial instruments - recognition and measurement issued by the international accounting standards board ( iasb ), establishes the principles for recognizing and measuring financial assets and financial liabilities. this standard is of particular importance to the banking sector and nbfcs which deal primarily in financial instruments. ias 39 includes provisions about classification of financial instruments, their ongoing measurement ( including when impairment is required ) and derecognition. the provisions of ias 39 are currently applicable globally in respect of financial instruments. following the crisis, there was widespread criticism that the accounting standards, more so, fair value accounting significantly contributed to the financial crisis or at the very least exacerbated the severity of the crisis, in view of its failure to deal with illiquid markets and distressed sales. the g 20 working group on β enhancing sound regulation and strengthening transparency β recommended that accounting standard setters should strengthen accounting recognition of loan loss provisions by considering alternative approaches for recognizing and measuring loan losses that incorporate a broader range of available credit information. the g 20 working group also recommended that the international accounting standards board ( iasb ) should enhance its efforts to facilitate the global convergence towards a single set of high - quality accounting standards by sharing the experience of countries that have completed this process and by providing technical assistance. another significant recommendation was that accounting standard setters should accelerate efforts to reduce the complexity of accounting standards for financial instruments and enhance presentation standards to allow the users of financial statements to better assess the uncertainty surrounding the valuation of financial instruments. in april 2009, in response to the input received on its work responding to financial crisis, and following the conclusions of the g 20 leaders and the recommendations of international bodies such as the financial stability board, the iasb announced an accelerated timetable for replacing the principal standard for recognition and measurement of financial instrumentsias 39. ias 39 is sought to be replaced by ifrs 9 in three phases. the first phase was completed with the issue of the portion of ifrs 9 which deals with the classification and measurement of financial assets and financial liabilities. the second and third phases are in the
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##rences of similar incidents. idrbt has been nominated as the sectoral cert for banking and financial sector. i suggest that banks coordinate with idrbt and make use of this for fighting cyber intrusion. it vision document 2011 - 17 38. coming to the concluding part of my address, i would like to draw your attention to the rbi β s recently released it vision document for 2011 - 17, the major recommendations of which relate to transforming the rbi into a knowledge organisation, using it as a strategic resource, improving it governance and reviewing of it processes for better alignment between business objectives and it. the action points that emerge for rbi and banks from this document relate to the following issues : focus for rbi 39. the main recommendation is for the reserve bank to transform itself into an information intensive knowledge organisation. other recommendations include harnessing human resource potential, migrating to enterprise architecture for it systems and adopting appropriate business process re - engineering. conformity to internationally accepted standards and usage of business intelligence from data warehouse for optimal management information systems ( mis ) with effective decision support systems ( dss ) are also recommended. 40. improved it governance, effective project management, evolution of well defined information policies as well as information security frameworks, better vendor management and outsourcing practices are the other significant recommendations of the document. the document also suggests reviewing of it processes for better alignment between business objectives and it. focus for banks 41. the vision document sets priorities for commercial banks to move forward from their core banking solutions to enhanced use of it in areas such as mis, regulatory reporting, overall risk management, financial inclusion and customer relationship management. it also dwells on the possible operational risks arising out of adopting technology in the banking sector which could affect financial stability and emphasizes the need for internal controls, risk mitigation systems, fraud detection / prevention and business continuity plans. 42. although banks have deployed technology for transaction processing, analytical processing by banks is still in a nascent stage. banks may work towards reaping benefits of technology in terms of cost reduction, improved customer services and effective flow of information within the banks and to the regulator. the reserve bank has drawn up an action plan to implement the recommendations of the vision document. a high powered committee has also been constituted in the reserve bank which has the responsibility to ensure time bound and effective implementation of these recommendations. bis central bankers β speeches conclusion 43. in conclusion, i would like to say that banks need to take a disciplined approach to it architecture,
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the crisis, while the role of the state faces much less scrutiny. the question of whether monetary authorities, prior to the crisis, properly regulated interest rates as a key price in the economy attracts much less attention in the debate than it should. the same is true for the question of whether the existing store of individual countries'supervision tools was used correctly and adequately before the crisis. this is interesting, as the crisis poses some new challenges and questions. should monetary policy try to stabilize a broader set of indicators in the future, not just prices of consumer goods, but also real - estate or other asset prices? does it make sense to have a separate currency but not to have an autonomous monetary policy, like the baltic countries and bulgaria, or to have a separate currency but not to have an effective lender of last resort, like iceland? doesn't the system of exchange - rate pegs, quasi - pegs or currency boards increase imbalances of those who are pegged, and thus their vulnerability in a crisis? these questions are important, but they are not being properly discussed in the current debate. many forget that the state's role in the financial sector is already huge. central banks, finance ministries and various state agencies across the globe do regulate and supervise the financial industry more, not less, than many other industries. yet that is precisely why every further tightening of the screws should be carefully considered and analyzed, not adopted under pressure or threat, hastily or imprudently. one should bear in mind that regulation never distinguishes the bad banks from the good ones. and even this crisis has revealed that many financial institutions are in good shape and coping with its consequences quite well. although many people won't admit it, new rules being drawn up today will radically affect the financial market tomorrow and beyond. that's the way it goes : times of crisis permit dramatic and rapid changes that would not be implementable, or even thinkable, under normal circumstances. but when the dust settles, it is very difficult to reverse them. all thinking people in the financial sector should want to ensure that the rash solutions adopted in the present bad times, many of which will do little or no good anyway, do not in the long run generate much worse times for the industry, and hence its clients. putting out a fire is one thing. but improving the fire regulations is quite another. certainly a large fire can provide inspiration for future fire prevention. but it is by no means wise to fight the
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fixed and the banking union completed. otherwise, market participants will continue to fear that local vulnerabilities could eventually spread and destabilise the european banking system before all the firefighting tools are ready to be deployed. the aim must be to move forward swiftly on both risk reduction and risk sharing. risk sharing involves both the public and private sectors, for example by ensuring the same level of deposit protection through a european deposit insurance scheme, but also by continuing to build a capital markets union in europe. the eu and emu also need to face up to their institutional weaknesses. on average, people β s trust in both national and eu political institutions is very low. as regards the national level, we know from the economic literature that strong institutions are crucial for sustainable economic growth and governance indicators suggest that there is room for improvement in many member states. as regards the european level, the gap between people β s expectations and the eu β s institutional setup is widening : β’ first, the perceived legitimacy of the eu remains low. the eu is not regarded as β efficient β and only a minority of citizens feel that their voice counts in the eu. β’ second, opinion polls suggest that citizens are not opposed to european decisionmaking. specifically, they want the eu to concentrate on their key concerns, notably to protect them better from economic and security risks, and to provide solutions. when responding to these expectations, the eu and emu face however two challenges : β’ the first has to do with subsidiarity : it should be made clearer where the eu has an advantage over member states in terms of exercising competence and where not. a better demarcation of competences between the european and national level is desirable β but not easy. loose coordination at european level may give the impression that a competence has been passed to the european level, when in fact it continues to be exercised by member states. the result tends to be that the eu gets blamed for apparently seeking to interfere in national affairs when in fact it does not effectively have the power to do so. it should not be so surprising that in such situations the practical result is a lack of coherent action across the eu. this, in my view, means that responsibilities and accountability lines should be more clearly defined and assigned, as europe has done with the single monetary policy and the creation of the european central bank. β’ the other challenge has to do with intergovernmentalism. the rationale for the intergovernmental approach is to ensure that decisions
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increase in resource utilisation is already evident in some indicators. a growing proportion of firms are reporting, for example, that output is being restricted by productive factors rather than by demand. the gap between total demand and total resources for production is an important but elusive indicator of inflationary pressure. the riksbank considers that the output gap, which is an attempt to measure the degree of unutilised resources in the total economy, is 2 per cent of gdp. with the gdp forecast from the inflation report, this means that the gap will narrow by degrees and close some time during 1999, in any event towards the end of that year. in the light of the assessments of resource utilisation and other factors, in the inflation report the riksbank forecast that the annual increase in the cpi will be around 1 per cent in 1997 and around 2 per cent in both 1998 and 1999, with some upward tendency in the latter two years. this is our main scenario. like most other forecasts, however, inflation assessments are subject to uncertainty. our forecasts as a foundation for monetary policy therefore do not consist of single point estimates of future inflation. in practice we construct a number of alternative outcomes and assess their probabilities. normally there is one main scenario and two alternatives. economic activity could be stronger than we have envisaged, so that inflation is somewhat higher ; but it could also be weaker, giving lower inflation. most of the evidence suggests, however, that since the inflation report, an outcome which is appreciably weaker than the main scenario has become less likely. the forecasts for all the demand components are naturally uncertain. it is, however, particularly worth discussing the forecast for private consumption, since this component represents about one - half of total demand. some factors suggest that the growth of private consumption could become stronger than most observers count on today. the background here is that for a number years the growth of household disposable income has been held back by fiscal consolidation. after 1998, however, the direct restrictive fiscal impact on household finances is expected to diminish. but in spite of the weak or negative income trend, private consumption has already been rising for a number of years, albeit rather slowly. the reason is that, besides the effect of income on private consumption, spending by households, as well as their view of the future, is influenced by the increase in wealth. households have recently become appreciably more optimistic about the future. house prices
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political attention is focused elsewhere right now. but leaving emu unfinished will leave us too fragile and vulnerable to be able to deal with future shocks. completing banking union and financial union one area that deserves particular attention is the finance sector. this year β s ecb annual report outlines the key challenges the euro area is facing, namely ( i ) a further increase in risk premia, a decline of financial asset prices inducing capital losses, in the context of possible emerging market stress and persistently low commodity prices ; ( ii ) weak profitability for insurers and for banks, aggravated for some banks by non - performing loans ( npls ) inherited from the crisis ; ( iii ) sovereign and corporate debt sustainability concerns ; and ( iv ) the potential for stress in the investment funds sector β and shadow banking more broadly. in the past few months, a discussion has started about the need for a new risk reduction agenda. but, before discussing such further steps, it is worth recalling that we have already made significant progress β since the beginning of the crisis β in β de - risking β europe β s financial system. we enhanced and implemented the single rulebook ; defined a common resolution framework for banks to protect european taxpayers ; established the single supervisory mechanism and single resolution mechanism, and conducted a comprehensive assessment of banks to deal with legacy issues before the start of banking union. the results are tangible. the common equity tier 1 ratio has risen, on average, from around 9 % to 13 % since 2012 for significant institutions. most european banks have managed to meet the fully - loaded capital requirements by now. while a lot has been achieved, there is no room for complacency : too many of our banks are still troubled by the ghosts of the past, legacy assets and npls. the ecb as supervisor is actively looking into this and has identified the issue as a priority. so, what is left to be done to mitigate the remaining risks and make the financial system more resilient? it is important to further improve and fine - tune what we have started. first, there is still room for improvement when it comes to establishing a truly level playing field, for example by creating a truly single rulebook. the ecb is contributing here with its work on options and discretions in the crd iv / crr framework, but you as legislators can also play an important role to complement our action. second, we should implement the missing elements of the international regulatory agenda. i will come back
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##uritisation ( abs ) is the largest securitisation class in india, driven by retail loan portfolio of banks. nbfcs like the asset finance companies ( afc ) operating in the sme and transport financing segments and micro finance institutions ( mfi ) are very active as originators. though the market had begun since the year 2000, the gfc obviously has its repercussions in indian market as well. it is reported that the indian securitisation market which reached a high of βΉ 63, 730 crore by march 2008 dwindled down to βΉ 28, 800 crore in by march 2014. 22. the micro finance companies play a larger role mainly due to their psl underlying pools. another positive development witnessed in recent years is the preference for multiple tranche products as against single tranche structures. another encouraging factor is the preference for the lower rated senior tranches by the investors. it is reported that during the financial year 2014, the number of aaa ratings at initiation dropped from 45 % in 2012 to 26 %. 23. insurance, pension and mutual funds can play an important role in the indian securitisation market as they can invest long term and at the same time have the risk appetite, capacity and expertise for taking exposures to the lower tranches. however, the pension funds are not allowed to invest in securitisation ptcs and insurance companies are allowed to invest in high investment grade aaa securities only. mfs are still hesitant to invest in the securitised papers due to past pending court cases as well as lack of clarity on the tax implications for their investments. in the finance bill 2013, mutual funds were exempted from application of the distribution tax imposed on securitisation spv β s. low appetite for securitisation in indian financial market 24. the appetite for securitisation in india has been on the lower side ; it is used largely to meet priority sector lending targets by banks as investors, nbfcs being the originators. this low appetite can be ascribed to several factors, including legal, taxation and stamp duty issues. 25. recently, we undertook an informal and quick survey of the securitisation market in india. the primary objective was to assess the issues facing the market along with the reasons for poor take off in securitisation as a risk transfer and liquidity enhancing product. the sample survey included originators, investors, third party liquidity and credit enhancement providers, servicers
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economies. interest rates were brought down to very low levels in most developed countries and fiscal deficits widened. however, these measures were unable to prevent some major corporate defaults. although this exerted pressure on the world financial system, institutions were generally able to cope with the situation. japanese banks were affected by bad debts and low profits and some banks in europe also encountered problems. insurance companies and pension funds fared worse than banks. of further concern is the volatility experienced in exchange rates and its effect not only on the financial sector, but also on real economic activity. in particular, the us dollar has weakened substantially, which could have major repercussions for the world economy. domestic economic developments the weakness of the us dollar was a major factor in a significant recovery in the external value of the rand. having declined by 34 per cent on a trade - weighted basis during 2001, the nominal effective exchange rate of the rand recovered by 24 per cent in 2002 and by a further 12 per cent up to the end of july 2003. the performance of the rand was also related to south africa β s inherent economic strength and to the sound and consistent macroeconomic policies pursued by the authorities. improved international perceptions of these strong fundamentals were reflected in a significant narrowing in spreads on internationally - traded south african bonds, and was recognised by higher ratings of the country by two major international rating agencies, which further underpinned the rand β s recovery. the positive sentiment in the market was supported by attractive domestic interest rates and an increase in the country β s terms of trade. similarly, the real effective exchange rate of the rand recovered markedly since the beginning of 2002. this index, which reflects the trade - weighted exchange rate of the rand deflated by the production price differential between south africa and its main trading partners and competitor countries, rose by an estimated 16 per cent over the eighteen - month period up to the end of june 2003. even after this increase the level of the real effective exchange rate of the rand was still below the index values of early 2000, i. e. before the currency market turbulence. this indicates that south african producers are fairly price competitive, but the profitability of their international transactions has, of course, fluctuated considerably over the past three years. domestic output could not escape the impact of the still subdued global economy. growth in real gross domestic product slowed down from 3Β½ per cent in the first half of 2002 to 3 per cent in the second half and 1Β½ per cent
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this has been reinforced by the dynamic pace of innovation in islamic finance that has widened the range of financial products and services. islamic finance has thus become an increasingly important channel for the efficient allocation of funds across borders and the diversification of risks. islamic finance : financial solutions for international business despite an increasingly more challenging environment, islamic finance has continued to expand its potential as a sustainable and stable form of financial intermediation. its emphasis on the close link between financial transactions and economic activity has positioned islamic finance to be well - anchored to serve the real economy. the adoption of profit - and risksharing, transparency and disclosure, and the universal ethical values of fairness which is implicitly embedded in the islamic financial system provides the internal checks and bis central bankers β speeches balances. embraced in its entirety, it enhances the prospects for sustainable economic growth and financial stability. the resilience of the islamic financial system is also further strengthened by the international prudential standards and best practices that have now been introduced. these include the standards issued by the islamic financial services board since 2002 in the areas of capital adequacy, risk management, governance, and the conduct of business and supervisory process. the industry is also guided by international accounting standards that have been developed by the accounting and auditing organisation for islamic financial institutions since its establishment in 1990. in enhancing liquidity management in the islamic financial system, the international islamic liquidity management corporation ( iilm ), which was established in 2010, is putting in place the mechanism that will facilitate effective liquidity management solutions through the periodic issuance of short - term shariah - compliant financial instruments. as the islamic financial system transitions to becoming more diversified and comprehensive, it provides the spectrum of financial solutions that meet the different needs of the economy. such financing products offered in islamic finance also include syndicated financing, equity financing and venture capital. there are also a wide range of investment and treasury instruments, as well as fund and wealth management products for the management of portfolios of businesses. in terms of takaful, there is also a broad range of products, including takaful coverage for physical properties and assets of businesses, as well as protection for employees. the growing significance of the international dimension of islamic finance in this recent decade has witnessed its increasing role in bridging economies through the mobilisation and channelling of funds to productive investment activities across borders. despite the challenging global environment and the increased uncertainties, the islamic finance industry has continued to experience
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, is committed to supporting these efforts within our mandates for financial and monetary stability. on that note, i wish you productive discussions in the sessions ahead. we look forward to concrete outcomes from these discussions given the heavy and urgent responsibility we all bear to mitigate the devastating effects of climate change.
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thomas c baxter, jr : reflections on the new compliance landscape remarks by mr thomas c baxter, jr, executive vice president and general counsel of the federal reserve bank of new york, at β the new compliance landscape : increasing roles β increasing risks β conference, new york city, 23 july 2014. * * * the views expressed are the views of the author and do not necessarily reflect the views of the federal reserve bank of new york, or any component of the federal reserve system. let me begin by thanking the risk management association, pwc, debevoise & plimpton, and my friend paul lee for inviting me to participate in this conference. of course, i need to give what sometimes sounds like a miranda warning β my remarks are personal, and do not represent an official position of the federal reserve bank of new york, or any part of the federal reserve system. there is nothing i will say that can be used against them. i am going to address three specific compliance problems : economic sanctions, tax evasion, and foreign corrupt practices. i will use these three compliance problems to illustrate a larger point about organizational culture. if organizational values do not support the rules that organizations use to guide the behavior of employees, and worse, if organizational values actually conflict with those rules, the organization is headed for troubled territory. in my remaining time, i will elaborate on this fundamental point. let me start with economic sanctions. we have the recent case against bnpp for its conduct in evading u. s. sanctions related to iran, sudan and cuba. the case is noteworthy because the disposition involved pleas to federal and state criminal violations, and a record fine of nearly $ 9 billion. the bnpp case is not the only case against a financial institution for economic sanctions violations. there have been a series of others. every one of this series of cases concerns a foreign bank. observers ask, β why are all of these economic sanctions cases against foreign banks? β before offering my answer, let me start with some β not β s β. in my view, it is not that u. s. financial institutions are so much more compliant than foreign institutions. i will avoid an ugly name - and - shame ritual, where i would identify the u. s. financial institutions that violated u. s. law. it is not that u. s. prosecutors are xenophobic individuals who are bound and determined to target only foreign institutions. i know from personal knowledge that prosecutors have followed the evidence
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β s economic stability over the past few years. indeed, cornell provides a clear example of how a university can play a key role in its local economy. the benefits of the higher education industry go beyond their direct economic contributions, such as employment and spending, for a very important reason : they can increase a region β s stock of human capital β that is, the total supply of knowledge and skills in its workforce. a region β s human capital contributes to its economic success and resiliency. the educational activities of a region β s colleges and universities help build the skills of the local workforce. in addition, the knowledge created by colleges and universities through research activities can play a key role in starting and supporting local businesses. businesses can use university expertise, infrastructure and research findings to help them develop cutting edge products and services. furthermore, universities often employ local businesses to develop and commercialize products that arise from their research activities. this dynamic can expand local economic activity and consequently create new jobs for high - skilled workers in a region. these dynamics are clearly visible in ithaca, where a large number of local companies β in industries ranging from information technology to medical equipment to agriculture β are closely tied to cornell. many of these companies were started by cornell β s faculty and students and have remained in the local economy to stay connected to the university. other companies have been attracted to the region because of the access afforded to specific knowledge or new products and processes invented at cornell. higher education institutions such as cornell play a vital role in upstate new york β s economy. the relative stability of the higher education industry has, not surprisingly, contributed to a strong economic performance in recent years. ithaca β s housing market is among the healthiest in the state, and it has experienced relatively strong employment growth during and since great recession. indeed, unlike most of its upstate peers, ithaca has gained population throughout the past decade. what is the fed doing now? since the beginning of the downturn, the fed has actively used monetary and regulatory policy to help support economic activity and improve economic outcomes β here in ithaca and across the nation β relative to what would have happened in the absence of this support. with regard to monetary policy, the fed has in place a highly accommodative stance. the fomc has said that it will keep short term interest rates at exceptionally low levels for an extended period of time. the fed also retains large amounts of mortgage - backed bonds acquired in order to support the housing market and help bring
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imperceptible and the demand for prudential regulations declines during prolonged good times, thereby increasing the ultimate cost of eventual crises. micro and macro prudential supervision the framework for regulating the financial sector has traditionally been built on a microprudential foundation, where the primary objective is to limit the risk of financial distress of individual financial institutions. this approach is consistent with the objective of protecting depositor β s interest and the integrity of the payments system. in contrast, the objective of macroprudential oversight is to limit systemic risk. it is not only important to consider the risk of distress of an individual bank but the aggregate risks of all interconnected entities entities in the system. hence, there is a need to evolve an appropriate mix of the micro - prudential regulations within an overarching macro - prudential framework. one of the lessons of the current crisis is that regulators need to understand the signals and identify appropriate tools to mitigate the build - up of systemic financial vulnerabilities more effectively. while financial stability reports did make such analysis particularly relating to the excess leverage and the under pricing of risk, such analysis was not translated into action in view of the seemingly benign environment and confidence in risk management system, market discipline and self regulation. a challenge for policymakers is to achieve the appropriate balance between the microprudential and macroprudential approaches to financial sector oversight. the micro prudential approach is bottom up while the macro approach is top down. in the case of the banking sector the macro prudential analysis is based on both back ward looking indicators such as balance sheet profitability asset quality and capital adequacy as well as forward looking indicators which identify major risk facing the banking sector. several mpis are constructed to summarise the available quantitative information covering competitive conditions in the banking sector, credit growth, asset market developments and the concentration of risks in the household and corporate sector. unregulated nodes in the financial architecture the global financial system over the years has evolved into a huge behemoth with strikingly monolithic characteristics and close inter - linkages. the innovations in financial products and technology have also enabled the market players to acquire a variety of risk exposures, transcending their customary role definitions. furthermore, the regulation of investment banks did not cover prudential oversight and they were allowed to build up excessive leverage. there was clear dichotomy here between the homogeneous financial profiles of various entities and the regulatory prescription
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we should also continue with further reforms in labour and product markets to encourage competition and dynamism and to benefit from pandemic induced opportunities. the production linked incentive ( pli ) scheme announced by the government for certain sectors is an important initiative to boost the manufacturing sector. it is necessary that the sectors and companies which benefit from this scheme utilise this opportunity to further improve their efficiency and competitiveness. in other words, the gains from the scheme should be durable and not one off. 22. again, for growth to be sustainable, a transition towards greener future will remain critical. the need for clean and efficient energy systems, disaster resilient infrastructure, and environmental sustainability cannot be overemphasised. due consideration should be given to individual country roadmaps keeping in mind country - specific features and their stage of development while adopting policies towards climate resilience. conclusion 23. on the whole, while the pandemic has created enormous challenges, it can also act as an inflection point to alter the course of development. enhanced adoption of technology will give impetus to productivity, growth and income. leveraging technology in implementing government 4 / 5 bis central bankers'speeches schemes, training and skill development programme for the unemployed, promoting women friendly work atmosphere and supporting education of the poor and marginalized sections would be areas of focus as we embark on our journey beyond covid - 19. income and job creation with digitalisation and innovation can bring about a new age of prosperity for a large number of people. 24. many of us have grown up reading mahatma gandhi β s talisman5 in text books β β i will give you a talisman. whenever you are in doubt β¦ recall the face of the poorest and the weakest man whom you may have seen and ask yourself if the step you contemplate is going to be of any use to him. will he gain anything by it? will it restore him to a control over his own life and destiny? β as we strive to build a stronger and resilient india, this pearl of wisdom that we learnt long ago remains as relevant even today. thank you. stay safe. namaskar! 1 pib press release β key declaration on climate change to be signed at the india ceo forum on climate change β dated 4th november 2020. 2 roadmap for ethanol blending in india 2020 - 25, government of india, june 2021. 3 pib press release β eepc celebrates 50th year of engineering
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some of these bottlenecks in the financial sector. innovations in technology that enable ict - empowered financial services platform coupled with conducive regulations have led to a large proportion of the previously unbanked population to be mainstreamed in the formal banking system. central banks in the region are committed to improving access to financial services and products to a much larger number of individuals and small businesses because it is good for management of both monetary policy and the stability of the financial system. bis central bankers β speeches your excellency, ladies and gentlemen ; the overall objective of this conference is to promote the development of smallholder and agri - business inclusive finance. to this effect, the conference brings together : 1. financial institutions to learn about innovative financial tools and products ; 2. farmers organisations that will help solve their members β financial challenges ; 3. central banks, ministries of finance, agriculture and other government agencies seeking to discover how to develop and strengthen an enabling environment, that will enhance financial access and unlock agricultural growth in their respective countries ; 4. ict developers willing to showcase their agri - finance innovations and build a strategic network ; 5. development practitioners and the academia who will share their experiences, get acquainted with new developments and challenges, and strike new partnerships. your excellency, ladies and gentlemen : banks all over the world are concerned with risk mitigation and appropriately pricing these risks. this is more pervasive in the agricultural sector. this forum seeks to address these issues by sharing experiences of innovations that are aiding banks, insurance companies and other financial institutions to safely reach out to such sectors and sub - sectors in sustainable ways. this is the model we would like to learn and enact in our economies. with these remarks, ladies and gentlemen, it is my honour and duty to once again welcome you all to the kenya school of monetary studies, and to our international guests, we feel very honoured to host you. i now wish to invite the chairman of afraca to give his remarks. thank you. bis central bankers β speeches
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njuguna ndung β u : revolutionising finance for agricultural value chains remarks by prof njuguna ndung β u, governor of the central bank of kenya, at the opening ceremony of the international conference on β revolutionising finance for agricultural value chains β, kenya school of monetary studies, nairobi, 15 july 2014. * * * his excellency, hon. william ruto, deputy president of the republic of kenya ; her excellency, tumusiime rhoda peace, commissioner for rural economy and agriculture, african union commission ; hon. akinwumi ayodeji adesina, minister for agriculture and rural development, nigeria ; mr. henry rotich, cabinet secretary for the national treasury ; mr. felix koskei, cabinet secretary for agriculture, livestock and fisheries ; honourable ministers ; ambassadors ; development partners ; fellow governors and deputy governors of central banks ; distinguished ladies and gentlemen : it gives me great pleasure, on behalf of the central bank of kenya, the kenya school of monetary studies and on my own behalf, to welcome you to nairobi and to this conference on β revolutionising finance for agricultural value chains β. i would, like, first of all, to recognize the role of the technical centre for agricultural and rural cooperation for african caribbean and pacific countries ( cta ) in bringing together the stakeholders in agricultural and development finance to discuss this highly important development agenda. the conference seeks to share experiences on innovative models of financing agricultural value chains and to further explore opportunities and challenges in expanding financial inclusion to rural households. the objective of this conference is very much in line with the development goal of promoting inclusive growth and the facilitative role of the financial sector in achieving this goal. the presence of his excellency, the deputy president of the republic of kenya in this opening ceremony, goes to show the commitment of the kenyan government to the inclusive finance and growth objective. your excellency, ladies and gentlemen ; evidence shows that much of the gains in growth experienced in africa in recent decades have largely been driven by efficiency gains and not due to new investments in the productive sectors. achieving the growth targets envisioned in our national development objectives such as vision 2030, would therefore require unlocking the bottlenecks to growth. these include among others, increasing savings and investment ; improving the business environment ; closing the infrastructure gaps ; reducing telecommunications costs ; and formalizing the informal sector. in the last few years, kenya has made great strides in unlocking
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the strongest tools for boosting investment activity and achieving sustainable growth, but also for supporting fiscal adjustment, insofar as they serve to reduce public debt. 3rd. tackling the high stock of non - performing loans, which is the greatest challenge facing the banking system. addressing this problem will not only alleviate the burden on cooperating borrowers, but will also enable banks to free up funds for channelling into more dynamic and extrovert businesses. this would contribute to a comprehensive restructuring of the economy in favour of tradable goods and services, leading to a rise in productivity and potential output, even in the short run. the actions described above, together with an exit from recession and a gradual recovery of the economy, will bring about stabilisation and, subsequently, a decline in the npl ratio, with beneficial effects on the economy as a whole. 4th. gradual lifting of the capital controls. the relaxation of the capital controls described earlier, along with improvements in confidence and liquidity, are expected to contribute to the normalisation of economic conditions by facilitating both enterprises and individuals in their transactions. 5th. reforms to support extroversion. the implementation of reforms in the markets for products and services and in the functioning of the public sector will lead to an increase in investment and employment, while it is also expected to encourage innovation and the introduction of new technologies by increasing competition. in turn, these developments will improve the quality of greek exports and expand the export base and overall competitiveness of the greek economy. this will ensure that the decrease in the current account deficit is sustainable, while also increasing potential output in the medium - to - long term. these actions will attract foreign direct investment and set in motion a virtuous circle signalling the definitive exit from the crisis and a sustainable increase in total productivity of the greek economy over the medium - to - long term. 6. conclusions the completion of the first review creates positive prospects for the recovery of the greek economy in the second half of 2016. at the same time, the commitment of our european partners to take action in order to ensure the sustainability of public debt in the short and medium - to - long term is a positive step forward. bis central bankers β speeches the bank of greece is of the view that the envisaged public debt management measures need to be specified, quantified and frontloaded. this would enhance the credibility and acceptance of the policies pursued, thereby helping to further consolidate the climate of confidence and strengthen economic recovery. moreover
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home / news and media / newsroom / news list / news speeches remarks by governor of the bank of greece yannis stournaras at the 22nd rencontres economiques, d β aix - en - provence 10 / 07 / 2022 - speeches β beyond risk reduction and risk sharing : remarks on the transformation of economic governance in europe β the russian invasion of ukraine on 24 february 2022 has brought the european union ( eu ) and the western developed world as a whole in front of the greatest challenge since the end of the cold war. the military conflict has unpredictable consequences not only for the global and the european economies, but also for international geopolitical stability, security, peace and cooperation. it triggers tectonic shifts in world politics and urgently calls for an update of the eu β s security architecture, as well as for action to defend european values and institutions. shoring up the european economy against the effects of this new shock and preventing an interruption of the ongoing recovery are key priorities for the current economic policy at the european level. the magnitude and duration of these effects will depend on how the war unfolds, on the impact of the current sanctions and possible further measures and on the response of fiscal and monetary policies. the rupture in eu - russia relations will inevitably have lasting and far - reaching impacts on the european economy, particularly in terms of energy, defence and security, while the largest refugee crisis since 2015 is unfolding, this time with flows coming from within the european continent. russia β s war against ukraine is heightening the geopolitical tensions between the us and the eu, on the one hand, and russia, on the other. it is a new, major exogenous supply - side shock to the economies of the eu member states that also affects, through various channels, aggregate active demand. it occurred at a very critical time, when economies were rebounding globally from the two - year health crisis and the ensuing severe recession. apart from the incalculable human cost, the conflict has significant adverse effects not only on the economy in the wider region, but also on the global economy. it exacerbates the already strong inflationary pressures through further rises in energy prices and a new wave of medium - term price increases in metal commodities and basic consumer goods, notably in the food supply chain ; it erodes investor and consumer confidence and disrupts global trade and the international financial system. globalisation is in fact reversing.
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, are critically dependent on the willingness of dealers to warehouse risk in return for the informational advantage that seeing the flow provides. such frictions have started to take new forms in fast markets. in particular at the same time as highfrequency trading activity has increased, a number of banks have stepped back from acting as market makers and have assumed a more infrastructural role. but new market participants still rely on banks to provide market access and extend them credit when engaging in algorithmic trading, through banks β prime brokerage and clearing businesses. providing a competitive service to such technologically advanced clients β particularly those trading at very high frequency β requires substantial investment in technology and infrastructure, including that to facilitate the real - time monitoring of exposures and risk management. the costs associated with this are high, and serve as an effective barrier to entry. as few banks provide these services, this leads to a concentration of nodes of market access for short - term liquidity providers. the changing role of banks / dealers in fast markets prompts the question whether the nature of potentially disruptive risks is also changing. one obvious concern would be if a prime broker or clearing bank was paralysed, including for reasons unconnected to its activity in fast markets β say because of a cyber attack. i think it is fair to say that our understanding of how market functioning would respond in such a scenario β i. e. one in which a number of, in particular high - frequency, liquidity providers were denied market access β remains relatively limited. if there is a common theme across all three of my examples, it is the limits of our understanding. none of the points i have raised with regard to market resilience are wholly new. we at the bank are following developments in the structure of these markets and their implications for financial stability closely, including through discussions within the bank β s financial policy committee ( fpc ). and as regulator both of many participants in electronic markets and some of those markets themselves, the financial conduct see, for example, shafik, m ( 2015 ), β dealing with change : liquidity in evolving market structures β and the analysis of the sterling flash crash in box 3 of the financial stability review, november 2016 ( pages 39 - 41 ). all speeches are available online at www. bankofengland. co. uk / speeches authority ( fca ) too has remained deeply engaged and responsive to those developments which fall under its purview. likewise
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##mptom of material changes in the structure of certain markets and the nature of their participants. although these changes are ongoing, we need to understand them and their drivers, if we are to succeed in correctly identifying any implications for financial stability. one should be wary of over - generalisation, particularly with an audience such as this, given the substantial diversity in markets across both product types and geography. i would nonetheless characterise the broad trends of the past few decades as follows : firstly, there has been an increase in electronic trading across most markets. this is particularly the case in markets for inherently liquid instruments β i. e. those which are simple and homogenous, such as equities ( chart 3 ). all speeches are available online at www. bankofengland. co. uk / speeches second, at least initially, the migration from voice to electronic trading has allowed for far greater transparency around the prices at which market participants are both willing, and able, to transact. this in turn has given rise to a plethora of new data, which combined with advances in technology, has led to the growth of algorithmic trading, including that at high frequency ( chart 4 ). and, for the purposes of this speech, by β fast markets β i mean those markets where these trends have gone furthest : most obviously major equity, foreign exchange ( fx ) and futures markets. in these markets, there is less need for intermediaries to warehouse risk, due to the inherent liquidity characteristics that attract a wide range of participants, making it easier to find a near - instant match between buyers and sellers. this has allowed the emergence of new technology - focused, smaller, non - bank, market participants that specialise in using algorithms to execute and route orders at high speed. chief amongst these are principal trading firms ( ptfs ), who trade on a proprietary basis, using sophisticated technology ( chart 5 ). importantly, some ptf firms have been able to make markets at lower marginal cost than other participants, including by closing positions or offsetting risk in correlated instruments in shorter time frames. these competitive pressures have been one factor prompting many banks to warehouse less risk in fast markets, changing their business model to act as agents who sit between end - users and ptfs and the remaining, typically large, bank market - makers. to differing degrees across markets, regulation has also played a role in encouraging such activity. in us equity markets, for example, regulation national markets system (
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francois villeroy de galhau : supervision of business practices opening speech by mr francois villeroy de galhau, governor of the bank of france and chairman of the autorite de controle prudentiel et de resolution ( acpr ), at the acpr conference β supervision of business practices β, paris, 20 november 2015. * * * ladies and gentlemen, i am delighted to welcome you today to this new conference organised by the autorite de controle prudentiel et de resolution and would like to thank you all for coming. this is an opportunity for me to tell you for the first time how important i find this type of event, where the authority that i chair explains its actions and the principles that guide it. it is also an opportunity for us all to listen to the parties concerned, on a topic that brings us together today β that of the supervision of business practices β on which i would like to put forward three ideas : ( i ) first, our supervision of business practices is important for the current mobilisation of the nation. ( ii ) second, our supervision of business practices is important for financial stability. ( iii ) lastly, our supervision of business practices must increasingly take account of developments in technology and changes in europe. our supervision of business practices is important for the current mobilisation of the nation. many lessons can be learned from the dramatic events of friday 13 november in paris and its suburbs, which requires of us a total mobilisation. faced with these barbaric acts, i wish to recall the determination of the banque de france β and of the financial sector β to participate in the fight against terrorism, by attacking its financing. many of you will attend this afternoon the presentations, introduced by mr delas, vicechairman of the acpr, on anti - money laundering and counter - terrorist financing in the insurance sector. as you know, the acpr college, together with tracfin, adopted just last week new guidelines in this area, applicable to both banks and insurance firms. i am in no doubt that the financial sector will be fully involved in their implementation ; we will ensure this together with the professionals. i would also like to recall today our determination to fully participate in the mobilisation of the nation, by contributing more broadly to economic and social cohesion, through greater banking and financial inclusion. the protection of consumers β and in particular the most vulnerable ones β is one of the components of this. financial education
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page 1 sur 8 asociacion de mercados financieros annual financial convention madrid, 21 november 2016 francois villeroy de galhau, governor of the banque de france europe facing a new political economy mr. president, ladies and gentlemen, thank you for your invitation. i am grateful for the opportunity to speak here in madrid today with my friend governor l. linde, in the midst of the spanish financial community, and in a country which has demonstrated its active commitment to the european project since it joined the european union thirty years ago. we have come a long way in europe and our common history and past success will help us look ahead in these challenging times. the brexit referendum in june and mr. trump β s victory two weeks ago have indeed come as shocks for europe : both have increased uncertainty and are raising questions about the european identity. how should we, as europeans, react? not by less europe : this would clearly be a mistake if we want to collectively master our own destiny in this new world. but by a better europe, a more focused and efficient one. in concrete terms, we need to adapt in two ways : first, by building actively on our economic and social assets β among them our single currency and monetary policy ; second, by coming together around a few new select priorities β including tackling the current β investment crunch β. * * page 2 sur 8 i. first, europe β s assets in the new β political economy β. let me start with a brief remark about terminology. for a long time, economic thinkers used the term β political economy β to refer to the discipline that we now call β economics β. adam smith, david ricardo or leon walras, to name but a few, were some of its exponents. despite its 400 year - old history, the term β political economy β had in the last decades gradually lost its importance as a comprehensive way of understanding economic issues. and yet it could now be returning to the forefront, given the strong interactions between politics and economics. at the international level, we cannot yet predict what mr. trump β s presidency will really be like, but we can expect a deep political shift, with consequences for american economic policies. besides, the electoral cycle will continue in europe, starting with the italian referendum in december. to state the obvious, the first certainty is that we are facing a lot of uncertainty. how will europe overcome this? i sincerely hope not by β waiting and
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