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##ps are designed to be shock absorbers at the centre of the financial system, damage to a ccp presents risks to the system as a whole. in order to ensure that what has been designed as a shock absorber does not under stress become a shock transmitter, ccps not only hold collateral from their members, they are required to hold additional default funds large enough to cover the default of their two largest members. this default fund includes the ccps own capital. and they are able to call for further resources from their members under their recovery plans if these funds are exhausted. notwithstanding the high level of resilience that has been achieved in this area, i think there are three important β prudential risk β challenges for ccps going forward. the first is to ensure that ccps are prudent and require enough collateral, or β margin β, from their counterparties in good times to ensure they are protected in times of stress against movement in financial asset prices and in counterparty credit worthiness. ccps use mathematical models to calculate, on the basis of past and potential market moves, the size of the risks they need to insure against. posting margin to a ccp is a cost for a ccp counterparty and its clients. ccps need strong internal systems and controls to ensure that over time, commercial pressures and competition from other ccps do not lead to inadequate margining. it is crucial to ensure that the models that drive ccps margin requirements are robust, conservative and do not act pro - cyclically. this is an area that, as a supervisor, we look at closely. the second is to develop further the arrangements for the recovery and, if necessary, resolution of ccps. i will cover this in the next section. emir rts article 45. 2 requires ccps to secure not less than 95 % of cash collateral with highly liquid financial instruments, thereby limiting the amount of cash ccps can hold unsecured. all speeches are available online at www. bankofengland. co. uk / speeches and the third, and perhaps most important, is to develop within ccps the culture of the β systemic risk manager β - responsible not just for managing the risks to the firm but also managing the risks to the system more broadly. ccp management, with encouragement from supervisors and regulators, have made significant progress in strengthening their governance and risk culture. but as the reforms are implemented, as greater use is made of ccps, as they become more
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a more stable world public policy must still determine the best use of tools β for instance, advocating ever tougher stress tests and larger liquidity buffers in an attempt to cover future black swans is not obviously preferable to having tools by which central banks can make temporary and targeted interventions, as we did last october. this underlines my earlier point that strong institutions of prudential policy ( macro and micro ) are important to enable these decisions to be made. let me end with the short version of the main points : 1 : i don't believe we face a systemic banking crisis ; 2 : we must ensure that financial stability continues to mean that monetary policy takes into account financial conditions but does not have to aim off for instability ; 3 : this requires robust structures for financial stability policymaking ; 5 / 6 bis - central bankers'speeches 4 : central bank balance sheets will remain larger than pre - crisis for financial stability reasons ; 5 : we don't know yet where central bank balance sheet reduction will need to stop in terms of the necessary level of reserves ; 6 : this will in part depend on the desired future size and make - up of banks'liquidity buffers ; 7 : stable coins will need to have the characteristics of, and be regulated as, inside money ; 8 : the key question on retail digital money is can we envisage a demand for it, but we should guard against failure of imagination ; and be able to accommodate it within the regulatory framework ; 9 : if retail digital money is part of the future, it would be better not to disturb the need to have both inside and outside money β so we cannot rule out a need for cbdc ; 10 : we will need to revisit the protection of inside money in the form of deposits, especially in smaller banks ; 11 : stress testing the financial system is crucial, but stress tests will not always deal with black swans β that's why resolution and other policy intervention tools must be in place ; 12 : non - bank financial intermediation is a very large and heterogeneous landscape β it presents surveillance challenges of both breadth and depth ; 13 : nbfi leverage and inter - connectivity can be hard to map ; 14 : nbfi issues are often inherently cross - border in nature. the role of the fsb is important ; 15 : macro and micro - prudential policies need also to support lending to and investment in the economy ; good luck with the roundtable today. thank you
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a theoretical curiosity rather than a practical problem likely to confront policymakers. but with short - term rates now at zero in japan and low inflation almost everywhere in the industrialized world, the problem is taken more seriously by central banks β to the point that it was one of the topics at jackson hole. keynes β views on the liquidity trap have, in my view, often been misunderstood. keynes understood that central banks could push rates on short - term government debt to zero. the liquidity trap, as keynes used the term, is better thought of as a term - structure trap or, more generally, a limit on how low long - term and private interest rates can go once the interest rate on short - term government debt is pushed to zero. when short - term government rates reached zero, keynes believed that there would still be positive interest rates on both longer - term government securities and private debt and that monetary policy then would be unable to push those rates any lower. the conventional view is that the level of long - term rates is determined by current and expected shortterm rates. given that market participants are unlikely to expect that zero short - term rates will be sustained for 20 or 30 years, the maturity of long - term bonds, rates on long - term securities will remain positive when short - term rates reach zero. stated somewhat differently, shocks that would otherwise lower short - term rates cannot do so at the zero bound, while shocks that would raise short - term rates still will do so. in addition, private rates differ from government rates by an amount that reflects the risk of default on private debt, assuming that government debt is viewed as being default free. even if the rate on government debt reaches zero, therefore, private debt will still carry positive rates. the liquidity trap is sometimes referred to as the problem of the zero bound on nominal interest rates. nominal interest rates cannot be negative, because, in this case, everyone would want to hold cash. consequently, an environment of very low inflation would constrain how low monetary policy could push real interest rates in response to a recession and, therefore, be associated with less - favorable cyclical performance of the economy. if inflation were 2 %, for example, monetary policy, by driving the nominal interest rate to zero, could push real interest rates to minus 2 %. if prices were stable, on the other hand, the limit on the real interest rate would be zero, and this limit might constrain the ability of monetary policy
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imparting pressures on prices in the united states. in the recent economic environment, however, the widening of the trade and current account deficits had some beneficial aspects. it provided a safety valve for strong u. s. domestic demand, thereby helping to restrain pressures on u. s. resources. it also cushioned, to some extent, economic weakness in our trading partners. moreover, decreasing import prices, which partly came from the appreciation of the dollar through mid - summer, contributed to low overall u. s. inflation, as did ample manufacturing capacity in the united states and lower prices for oil and other commodities stemming from the weak activity abroad. the marked drop in energy prices significantly contributed to the subdued, less than 1 percent, increase in the price index for total personal consumption expenditures during 1998. in addition, supported by rapid accumulation of more efficient capital, the growth of labor productivity picked up last year, allowing nominal labor compensation to post another sizable gain without putting added upward pressure on costs and prices. i shall return to an analysis of the extraordinary performance of inflation later in my remarks. the federal open market committee conducted monetary policy last year with the aim of sustaining the remarkable combination of economic expansion and low inflation. at its meetings from march to july, the inflation risks accompanying the continued strength of domestic demand and the tightening of labor markets necessitated that the fomc place itself on heightened inflation alert. although the fomc kept the nominal federal funds rate unchanged, it allowed the real funds rate to rise with continuing declines in inflation and, presumably, inflation expectations. in august, the fomc returned to an unbiased policy predilection in response to the adverse implications for the u. s. outlook of worsening conditions in foreign economies and in global financial markets, including our own. shortly thereafter, a further deterioration in financial market conditions began to pose a more serious threat to economic stability. in the wake of the russian crisis and subsequent difficulties in other emerging market economies, investors perceived that the uncertainties in financial markets had broadened appreciably and as a consequence they became decidedly more risk averse. safe - haven demands for u. s. treasury securities intensified at the expense of private debt securities. as a result, quality spreads escalated dramatically, especially for lower - rated issuers. many financial markets turned illiquid, with wider bid - asked spreads and heightened price volatility, and issuance was disrupted in some private securities markets. even the liquidity in
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svein gjedrem : inflation targeting in an oil economy address by mr svein gjedrem, governor of norges bank ( central bank of norway ), at sparebanken mΓΈre, alesund, 4 june 2002. please note that the text below may differ slightly from the actual presentation. * * * norway is unique in being both a fully developed economy and a major oil exporter. last year, norway was the world β s third largest exporter of oil. in the future, we will become an increasingly important exporter of natural gas. the present value of remaining petroleum reserves has been estimated at nok 2 200bn, or roughly 1Β½ times our current gdp. the bulk of norway β s petroleum wealth will be extracted over a period of 40 years, from 1990 to 2030. new technology has had a significant impact on our future production potential. in spite of rapid production growth, the estimated present value of our petroleum wealth has increased some 35 - 40 per cent over the last ten years, measured in real terms. as an example, the registered oil reserves in the ekofisk field are larger today than when the field started production 30 years ago. revenues from the petroleum sector have generated a fiscal surplus of some 10 - 15 per cent since 2000. a similar surplus is generated on the current account, reflecting capital outflows to the government petroleum fund. even in 1998, when the oil price fell to 10 usd / barrel, norway had a fiscal surplus of some 4 per cent of gdp. the existence of abundant natural resources can be a mixed blessing. experience elsewhere suggests that the sudden occurrence of major income flows tends to undermine future production potential. in the long term, it is difficult to ensure an efficient distribution of wealth between and within generations without triggering rent - seeking behaviour among households and firms. in the short term, the volatility in income flows and in terms of trade poses a challenge for monetary and fiscal policy. the mixed blessing of national wealth is not a new problem. vigilant observers were already aware of this in the 17th century. in modern economic language, the moroccan ambassador to spain pointed to the problem of deteriorating competitiveness 300 years ago ( see chart 2 ). the main long - term challenge to economic policy is how the returns on petroleum wealth can be phased into the economy without a deterioration of our future growth potential. even with our substantial petroleum reserves, human capital is by far our most important resource. it accounts for over
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per cent stronger than in 1990. over this longer period, other nordic currencies have shown larger fluctuations. over the last two years, the appreciation of the norwegian krone has been driven by the wide and increased interest rate differential between norway and other countries. the interest rate differential reflects high growth in wages and aggregate demand in norway. there is thus a clear link between cost pressures in the norwegian economy and the exchange rate. the link works through interest rate expectations driving the krone upwards. the appreciation of the krone has a dampening effect on inflation. at the same time, profitability in the internationally exposed sector is under pressure both due to higher wage costs and the appreciation of the krone. but the krone can move in both directions. it will not appreciate indefinitely. if the krone follows the path of the forward rate, it will depreciate in the years ahead. the forward effective krone exchange rate two years ahead is close to the average level of the effective exchange rate during the 1990s. nordic countries β institutional differences eu membership monetary policy regime sweden yes inflation target of 2 per cent ( + / - 1 percentage points ) denmark yes erm ii finland yes member of emu iceland norway no ( eea agreement ) no ( eea agreement ) inflation target of 2Β½ per cent inflation target of 2Β½ per cent sg 240802 sector composition of norex exchanges. june 2002 100 % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0 % stockholm industrials and materials financial services copenhagen it / telecom energy oslo consumer goods and services other sg 240802 government net cash flow from the petroleum sector and total capital in the government petroleum fund. per cent of gdp total capital ( end of year ) net cash flow 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 source : ministry of finance. rnb 02 sg 240802 gdp mainland - norway and employment. percentage change from previous year gdp mainland norway employment average 1990 - 2001 = 2. 8 % - 1 - 1 - 2 - 2 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 source : statistics norway sg 240802 correlation with world index. usd based price indexes 0, 8 dec 93 - 1997 0, 6 1998 - 2002 0, 4 0, 2 denmark finland norway sweden source : ecowin / financial times sg 240802 key interest rates in the nordic countries 12, 0 11, 0 10, 0 12
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temporary. i would like to conclude by coming back to newton's experiment, where he split white light into the colours of the spectrum using a prism, and then recombined them using a second prism. after breaking the challenges of financial stability down into a spectrum of five questions β which are not exhaustive β i would like now to recombine them into a single certainty : we, as supervisors and regulators, we the acpr, will do everything within our power to safeguard financial stability in the new macrofinancial landscape. i shall give the floor now to dominique laboureix : i would just like to congratulate him on his appointment as chair of the european single resolution board, and thank him warmly for his powerful work as secretary general of the acpr for the past three years. 1 those subject to solvency ii. 2 the ecb blog, bitcoin's last stand, 30 november 2022. 4 / 4 bis - central bankers'speeches
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denis beau : navigating the digital transition, maintaining a stable payment system opening address by mr denis beau, first deputy governor of the bank of france, at the france payments forum β les rencontres digitales conference 2021 β crypto - payments, 8 april 2021. * * * introduction the health crisis that we have all been living through for a year now has affected people β s day - today habits, changing not only how we consume but also how we like to pay. this has sped up the transition towards more digital approaches. this acceleration raises major challenges for europe β s payment ecosystem, but also for payment regulators and supervisors. thinking now specifically from the viewpoint of the latter, the central question to be addressed is as follows : how to facilitate and support the transition whilst at the same time maintaining the foundations that underpin a safe and efficient payment system. from a safety perspective, these foundations are built on an appropriate regulatory framework and on the availability under any circumstance of central bank money, which alone has legal tender status and which anchors the stability of the whole system ; efficiency, meanwhile, relies on having diverse and competing payment solutions and participants, to ensure inclusivity and competitiveness. i would like to share with you my perspective on the answers to this question. i will begin by highlighting the challenges raised by the accelerated digital transition of our payment system, seen from the perspective of an authority tasked with safeguarding monetary and financial stability ( 1 ), before going on to discuss how we at the banque de france are playing our part in tackling these challenges ( 2 ). i / challenges major innovation in the field of payments has clearly accompanied the increasing digitalisation of the ways in which we consume and behave, fuelling the emergence of a dynamic and enhanced new ecosystem. as i see it, this raises three types of challenges for the safety and efficiency of our payment system. a. ensure that the rise of β decentralised finance β contributes positively to the safety and efficiency of our payment system when i say decentralised finance, i am talking about the new trend towards the tokenisation of financial assets, such as the creation of new tradable assets associated with new rights, for instance utility tokens, and the development of crypto - assets. these offer opportunities to improve our payment systems and solutions, particularly for cross - border payments, but also for securities issuance and settlement systems. they could also help to expand the array of financing tools available to businesses. but they
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being asserted, documents signed by individuals who are not properly authorized to make such claims or assertions, notarized signatures on documents that were not executed in the presence of a notary or that have other violations of proper notary procedures, and documents that contain inaccurate amounts, dates, or other facts. lenders and servicers are responsible for ensuring that the person who signs a document is duly authorized and has appropriate knowledge obtained from a review of the case. in addition, servicers and lenders are responsible for ensuring the accuracy of records and the facts recited in the documents. state law and local real estate recording requirements govern recordation of real estate and mortgage title transfers. given the multiple transfers of mortgage loans over time, concerns have been raised about investors β or servicers β right to foreclose. although state - by - state practices vary considerably, generally the note holder has the right to initiate foreclosure if an original note can be produced and the current holder β s ownership is able to be verified in some fashion. if there is no controversy concerning ownership of the note, but rather an inability to locate original documents, processes usually exist that allow for a foreclosure to proceed, albeit at some cost and delay. if there is some question of ownership, the investor or servicer may be required to produce evidence of ownership before a foreclosure can proceed. matters regarding real estate titles and foreclosures are generally governed by state law, and the 50 state attorneys general have undertaken a joint review of lenders and servicers and the reported problems in foreclosures. in addition, numerous federal agencies have launched investigations, including examinations in process by the federal financial regulators. interagency examinations the federal reserve has supervisory and regulatory authority for bank holding companies, approximately 800 state - chartered banks that are members of the federal reserve system ( state member banks ), and certain other financial institutions and activities. we work with other federal and state supervisory authorities to ensure the safety and soundness of the banking industry, foster the stability of the financial system, and provide for fair and equitable treatment of consumers in their financial transactions. as the consolidated supervisor of bank holding companies, including financial holding companies, the federal reserve conducts inspections of those institutions. the federal reserve is involved in both regulation, which involves establishing the rules within which banking organizations must operate, and supervision, which entails ensuring that banking organizations abide by those rules and remain, overall, in safe and sound
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alan greenspan : jackson hole conference - closing remarks closing remarks by mr alan greenspan, chairman of the federal reserve board of governors, at a symposium sponsored by the federal reserve bank of kansas city, jackson hole, wyoming, 27 august 2005. * * * the federal reserve will almost surely face as many uncertainties over the next eighteen years as it has over the past eighteen. technology continues to bring rapid change and, hence, considerable uncertainty, to the global marketplace. monetary policy, supervision and regulation activities, and payments system operation will need to be calibrated to respond to the influences of that technological change. other forces will be at work on the economic environment as well. the inexorable aging of our population will markedly influence the policy milieu in the years ahead. monetary policy, for example, cannot ignore the potential inflationary pressures inherent in our current fiscal outlook, especially those that could arise in meeting commitments to future retirees. however, i assume that these imbalances will be resolved before stark choices again confront us and that, if they are not, the fed would resist any temptation to monetize future fiscal deficits. we had too much experience with the dangers of inflation in the 1970s to tolerate going through another bout of dispiriting stagflation. the consequences for both future workers and retirees could be daunting. nearer term, the housing boom will inevitably simmer down. as part of that process, house turnover will decline from currently historic levels, while home price increases will slow and prices could even decrease. as a consequence, home equity extraction will ease and with it some of the strength in personal consumption expenditures. the estimates of how much differ widely. the surprisingly high correlation between increases in home equity extraction and the current account deficit suggests that an end to the housing boom could induce a significant rise in the personal saving rate, a decline in imports, and a corresponding improvement in the current account deficit. whether those adjustments are wrenching will depend, as i suggested yesterday, on the degree of economic flexibility that we and our trading partners maintain, and i hope enhance, in the years ahead. on monetary policy, i envision a continuous refinement of our risk - management paradigm. i presume maximum sustainable economic growth will continue to be our goal, with price stability pursued as a necessary condition to promote that goal. to date, we have chosen not to formulate explicit inflation targets, in part, out of concern that they could inhibit
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statement by kuroda haruhiko, governor of the bank of japan, concerning the bank's semiannual report on currency and monetary control before the committee on financial affairs, house of councillors, on june 7, 2022 introduction the bank of japan submits to the diet its semiannual report on currency and monetary control every june and december. i am pleased to have this opportunity today to talk about recent economic and financial developments and about the bank's conduct of monetary policy. i. economic and financial developments i will first explain recent economic and financial developments. japan's economy has picked up as a trend, although some weakness has been seen in part, mainly due to the impact of the novel coronavirus ( covid - 19 ) and a rise in commodity prices. overseas economies have recovered on the whole, albeit with variation across countries and regions. in this situation, exports and industrial production have continued to increase as a trend, despite the remaining effects of supply - side constraints. corporate profits have improved on the whole, but business sentiment has seen a pause in its improvement recently, mainly due to the impact of covid - 19 and the rise in commodity prices. business fixed investment has picked up, although weakness has been seen in some industries. the employment and income situation has remained relatively weak on the whole, although improvement has been seen in some parts. private consumption has started picking up again, with downward pressure stemming from covid - 19, particularly on services consumption, waning. with regard to the outlook, although japan's economy is expected to be under downward pressure stemming from the rise in commodity prices due to factors such as the situation surrounding ukraine for the time being, it is likely to recover, with the impact of covid - 19 and supply - side constraints waning and with support from an increase in external demand, accommodative financial conditions, and the government's economic measures. the year - on - year rate of increase in the consumer price index ( cpi ) for all items excluding fresh food has accelerated to around 2 percent due to a significant rise in energy prices, with much of the impact of last year's reduction in mobile phone charges dissipating. the rate of increase is expected to stay at around 2 percent for the time being, mainly due to the positive contribution of the rise in energy prices to the cpi, but is projected to decelerate thereafter because the contribution is likely to wane. meanwhile, the year -
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end of this october, the bank reduced the target to 0. 3 percent, and it was further reduced to 0. 1 percent last week. the federal reserve, last week, also reduced its target for the federal funds rate, and set the interest rates on required and excess reserve balances at 0. 25 percent. at the same time, the federal reserve announced that the exceptionally low level of the federal funds rate will continue for some time. when interbank overnight interest rates are lowered this far, meaningful policy in terms of stimulating demand through interest rates shifts toward easing firms'accessibility of funds. this holds true in both japan and the united states. in this sense, measures that will ensure stability in financial markets and maintain an environment to extract maximal monetary easing effects are extremely important. in this area, the bank implemented u. s. dollar funds - supplying operations soon after the bankruptcy filing of lehman brothers as a coordinated measure among the central banks in major economies, and has been supplying sufficient dollar funds ever since. these operations are currently being conducted without limitation on the amount, as long as it is within the value of collateral. as a result, dollar funding rates have declined, mainly for shorter terms, and these operations are supporting economic activity by relieving the funding concerns of japanese firms through reducing the dollar funding pressures among financial institutions. with regard to yen funds, the complementary deposit facility has been introduced to enable smooth and sufficient provision of funds, and funds for over the year - end have been provided in larger amounts than a year before. although the influence of intensified tensions in the global financial markets is being felt in japanese markets in the form of large fluctuations in stock prices and a widening of credit spreads in the corporate bond market, japanese financial markets have still been relatively stable compared to u. s. and european markets, in part because of the swift money market actions taken by the bank. in addition, at the monetary policy meeting held last week, the amount of outright purchases of jgbs was increased from 14. 4 trillion yen per year to 16. 8 trillion yen per year. this is to supply longerterm funds and resolve the problem of having to conduct frequent short - term funds supplying operations, thereby facilitating smooth money market operations. along with money market stabilizing measures, the bank has introduced various measures to support corporate financing with a view to extracting maximal monetary easing effects. in advanced economies, the parties that extend credit directly to firms are private financial institutions and investors, and the
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financial services sector that takes into account a national risk appetite. one must take stock of the risk / benefit quotient of each subsector, and the lessons learnt thus far, and put it in a long - term context on where to focus going forward. during the year, at the request of the maltese government, malta underwent an imf financial sector assessment programme, which is an in - depth assessment of the financial sector. furthermore, a comprehensive update of the 2015 national risk assessment ( nra ) was carried out in 2017 and published earlier this year. it identified potential money laundering and terrorism financing threats and vulnerabilities that present risks to malta's economic and societal stability. the nra forms the basis of malta β s national aml / cft strategy. in fact, some of the initiatives identified in the nra are already being implemented. in addition, a committee of experts on the evaluation of anti - money laundering measures and the financing of terrorism ( monevyal ) has just ended a rigorous on - site mission to assess malta β s standing with international aml / cft standards. the local authorities are eagerly expecting the final results of these evaluations as they represent a standardised global yardstick against which to benchmark our state of play. this will leave a wealth of information for authorities to exploit as they direct efforts into strengthening further the current institutional framework and operations. all stakeholders are encouraged to seize the opportunity to improve the reputation, soundness and resilience of our financial services sector. malta is also actively working to embrace blockchain technologies, including virtual assets. 2018 will also be remembered as the year when malta was propelled to the fore with the introduction of a holistic legislative and regulatory framework for fintech and virtual assets, asserting itself as a digital hub. such technologies provide the benefits of reducing transaction costs which can be passed on to consumers ; greater efficiency, transparency, advancement in kyc capabilities and competition. while these benefits are acknowledged and duly welcomed, one must also be sensitive to the underlying potential risks they might pose as they become more main - stream. the effective implementation of the new legislation and regulation requires expertise not only in the underlying technology, but also in its legal aspects and all the risks involved, such as cyber risks. the fast technological advancements are also a challenge and staying ahead of the game from a page | 9 regulatory perspective should be given high importance for the successful development in this new field. thus, while all the legislative initiatives
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, at 87 % of gdp in 2006, and of gross fixed capital formation, which was barely 20 % of gdp last year, are appropriate. this imbalance is reflected in the persistent, if reduced, current account deficit, which suggests that consumption levels are indeed too high. mr. president, the members of the financial community, and the credit institutions in particular through their lending policies, can play a useful role in seeking to correct this bias towards consumption, which occurs at the expense of improving the economy β s long - term growth potential and, therefore, weakens its ability to narrow the income gap with the more advanced members of the euro area. in this regard, we should be aware that despite the recent economic recovery, malta β s per capita gdp measured in purchasing power standards is still just below 70 % of the euro area average. lessons from euro area country experiences policy prescriptions for bridging the remaining income gap are readily available. in this regard, the recent, widely different experiences of ireland and portugal are highly instructive. 1 thus, whereas real per capita income in these two countries was not very different in the early 1990s, it had roughly doubled in ireland by 2006 to 131 % of the euro area average, but had only improved slightly in portugal to 68 %. how can such divergent performances be explained? before joining the euro area portugal pursued a pro - cyclical fiscal policy, which reinforced domestic demand, while in ireland the fiscal stance was more disciplined. whereas unit labour costs and inflation rose fast in portugal, cost and price pressures were more contained in ireland. as a result, competitiveness declined in portugal, reflected in a growing current account deficit, whereas ireland remained competitive and enjoyed a roughly balanced current account. these different policy approaches left their mark in the post - euro period. in ireland, real output growth in the years 1999 - 2006 continued at a strong pace, 6. 5 % per year on average, and the fiscal balance was in slight surplus. in contrast, portugal experienced an average growth rate of 1. 7 %, continued weak competitiveness and a substantial current account deficit. a major factor behind ireland β s success was a 3 % average annual increase in labour productivity growth, compared to less than 1 % in portugal. another lesson that has emerged from the experience of these two countries, and is also widely documented in the literature, is that cost levels are not the only determinant of competitiveness. constantly upgrading human and physical capital and freeing markets are
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assets the bank holds are adequate to secure the banknotes issued. this adequacy, i believe, involves two specific points. first, the bank β s assets must be sound and its financial base must be solid β β the latter means that the bank must have a sufficient capital base β β in order for the bank to continue to act decisively as a central bank in total independence of intervention by a third party. second, the bank must have a sufficiently liquid asset portfolio to flexibly inject or withdraw funds as necessary. i believe that the bank β s balance sheet has also attracted growing attention in other countries. some observers have expressed concern over the expansion of the bank β s balance sheet as a sign of deterioration in its assets. this may be because a rapid growth of the balance sheet is associated in people β s minds with an increase in nonperforming assets that need to be disposed of at a substantial loss. but as i stated at the beginning of my speech, setting aside technical factors, the recent expansion of the bank β s balance sheet is primarily the result of active provision of liquidity under the easing policy. nevertheless, mere suspicion about an erosion of asset quality can be a serious problem if it undermines people β s confidence in the central bank and, in turn, in the national economy. such loss of confidence could, for example, result in japan β s commercial banks and firms paying an unnecessary premium when raising funds in other countries. that is why the bank recognizes the need to be vigilant against deterioration in its assets. the policy board, the bank β s decision - making body, constantly deliberates whether the various measures implemented to fulfil the bank β s mission could jeopardize the bank β s credibility because of the resulting changes in its balance sheet. b. three key principles of the bank of japan β s portfolio selection i will next talk about the philosophy that guides the bank in portfolio selection β β in other words, the key principles in selecting a central bank β s portfolio. there are three. the first principle is to maintain the soundness of the bank β s assets. in other words, assets and collateral held by the bank must be of high quality. the bank has devised a number of methods to achieve this. when supplying funds to financial institutions through loans, the bank acquires financial assets that are trustworthy as collateral. when providing funds through market operations, it purchases financial assets from financial institutions or other sellers based on rep
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of the japanese economy. perhaps β ensuring the functions of the currency β sounds a little too abstract. specifically, the bank must first ensure the stability of the currency β s value, and second maintain an appropriate framework for its circulation. referring to these two requirements, the role of a central bank is often defined as maintenance of price stability and financial system stability. on a day - to - day level, the bank seeks to fulfil its mission by engaging in banking activities that are similar to those of commercial banks. when the economy is experiencing inflation or deflation, the bank tries to restore and maintain a non - inflationary and nondeflationary situation β β that is, a situation of price stability β β by influencing the quantity of money in circulation and the levels of various interest rates. the bank achieves this objective by influencing interest rates in the financial markets. and this is done basically by supplying or absorbing the appropriate amount of funds through the purchase or sale of financial assets. such activity by the central bank is called β market operations. β the same is true of the bank β s activities to maintain an orderly financial system. when the stability of the financial system is at risk due, say, to failure of a commercial bank, the bank of japan acts decisively to minimize the ensuing disturbance by injecting funds into the system. the principal tool the bank employs in such cases is lending. as with commercial banks, the activities of the bank are clearly reflected in its assets and liabilities shown on its balance sheet. for instance, when the bank drastically eases money in order to avert deflation, as is the case at present, the bank increases provision of funds in the β 3 β markets by increasing its purchase of financial assets. this naturally causes the bank β s balance sheet to expand. the key question is whether or not people will trust their central bank and be willing to hold the country β s currency ( including banknotes, which bear no interest ). this depends on whether or not the central bank β s behavior has measured up to the expectations of the people, and whether or not it continues to do so. one source of clues for making such a judgment is the balance sheet, and it is therefore natural that people in japan and abroad take a keen interest in the bank β s balance sheet. the bank β s balance sheet can be discussed from various perspectives. from the viewpoint of people β s confidence in a central bank, it is most important that the financial
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reise was an essential bridge between the culture of germany and that of the land wo die zitronen bluhen. the programme for these days revisits our cultural heritage, our artistic and historical legacy, but it also reflects the culture and cultural activities of present - day italy. classical music is the centrepiece of the opening and closing concerts as well as the charity event, but there will also be presentations of contemporary italian music. the italian film days are entirely given over to contemporary directors and will offer the opportunity to reflect on the ways in which the traditional italian family model has changed. in literature, the themes range from the deeper meaning of cultural identity to the role of women in the risorgimento. this evening the orchestra mozart will perform the opening concert under the baton of claudio abbado. the maestro β s career, his essential embodiment of the universal language of music, certainly needs no presentation. i cannot even begin to sum up the course of his art. let me merely recall that he has conducted some of the world β s greatest orchestras : the berliner philarmoniker, the wiener philarmoniker, la scala. constantly engaged with social problems and active in promoting the artistic growth and careers of young musicians, claudio abbado has founded a series of orchestras for young instrumentalists of artistic excellence, including notably the chamber orchestra of europe and the orchestra mozart, which came bis central bankers β speeches into being in bologna. both draw their players from a vast range of different countries, talented young musicians playing alongside established soloists. the orchestra mozart owes its name to the role that the city of bologna played in mozart β s development. it was with the philharmonic academy of bologna β one of the centres of european cultural life β that mozart, at the age of fourteen, took his diploma as β maestro compositore β on the 9th of october 1770. music as solidarity, music as social life, music as at once expression of and factor in personal and cultural growth. these are the values that claudio abbado and all these young musicians have brought with them to the orchestra mozart, from the very start. now, it is my pleasure to leave you to the sublime art of gioacchino rossini. claudio abbado conducts the orchestra mozart in the overture to the barber of seville. bis central bankers β speeches
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labour force participation. incentives to stop working early, such as the option to retire on a full pension at 63, are no longer in keeping with the times and should be phased out. at the same time, employers have to create suitable conditions and lay the right groundwork to enable people to actually work for longer. this includes measures for promoting health management or providing an appropriate workplace, for instance. we also have to commit to a culture of lifelong learning so that people can adapt more quickly and more successfully to an ever changing environment. this would make it easier for employees who lose their job at 50 plus to find new employment. in times where specialised labour is in short supply, older employees should be held in higher esteem anyway β and i β m not just saying that because i am one of them. the participation of women in the labour force can be increased by further improving conditions for balancing work and family commitments. expanding the provision of all - day schools across the country would enable more women to work full time. but that β s not the only reason why investment in education is essential. when, in future, fewer young people join the workforce, it will be all the more important for them to be trained as well as possible. for this, we need an education system that meets high standards and gives young people the opportunity to realise their full potential. by choosing to attend an internationally renowned business school, you, of course, have already heeded benjamin franklin β s advice : " an investment in knowledge always pays the best interest. " but this does not just apply to investment in academic training. studies have shown that educational achievement in germany is still closely correlated with social background, and this also has a negative impact on subsequent employment prospects. because educational achievement in later life is often decided to a significant degree at the pre - school stage, society as a whole would reap the benefits of investing in education for infants and pre - school students. education also plays a key role in the integration of immigrants. but immigration is certainly not the answer to our demographic problems. yet, it helps to curb the decline in the potential labour force. that is why a systematic approach to attract labour from abroad with the qualifications that are needed here would go a long way towards cushioning the impact of an ageing society on the labour market. to sum up, it is essential that the german economy β s current excellent condition does not blind us to the major challenges that lie ahead. the demographic factor will increasingly take a toll
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. 1 pp and remains in the expansionary zone at 57. 9. under this baseline scenario, euro area gdp was projected to shrink by 7. 3 % in 2020 then grow by 3. 9 % in 2021, one point less than projected in september. drawing on the preliminary estimate of the euro area national accounts, gdp ultimately appears to have decreased by 6. 8 % year - on - year in 2020, somewhat less than expected. as regards the euro area β s inflation outlook, the ecb projected a slight recovery for 2021, increasing from 0. 2 % in 2020 β it ultimately rose by 0. 3 % β to 1 %. this recovery would continue in 2022 and 2023 ( to 1. 1 % and 1. 4 %, respectively ). however, these values are far below the objective of price stability, which is defined as inflation of below, but close to, 2 % in the medium term. the latest data, referring to the february estimate, for the euro area β s harmonised index of consumer prices show a year - on - year increase of 0. 9 %, the same figure as in january. the smaller drop in energy prices appears to have been offset, in the context of rising oil prices, by moderation in the core component ( which excludes energy and food ). the latter fell by 0. 3 pp with respect to january to 1. 1 %. this outcome was determined in particular by temporary factors, such as the updated hicp weights, which since january are based on 2020 consumption patterns and which, although they will have a very marginal downward moderating effect on the year as a whole, will have a considerable impact on short - term inflation dynamics, making them difficult to interpret. also, the pandemic containment measures appear to be changing the seasonal sales calendar in various countries. the situation i have just described is, therefore, one of a fragile, uneven and uncertain recovery in the euro area, where some of the downside risks for our short - term baseline scenario, which were identified just a few months ago, appear to be materialising. against the current backdrop of uncertainty surrounding both the course of the pandemic and the speed of the vaccination campaigns, the best contribution that economic policy can make is to instil confidence and certainty. with regard to monetary policy, this is precisely one of the key rationales behind the ecb governing council β s decisions and recent statement. specifically, last december we extended
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potential conflict between real and nominal convergence has often been exaggerated. the two processes have different time horizons, nominal convergence being achievable in the medium - run, whilst real convergence remains a long - run matter. there is, however, one particular link between the two processes that needs to be taken into account when we design our policies towards emu accession. faster gdp growth is likely to lead to a real exchange rate appreciation, making it impossible to have both very low inflation and a completely stable nominal exchange rate. this issue is well known and has received much attention. at the current stage of development, however, we need to shift from purely qualitative judgements to quantitative analyses of what has caused the real exchange rate appreciation trends in many accession countries. for example, the majority of empirical studies of the well - known balassa - samuelson effect have concluded that this hypotheses explains only 1 - 2 percentage points ( or even less ) a year of the observed real appreciation in central european countries. this necessitates searching for other influential factors and forecasting their development for the future. the implications of the real appreciation process are probably different for those countries with hard pegs against the euro compared with countries that have floating exchange rates. in the case of currency boards, the only channel of real appreciation is an inflation differential. as the maastricht inflation criterion is relatively strict, even a relatively modest pace of real appreciation might lead to complications. it will be certainly interesting to hear today if these countries really perceive this challenge as serious and what alternative policies - such as fiscal policies and / or income policies they can use to overcome the problem successfully. for countries with more flexible exchange rates, the maastricht exchange rate criterion is less binding, and a modest nominal appreciation trend can be accommodated within its fluctuation bands. it will be interesting to hear whether we all share this view. another question is whether we see any implications of the real appreciation process for designing the details of our erm2 membership, such as its duration or the chosen central parity. this brings me to the issue of erm2 membership and its consistency with our current monetary policy regimes. the proponents of the erm2 regime argue that it is a useful monetary policy framework which can have a disciplining impact on domestic policies, limit exchange rate volatility, and help determine the conversion rate for emu entry, but at the same time provides enough flexibility. even though there is no
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jackie robinson was lucky, because he was rewarded for his skills and courage. he was named rookie of the year, played on six world series teams, and was once named the national league's most valuable player. someone less fortunate in this respect was josh gibson, considered the greatest power hitter of the negro leagues. he played right here in washington for the homestead grays in the 1930s and 1940s. some people say he was the equal of babe ruth as a hitter. but he never got the chance to play in the major leagues. he died at the age of thirty - five, three months before jackie robinson first trotted onto ebbets field with the brooklyn dodgers in 1947. both men played the game superbly, but whereas jackie robinson was honored and recognized in his lifetime for his achievements, both as a baseball player and a civil rights leader, recognition of josh gibson came only after his death. gibson, along with other greats of the negro leagues, was finally admitted to the national baseball hall of fame in 1972, a quarter century after he died and a decade after robinson was admitted. it is tragic that gibson did not live to see the integration of major league baseball or to enjoy the honors that were due him. however, even though society's recognition of gibson's achievements came too late for him to enjoy it, honoring him was still worthwhile. the belated recognition of gibson illustrates a most important reason to honor achievement : we do it not so much for the person being honored but rather for ourselves. please do not misunderstand me. i hope today is a joyous and proud day for today's prize winners and certificate recipients and their families. but i strongly suspect that when they set out on the path that earned them this recognition, they were not motivated at all by β and probably were not even aware of β the prospect of an award such as the princeton prize. they did what they did from inner motivation. so, if the prospect of recognition had little or nothing to do with their achievement, why go through the exercise? the reason they are being honored, and the reason we remember jackie robinson and josh gibson and countless other achievers in countless other endeavors, is because doing so provides inspiration for all of us. and, usually, the aspect of an achievement that is most worth recognizing is not the achievement itself but the spirit of energy, determination, and courage that made it possible. so, let me say to today's honorees : thank you
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. thank you not only for serving as a role model for your peers in high school but also for being exemplars for us all. now, because we are in the midst not only of baseball season but also of graduation season, i would like to touch briefly on the theme of education. the saddest aspect of josh gibson's story is that he had talent but was denied an opportunity. then as now, the principal path to opportunity is through education. as an economist, i am persuaded that a strong educational system β one that promotes lifetime learning and skill development β is a critical factor in our nation's prosperity. the economic importance of education will only increase as technology advances and as the global economy becomes increasingly integrated and complex. but education is important for non - economic reasons as well. by providing us with a broader view of the world, education helps each of us become the most complete person we can be. many β i hope all β of the young people here today will continue their education, and i hope it leads them to work that brings financial success. but i also hope it cultivates their creativity and appreciation for other cultures and leads them to work they find personally satisfying and meaningful. i know it will help them continue to demonstrate the kind of leadership that they have already shown. perhaps, as they acquire a deeper knowledge of places and times other than their own and a fuller understanding of people from backgrounds other than their own, it will also lead them to contribute positively at the national or international levels, as they already have done in their schools and local communities. but this evening, i don't think we should dwell entirely on the future. i hope each of the honorees will take pride in what he or she has already achieved and will celebrate that achievement with family and friends. congratulations to all of you.
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##flation and a modest cooling in the labor market, i see the fed's dual - mandate goals of maximum employment and price stability as being roughly in balance. in light of the progress toward our goals, my colleagues and i on the fomc judged it appropriate to lower our policy rate in september and again last month. these actions were steps toward removing restraint, as we are in the process of moving policy toward a more neutral setting. looking ahead, it is important to emphasize that policy is not on a preset course. i will make decisions meeting by meeting and carefully assess incoming data, the evolving outlook, and the balance of risks. while i have gained more confidence that the two positive supply shocks i described have helped create the solid economic conditions that are currently in place, i will vigilantly monitor for incoming risks or negative supply shocks that may undo the progress that we have achieved in reducing inflation. i view our current policy setting as well positioned to deal with any uncertainties we face in pursuing both sides of our dual mandate. thank you for your time, and i look forward to your questions. 5 / 6 bis - central bankers'speeches 1 the views expressed here are my own and not necessarily those of my colleagues on the federal reserve board or the federal open market committee. 2 see wolters kluwer ( 2023 ), blue chip economic indicators, vol. 48 ( december 8 ). 3 see adriana d. kugler ( 2024 ), " the challenges facing economic measurement and creative solutions, " speech delivered at the 21st annual economic measurement seminar, national association for business economics foundation, washington, july 16. 4 see congressional budget office ( 2024 ), the demographic outlook : 2024 to 2025 ( washington : cbo, january ). 5 see dario caldara, matteo iacoviello, patrick molligo, andrea prestipino, and andrea raffo ( 2020 ), " the economic effects of trade policy uncertainty, " journal of monetary economics, vol. 109 ( january ), pp. 38aβ¬ β 59. 6 / 6 bis - central bankers'speeches
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ben s bernanke : regulatory reform testimony of mr ben s bernanke, chairman of the board of governors of the us federal reserve system, before the committee on financial services, us house of representatives, washington dc, 1 october 2009. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system β s website. * * * chairman frank, ranking member bachus, and other members of the committee, i appreciate the opportunity to discuss ways of improving the financial regulatory framework to better protect against systemic risks. in my view, a broad - based agenda for reform should include at least five key elements. first, legislative change is needed to ensure that systemically important financial firms are subject to effective consolidated supervision, whether or not the firm owns a bank. second, an oversight council made up of the agencies involved in financial supervision and regulation should be established, with a mandate to monitor and identify emerging risks to financial stability across the entire financial system, to identify regulatory gaps, and to coordinate the agencies'responses to potential systemic risks. to further encourage a more comprehensive and holistic approach to financial oversight, all federal financial supervisors and regulators β not just the federal reserve β should be directed and empowered to take account of risks to the broader financial system as part of their normal oversight responsibilities. third, a new special resolution process should be created that would allow the government to wind down a failing systemically important financial institution whose disorderly collapse would pose substantial risks to the financial system and the broader economy. importantly, this regime should allow the government to impose losses on shareholders and creditors of the firm. fourth, all systemically important payment, clearing, and settlement arrangements should be subject to consistent and robust oversight and prudential standards. and fifth, policymakers should ensure that consumers are protected from unfair and deceptive practices in their financial dealings. taken together, these changes should significantly improve both the regulatory system's ability to constrain the buildup of systemic risks as well as the financial system's resiliency when serious adverse shocks occur. consolidated supervision of systemically important financial institutions the current financial crisis has clearly demonstrated that risks to the financial system can arise not only in the banking sector, but also from the activities of other financial firms β such as investment banks or insurance companies β that traditionally have not been subject to the type of regulation and consolidated supervision applicable to bank holding companies. to close this important gap in our regulatory structure, legislative action is
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are allowed β and even requested β to leave quietly before investigations are opened. this leaves them with a clean record to go on and stir wrongdoing in another organisation, and the next, and so on. this practice should stop. we are collectively responsible for upholding the integrity of our entire industry, not just our respective institutions. what is important is transparency, to allow the job market to make informed decisions. in this regard, the bank is currently pursuing an initiative that will mandate the sharing of employment references with future employers. a key objective for this is to mitigate the problem of β rolling bad apples β within the malaysian financial industry. conclusion business ethics has become a popular topic in the world of finance. we must be careful not to pay lip service to the hype. we must be careful not to pretend that it can be addressed with simplistic solutions. we must instead take a holistic, thoughtful and realistic approach in building a culture of professionalism and ethics. allow me to conclude here by leaving you with three key messages β first β we cannot afford to underestimate the power and danger of β bad barrels β. the evidence demands that we focus carefully on cultivating a β system β and designing β situations β that encourage continuous ethical behaviour. this is a shared responsibility. as i have said, regulators play a crucial role in articulating the letter of the law. but it is the private sector leadership that determines whether its moral spirit will be pursued. second β we must not neglect the uncomfortable reality that there are β bad apples β out there. a clear message needs to be sent out, that the financial industry does not have room for these. fair, proportionate and transparent disciplinary action will be central in communicating this message. finally β the entire financial sector must embrace the language of ethics and objectivity. just like in any human relationship β trust, honesty and integrity are moral values which must permeate through the business. perhaps it is fitting that i end by quoting from a great icon of professionalism in finance, the late tun ismail ali. and i quote : β it is timely that we should examine the real meaning of integrity, hard work and capacity for efficient management of our affairs, accountability and corporate citizenship β these words still ring true today. as leaders, our challenge is to emulate his example of building a culture of genuine professionalism and integrity β one that sinks into the very dna of the financial industry. i wish you all a fruitful session
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##ised towards addressing contemporary issues facing the ummah. from ending poverty and hunger to promoting responsible production and consumption ; providing affordable housing ; better healthcare and education β shariah deliberations on islamic finance matters should reflect on the evolving needs of the economy and society. shariah scholars are constantly challenged to have a thorough and sound understanding of other fields of expertise such as economics, law, psychology and technology to formulate well - rounded and pragmatic ijtihad. with shariah scholars at the forefront of multi - disciplinary knowledge, the shariah fraternity can play a more prominent role in the global call for action for the financial sector to better respond to the contemporary challenges facing our world today. closer engagement with wider stakeholders, be it the financial industry, regulatory authorities, central banks and the public sector, has never been more pressing than before. it is the way forward. it is the way to ensure that the islamic finance industry continues to be able to deliver on the intended objectives of shariah. 1 / 2 bis central bankers'speeches transparency of shariah rule - making my second point relates to the importance of transparency of shariah reasoning and credibility of shariah rulings. this will encourage a deeper understanding of shariah requirements and outcomes beyond a compliance mindset. pronouncing a clear and comprehensive hukum is certainly not easy ; shariah deliberations would need to be anchored to a comprehensive and robust decision making approach that captures holistic considerations including legal, risk, accounting, operations and also stakeholder implications. it is equally important that shariah rulings are well - understood by everyone. this calls for an effective communication strategy to advocate the intended outcomes of each rulings and the underlying reasons for each decisions. platform such as this gathering β offers all of us the opportunity to learn and exchange views from each other β s experiences. best practices in shariah methodology and governance can be shared and deliberated to elevate the quality of rulings and stature of shariah advisory authorities globally. connectivity among centralised shariah advisory authorities the final point is on increasing connectivity among centralised shariah advisory authorities to promote mutual respect and knowledge - sharing. islam has flourished with a strong foundation of knowledge, wisdom and tolerance among its scholars. differences in ideas and open discourses to assess the veracity of knowledge β have always been practiced in many islamic societies. while achieving consensus is ideal β full appreciation of differences
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or incomplete, hampering its ability to deliver its full potential for euro area citizens. this is why the ecb has been advocating and will continue to make the case for a more complete emu. let me spell out what i mean by a more complete emu. i mean an emu with a full banking union underpinned by a common deposit insurance scheme ; a true capital markets union that channels investment to innovative and productive uses ; and a central stabilisation function as a common line of defence against shocks. a more resilient emu with these elements would not just help to protect our living standards from adverse domestic and global developments. it would also support europe β s influence in the world, including by making the euro more attractive worldwide. conclusion let me close by highlighting that the joint nature of the challenges i have discussed will require all parties to do their bit to enable europe to perform at its best for all of its citizens. this includes the ecb, which within its mandate is ready to play its part. as i said at the beginning, the universal nature of these challenges also underscores the need for continued dialogue between the ecb and the european parliament. in this spirit, i look forward to our exchange this afternoon and the final resolution on the ecb β s annual report. thank you. 3 / 3 bis central bankers'speeches
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peter praet : interview in expresso interview with mr peter praet, member of the executive board of the european central bank, in expresso, conducted by mr joao silvestre on 18 june 2018 and published on 23 june 2018. * * * is the asset purchase programme ( app ) really going to conclude at the end of this year? what we did last week was to express an anticipation that net asset purchases would end at the end of the year. we didn β t say we were now deciding to stop the programme in december. we still have six months to go. we translated the increased confidence we expressed about developments in the economy and inflation into an anticipation about the app. and, at the same time, we also enhanced the forward guidance on interest rates. but, in any event, to anticipate the end of the programme is to give a strong signal. what exactly do you mean by giving a strong signal? we undertook a careful review of the progress made towards a sustained adjustment in the path of inflation to levels below, but close to, 2 %. it was a strong signal because, in spite of a recent moderation in euro area economic growth, we concluded that progress towards our aim has been substantial so far, and actually sufficiently substantial for us to be in a position to express this anticipation of an end to net asset purchases at the end of the year. we think that the underlying strength of the economy gives grounds that inflation convergence will continue in the period ahead, even after a gradual winding down of net asset purchases. what is that confidence based on? there is a path of gradual improvement towards our inflation aim, as the euro area economy will continue to grow above potential. increasing pressure on the utilisation of resources, notably in the labour market, will continue to support inflation over the medium term. is the ecb comfortable with the recent projection pointing to annual inflation of 1. 7 % over the period to 2020, clearly below the 2 % aim for these three years? the eurosystem staff projections are only one element of our assessment. what is crucial is that we see a sustained path of adjustment of inflation towards levels that are below, but close to, 2 %. over the projection period, the contribution of energy to inflation declines, and inflation excluding energy and food gradually rises, as capacity constraints become increasingly binding. what the ecb anticipated last week was the halving of asset purchases between october and december. but there was a provis
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in actual transactions wherever possible, the fsb report recommended that the reliability and robustness of existing major benchmarks such as tibor and euribor, as well as libor, be improved by minimizing the opportunities for market manipulation. moreover, to respond to the need for benchmark rates without bank credit risk, the report encouraged the development of alternative, nearly risk - free rates that do not include bank credit risk, thereby enabling market participants to choose libor or other benchmark rates depending on the purpose of that use. this policy is called the " multiple - rate approach " because it is intended to allow users to choose from more than one interest rate benchmark and select one that best fits their purpose. japan has also been affected by libor reform since libor is also calculated for jpy. there has been a need for tibor reform and discussions on risk - free rates for jpy. thus, in response to international discussions, interest rate benchmark reform has become an important and unavoidable issue for japan. ii. initiatives for interest rate benchmark reform i would now like to explain the initiatives for interest rate benchmark reform that have been taken to date by dividing them into two phases. first phase in response to international discussions, each jurisdiction has proceeded with reforming existing benchmarks such as libor, tibor, and euribor, and the use of risk - free rates to be calculated based on the actual transaction rates for overnight fund transactions has been discussed. this was the first phase of the interest rate benchmark reform. the first reform implemented in japan was the reform of tibor, which was widely used as the interest rate benchmark for domestic loan transactions and other transactions. tibor used to be published by the japanese bankers association, but the jba tibor administration was established in april 2014 to develop a more independent and neutral administration framework for tibor and it took over the calculation and publication of tibor. moreover, in may 2015, it became apparent that tibor was subject to regulations of the japan financial services agency ( jfsa ) as a specified financial benchmark under the financial instruments and exchange act. in july 2017, the rates to be submitted started to be calculated in accordance with a standardized and clarified calculation and determination process. at the same time, discussions on the jpy risk - free rate were held by the study group on riskfree reference rates, which was launched in april 2015. in december 2016, the study group identified the
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connected. to facilitate networking opportunities, a special section has been created on iclif β s website to cater for the activities of the alumni association. this would include the facility to disseminate information among its membership, including the publication of an alumni directory, highlights of important events and latest developments that may be of interest to its members. the centre will serve as the secretariat to support all activities undertaken by the alumni association. as we advance forward, the reputation, image and stature of the centre will depend on the performance of its participants and their contributions to the environment and the organisations they represent. iclif regards its alumni members as important and looks forward to your continuous support to building iclif into a regional centre of excellence for leadership development in financial services. while iclif has put in great efforts in working with leading international consultants and the best schools in the design and delivery of its leadership development programmes, we see this as an evolving process. in this context, we see alumni members as an important sounding board in providing feedback to enhance the relevance and effectiveness of iclif β s programmes. as beneficiaries of iclif β s programmes, the alumni members are the best intermediaries in making iclif better known to the industry. ladies and gentlemen, iclif leadership competency model one of the first initiatives by iclif upon its inception is to develop a unique leadership competency model that will analyse and enhance the understanding of what makes for great corporate leaders in the regional context. the competency model was developed through a participatory process involving strategic insights by industry leaders in the country and the region. this was achieved through behavioural - event interviews as well as benchmarking exercises based on literature research and the database of leadership competency models of world class companies. the preliminary model was further refined in a validation seminar attended by visionary and prominent leaders with proven track record of business performance excellence from both the private and public sectors. the model forms the foundation to guide the philosophy and drive the design and delivery of iclif β s leadership development programmes. i wish to take this opportunity to express our appreciation to the industry luminaries who have given so much of their time in participating in the validation seminar for the iclif leadership competency model. let me share with you some of the interesting findings of the consultants in assessing our leaders based on the competencies identified in the model. among the positive findings of the exercise was the observation by
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effectively a two - way repo transaction, whereby it gives the dealer its junk bonds as collateral, borrows the treasury securities, and agrees to unwind the transaction at some point in the future. now the insurance company can go ahead and pledge the borrowed treasury securities as collateral for its derivatives trade. of course, the dealer may not have the spare treasury securities on hand, and so, to obtain them, it may have to engage in the mirror - image transaction with a third party that does β say, a pension fund. thus, the dealer would, in a second leg, use the junk bonds as collateral to borrow treasury securities from the pension fund. and why would the pension fund see this transaction as beneficial? tying back to the theme of reaching for yield, perhaps it is looking to goose its reported returns with the securities - lending income without changing the holdings it reports on its balance sheet. there are two points worth noting about these transactions. first, they reproduce some of the same unwind risks that would exist had the clearinghouse lowered its own collateral standards in the first place. to see this point, observe that if the junk bonds fall in value, the insurance company will face a margin call on its collateral swap with the dealer. it will therefore have to scale back this swap, which in turn will force it to partially unwind its derivatives trade β just as would happen if it had posted the junk bonds directly to the clearinghouse. second, the transaction creates additional counterparty exposures β the exposures between the insurance company and the dealer, and between the dealer and the pension fund. see hanson and stein ( 2012 ). bis central bankers β speeches as i said, we don β t have evidence to suggest that the volume of such transactions is currently large. but with a variety of new regulatory and institutional initiatives on the horizon that will likely increase the demand for pristine collateral β from the basel iii liquidity coverage ratio, to centralized clearing, to heightened margin requirements for noncleared swaps β there appears to be the potential for rapid growth in this area. some evidence suggestive of this growth potential is shown in exhibit 8, which is based on responses by a range of dealer firms to the federal reserve β s senior credit officer opinion survey on dealer financing terms. 21 as can be seen, while only a modest fraction of those surveyed reported that they were currently engaged in collateral transformation transactions, a much larger share reported that they had been involved in discussions of prospective transactions with their
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alan greenspan : economic outlook and current fiscal issues testimony by mr alan greenspan, chairman of the board of governors of the us federal reserve system, before the committee on the budget, us house of representatives, 2 march 2005. * * * mr. chairman, ranking member spratt, and members of the committee, i am pleased to be here today to offer my views on the federal budget and related issues. i want to emphasize that i speak for myself and not necessarily for the federal reserve. the u. s. economy delivered a solid performance in 2004, and thus far this year, activity appears to be expanding at a reasonably good pace. however, the positive short - term economic outlook is playing out against a backdrop of concern about the prospects for the federal budget, especially over the longer run. indeed, the unified budget is running deficits equal to about 3 - 1 / 2 percent of gross domestic product, and federal debt held by the public as a percent of gdp has risen noticeably since it bottomed out in 2001. to be sure, the cyclical component of the deficit should narrow as the economic expansion proceeds and incomes rise. and the current pace of the ramp - up in spending on defense and homeland security is not expected to continue indefinitely. but, as the latest projections from the administration and the congressional budget office suggest, our budget position is unlikely to improve substantially in the coming years unless major deficit - reducing actions are taken. in my judgment, the necessary choices will be especially difficult to implement without the restoration of a set of procedural restraints on the budget - making process. for about a decade, the rules laid out in the budget enforcement act of 1990 and in the later modifications and extensions of the act provided a framework that helped the congress establish a better fiscal balance. however, the brief emergence of surpluses in the late 1990s eroded the will to adhere to these rules, which were aimed specifically at promoting deficit reduction rather than at the broader goal of setting out a commonly agreed - upon standard for determining whether the nation was living within its fiscal means. many of the provisions that helped restrain budgetary decisionmaking in the 1990s - in particular, the limits on discretionary spending and the paygo requirements - were violated ever more frequently ; finally, in 2002, they were allowed to expire. reinstating a structure like the one provided by the budget enforcement act would signal a renewed commitment to fiscal restraint and help restore discipline to the annual budgeting process. such a step would be
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of macroprudential policy beyond the banking sector. at least over the medium term, the covid - 19 pandemic is likely to accelerate trends that call for extending the reach of macroprudential policy to a larger set of financial institutions and financial transactions. as a case in point, digitalisation provides opportunities for new players, and non - banks may take a larger role in financial intermediation. to protect financial stability, macroprudential policy should be adjusted to also cover the systemic risks created by non - bank finance. over time, digitalisation may also boost cross - border banking and the provision of cross - border financial services, thus increasing the contagion channels of systemic risks between financial systems. this increases the importance of cross - border cooperation between macroprudential authorities, which should be systemically enhanced. related to digitalisation, let me recall that a number of central banks, including the ecb, are actively examining avenues to develop and adopt a central bank digital currency, or cbdc for short. on specific areas of concern, both residential and commercial real estate markets have often been a significant source of systemic risks and vulnerabilities. the pandemic is likely to have lasting but very diverse effects on real estate markets. therefore, a comprehensive analysis of the macroprudential risks on real estate markets and appropriate tools for addressing them would be most needed. in addition to state - of - the - art analytical methods and policy tools, macroprudential policy needs a strong institutional framework to operate effectively. in its early recommendation1 the european systemic risk board proposed clear mandates for macroprudential decision - makers, cooperation between relevant authorities, as well as a leading role for the central bank in macroprudential policy β irrespective of the specific institutional structure. importantly, as already noted by the imf some years ago2, the framework should be able to counter inaction biases that could arise because of lobbying or political pressures. the framework should ensure access to sufficient information and promote effective cooperation in risk analysis. survey results published recently by the czech national bank3provide interesting information on the views of academic and professional experts on macroprudential and monetary policy. according to the survey, sharing of data and knowledge and the capacity to act swiftly are key benefits of a framework in which the central bank conducts both monetary and macroprudential policy. however, further research on the institutional arrangements of macroprudential policy would
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it, the amount of equity that a host regulator requires to be held in a subsidiary over and above the basel minimum may vary according to whether it is part of an β spe group β in which the parent / holding company is a source of strength through resolution. where that is the case, it may be possible to shade the subsidiary β s capital structure from equity to subordinated debt issued to the holdco. where the group as a whole is not a source of strength in resolution, a subsidiary may need more equity than otherwise. what i am describing would entail some recasting of the key pillars of international supervisory cooperation : the basel concordat, core principles of supervision, and capital accord. 3 there is no such thing as a β bailin bond β. bailin is a resolution tool. all creditors can face having to absorb losses. what matters is the creditor hierarchy notwithstanding the clarity in the financial stability board β s international standard on resolution, 4 and in the us and draft eu legislative regimes, it is still common for commentators and industry participants to refer to β bailin bonds β. 5 as i have said before, β bailin β is a verb not a noun. it is a power, not a special kind of bond. like other resolution tools, it can be applied to any kind of debt obligation. what is true is that if bonds are issued from a holding company and the resolution is topdown ( spe ), then those bonds will absorb losses before any creditors of the operating see financial stability board ( 2013 ), β recovery and resolution planning for systemically important financial institutions : guidance on developing effective resolution strategies β and tucker ( 2013 ), β resolution and the future of finance β. see tucker ( 2013 ), β the reform of international banking : some remaining challenges β. see financial stability board ( 2011 ), β key attributes of effective resolution regimes for financial institutions β. most recently in chapter 3, β changes in bank funding patterns and financial stability risks β, of the imf β s october gfsr, which misleadingly refers throughout to β bail - in debt β. bis central bankers β speeches subsidiaries ; holdco creditors are structurally subordinated to opco creditors. but if the losses are vast enough, then the haircuts imposed by the resolution authority can in principle permeate to any level of the creditor stack. in the case of insured deposits, that means deposit guarantee schemes ( dgs ) suffering losses, as they
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swaminathan j : catalysing inclusive growth - strengthening partnerships for reaching the last mile keynote address by mr swaminathan j, deputy governor of the reserve bank of india, at the conference for lead district managers of maharashtra held in tadoba, chandrapur, maharashtra, 30 november 2024. * * * regional director for mumbai regional office, shri suman ray ; regional director for nagpur regional office, shri sachin shende ; chief general manager, national bank for agriculture and rural development, ms. rashmi darad ; general manager, bank of maharashtra and convenor, slbc maharashtra, shri r d deshmukh ; senior executives from banks, lead district managers ( ldms ), lead district officers ( ldos ) and my colleagues from reserve bank of india, present here. good morning, it is my proud privilege today to be addressing this conference for lead district managers of maharashtra. being here near nagpur and that, too, for a conference of the ldms, it would be amiss of me if i am not reminded of shri baba amte, whose ashram is within a few kilometres. as you all would be aware he was one of the proponents of rural economy - driven growth. there is this one part of a quote attributed to him, which says, " a balanced economic system is one which provides sufficiency for all and superfluity for some - " when you parse the quote, you will realise that the ldms are facilitating the sufficiency of the rural economy. and balancing the economy by facilitating sufficiency for the rural economy rings as much true today as it must have been when it was said. when you look at the results of the economic survey, 2023 - 24, it is observed that indian agriculture sector provides livelihood support to about 42. 3 per cent of the population and has a share of 18. 2 per cent in the country's gdp at current prices. 1 so, with the rural economy thriving, the role of lead banks assumes a renewed emphasis. in fact, the aspirational goals that rbi has set for rbi @ 1002 in a multi - year time frame, reiterates its focus on'accessibility, availability and quality of financial services to all sections of the society '. it is this underlying principle that had conceptualised the lead bank scheme ( lbs ) in 1969. the lead bank is expected to assume a leadership role for coordinating the efforts of the credit institutions and the
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low - wage countries. but a flatter phillips curve does not call into question this relationship : we are in no doubt about the way we are heading : the recovery and job creations will lead to higher wages and, ultimately, more inflation. but we nevertheless remain less certain as to the speed of this adjustment. we are both confident about the effectiveness of our monetary policy and willing to be patient regarding the time it will take. ii. what prospects for the future? let me now turn to the consequences for our monetary policy. you are well aware that we at the ecb β s governing council will decide this autumn on the re - calibration of our policy instruments beyond the end of the year β and, i quote mario draghi, β probably the bulk of these decisions will be taken in october β. we are now faced with a simple requirement, in line with our mandate to maintain price stability, and the progress towards our inflation target : we have to reduce the intensity of our net asset purchases, while maintaining overall a substantially accommodative monetary policy. as regards our asset purchases, we have to reduce their intensity in a pragmatic manner, as we already decided successfully in december 2016. i insist on the word β pragmatic β because, while keeping the current rules, we should on the one hand exploit the margins of flexibility of the programme and on the other hand hold in reserve an additional purchasing capacity β if needed. that said, monetary policy is not limited to qe, and qe is not limited to net asset purchases : we can keep a substantial degree of monetary accommodation even if we reduce our monthly flow of net purchases. 1 / on qe, the academic literature provides consistent evidence that the impact of asset purchase programmes on the yield curve and asset prices is primarily driven by the total stock of assets held by the central bank ( the so called β stock effect β ), rather than by the flow of transactions conducted over a given period ( β flow effect β ). in - house studies of the effects of the pspp find that holding a stock of bonds equivalent to 10 % of gdp lowers the 10 - year yield by about 45 bps in the euro - area. 5 by contrast, flows of purchases have no significant additional impact. these results imply that our current programme lowers the 10 - year euro - area government bond yield by about 100 bps. these effects are of similar magnitude than results obtained for the programmes conducted in the united states and the
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. it has indeed been a pleasure listening to the illuminating remarks of dr. deshpande, dr. chandra mohan, dr. narsimha reddy and dr. parikh. let me conclude by expressing, once again, my deep appreciation of the excellent and pioneering work undertaken by igidr on developmental issues. thank you.
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from us $ 113. 0 billion at end march 2004 to us $ 131. 2 billion as at end december 2004. nearly sixty per cent of the reserve accretion in the current financial year has come in two months ( november and december ) - perhaps indicative of the volatility in portfolio flows. second, the trade - deficit on the balance of payments basis doubled to us $ 12. 3 billion in the second quarter from us $ 5 billion in the first quarter - reflective of surge in imports - both due to increase in oil - prices and pick up in investment activity. there is no reason to believe that the trend will not persist for the rest of the year which may have a potential for a large trade - deficit during the year as a whole. third, the current account of the balance of payments which was in a surplus of us $ 3. 2 billion in the first quarter turned into a deficit of us $ 6. 4 billion, reflective of not only surge in trade - deficit but also moderation in the invisibles surplus. it is, therefore, possible that the current account for the year as a whole may be marginally in deficit or very marginally in surplus. despite the surge in trade - deficit, a strong case for further liberalisation of trade and rationalisation of tariffs persists since the beneficial effects of such liberalisation are evident. fourth, the capital account of the balance of payments shows that in the second quarter, external commercial borrowings and short term credit moderated, while there were outflows under banking capital. nri deposits continued to register net outflows. overall, however, the current trends do point to continued surpluses in balance of payments, with possible marginal deficit in the current account being more than compensated by continued strong inflows, particularly on account of inflows on foreign direct investment ( fdi ) and fii flows. our emphasis in management of capital account has generally been on external debt as recommended by rangarajan committee, more than a decade ago, but there are several reasons, for exploring an appropriately active but nuanced management of non - debt flows at this stage. the magnitudes of fdi / fii flows are tending to be large and volatility has perhaps increased. the impact of such flows on the stock markets is discernible, but perhaps less evident at this juncture in corporate ownership and control. the possible issues that need to be considered if one were to achieve a better management of non
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customer relationships can be observed. the driving forces identified in this speech may have put the industry under pressure but, more importantly, they have also created new opportunities. one is left with the undeniable impression that the regulation of banks has not prevented them from developing new activities and entering into new markets. in this respect, it may be noted that banking supervision and regulation are naturally frequently re - assessed in light of new developments. the recent suggestions for adaptations in the regulatory framework for banks by the basel committee on banking supervision mirror the genuine intention and proactive attitude of supervisors to ensure sound market conditions in the financial services industry, and to safeguard the stability of the global financial system. having said all this, i cannot but finish with an optimistic observation. the banking industry has shown ingenuity in coping with many challenges. this is mirrored in the diversification of its activities. by continuously aiming at a high level of ethics and professionalism within the dutch investment community, the netherlands society of investment professionals will certainly contribute to the health and integrity of the financial sector in general, and the banking industry in particular.
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and 0. 7 % in 2009. owing mainly to base effects stemming from the past behaviour of energy prices, headline annual inflation rates are projected to decline further in the coming months, possibly temporarily reaching negative levels around mid - year. thereafter, annual inflation is expected to increase again, also owing to base effects stemming from past energy price developments. accordingly, it is likely that hicp inflation rates will fluctuate noticeably during 2009. such short - term volatility is, however, not relevant from a monetary policy perspective. for 2010, ecb staff project hicp inflation at between 0. 6 % and 1. 4 %. this range also represents a substantial downward revision compared with the december 2008 eurosystem staff macroeconomic projections, mainly reflecting the change in the economic growth outlook. available forecasts from international organisations have also been revised downwards and broadly confirm an outlook of moderate inflation rates in 2010. as in the case of growth, a considerable degree of uncertainty surrounds the inflation projections. risks to these projections are broadly balanced. they relate in particular to the risks to the outlook for economic activity as well as to risks to commodity prices. turning to the monetary analysis, the latest data and estimates provide further evidence of an ongoing deceleration in the underlying pace of monetary expansion in the euro area. this implies a further reduction in inflationary risks in the medium term. the further deceleration in underlying monetary dynamics has contrasted with the high month - to - month volatility of developments in m3 and its components which has been observed since the financial turmoil intensified in september 2008. this relates in particular to marketable instruments, but also to the significant substitution that is taking place between different categories of deposits included in m3. while annual m3 growth declined further, to 5. 9 %, in january 2009, the annual growth rate of the narrow aggregate m1, which includes the most liquid assets, rose to 5. 2 %. volatility also characterised the flow of mfi loans to the private sector around the turn of the year, with a monthly contraction in the outstanding amount in december followed by a significantly positive flow in january. however, discounting a possible turn - of - the - year effect and looking beyond these latest developments confirms the decline in the growth of bank credit to households and non - financial corporations observed in 2008. at the same time, it appears that the substantial past reduction in the key ecb interest rates is increasingly being passed through to bank lending rates, indicating that, despite the
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area. as concerns economic activity, recent data continues to support the broad growth scenario embodied in the december 2005 eurosystem staff projections. this continues to form our working assumption regarding the outlook for growth in the euro area. on the basis of the indicators and survey data, it appears that the tendency in economic activity to strengthen and broaden since the second and third quarters of 2005 has so far been broadly confirmed. i am not speaking of successive indicators and figures which can be volatile, but of the trend. looking ahead, the conditions remain in place for economic growth to continue to materialise around current estimates of potential growth. the external environment is buoyant, providing support for euro area exports. investment is expected to continue to pick up, benefiting from an extended period of very favourable financing conditions, some balance sheet restructuring, and accumulated and ongoing gains in earnings and business efficiency. consumption growth is also expected to strengthen progressively, in line with developments in real disposable income as the labour market situation improves. this broad scenario for economic activity is also confirmed by available forecasts. downside risks to this outlook for economic growth certainly remain and relate, in particular, to external euro area developments, such as high and volatile oil prices and concerns about global imbalances. inflation moderated somewhat over the last months of 2005, although it remains at levels above the 2 % ceiling of the ecb β s definition of price stability. over the short term, annual inflation rates may remain elevated, reflecting, in particular, past developments in energy prices and also some base effects. meanwhile, wage dynamics have remained moderate over recent quarters and are assumed to remain so for the time being, reflecting, in particular, global competitive pressure. this scenario for price developments remains surrounded by upside risks, which relate to the possibility of further rises in oil prices, a stronger pass - through of oil prices into consumer price index and additional increases in administered prices and indirect taxes. more fundamentally, upside risks to inflation also relate to potential second - round effects of past increases in inflation on wage and pricesetting behaviour. when looking at current monetary developments, the annual growth rate of m3 remained at elevated levels, even though it moderated further at the end of 2005. this moderation can be explained in part by an apparent resumption of the unwinding of past portfolio shifts, which exerts a dampening effect on headline m3 growth. the underlying rate of monetary expansion remains strong, reflecting the stimulative
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policy β at the level of interest rates decided to deliver price stability β which is managed with a view of appeasing the tensions in the money market. folha β but why aren β t the financial markets as smooth as they should be after all these guarantees? trichet β this is an important issue, despite the fact that central banks and government authorities have taken very important decisions. the central banks put in place a first line of defence against systemic liquidity threats, and then the governments came with a second line of defence against what i would call systemic solvency threats. at the moment i am speaking, there is a remaining level of tensions that doesn β t take fully into account all the decisions that have been taken. folha β does it mean that markets do not trust governments? trichet β no. i think it is a question of time and i have called on commercial banks to speed up the process of fully taking into account the decisions that have already been made. folha β how much can emerging countries like china and brazil help to avoid a worse global crisis? trichet β i think that first of all we should recognize that, for the first time since world war ii, we have seen a solid resilience of the emerging economies, which has been quite impressive at a time when we could see the industrial economies heavily affected. and that is true, since the start of the turbulences, since the beginning of august, last year. during one year we observed that the emerging world was more resilient than the developed world. at the present moment, it is clear that even the emerging economies are affected by what has happened in the industrialized economies, and in particular since mid september. of course, we are in a global economy where we are all interdependent. i myself never spoke of decoupling. so, we are all more or less touched by a phenomenon that comes here or there, but it is wrong to think that any of us could be out of the influence of the others. that doesn β t prevent me from thinking that for the global economy to get out of this difficult period we have to count very much on brazil, on mexico, on china, on india, and on all other major emerging economies. that β s absolutely clear. the potential for global growth is there. that β s not to say that the industrialized world has not to put itself in order and contribute themselves to a steady and sustainable growth. f
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be promptly and regularly updated in the face of rapid financial innovation and broader structural change. of course, a trade - off exists between the stability and flexibility of the statistical framework. careful management of this trade - off is required in order to make monetary series meaningful for policy purposes in real time. in particular, it is apparent that the statistical framework needs to incorporate new instruments and business models resulting from financial innovation in a manner that maintains consistency between key aggregates ( such as m1, m3 or mfi loans ) and the policy - relevant underlying economic concepts ( such as liquidity, money or financing ). yet if such updating implied almost continuous changes to the definition of key aggregates, a consistent analysis of the data over time would be impossible. of course, i could go on and on : statisticians and reporting agents know all too well that economists and policy makers β data requirements are, in principle, inexhaustible. the merits and costs procedure adopted by the governing council to assess new statistical regulations reflects the need to cap this insatiable demand. today i will limit myself to nine requirements, and thereby come to my final point. in designing and constructing monetary and financial statistics for monetary policy purposes, it is crucial that close cooperation and active dialogue is maintained among reporting agents, statisticians at the ecb and the national central banks, users of the statistics and policy makers. this is a point i will take up again in my conclusion. before coming to that, please allow me to make a number of remarks about the role of monetary analysis in the current period of financial turmoil, drawing on the general requirements i have just listed to identify a number of specific implications for the construction of the monetary statistics that have arisen in this context. preliminary lessons from the ongoing financial turmoil since the emergence of financial tensions in early august 2007, the ecb β s monetary analysis has proved a crucial bulwark for the conduct of monetary policy in the euro area. in particular, the monetary analysis has helped to maintain the necessarily medium - term orientation of monetary policy, at a time when the power of the short - term forces at play threatened to overwhelm it. moreover, the monetary analysis has served to maintain a focus on nominal developments β that is, the inflation outlook at longer horizons β over which central banks can exert control and for which they ultimately need to take responsibility. the monetary analysis has thus helped the ecb to maintain the orientation of monetary policy towards its primary objective.
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with the findings by chetty, there exists a large literature that has established the importance of high - quality education as a key determinant of economic mobility. while there are differences of opinions on the most relevant measures of school quality, there is ample evidence that children who attend better schools on average end up with better outcomes later in life β such as higher levels of educational attainment and higher earnings. it is also well known that there exist large disparities in the quality of education by geography and socioeconomic background. compared to children born to lowincome parents, those born to higher - income families can better afford to move and live in areas with high - quality schools. the sorting of families by income and their desire for better educational opportunities leads to enclaves of higher - quality and higher - spending schools that are separated from areas of economically less - advantaged populations and lower - quality schools. to a degree, this residential segregation has been perpetuated by our system of school financing that relies heavily on local property tax funding. local financing of public schools leads to a bundling of two distinct choices β residential choice and school choice β and increases the degree of socioeconomic segregation across school districts. we can promote greater income mobility by unbundling the residential and school choices. this can be done in one of two ways. the first is to work to equalize school quality across location, while the second is to allow parents more choice of schools from a given location. along the lines of the first approach, new york fed research has shown that school finance reforms that seek to equalize funding across school districts by reducing the role of local property taxes can go a long way in decreasing residential segregation and equalizing quality of education. 6 the key mechanism is that such reforms make underperforming neighborhoods more attractive, thus reducing socioeconomic segregation and leading to consequent gains in peer quality in previously - challenged enclaves. this in turn reduces disparities in school quality stemming from reduced socioeconomic segregation. on the second approach, there exists research indicating that school vouchers that enable students to move to private schools or better - quality public schools can lead to improvements in public school quality and student performance by increasing competition among schools. 7 it is important to note, though, that not all voucher programs are created equally, and the design of the program matters in how vouchers impact school quality. charter schools have provided another source of school choice in education. more research into evaluating the
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activity in various ways. in contrast, price hikes due to a rise in the consumption tax rate are equivalent to a once only rewriting of all the old price tags on april 1. there are no relevant changes in economic activity, such as a tightening of supply and demand conditions, an increase in wages, or excessive money supply. therefore, it would not be appropriate to formulate monetary policy against such superficial changes in prices. although this represents the fundamental thinking of the bank, it does not mean that the central bank is indifferent to the rise in the consumption tax rate. if the rise triggers price hikes taking advantage of the tax rate rise, or if overall inflationary expectations are heightened, then the risk of a genuine inflation will arise. in particular, this risk cannot be disregarded when the supply and demand conditions for products are fairly tight. therefore, it is necessary to pay attention to the inflationary expectations and possible over - reactions caused by the rise in the consumption tax rate rather than paying attention to the previously - mentioned superficial hikes in prices. in summary, in order to promote a smooth structural adjustment, to bring about a strengthening of the economic recovery, and to encourage the renewed development of the japanese economy, the implementation of a drastic structural reform, including effective deregulation, is indispensable. in this respect, i hope that the government will continue to exercise strong leadership and earnest efforts will continue to be made by various parties. v. financial system reform and revision of the bank of japan law a. financial system reform i would like to use the remaining time to discuss financial system reform and the revision of the bank of japan law. the important challenge for japan today is to vigorously promote structural reform as discussed above, and this also applies to the reform of the financial markets and of the financial system. financial markets worldwide have experienced significant changes in recent years amid rapid financial and economic globalization and technological innovation. new financial instruments such as derivatives and securitized products have been developed in succession to provide firms and households with diverse means of risk - hedging, investment, and financing. at the same time, profit opportunities for financial institutions have expanded in various fields. it seems that it is now time for the market participants to select the market, rather than the markets selecting the participants. countries are vying with each other to reform their financial markets, based on a growing worldwide perception that the financial services sector will show rapid growth and create numerous employment opportunities into the twenty - first
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mr matsushita comments on recent monetary and economic conditions in japan speech given by the governor of the bank of japan, mr yasuo matsushita, at the keizai club in tokio on 4 / 2 / 97. i. introduction i truly appreciate this opportunity to address this distinguished audience at the invitation of the keizai club. over the past several years, the japanese economy has had to overcome the aftereffects of the bursting of the economic β bubble β while facing the weighty challenge of establishing an economic structure suitable for the new era. although there were concerns about a deflationary spiral at one time, the economy has been recovering moderately since the beginning of 1996 partly due to strong monetary and fiscal support. recently, this economic recovery has gradually firmed, offering signs that progress has been made toward establishing this suitable economic structure. however, since the beginning of the year, stock prices have fallen significantly, suggesting that market participants remain cautious about the economic outlook. with this in mind, i would like to discuss the bank of japan β s thinking on the recent economic developments and monetary policy management, together with the bank β s views on the uncertain factors regarding the economic outlook. ii. domestic economic condition with regard to the domestic economic condition, the bank of japan β s judgment is that a moderate economic recovery continues, and that the economic recovery is gradually becoming firmer. when considering the strength of an economic recovery, the bank pays attention to the positive interactions between production and private demand. specifically, attention is given to whether the increase in production is leading to an expansion of business fixed investment through improved corporate profits, and whether this increased production is followed by a recovery in personal consumption through increased income. looking back on the economic developments in japan over the past year from a viewpoint of determining the strength of the recovery, the growth of aggregate demand, including public and housing investments, accelerated in the first half of 1996, and accordingly, market expectations of an economic recovery strengthened and long - term interest rates showed a temporary rise. however, no significant improvement was seen in production, as the increase in final demand was partly offset by inventory adjustment and by an increase in imports. as a result, a virtuous circle of demand, production, and income was not confirmed. this situation, however, appears to have changed somewhat in the latter half of 1996. firstly, the decline in external demand, which had been a constraining factor of the economic recovery, halted in autumn 1996
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during this period, the financial industry made use of the opportunity offered by economic growth, consolidated the foundation for sustainable and stable development. a brief look back of past history of the macao economic development and change in industry, we can perceive the pattern ; the two significant developments of macao financial industry were brought about by the rapid growth of the economy and prosperity. in the 70 β s and 80 β s, the policy to diversify manufacturing industry enabled new manufacturing industries to flourish. coupled with the prosperous development of other pillar industries and the legislation promulgated in 1982 which allowed banks in macao to expand their activities, the financial system had a rapid growth which in turn stimulated economic development. in 1999, after the return to the motherland, under the auspices of the central government and leadership of the msar government, macao experienced economic consolidation to rapid growth. the financial industry also benefited from phenomenal economic growth. financial products became highly diversified and differentiated. services network, channel and related quality were enhanced. risk control, management and resilience continued to be strengthened. in the face of this unprecedented global financial crisis, our financial system emerged relatively unscathed, while the operating results continued to stay at a high level. all along, capitals from the mainland, portugal and hong kong dominate the macao banking industry and account for a large chunk of the market. together with branches of the us, the uk, france, singapore and chinese taiwan banks, the banking system of macao as a whole is pivotal to the industrial transfer of macao. in the 80 β s to the beginning of the 90 β s in last century, the pearl river delta was the ideal relocation area in attracting industrial transfer due to its comparative advantage in its convenient location, availability of labour and cheap land cost. macao enterprises made full use of the opportunity provided by the reform / opening - up policy of the nation to move their labour - intensive production base to this area. from a micro point of view, the migrant enterprise, in the course of transfer, will face the problem if it can obtain the much sought financial services in the new location. how the local financial institutions can provide the necessary funding services for the migrant enterprise under controlled risk is an issue for financial regulator. generally speaking, the local financial institution has limited information on the migrant enterprise. there is insufficient knowledge of the financial condition of the migrant enterprise, its cash flow, its profitability, its debt servicing ability, the quality of management, hence it
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the arrangement and choosing macao to hold such a practical and meaningful workshop. thank you very much. enjoy your workshop and the rest of your stay in macao.
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under its 13 ( 3 ) authority are for times of emergency, such as the ones we have been living through. when economic and financial conditions improve, we will put these tools back in the toolbox. the final area where we took steps was in bank regulation. the board made several adjustments, many temporary, to encourage banks to use their positions of strength to support households and businesses. unlike the 2008 financial crisis, banks entered this period with substantial capital and liquidity buffers and improved risk - management and operational resiliency. as a result, they have been well positioned to cushion the financial shocks we are seeing. in contrast to the 2008 crisis when banks pulled back from lending and amplified the economic shock, in this crisis they have greatly expanded loans to customers and have helped support the economy. 4 / 5 bis central bankers'speeches the federal reserve has been entrusted with an important mission, and we have taken unprecedented steps in very rapid fashion over the past few months. in doing so, we embrace our responsibility to the american people to be as transparent as possible. with regard to the facilities backed by equity from the cares act, we have conducted broad outreach and sought public input that has been crucial in their development. for example, in response to comments received, the treasury and the federal reserve have made a number of changes to expand the scope of the main street lending program to cover a broader range of borrowers and to increase the flexibility of loan terms. and we are now disclosing and will continue to disclose, on a monthly basis, names and details of participants in each facility ; amounts borrowed and interest rate charged ; and overall costs, revenues, and fees for each of these facilities. we recognize that our actions are only part of a broader public - sector response. congress β s passage of the cares act was critical in enabling the federal reserve and the treasury department to establish many of the lending programs. the cares act and other legislation provide direct help to people, businesses, and communities. this direct support can make a critical difference not just in helping families and businesses in a time of need, but also in limiting long - lasting damage to our economy. we understand that the work of the federal reserve touches communities, families, and businesses across the country. everything we do is in service to our public mission. we are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible. thank you. i β
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the federal reserve has published all of the legal documents that borrowers and lenders will need to sign under the program and lender registration began on june 15. loan participations will be purchased soon. additionally, the federal reserve recently sought feedback on a proposal to expand the main street program to include loans made to small and medium - sized nonprofit organizations, such as hospitals and universities. nonprofits provide vital services around the country, and the program would likewise offer them support. while businesses in certain sectors that were particularly hard hit by the pandemic have reported continued difficulty in accessing credit, the small business administration β s paycheck protection program ( ppp ), which draws from existing bank lines, has apparently met the immediate credit needs of many small businesses. in the months ahead, main street loans may prove a valuable resource for firms that were in sound financial condition prior to the pandemic. to bolster the effectiveness of the small business administration β s ppp, on april 16, the federal reserve launched the paycheck protection program liquidity facility. the facility supplies liquidity to lenders backed by their ppp loans to small businesses and has the capacity to lend up to the full amount of the ppp. as of last week, the facility held over $ 65 billion in outstanding term loans to participating financial institutions. the most recent monthly survey from the national federation of independent business released in may indicates that small businesses have been able to meet their funding needs in recent months largely due to the ppp. 2 to help state and local governments better manage cash flow pressures in order to continue to serve households and businesses in their communities, the federal reserve, together with the treasury department, established the municipal liquidity facility ( mlf ). the mlf is backed by $ 35 billion of cares act equity and has the capacity to purchase up to $ 500 billion of short - term debt directly from u. s. states, counties, cities, and certain multistate entities. the facility became operational on may 26, and, to date, the mlf has purchased $ 1. 2 billion worth of short - term municipal debt. with the mlf and other facilities in place as a backstop to the private market, many parts of the municipal bond market have significantly recovered from the unprecedented stress experienced earlier this year. municipal bond yields have declined considerably, issuance has been robust over the past two months, and market conditions have improved. 3 the tools that the federal reserve is using
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are made once a year in the spring budget. in the uk, coordination between monetary and fiscal policy works well. 4. conclusions in conclusion, therefore, i do not offer any simple solutions to the imbalances between different parts of the british economy. fiscal policy is not an alternative to the month - by - month determination of monetary policy. and interest rates cannot target both inflation and asset prices, whether the exchange rate or share prices or house prices. nor should they. interest rates must focus on the economy - wide inflation target. but macroeconomic stability benefits all sectors of the economy. that stability, upon which the aspirations of parliamentarians, both at westminster and in edinburgh, depend, is fundamental to the future prosperity of the united kingdom. and to maintain stability, interest rates will sometimes go down and sometimes go up. for a quarter of a century, my generation β the inflation generation β suffered from the instability created by high and unpredictable inflation. to the next generation, i would like the prime minister, whoever he or she is at that point, to be able to say, β you β ve never had it so stable, not just for one year, or two years, or even three, but for a whole generation. β it is well known that many, if not most, of the great british economists were scottish. one of the few english economists to rival the scots was john maynard keynes. his view was that, β if economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid! β. so perhaps the fate of the mpc is, rather like dentists, to perform an important service but one which does not make people happy. regular monitoring and early treatment, while rarely pleasurable, prevent more unpleasant symptoms later. so it is with a pre - emptive monetary policy. as we said in our press release in september, an early move in interest rates β could lower the level at which interest rates might otherwise need to be set β. that is why we raised interest rates last month and why the mpc is committed to the consistent pursuit of a symmetric inflation target. but that is not all. the new monetary policy regime is probably the most transparent and open in the world. we are committed to explaining our policy β both to improve the efficiency of monetary policy itself and also to build up support for what we are doing. try going onto the bank of england β s website β the address is www
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the greater stability of both inflation and output. there are three key elements in the regime. first, there is a clear and unambiguous objective for monetary policy β an inflation target of 2Β½ % β set by the government. second, decisions on interest rates are taken each month by the monetary policy committee ( mpc ) comprised of nine individuals with expertise in monetary policy β five executive members of the bank and four non - executives β who operate on the basis of one person, one vote. there is, therefore, an appropriate division between the objectives of monetary policy, which are set by the democratically elected government, and the implementation of those objectives, which is delegated to a group chosen for their expertise. the third, and crucial, component of the regime is that the monetary policy process is characterised by a high degree of transparency and openness. minutes of the mpc meetings are published within two weeks and the bank β s quarterly inflation reports contain the committee β s views on the outlook for inflation and output. it is important that the monetary policy committee explain its decisions, not least to make future decisions as predictable as possible in the light of the evolving economic data. of course, it is always easier to explain policy when the decisions are popular. we have to redouble our efforts when decisions are less popular, and so i am delighted to have an opportunity this evening to explain and to listen. i shall leave plenty of time for questions because one of the purposes of visits such as these is to see things from your perspective. as rabbie burns wrote, β o wad some pow β r the giftie gie us to see oursels as others see us! β the real test of the mpc is whether it aims continuously to meet the inflation target. for that reason, the monetary policy committee must be setting a policy for all seasons. some of you may say that it is all very well to set a policy for all seasons, but what about a policy for all regions, or parts of the uk? many critics disapproved of the recent increase in interest rates. indeed, the scottish council development and industry ( scdi ) itself described the decision as β disappointing β. it also described the rise as β premature β ; we would describe it as pre - emptive : prompt action to head off inflationary pressures in the future and so lower the level at which interest rates might otherwise need to be set. the scdi said that β scottish business is regaining
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markets as many of them are the main exporters of commodities. β’ fourth and probably most worrisome, in several emerging market countries considerable political tensions have emerged recently, which may have been masked by the economic boom of previous years. we must not forget that the people β s trust in their governments is a key prerequisite for a soft landing and maintaining financial sector stability. what policy challenges lie ahead? let me conclude with some policy considerations. at the current stage it is of utmost importance that a further escalation of geopolitical tensions in ukraine can be avoided. a spiral of economic sanctions of increasing severity cannot be in the interest of either russia or the eu or the u. s. a. moreover, it is important to contain political risks in other emerging markets. the delay in the fed β s tapering should be used to address external and internal macroeconomic imbalances in the emerging market economies as soon as possible in order to be better prepared for the eventual monetary tightening in the u. s. a. prudent macrofinancial measures are necessary to address potential negative balance sheet effects on domestic borrowers or a stagnation in lending, which could arise in the medium run from the combination of increasing interest rates and relenting gdp growth. finally, it should be noted that global financial stability is a shared responsibility. the fed should therefore clearly communicate the path of its intended policy actions to minimize negative spillovers which could undermine the policy adjustment efforts of emerging markets. altogether i believe that emerging market economies will be able to address these challenges appropriately and that they will emerge from this crisis situation stronger and more resilient! bis central bankers β speeches
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an important contribution to reviving europe and making it flourish again. one challenge along the way is that of gaining a more comprehensive understanding of the financial cycle β which is the topic of our conference. the global financial crisis and subsequently the sovereign debt crisis have ( once again ) strongly highlighted the key role financial developments play for economic activity and, at the same time, the necessity to review our understanding of the finance - growth nexus. let me briefly spell out what i mean by that. prior to the crisis, most economists believed that financial deepening strengthens long - term growth as it improves the allocation of resources by facilitating the collection of information, the monitoring of projects, the trading, diversifying and managing of risks, the mobilization and pooling of capital and, finally, the exchange of goods and services within the economy. 1 consequently, most observers did not consider the strong growth of private sector credit and house prices in several euro area economies ( like e. g. spain or ireland ) prior to the global financial crisis to be overly problematic but were of the opinion that it was β at least largely β sustainable. in a similar vein, the credit boom in cesee ( which started around 2003 ) and the substantial increase in house prices in many cesee economies before the global financial crisis were conceived as part and parcel of the catching - up process these economies went through β at least during the first years of the boom. given the low starting levels of credit - to - gdp ratios and of house prices in the early phases of the transition process ( as compared with fundamentals ), there was general agreement that there was a need β and indeed room β for further financial deepening in cesee. aptly reflecting these considerations, the ceei 2005, for example, dealt with the topic of β financial development, integration and stability. β while most of the contributions at the time emphasized the considerable potential for further financial deepening in cesee, which would increase growth and foster economic convergence in the region, several discussants aired concerns that rapid credit growth and soaring house prices, if they continued unchecked, could breed instability further down the road. oenb research at the time suggested that credit - to - gdp levels had surpassed equilibrium values ( as given by fundamentals ) in some, but not in all, cesee countries by 2005 / 06 β while the credit boom went on until late 2007 in the baltic countries and until the fall of 2008 in most other cesee economies. however, the tendency
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financial system. our microentrepreneurs, nanays, and tatays can approach microfinance institutions to open an account and secure credit with just their philid. onboarding will be more cost - efficient too for our service providers. we are boosting our whole - of - government approach to diversify the broadband market so that filipinos across the country can have affordable internet connectivity and digital financial services available to them. we have begun with steps to encourage the adoption of satellite broadband. microfinance institutions can save on it costs, automate processes, and enhance delivery of financial services in the last mile through this technology. picture a farmer in the field or a fisherman at sea doing pera padala, paying loans, receiving 2 / 3 bis central bankers'speeches payments with his phone through your mobile apps, just as he would use its built - in gps to check the weather or navigate the seas. the possibilities are endless. together with industry partners, we launched the qr ph to standardize and create an interoperable qr system for person - to - person and person - to - merchant fund transfers. in terms of policy, our recently issued open finance framework gives the power of data to the people. through open finance, players inside and outside of the industry, regardless of size, will have an opportunity to provide more contextualized services for a wider client base. the digital age is here, and so we encourage microfinance institutions to continue their advance towards digital adoption. as more businesses, including microenterprises shift online, it is also fitting that financial service providers do the same. and so, we urge you to capitalize on these developments. crises also breed opportunities. and there is no time like the present to recalibrate strategies and fortify digital capabilities. the pandemic may seem insurmountable, but giants like you continue to take huge steps with government to ensure no one is left behind. we owe much to the microfinance community. after all, the bsp β s financial inclusion mission started with microfinance, in the belief that the poor can contribute just as much, if not more, to the country β s growth and prosperity. in closing, we must do things with a greater sense of urgency and efficiency. we must aim higher and strive to reach out to more filipinos. as the olympic motto goes : citius ( kee - tee - oos ), altius ( al - tee
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would like to thank the independent evaluation office for the invitation. thank you.
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management to be able to use them as guides. since 2012, declining unemployment has had surprisingly little effect on inflation, prompting a steady decline in estimates of u * ( figure 3 ). 11 standard estimates of r * have declined between 2 and 3 percentage points over the past two decades. some argue that the effective decline is even larger. 12 incorporating a lower value of u * into policymaking powell ( 2018 ). the fact that inflation did not react much to changing unemployment also led some to reassess other structural features such as the slope of the phillips curve. as discussed in rachel and summers ( 2019 ), many factors combine to determine the normal growth rate of the economy and r *. persistent movements in longer - term interest rates in a stable inflation environment are one indicator of r * movements. - 7 does not require a significant change in our approach. the significant fall in r *, however, may demand more fundamental change. a lower r * combined with low inflation means that interest rates will run, on average, significantly closer to their effective lower bound. the key question raised by this era, then, is how we can best support maximum employment and price stability in a world with a low neutral interest rate. current policy and the three key questions let me turn now to the current implications for monetary policy of the questions raised by these three eras. the first era raised the question of whether the fed can avoid excessive inflation. inflation has averaged less than 2 percent over the past 25 years, and low inflation has been the main concern for the past decade. low inflation seems to be the problem of this era, not high inflation. nonetheless, in the unlikely event that signs of too - high inflation return, we have proven tools to address such a situation. the second era β s question β whether long expansions inevitably breed financial excesses β is a challenging and timely one. hyman minsky long argued that, as an expansion continues and memories of the previous downturn fade, financial risk management deteriorates and risks are increasingly underappreciated. 13 this observation has spurred much discussion. at the end of the day, we cannot prevent people from finding ways to take excessive financial risks. but we can work to make sure that they bear the costs of their decisions, and that the financial system as a whole continues to function effectively. since the crisis, congress, the fed, and other regulatory authorities here and around the world have taken substantial steps to achieve these goals. banks and other
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. edt ( 8 : 00 a. m. mdt ) august 23, 2019 figure 1. era 1 : 1950β82 a. real gdp growth quarterly b. unemployment rate quarterly percent percent β5 1950 1956 1962 1968 1974 1980 1950 1956 1962 1968 1974 1980 c. pce inflation d. federal funds rate quarterly quarterly percent percent overall core β2 1950 1956 1962 1968 1974 1980 1950 1956 1962 1968 1974 1980 note : unemployment and federal funds data are quarterly averages ; overall personal consumption expenditures ( pce ) are the fourβquarter change in the pce price index ; core pce is the fourβquarter change in the pce price index less food and energy ; real gross domestic product ( gdp ) growth is the fourβquarter change in the level of real gdp ; federal funds data start in july 1954 ; core pce data start in january 1960 ; all data extend through 1982 : q4. shaded bars indicate periods of business recession as defined by the national bureau of economic research. source : for overall pce, core pce, and real gdp growth, the bureau of economic analysis ; for the unemployment rate, bureau of labor statistics ; for the federal funds rate, board of governors of the federal reserve system ; all series retrieved from the federal reserve bank of st. louis, fred. figure 2. eras 2 and 3 : 1983β2009 and 2010βpresent a. real gdp growth b. unemployment rate quarterly quarterly percent percent β5 c. pce inflation d. federal funds rate quarterly quarterly percent percent overall core β2 note : unemployment and federal funds data are quarterly averages ; overall personal consumption expenditures ( pce ) are the fourβquarter change in the pce price index ; core pce is the fourβquarter change in the pce price index less food and energy ; real gross domestic product ( gdp ) growth is the fourβquarter change in the level of real gdp ; all data extend through 2019 : q2. shaded bars indicate periods of business recession as defined by the national bureau of economic research. source : for overall pce, core pce, and real gdp growth, the u. s. bureau of economic analysis ; for the unemployment rate, bureau of labor statistics ; for the federal funds rate, board of governors of the federal reserve system ; all series retrieved from the federal reserve bank of st. louis, fred. figure 3. realβtime estimates of r * and u * fomc
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the modest recovery. the desperate search for growth and jobs by governments and policy makers, following seven years of gradual reforms, could give some credence to this view amidst feelings of reform fatigue. however, i argue that it would be wrong to listen to these opinions. the pace of the veld, j. ( 2013 ), β fiscal consolidations and spillovers in the euro area periphery and core β, european economy economic papers 506, october. rannenberg, a., c. shoder and j. strasky ( 2014 ), β the macroeconomic effects of the european monetary β s union fiscal consolidation from 2011 to 2013 : a quantitative assessment β, mimeo. bis central bankers β speeches recovery is not being affected by lack of finance. finance would be abundant if there were investment projects with prospects of good return. a fourth possible answer to the conference β s question relates to a β liquidationist β view that amazingly surfaced again, in spite of the lessons from the 1930 β s. its defenders claim that macroeconomic policies, aimed at mitigating the recessionary consequences of the crisis, do more harm than good in the medium - term. however, some accept that reforms to strengthen capital and liquidity buffers in credit institutions were necessary. according to this view, the crisis stemmed from excessive credit, debt and bad investments and thus, deleveraging and liquidation of bad capital must happen. applying a very accommodative monetary policy to fight recession would risk inflation or, in the more modern guise of the doctrine, would lead to asset price bubbles and future crises. consequently, monetary policy, in view of the alleged ineffectiveness of macro - prudential policy, should have become restrictive since 2011 or 2012. according to this reasoning, precedence should be given to the financial cycle over the stabilisation of the business cycle or, in more telling terms, precedence should be given to the risk of asset price bubbles over the risks of deflation and unemployment. acknowledging that my description of these four different opinions has hardly been neutral, in my view, a combination of the first and second approaches is the appropriate response to the question setting the conference theme. nevertheless, i want to clearly state that the financial regulatory reform has to be completed and extended through further efforts to contain risks in the so called shadow banking sector and to strengthen macro - prudential policies. believing that advanced economies face a protracted period of low growth that requires accommodative monetary policy
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real sector β, quarterly journal of economics, 112 ( 3 ), pp. 663 β 691 ; diamond d., ( 1984 ), β financial intermediation and delegated monitoring β, review of economic studies, 51 ( 3 ), pp. 393 β 414. it started with gurley, j. g and shaw, e. s. ( 1955 ) β financial aspects of economic development β american economic review, 45, pp. 515 β 538 ; goldsmith, r w ( 1969 ) financial structure and development β yale university press ; shaw, e. ( 1973 ) : β financial deepening and economic development β, oxford university press, new york, and mckinnon, r. i. ( 1973 ) β money and capital in economic development β, brookings institute. more recently, see king r., and r. levine, ( 1993 ), β finance and growth : schumpeter might be right β, quarterly journal of economics, 108, pp. 717 β 737 ; rajan, r. and l., zingales, ( 1998 ), β financial dependence and growth β, american economic review, 88, pp. 559 β 586 ; fisman, r., and i., love, ( 2007 ), β financial dependence and growth revisited β, journal of european economic association, 5, pp. 470 β 479. cecchetti s. g., and e. kharroubi, ( 2012 ), β reassessing the impact of finance on growth β, bis working paper 381 and arcand j. l., berkes e. and panizza u., ( 2012 ) β too much finance? β, imf working paper 12 / 161. cecchetti s. g., and e. kharroubi, ( 2012 ), β reassessing the impact of finance on growth β, bis working paper 381. popov a., ( 2013 ), β credit constraints, equity market liberalization and growth rate asymmetry β, journal of development economics, 107, pp. 202 β 214 ; beckaert g., and popov a., ( 2015 ), β on the kink between the volatility and the skewness of growth β, mimeo. reinhart c. m., and rogoff k. s, ( 2009 ), β this time is different.
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alwyn jordan : shaping the caribbean's banking landscape remarks by mr alwyn jordan, deputy governor of the central bank of barbados, at the caribbean association of banks'50th anniversary dinner, bridgetown, 24 october 2024. * * * tonight, we gather to celebrate a remarkable milestone β 50 years of the caribbean association of banks. this half - century journey is not just the story of an association, but the evolution of a region's financial landscape. it reflects our collective strength, vision and commitment to the development of our economies and societies. the caribbean association of banks or cab, has long served as a vital pillar in the region's financial ecosystem. since its inception, cab has played an instrumental role in shaping the caribbean's banking landscape, guiding the development of a resilient and inclusive financial services industry that meets both regional and international standards. our banking systems in the region are more robust, responsive and vibrant, as a result of the collaboration across the caribbean's financial institutions which has been fostered by cab, and this ensures that our banks are well - equipped to handle the evolving challenges of the global economy. this is exemplified in the fact that following the covid - 19 pandemic - induced job losses and economic strains, the capital adequacy ratios of banks across the region have strengthened on average, reflecting the resilience of our institutions. similarly, nonperforming loan ratios, which peaked in 2020, decreased significantly in 2023, compared to the prior two years. this reduction is a clear indicator of the ongoing stabilization and recovery within our financial sector ; demonstrating our ability to effectively navigate through adversity and emerge stronger. history of cab building on this legacy of collaboration, cab has evolved over the past 50 years from its humble beginnings to meet the changing dynamics of our financial sectors in the region. initially formed in 1974 as a direct response to the region's need for greater financial independence and reduced reliance on external providers, cab's founding goal was to support the ownership and development of a financial services industry with the capacity to satisfy the financial needs of people in the region. in its early years, cab played a vital role in uniting regional financial institutions and acting as an advocate for indigenous banks. the association aimed to ensure regulatory compliance, promote economic growth, and improve financial services accessibility in the caribbean. over the decades, cab has expanded its scope to address emerging challenges in the global financial landscape, such as anti - money laundering and the
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risk. there is a nontrivial risk, every time you go out in your car, that you will become involved in an accident. that doesn β t prevent us from driving our cars, even though the cost of an accident may be considerable, because we have insurance. secondly, we have to consider the impact of risk minimisation on our efficiency. we can minimise the risk of damage to our car by using it as little as possible, and taking the bus to work and school. not many barbadians are persuaded that is an efficient thing to do. thirdly, all of us have incorrect perceptions of risk. most people don β t realise that the risk of being murdered is actually lower than the risk of dying in a car accident, almost anywhere in the world. and even statisticians who are aware of it don β t derive any particular reassurance from that knowledge. fourthly, there are the risks we cannot know. on cctv on saturday evening i watched an animated debate between experts on either side of the debate about genetically modified foods. the truth of the matter is that the current generation of genetically modified foods has not been around long enough, in sufficiently widespread use, for us to know what the long term effects might be. the same is true of prolonged use of cellphones and computers. bis central bankers β speeches there are more technical imponderables with respect to the measurement of risks that cannot be readily explained in a short speech. for those who have an interest, i can recommend the excellent book " the black swan " by nassim taleb, which i reviewed for the central bank β s economic review, available on the central bank of barbados website. the complexity of the it security challenge is aptly illustrated by an email members of the barbados information society received from the late great james corbin, just before his tragic death. in it he reported that computer power was now available to uncover even the most secure password, by a massive process of iteration, in shorter times than we would have expected. does that mean we should not have secure passwords? absolutely not ; we should be as secure as is reasonable, using numerals in combination with upper and lower case letters. but i, for one, will not henceforth ever compose a password that is longer than is called for by the programme or service i am using. in view of the complexity of the issues, and the number of unknowables, what we may expect
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governing council are clearly separated from other ecb tasks. the governing council β s commitment to deliver on its primary mandate must not be put in doubt. at the same time, a successful banking union in the euro area will help crisis prevention in future. it will also be helpful for crisis resolution at present. on both counts swift implementation of ssm and srm would reduce, not increase, the risks of overburdening monetary policy. over the medium term, and in most circumstances, monetary and financial stability are complementary. this also applies to the task of supervision to maintain sound financial institutions. conflicts arise once one or the other objective is put in jeopardy and if appropriate instruments are not in place to achieve the respective objectives. today, most countries have adopted arrangements where possible conflicts are appropriately managed and internalized inside the central banks. what monetary policy can do and cannot do this brings me to the role of monetary policy in times of financial crisis. we need, again, to distinguish three aspects : crisis prevention, crisis management and crisis resolution. on crisis prevention, maintaining an environment of price stability is the best contribution that monetary policy can make to supporting financial stability. the attention paid to money and credit variables in the ecb β s monetary policy strategy also helps to take into consideration the build - up of financial imbalances and associated development in asset markets. these in turn can imply risks to both financial stability and price stability over the medium term. 1 on crisis management, in a financial panic there is a legitimate and well - established case for central banks to step in to provide liquidity as a lender of last resort. the well - known principles established by bagehot in the 19th century remain a valuable guidepost : β lend freely, to illiquid but solvent institutions, against adequate collateral, at a penalty rate β. while this is easier said than done in practice, these principles remain a salutary reminder of the need to guard against moral hazard in central bank crisis measures. responsibility for crisis resolution lies outside the domain of monetary policy and is up to supervisory and fiscal authorities. more precisely, while the ssm is to be entrusted with the analytical role performed inside the central bank, the srm needs to take the financial and redistributive decisions that belong to the political sphere, when it comes to winding down non - viable banks. more broadly, addressing the root causes of the crisis, both economic and financial, is up to other policy domains, it namely lies in
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as an example where government regulation may have adverse consequences on financial markets and monetary policy transmission. i would not like to enter into the case for or against the ftt. bis central bankers β speeches reservations are well known, while it is appropriate for us to take a neutral view on the objectives of this measure. looking at the specific ftt proposal published by the eu commission on 14 february, nonetheless attention needs to be drawn to possible negative implications for the implementation of monetary policy and financial stability : β’ incentives to replace secured market funding ( subject to ftt ) with central bank liquidity ( exempt from ftt ), which may hamper market liquidity and increase banks β recourse to the eurosystem funding. β’ the possible distortion will be largest on the shortest maturities in the secured money markets, i. e. repo market ( given ftt does not take into account maturity ). β’ reduced liquidity in secondary fixed income markets ( including government bonds ) which may hamper smooth monetary policy transmission and worsen market fragmentation at a time when many of these markets remain fragile. for these reasons a careful impact assessment warranted in these respects and some modifications in the current proposals merit consideration. some decades back, long before the financial crisis, james tobin gave us four definitions of financial market ( in ) efficiency ( in his fred hirsch memorial lecture 1984 ) 2 : 1. information arbitrage efficiency β accepted by tobin in its weak form. 2. fundamental valuation efficiency : do financial asset prices reflect rational expectations of future payment flows? β very much doubted by tobin. 3. full insurance efficiency : do financial markets support pareto efficient, complete markets arrow - debreu allocations? β very much questioned by tobin, since incomplete financial markets interact with inefficient goods and labour markets. 4. finally, tobin proposed a notion of β functional efficiency β, i. e. do financial markets and intermediaries provide value to society at large? do they channel savings to the most productive investments, by pooling risk and allocating it to those best placed to bear it? it is this fourth notion ( not much found in our finance textbooks ) that we need to revert to assess the financial system in the wake of the crisis and its service for the real economy. while he was critical of the considerable resources that tended to be devoted to β churning β, to β gambling β and endogenous, self - referential activities in financial market, he was a lifelong
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, which is part of the wider eurosystem bank lending survey, provides very useful information on issues such as the banks β lending policies, their demand perceptions and their risk assessments. the september 2007 and january 2008 results highlighted the tightening in credit conditions on accounts of the higher cost of funding. they were nevertheless more optimistic than those of the euro area, and banks reported particularly sustained demand by both non - financial corporations and households. reminiscent of the effects of the 2001 - 2003 downturn on financial markets, fiscal policy in luxembourg is not oblivious to the current developments. the financial services sector accounts for about 30 % of total tax receipts and complacency in the early stages can have dire consequences for the medium term policy. after three years of significant revenue windfalls, the development in 2007 continued to be stronger than what could have been expected on the basis of the regular tax assessment bases. according to the preliminary results, the central government balance also returned to a surplus equivalent to 0. 7 % of gdp, for the first time after five years. nevertheless, the outlook for 2008 is highly uncertain, and, if the downturn on financial markets were to persist or to worsen, that would, akin to the real gdp prospects, weigh on tax receipts. lessons to be drawn and concluding remarks let me now share with you some reflections about lessons that may be drawn from the recent turmoil. there are a number of weaknesses that have been highlighted during the recent months and call for corrective actions by the private and public sectors. a financial sector that generates on the one hand huge revenues for some of its participants but on the other hand regular crises with high costs for non - participants, is in my view ripe for a hard look at the balance of existing incentives. the first issue that i would like to stress is the obvious underestimation by financial actors and supervisors of the actual degree of leverage in the financial system. this leverage is not only generated by traditional banking activities but also by highly leveraged institutions, sivs, conduits, lbo - financed firms etc. yet there has been an imperfect assessment of the existing risks arising from the linkage between the banking sector and all these sivs and conduits. indeed, the recent financial turbulences have pointed out that significant risks may be transferred back to banks using puts, guarantees, credit lines or other mechanisms. hence it seems urgent for the financial industry to improve its risk management practices and the transparency in this respect. these characteristics, coupled
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of my speech, i will try to shed light on how luxembourg has been impacted by these turbulences and what we expect in the near future. as regards the most pressing concerns, the liquidity position of the luxembourg banking sector was hardly affected according to the standard indicators which display a liquidity level considerably higher than the minimum required which is currently set at 30 %. however, as central bank we follow with a great attention the liquidity needs of the luxembourg banking system. as a result, during the turmoil months, we have observed the participation of 4 to 5 additional counterparties for some mros even if on the average the number of bidders has remained unchanged. furthermore, as regards ltro operations, we have also noticed an increase in the average bid amount from β¬3. 9 to β¬4. 3 billion. however, the average aggregate amount of liquidity provided by the bcl to its counterparties has not risen compared to the end of july. notwithstanding this fact, an increase of 20 % in the total collateral deposited at the bcl by our counterparties has been observed from july to december 2007. by this, counterparties might have intended to ensure a potential access to liquidity if needed. finally, the bcl as a member of the eurosystem is participating in the joint actions of the ecb and the federal reserve, providing us dollar funding to luxembourg counterparties. the relative portion of central bank provision of liquidity shows, however, that other national central banks than luxembourg have increased their shares in the total liquidity provisions. this would allow for two deductions : either the luxembourg financial sector is less affected by the crisis and the stable need of domestic intermediaries for central bank liquidity may reflect the net creditor position and the soundness of the aggregate balance sheet as well as the relative independence of these banks inside their groups. or, as a consequence of the crisis, core functions of banking groups have been further centralized and funding and liquidity management is concentrated even more at headquarters than before. let me add that the relative share of luxembourg banks in securitization is low relative to international standards. therefore, banks in luxembourg might be less affected on the liquidity side of the balance sheet than on the asset side. as regards the impact on the economic activity, the fallout from the us housing market problems has provoked a downturn that proves to be more severe and more protracted than initially assumed. in this respect, the euro area and the luxembourg economy
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on this issue in late march and has held consultative meetings recently. final policy recommendations are expected in the summer. β’ the fsb is working to have the hedge fund industry bodies bring forward proposals for high quality global best practice standards for hedge fund managers. these are now expected in may. the various interested bodies will assess their adequacy and report in the fall. three distinct efforts are underway internationally on other systemically relevant entities and products : β’ the joint forum is advancing its project on the differentiated nature and scope of regulation. it covers four areas : ( i ) consolidation and group - wide approach, which deals with non - regulated entities within groups ; ( ii ) hedge funds ( other funds, such as money market funds, will be considered at a later stage ) ; ( iii ) mortgage originators and brokers and other intermediaries ; and ( iv ) risk transfer mechanisms, focusing on credit risk transfer instruments and associated markets. β’ this group is drawing on iosco β s work on unregulated markets and products, focused on securitised products and credit derivatives markets β a consultative document in this area will be put out in the next days. β’ the imf and the bis are advancing their work on methodologies to quantify systemic risk and identify systemically relevant institutions and activities. there will be discussion in the weeks ahead on the expectations for joint delivery for the fall. all the above address a few of the areas for actions highlighted during the london summit. in addition, β’ on supervisory colleges, the fsb is reviewing progress in the establishment and operation of the colleges. it is expected that colleges for all selected large and complex groups will have been established by june. β’ on cross - border crisis management, firm - by - firm groups will be established shortly to review contingency planning for the institutions that have fsb supervisory colleges. β’ the g20 also called on the fsb and standard setters to assess and raise supervisory and regulatory standards and codes, drawing efficiently on existing processes β including the joint imf / world bank financial sector assessment program ( fsap ). three related objectives under this headings include ( i ) fostering greater adherence to international standards ; ( ii ) helping to identify jurisdictions that lag behind in terms of their implementation of these standards ; and ( iv ) supporting a peer review process among fsb members. the fsb, with its expanded mandate and membership, is well placed to carry through and build on these various initiatives.
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low - paid workers. unequal access to health and education across and within countries and a consequent drop in human capital accumulation may worsen the impact on future generations. we praise management for the role the world bank group ( w bg ) is playing in this regard, having quickly conveyed substantial resources to help the poorest and the most vulnerable, supporting the health sector, and providing liquidity to the business sector in low - income countries. even more than in other episodes of widespread crisis, the w bg must provide countercyclical support while promoting long - term growth. these two objectives are not contradictory. indeed, it is necessary to help address the ongoing short - term financing needs of client countries in the fight against the covid - 19 shock while simultaneously promoting sustainable growth. interventions in some areas β such as health or social safety nets β emerge as key priorities. however, education and sustainable infrastructure must not be overlooked, as these sectors shore up resilience to environmental, economic and social vulnerabilities. needs arising from the consequences of the shock are huge, and financing a comprehensive economic recovery plan β targeting both poverty reduction and inclusive, sustainable growth β is challenging. only by working together is it possible to come out of the crisis faster and better : 1 / 2 bis central bankers'speeches international coordination is more important than ever. the world bank group β s financial resources have recently been boosted by the ibrd and ifc capital increase and the very successful ida replenishment. this calls for doubling the effort to coordinate with other multilateral development banks, international financial institutions, and the donor community and to leverage all sources of finance β including from the private sector. in this respect, w bg operations should be informed by a clear understanding of the reasons behind private sector retrenchment from developing countries. it is crucial to assess the extent to which retrenchment results from heightened uncertainty about the length and the depth of the crisis, which might call for a better use of guarantees or blending instruments. at the same time, putting the most appropriate economic policies in place is one of the most effective ways of de - risking. while policies aimed at protecting domestic industries to the detriment of fdi flows may have short - term employment benefits, they may entail larger medium - term costs in terms of innovation, technology transfer, and eventually growth potential. we encourage the w bg to support the adoption of long - term oriented policies in its dialogue with partners
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2002 shows that the price level in the euro countries rose by 0. 5 per cent between december 2001 and january 2002. however, this is not considered to be caused primarily by the cash changeover - the effect of this is estimated to be somewhere in the interval of 0. 0 - 0. 16 per cent. the bank of finland has not yet made a complete analysis of how large an effect the cash changeover has had on prices, but the figures for the month of january give no indication of inflationary pressure from the price rounding - off. however, there have been reports from the netherlands of some effects on inflation. in a number of other countries ( e. g. greece, france and ireland ) the authorities have been keeping a very close watch on price increases and are working to counteract them. naturally, there are a large number of other experiences from the introduction of the euro that could be mentioned in this context, and the riksbank is working on a compilation of the information we have received from other central banks in the euro area. this compilation will be presented in the next progress report from the sifs group ( no. 8 ), which will be published in may. discussion of the timetable for a potential swedish emu membership the timetable for a potential full swedish membership of emu will be determined by the political process. the government bill " sweden and the economic and monetary union " from 1997 states that if the government later finds that sweden should participate in the monetary union, the matter should be put before the swedish people. pronouncements by, for instance, prime minister goran persson indicate that a referendum will be held next year. other political leaders have expressed similar opinions. if the result is a " yes ", then sweden would put forward an application to the european commission and the ecb for an examination of whether we fulfil the legal and economic convergence criteria. the economic criteria assessed are the inflation rate, long - term interest rates, exchange rate stability and the public sector's budget and central government debt. following this scrutiny, the european parliament and the european council shall present their views on the reports made by the commission and the ecb and after this the ecofin council will decide on the commission's proposal to allow sweden to participate in the union. if sweden is accepted, there will be negotiations on when entry will occur and at what exchange rate the krona will be fixed against the euro, which is decided by the ecofin council. after
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##notes and coins. this would in total involve a period of between two and three years from a referendum until the introduction of the euro is complete. however, i believe that this period can be shortened somewhat, assuming that the political process openly and clearly chooses a transition process and establishes a timetable for the different stages. it is worth remembering, in this context, that there is no reason why a cash changeover should have to be made at the start of a year, for practical reasons it would be better implemented in march or october. another alternative described in the report is known as " big bang ", i. e. to begin a cash changeover at the same time as the krona exchange rate is fixed and full membership of the monetary union occurs. this scenario requires a preparation period of 2 - 2. 5 years. this makes the demand that the euro can be handled in all transactions in sweden, both physical and electronic, and by everyone in sweden, from the corner tobacconist to the national swedish social insurance board and the major banks from the first day of membership. as this alternative involves a simultaneous changeover in it systems, other practicalities such as accounting and payment of taxes, as well as a physical cash changeover, it makes high demands on co - ordination and information. taking into account the longer preparation period prior to the actual emu membership required in this alternative, it would take longer until sweden could fully participate in all forums for co - operation and decision - making within the monetary union than would be the case with a gradual transition process. the advantage of this scenario is that it would avoid uncertainty arising among the general public over the position of the euro during the transition period in that the euro could be used everywhere immediately. it has not yet been established what kind of transition scenario we would have in sweden. nor is it yet clear how much time would be required, partly because the political process has not yet chosen a transition scenario and partly because changes are constantly being made in operations and it systems that affect the time required for a potential transition. examples of measures that reduce the time required for a potential membership are that it systems that are being modernised for other reasons are designed to also process euros. within the riksbank we are working on reducing the length of time calculated as necessary for the production of swedish euro coins. the result of our preparations and those of the financial sector are reported, as i mentioned earlier, in regular progress reports. number 8 will be published in may.
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has adopted a risk management framework which indicates the level of equity the rbi needs, given the risks it faces. the dividend policy of the rbi then becomes a technical matter of how much residual surplus is available each year after bolstering equity. frameworks thus reduce the space for differences. the rbi β s role in macroeconomic stability is, however, still fuzzy. while rbi clearly has responsibility for the safety and soundness of credit institutions and the stability of the external account, there are some areas that are hazier. for example, with an inflation focused framework, the rbi β s ability to be accommodative depends on fiscal prudence from the center and states. how much should the rbi warn on fiscal profligacy, including the building up of contingent liabilities, and when should such warning be seen as interfering in the legitimate decisions of the elected representatives of the people? this is an area where clarity would be useful. strengthen oversight the freedom the rbi has to take operational decisions such as the fcnr ( b ) swap arrangement, albeit invariably in consultation with the finance ministry, is important. however, there are always government entities that are seeking oversight over various aspects of the rbi β s activities. multiple layers of scrutiny, especially by entities that do not have the technical understanding, will only hamper decision making. instead, the government - appointed rbi board, which includes ex - officio government officials as well as government appointees, should continue to play its key oversight role. in this regard, all important rbi decisions including budgets, licenses, regulation, and supervision are now either approved by the board or one of its sub - committees. vacancies in the rbi board, which have remained unfilled for many months now, should be filled quickly so that the full expertise and oversight of the board can be utilized. it is also important that parliament understand what the central bank is doing. the governor and deputy governors interact regularly with various parliamentary committees, but we have also initiated a six - monthly interaction with the parliamentary standing committee on finance, where the governor reports on the activities of the bank, and the committee offers its views and concerns. rank of rbi governor there is a reason why central bank governors sit at the table along with the finance ministers in g - 20 meetings. it is that the central bank governor, unlike other regulators or government secretaries, has command over significant policy levers and has to occasionally disagree with the most powerful people in the country. it is dangerous to
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##apitalized entirely if only the rbi paid a larger dividend to the government. let me explain why matters are not so simple. if what follows is complicated, trust me, it is. but pay attention, students, especially because it is about your money. i am sure you will understand. how does the rbi generate surplus profits? we, of course, print the currency held by the public, as well as issue deposits ( i. e. reserves ) to commercial banks. those are our fixed liabilities. as we issue these liabilities, we buy financial assets from the market. we do not pay interest on our liabilities. however the financial assets we hold, typically domestic and foreign government bonds, do pay interest. so we generate a large net interest income simply because we pay nothing on virtually all our liabilities. our total costs, largely for currency printing and banker commissions, amount to only about 1 / 7th of our total net interest income. so we earn a large surplus profit because of the rbi β s role as the manager of the country β s currency. this belongs entirely to the country β s citizens. therefore, after setting aside what is needed to be retained as equity capital to maintain the creditworthiness of the rbi, the rbi board pays out the remaining surplus to the rbi β s owner, the government. the rbi board has decided it wants the rbi to have an international aaa rating so that rbi can undertake international transactions easily, even when the government is in perceived difficulty β in the midst of the taper tantrum, no bank questioned our ability to deliver on the fcnr ( b ) swaps, even though the liability could have been tens of thousands of crores. based on sophisticated risk analysis by the rbi β s staff, the board has decided in the last three years that the rbi β s equity position, currently around 10 lakh crores, is enough for the purpose. it therefore has paid out the entire surplus generated to the government, amounting to about rs 66, 000 crores each in the last two years, without holding anything back. this is of the order of magnitude of the dividends paid by the entire public sector to the government. in my three years at the rbi, we have paid almost as much dividend to the government as in the entire previous decade. yet some suggest we should pay more, a special dividend over and above the surplus we generate. even if it were legally possible to pay unrealized surplus
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inflation is actually back at 2 percent? the difficulty with this strategy is that monetary policy affects real activity and inflation with a substantial lag. if the fomc were to delay the start of the policy normalization process for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals. such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession. in addition, continuing to hold short - term interest rates near zero well after real activity has returned to normal and headwinds have faded could encourage excessive leverage and other forms of inappropriate risk - taking that might undermine financial stability. for these reasons, the more prudent strategy is to begin tightening in a timely fashion and at a gradual pace, adjusting policy as needed in light of incoming data. conclusion to conclude, let me emphasize that, following the dual mandate established by the congress, the federal reserve is committed to the achievement of maximum employment and price stability. to this end, we have maintained a highly accommodative monetary policy since the financial crisis ; that policy has fostered a marked improvement in labor market conditions and helped check undesirable disinflationary pressures. however, we have not yet fully attained our objectives under the dual mandate : some slack remains in labor markets, and the effects of this slack and the influence of lower energy prices and past dollar appreciation have been significant factors keeping inflation below our goal. but i expect that inflation will return to 2 percent over the next few years as the temporary factors that are currently weighing on inflation wane, provided that economic growth continues to be strong enough to complete the return to maximum employment and long - run inflation expectations remain well anchored. most fomc participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter. but if the economy surprises us, our judgments about appropriate monetary policy will change. references ascari, guido, and argia m. sbordone ( 2014 ). β the macroeconomics of trend inflation, β journal of economic literature, vol. 52 ( september ), pp. 679 β 739. ball, laurence ( 2013 ). β the case for four percent inflation, β central bank of the republic of turkey, central bank review, vol. 13 ( 2 ), pp. 17
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about a possible decline in stock prices triggers the aforementioned fallacy of composition. against such a backdrop, the bank has decided to begin exploring specifically the provision of subordinated loans to the banks that are subject to international capital standards. this measure aims at ensuring the smooth functioning of financial intermediation and the stability of japan β s financial system, by enabling japan β s banks to maintain sufficient capital bases even in severe financial and economic environments. by the measure taken by the bank, financial institutions are provided with three channels to raise capital ; ( 1 ) capital raising by financial institutions through markets, ( 2 ) capital raising based on the act on special measures for strengthening financial functions, ( 3 ) borrowing subordinated loans from the bank. subordinated loans by the bank will work effectively in conjunction with the other two measures to raise capital. in addition, providing such a safetynet measure would enhance the robustness of japan β s financial system and the functioning of financial intermediation even under the stressed conditions. for a central bank, this kind of direct provision of quasi - capital funds is an extremely extraordinary measure. however, considering the future stress scenario of the financial system, the bank has judged that, from the standpoint of a central bank, it is necessary to do its best to maintain the smooth functioning of financial intermediation and ensure the stability of the financial system even by conducting this extraordinary measure. the bank expects financial institutions to grasp the thinking behind the measure and to strive to maintain the smooth functioning of financial intermediation with further efforts of boosting capital bases. needless to say, risk management is extremely important for financial institutions, which cannot be emphasized too much. however, under the current circumstances, as i mentioned above, the surfacing of the risk stemming from the fallacy of composition should be avoided. to that end, it is important for the management of financial institutions, while conducting sound business operations, to boost capital bases with envisioning the consequences for japan's economy. the bank also expects financial institutions to pay due concern for the smooth communication with their client companies to convey business policies and lending stances. it is the basic premise that the stability of the financial system should be ensured in order to return to a sustainable economic growth path under price stability. from the standpoint of a central bank, the bank is determined to make its best effort to secure the stability of the financial system. we would appreciate your continued support and cooperation. thank you.
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setting standards remarks given by dave ramsden, deputy governor for markets and banking iso 20022 conference, bank of england 6 december 2018 with thanks to carsten jung, amy lee, varun paul, neil pearston, cameron penny, james southgate and tom smith. all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx welcome all to today β s iso 20022 conference. iso produces a lot of standards, but it β s those related to financial messaging, and in particular payments data which is what we β re here to talk about today. i β m going to open this event by talking a little more about why the bank, along with pay. uk and the payment systems regulator ( psr ), is so keen to work with the payments industry to deliver this important change to create the conditions for the next generation of innovation in uk payments and internationally. to the bank of england, data, and the ability to collect, process and interrogate them, is vital to its ongoing ability to deliver its mission. careful analysis of economic data is a key input into the monetary policy committee β s deliberations. the bank collects large quantities of data from the firms it supervises ; that lets us understand their businesses individually and collectively, and so underpins the decisions of the financial policy committee and prudential regulation authority. in my own area, markets and banking, financial market data are crucial for calibrating and managing our own operations and risk management. the decisions that we make affect the whole economy, and ultimately serve the good of the people of the united kingdom. and, making these decisions effectively relies on good data. this isn β t new : the bank has been collecting data in one form or another since its foundation in 1694. but while data have always been important, the pace of change in technology has unlocked much greater potential. across public and private sectors alike the possibilities of leveraging data on a massive scale or in innovative ways are being explored β in health and consumer tech, in finance in the form of fintech, and regtech and suptech for regulators like the bank. 1 as well as providing new opportunities for individual firms, the use of data in fintech β to better price and allocate capital and to monitor the uses to which it is being put β has the potential to support productivity growth across the wider economy. 2 3 it is often said that β data
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largely owing to the adverse developments in participation that we did not fully foresee. now that the economy has slowed ( and probably entered recession ), we are starting to see labour market indicators turn. vacancies have stabilised and there are tentative signs they will fall from their historically high levels. should economic slack emerge and unemployment rise as the latest mpc forecasts imply, that will weigh against domestic inflationary pressure and ease the threat of inflation persistence. it is these two factors β the evolution of energy prices and developments in domestic labour markets β as well as the policy responses to them, such as the fiscal announcements made last week, that drive my current assessment of the outlook for monetary policy. if you like, these are the main arguments of my monetary policy reaction function, especially in so far as the typically more persistent domestically - driven dynamics of inflation stem from the labour market and corporate pricing behaviour. as i have said on previous occasions, in my judgment there is still some more to do with bank rate in order to address prevailing inflationary pressures and complete the necessary normalisation of monetary policy following a decade or more of exceptional accommodation. bank of england in line with the mpc β s most recent forecast and communication and on the basis of the information we have available today, i do not anticipate the levels of bank rate priced in financial markets when the forecast β s conditioning assumptions were frozen12 will be required. but, given the need to contain the risk of greater inflation persistence implied by potential second round effects, further action is likely to be required to ensure inflation will return sustainably to its 2 % target over the medium term. as ever, my votes on bank rate at the december mpc meeting and beyond will be determined by pursuit of the inflation target, and guided by the evolution of the economic and financial data. conducting central bank asset purchases but the mpc is not only taking decisions about bank rate. in parallel with increases in bank rate, the mpc has also embarked on quantitative tightening. gilts held as a result of qe conducted over the past decade or more have been sold as of the beginning of this month, following the decision in february 2022 to cease reinvesting the proceeds of maturing bonds. qt is another aspect of the normalisation of the monetary policy stance. the mpc has committed to unwinding its qe holdings in a gradual and predictable manner. gilt sales are running β in the background β, rather than being responsive to month
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mandates for the ecb and the bank of england? under hierarchical mandates, price stability or low inflation is typically the principal objective, and other objectives can be pursued only once the inflation objective is met. second, there could be different strategies for achieving a given set of objectives. of course, the most important factor in determining monetary policy strategy is likely the nature of the objectives themselves, so any differences in strategy may be related to the first question. at any rate, is a taylor - rule type of approach β well aligned with a dual mandate and therefore a simple representation of the u. s. policy response β different in practice from the flexible inflation - targeting strategy of the bank of england and the two - pillar strategy of the ecb? if so, what are the consequences of the differences in strategy for how central banks respond to unexpected developments? third, what determines how effective a central bank is in meeting its objectives, given its strategy? this takes us into the main subjects that this program will cover. to what extent does the process followed in making monetary policy shape the details and effectiveness of the outcomes? does the nature of the governance and decision process matter? for example, does it matter whether there is a single governor or a committee ; whether there are outsiders as well as insiders on the committee ; whether there is individual or collective responsibility for the decisions of the committee ; and whether the committee is made up only of centralized members or also includes regional representatives? does the effectiveness of policy depend on the central bank's skill in communicating the intent behind its policy and the future direction of policy and, therefore, on the transparency of the process itself? does the effectiveness of the policy depend on the instrument independence of the central banks as well as the overall relationship between the central bank and the rest of government? it is interesting to try to identify differences in practice among central banks. but is the more meaningful story a convergence in practice around the world? is there any real difference between a monetary policy executed under dual mandate and under flexible inflation targeting? if central bank practices are converging, is this due to a convergence in the economic environments or to greater acceptance of a common intellectual framework regarding what central banks can and should do as well as how those goals can be achieved? the politics of monetary policy well i have finally reached my assigned topic β the politics of monetary policy. i use the term to describe the relationship between the central bank and the rest of government. in an earlier paper on this subject,
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interest rate decision suggest that the labor market has continued to improve. although job gains slowed some last month, over the most recent three months payrolls have increased 230, 000 jobs per month on average, as the unemployment rate declined. moreover, the spending indicators that we have in hand for january point to a pickup in economic growth this quarter. further, the 12 - month change in average hourly earnings has moved up in recent months and stood at 2 - 1 / 2 percent in january. in addition, the rate of core consumer price index inflation over the past 12 months exceeded 2 percent, though this was not true of the core price index of personal consumption expenditures that the fed monitors closely. however β and there is frequently a β however β in our business β further declines in oil prices suggest that total inflation will likely remain low for somewhat longer than had been previously expected before moving back to 2 percent. in addition, global financial markets have been unusually volatile since the turn of the year. for instance, the s & p 500 volatility index ( vix ) rose markedly in early january, though it remains below the levels it reached in august of last year and in 2011, and it last week declined below its average value since the start of the year. the large movements in asset prices likely reflect increased concern about the global outlook, particularly ongoing developments in china and the effects of the declines in the prices of oil and other commodities on commodity - exporting nations. asset price declines may also reflect a reassessment of the prospects for growth in europe and japan, and perhaps also a recognition that u. s. gross domestic product and productivity growth have remained stubbornly low. if the recent financial market developments lead to a sustained tightening of financial conditions, they could signal a slowing in the global economy that could affect growth and inflation in the united states. but we have seen similar periods of volatility in recent years β including in the second half of 2011 β that have left little visible imprint on the economy, and it is still early to judge the ramifications of the increased market volatility of the first seven weeks of 2016. as chair yellen said in her testimony to the congress two weeks ago, while β global financial developments could produce a slowing in the economy, i think we want to be careful not to jump to a premature conclusion about what is in store for the u. s. economy. β of course, the fomc is closely monitoring global economic and financial developments and
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currency had been pegged to the au dollar, new zealand β s exchange rate to the rest of the world would have been higher, interest rates would have risen three times already, and our recession would probably have been deeper. the argument is even stronger for other currencies, such as the us dollar. australia and new zealand are not the same, but we are far more similar to each other than to europe or the us. if our currency had been pegged to the us dollar over the past decade, interest rates would have been lower for longer in 2003 and 2004, exacerbating the housing boom ( figure 3 ). some of the challenges of a currency union can now be seen in euro area economies such as ireland, greece and spain, where monetary policy settings have been unable to lean against unsustainable domestic booms, or against the deep recessions that followed. figure 3 policy interest rates in nz, the us, and australia source : bloomberg figure 4 gdp growth in euro area economies source : datastream singapore β s monetary policy regime is sometimes pointed to as an alternative to inflation targeting that has maintained stability in the currency while achieving a track record of low and stable inflation. over the past two years, of course, this has not been the case, with inflation approaching 8 percent in 2008 and prices falling in 2009. over a longer period, it does appear that singapore has generally managed to guide its exchange rate to keep inflation stable. but a range of special factors made this possible β singapore β s extraordinarily high trade ratio, its large stock of domestic savings and foreign exchange reserves, and a range of supplementary stabilisation instruments and capital controls. in particular, in new zealand, with its much larger non - traded sector, a singaporean regime might potentially have required greater swings in the exchange rate than we actually saw to achieve similar inflation outcomes. global policies, the tax system and financial stability also matter a lesson from this period is that while monetary policy can always achieve price stability, whether this occurs in the context of balanced growth also depends on other factors. as the housing boom has shown, these factors include global policy settings and the structure of the tax system. looking back over two years of crisis, perhaps the key lesson is that financial stability cannot be ignored when thinking about macroeconomic stability and the conduct of monetary policy. we β ve been reminded that financial system developments have the potential to complicate monetary policy enormously, and that stable prices do not
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, but it gets exacerbated by the international capital flows, particularly when the changes in such flows happen to be unrelated to domestic fundamentals. in such a situation, managing the transition turns out to be a critical challenge for policy making, and the management requires a more difficult and dynamic trade off between commitment and flexibility in policy. overall, while added risks β both upside and downside β are inevitable with increasing global financial and economic integration, the emes may consider strengthening their resilience through not only sound macroeconomic management but also by adopting appropriate prudential measures. over a period, co - ordinated efforts, both at regional as well as global levels, could also help emes to cushion themselves better against the risks of financial globalisation. thank you. 6 / 6
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gent sejko : albania's participation process in the single euro payments area address by mr gent sejko, governor of the bank of albania, at the hearing of the european affairs committee of the albanian parliament on the preparation of albanian institutions regarding albania's participation process in the single euro payments area ( sepa ), tirana, 17 july 2024. * * * honourable chair, honourable members of the committee, first of all, thank you for the invitation and the opportunity to share with you the work we have dedicated to the first step towards the economic integration in the european union. this step regards to the official submission of albania's application to the european payments council, for participating in the single euro payments area, also known as sepa. the application was sent in june, as scheduled in the action plan. given the multi - dimensional importance of sepa, i extend my gratitude for the attention expressed by this committee in the process of albania's membership into sepa. its successful finalisation will benefit from the support of all the public institutions involved in the integration processes. before delving into more details regarding the application process, allow me to briefly summarise its history and context. the work for albania's participation in sepa has started in 2021, when the bank of albania became part of the regional project " payments modernization in the western balkans ". this project originates from the agreements achieved under berlin process and aims at developing financial and economic relationships among western balkan countries, while simultaneously integrating the region into the european union. in november 2023, the european commission, to encouraging the efforts made by the countries to expand their economic integration with the european market, included the accelerated participation in sepa in their priority agenda of regional enlargement. previous assessments of the world bank experts showed that albania was noticeably prepared to start the application, since it fulfilled almost all the criteria. in particular, it was assessed that albania had made a significant progress regarding the alignment of its payment legislation with that of the european union. the commitment to start the application for membership in sepa was re - highlighted in the ministerial as well : " the western balkans toward the single euro payments area ( sepa ) ", which was held on 28 february of current year, where albania expressed its dedication to submit the application by june. the bank of albania has led and coordinated the work for submitting the application. however, to accomplish this task, the contribution and cooperation of other public institutions,
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list last year, removed a barrier that prevented it from fulfilling the application criteria. our legislation regarding money laundering is assessed as generally compliant with the acquis, although some legal amendments are still necessary. we are in close contact with our colleagues at the financial intelligence agency, as we discuss how to address these issues which will successfully support albania's application. however, allow me to highlight that a beneficial contribution originating from participation in sepa, besides the formalisation of the economy, is the possibility to implement in a more rigorous manner money laundering. more concretely, shortening the payment cycle and including fewer actors in this process, gives lawabiding institutions the possibility to monitor more effectively. furthermore, the practices 2 / 5 bis - central bankers'speeches and standards of sepa schemes implement the advanced communication standard ( iso 20022 ) to create the necessary pre - conditions so that the monitoring of transactions is rendered in a more effective manner. other legal aspects comprising the necessary criteria to participate in sepa are related to the protection of competition and personal data, free capital movement, taxation according to international standards, private international rights, etc. the assessment of relevant authorities, supported also by the conclusions of screening meetings, show that our legislation is adequately aligned with the acquis, in the context of sepa. albania's application will be analysed by the european payments council, which manages the sepa schemes, as well as the european commission. the latter should agree to include albania in the geographical scope of the sepa schemes in the context of integrating non - member countries in the european market, based on the same rules and standards. participation in sepa, beyond the political importance of the country's integration in the european union, brings a series of benefits for albanian consumers, businesses and the economy. first, cross - border payments in euro are conducted at the same costs with national payments. this means cheaper and faster payments with the countries which are sepa members. currently, transfers and payments with the european union countries and vice versa are conducted through correspondent banks. this is a costly and inefficient channel in terms of : transaction execution time ; monitoring of its finalization ; transparency of working conditions ; and consumer protection. through sepa, the costs of cross - border euro payments with its member countries are at a minimum 5 times lower. most of cross - border financial transactions are conducted with the eu countries - around 58 % of goods'trading. at the same time,
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is that the riksbank now has a larger funding need than before. i shall explain why. the reason is that the foreign currency reserve needs to be much larger than before, as the banks β funding in foreign currency has expanded so much over the past ten years. and this means that the traditional funding sources, equity and banknotes and coins, are not enough. how should the riksbank fund its assets? as i have already described, the riksbank chose to borrow foreign currency on the international capital market through the swedish national debt office when the foreign currency reserve was strengthened. we assessed that this was the most suitable procedure at the time and it functioned well and is still doing so. although the riksbank is able to borrow euros and dollars at a low cost on the capital market through the national debt office, the interest expenditure for the currency loans is higher than the return the riksbank receives on the money when it is invested in safe assets with very low risk. the difference is around 0. 2 per cent. this means that the strengthening of the foreign currency reserve of sek 200 billion costs the riksbank around sek 400 million a year. one can regard this cost as a form of insurance premium that the riksbank considers is worth paying to ensure a good level of preparedness for a crisis. as the swedish banking see peter sellin and virginia queijo von heideken : β the banking system β s liquidity surplus and interest rate formation β in sveriges riksbank economic review 2014 : 3. bis central bankers β speeches system is so large and important to the swedish economy, this cost can be considered small in relation to the costs that might arise if the banking system ceased functioning. the reinforcement of the foreign currency reserve thus reduces the riksbank β s profits by around sek 400 million a year. this is one of the reasons why it is has been discussed in various contexts whether the banks should contribute to the costs of the reinforcement. the riksbank has previously argued that it would be reasonable if the banks stood for the cost of the part of the foreign currency reserve needed to manage emergency liquidity assistance5, and we will probably have reason to return to this question in the future. how can the riksbank obtain funding in the future? by going through the balance sheet in this way, we can clearly see that the riksbank has little opportunity to influence how it obtains funding. we have already observed that
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of 512 brand new and branded computer sets. i understand that this number may go up further to about 540 units if we generate additional savings. let us therefore give these groups as well a well - deserved round of applause! but beyond the computers we are turning over to the department of education today, i am so inspired by the change in the public mindset about the barya. when we started our coin recirculation program, our slogan simply declared : β ang barya mahalaga, huwag bale - wala - in gamitin. β when we launched β tulong barya para sa eskwela β our slogan changed to β ang barya mahalaga, lalo na kapag pinagsama - sama. β i believe this national lesson in saving proved to our schoolchildren that every little amount saved adds up and can be the start of wealth creation. such is the power of barya! β tulong barya β therefore is a perfect introduction to the integration of saving and money management into our public elementary school curriculum. i am pleased to announce that today, we are turning over a total of 104 lesson plans on saving, money management, and basic economics to be incorporated in three subjects : social studies, character education and work education. i understand lessons on entrepreneurship are featured extensively in the teachers β guides for the work education subject. the development of these teachers β guides, the first step in the integration process, was completed by deped β s lesson exemplar writers from luzon, visayas and mindanao last april here in manila under the collaborative work of economic policy reform and advocacy or epra, bangko sentral and the deped. to continue the integration process, the monetary board unanimously approved the budget for the pilot - testing of the teachers β guides. today, try - out teachers with their principals and supervisors are in mandaluyong to complete a two - day launching and orientation for pilottesting in luzon. similar programs will be held in the cities of angeles, cebu and davao within the next two weeks. overall, pilot - testing for saving, money management and basic economic concepts will be conducted from august to september and will cover 9 regions, 15 provinces, 18 towns and cities, 36 schools, 180 teachers and approximately 9, 000 pupils. this morning, therefore, we turn over to the department of education, 484 copies of teachers β guides that will be used for the pilot - test phase. from
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than three hours, some of the strongest measures in the history of the euro, creating our now almost famous pepp [ pandemic emergency purchase programme ]. on the fiscal front, with its next generation recovery plan of eur 750 billion, financed by a shared debt instrument, the european union demonstrated an unprecedented level of solidarity towards the countries most affected by the covid crisis. monetary policy is no longer the only game in town, and europe has reacted appropriately over the past year. the ecb β s balance sheet is now double the size of the fed β s as a percentage of gdp : page 8 sur 14 moreover, thanks to our social model and its higher automatic stabilizers, the overall 2020 fiscal stimulus in the euro area has been almost as strong as in the united states : yes, president biden β s american rescue plan is significantly bigger for 20212022. but according to many american economists, it could create a risk of the economy running above potential, β making monetary policy more difficult to use in the futureiv β, as expressed by olivier blanchard β who is not really known as a supporter of austerity. the new infrastructure bill, to be announced today, could have more positive long - lasting effects in two regards : it strengthens supply, including possibly in education ; it could reverse the race to ever more tax cuts in advanced economies. with that in mind, for us europeans, our main issue now is not the scale of our fiscal response but the speed of its execution. speed, once more, is our collective handicap. governments now need to implement the recovery plan to which they have agreed and they need to do so urgently. in other words, we in europe need to walk our talk. on a structural level, three major crises in the past ten years β 2008 - 2009, 2011, 2020 β have shown the need to complete the economic union in addition to the successful monetary union, starting with a permanent fiscal capacity. yes, a page 9 sur 14 big step forward has been made thanks to next generation eu. but the real hamiltonian moment will come when the existence of a permanent common fiscal capacity allows genuine countercyclical action to be taken to counter major asymmetric shocks. conversely β and not contradictorily β, adequate fiscal discipline is key to cope with economic reversals. look at germany, which fixed the roof while the sun was shining, and made appropriate use of its financial leeway during the crisis. there will be a debate
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is because this floor β and consequently the standardised approach β would become the constraint for half of the international banks. i must stress that our goal is to finalise basel iii, based on improved models that remain risk sensitive, and not to move onto basel iv, which would use the standardised approach. therefore, an agreement must be reached on a lower output floor along with a tightening of controls over the banks β internal models, much like the targeted review of internal models ( trim ) that was approved for the single supervisory mechanism and the results of which we are more than willing to submit to peerreview. this stance is shared at the very least by other european countries such as germany and the netherlands, and by the european commission. international cooperation on financial reforms is a common good that has been extremely precious during these past eight years and is crucial to our future. the temptation to go back on it is extremely dangerous and would increase the risk of another financial crisis. in this respect, the current situation in the united states is worrying. generally speaking, the measures that will be effectively adopted and implemented by the new administration and the competent government agencies regarding financial and banking regulation still have to be clarified. there is a possibility that the regulations already finalised in basel such as the fundamental review of the trading book ( frtb ) or the net stable funding ratio ( nsfr ) could be called into question. unilateral deregulation would be nothing less than a lose - lose scenario with serious consequences for the stability of the global financial system as well as the competitive landscape for us and european banks. in view of this, the integration of a possible agreement on basel iii into european standards should be finalised while keeping a close eye on what the other major countries will do, starting, as you will have understood, with the united states. we must also avoid regulatory arbitrage. for non - bank players, significant progress is required on liquidity management by funds and asset management companies, on fintechs and more generally on the major digital platforms, which, if they carry out financial activities, will have to comply with similar regulations sooner or later. as for the financial markets, the decrease in market liquidity must be explained, and in doing so we must also consider the role of high frequency trading and its highly debatable social utility. a final word on central counterparties ( ccp ) : i would like to acknowledge the valuable proposals recently made by the european commission to insist that
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rachel lomax : uk monetary policy β the international context speech by ms rachel lomax, deputy governor of the bank of england, at the apcims annual conference, london, 17 october 2005. * * * those of you who have logged on to the bank of england β s website recently will have noticed that it has turned a cheerful shade of orange. it is a lovely website and we are very proud of it. but perhaps now was not the best time to major on pictures of happy shoppers clutching bulging carrier bags! the fact is that website design β like monetary policy - is beset by information problems and lengthy lags. these make it very hard to get the timing of changes just right. when the organisers of this conference pressed me for a title some weeks ago, i decided to talk about the international context for uk monetary policy for two reasons. first, i was fresh from a summer spent reading this year β s top business books, whose key theme is the dizzying pace of change in the global economy. but second, i wanted look beyond the shopping story that β understandably β tends to dominate the press, to some of the other factors that have to be weighed when the mpc sets interest rates. but let me start with the recent weakness in retail spending. judging by the latest indicators, this looks like persisting, at least in the near term. but while spending on retail goods has been virtually flat since last autumn, total consumer spending, including services and utilities, has continued to grow, though quite slowly. and while the prospects for consumption are clearly important, so too are those for other key drivers of the economy, such as business investment and net exports. the question is : if consumers decide to save more, are the conditions in place for other sources of demand to take up the slack? the answer depends in part on what is happening in the rest of the world. plainly, developments in the rest of the world will influence domestic monetary policy. the uk is a very open economy, exposed to trends and shocks that affect supply as well as demand, and our financial markets are fully integrated with global markets. sterling is one of the world β s most liquid currencies, and the ftse 100 is heavily weighted with multinational companies. let me give one example of what this can mean in practice. over recent years, the progressive shift toward sourcing from low cost producers has been depressing import prices, and improving the terms on which we trade. this
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β s early days still and i don β t want to front run any of the important thinking that needs to be done to inform that response. but i did want briefly to offer some thoughts around how we might embed some of the material i β ve touched on in this speech into our regular policymaking processes. first, building out our forecast evaluation capabilities β much as i have sought to do through these examples β will mean we can more systematically ask ourselves whether we have learned anything about the shocks that explain past data β and therefore how to think about the mediumterm outlook for inflation. second, as i hope i have shown, we can learn lessons from a range of models to help us identify shocks. [ 19 ] and we can use these models to build the potential for shock uncertainty into our scenario analysis. third, we should routinely be explaining publicly how monetary policy would need to change should we be wrong about the nature of the shocks that are hitting the economy. fourth, we should build more sophisticated analysis of climate policy into our bread - and - butter monetary policy work. there is mounting evidence that it matters for price stability. i plan to return to this in a speech later in the year. and finally, we need to make sure we explain how we are interpreting the data β in terms of its underlying shocks β and therefore what it is telling us about the medium - term outlook for inflation. that will help reduce the sensitivity of market rates to short - term data volatility and that will ultimately ensure that rates are appropriate for the state of the economy. updating my view of the economic outlook the economy has been undergoing waves of adjustment as the effects of the unprecedented shocks of recent years ease off. in informing my view of the outlook from here i find it helpful to look through the volatility in the data and group the shocks that are driving the economy into two buckets. first, there is the lagged effect of the large shocks that hit the economy in the past. the energy price shocks that i talked about earlier imparted downwards pressure on inflation through very mechanical so - called base effects β where headline inflation falls as increases in prices a year earlier are not repeated β and through a cooling effect on demand. but they are unlikely to have much further impact on activity or inflation as we look ahead. you can see that in part in chart 2, where the impact of energy prices on the output gap is estimated to be very flat from this point onwards. monetary policy is
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. the forward - looking indicators suggest further growth in jobs over the months ahead with vacancies at a very high level. our central forecast is for the unemployment rate to decline to below 4 per cent later this year and remain below 4 per cent next year. if this comes to pass, it would be a significant milestone. australia has not experienced unemployment rates this low since the early 1970s, almost half a century ago. the main source of uncertainty about the outlook continues to be covid - 19. the pandemic is not yet behind us and it is entirely possible that there will be more outbreaks. it also remains to be seen how households use all those savings that they have accumulated over the past two years. there are major geopolitical uncertainties and our largest trading partner, china, is working through a difficult adjustment in its property market. the sharp pick - up in inflation in parts of the 1 / 4 bis central bankers'speeches world, especially in the united states, has come as a surprise and is an additional source of uncertainty about the outlook. inflation for the first time in several decades, inflation has become a major issue in the global economy, although it is worth noting that inflation rates in most of asia remain low. in the united states, cpi inflation is running at more than 7 per cent and in the united kingdom it is expected to be at a similar rate soon. in germany, inflation is 5. 7 per cent and in new zealand it is 5. 9 per cent. these are the highest rates in decades and the higher inflation is turning out to be more persistent than earlier expected. this lift in inflation largely reflects the surge in global demand for goods during the pandemic coinciding with a reduced ability of the global economic system to produce and distribute goods. a related factor in a few countries, including the us and the uk, has been a decline in labour force participation, which has reduced the supply of labour and contributed to stronger wages growth. higher prices for petrol, electricity and gas have also pushed inflation up in many countries. in australia, we too have had higher inflation than we and others expected, although the increase here is smaller than in many other countries. in headline terms, inflation is 3Β½ per cent and in underlying terms it is 2. 6 per cent. we are feeling the effects of global supply - chain problems and higher oil prices, but we have not seen the same increases in goods prices as have occurred in the united states. it
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glenn stevens : issues in payments systems remarks by mr glenn stevens, governor of the reserve bank of australia, to the annual general meeting of the australian payments clearing association, sydney, 23 october 2014. * * * thank you for the invitation to speak on the occasion of australian payments clearing association β s ( apca ) annual general meeting. the reserve bank and apca have a long history of working constructively as they carry out their respective responsibilities in australia β s payments system. we both have an interest in ensuring a safe, efficient and competitive payments system that meets the needs of end - users. when i last addressed an apca gathering in may 2012, we were at a particularly interesting juncture for the payments industry. the bank was approaching the end of a two - year period of public discussion and consultation about innovation in the payments system. this extensive public process, involving all the key industry players, and users of the payments system, had not been done before. after a roundtable attended by most members of the payments system board, numerous meetings at staff and management level, extensive feedback about published material and so on, the bank released the conclusions of its strategic review of innovation in the payments system in june of that year. the reserve bank regards that document, and the process that led up to it, as a landmark for the payments system in australia. interestingly enough, the innovation review was not mainly motivated by concerns, on our part, that innovation was not occurring, even though it was sometimes claimed that the regulatory regime inhibited it. on the contrary, we were seeing, and continue to see, rapid innovation in some elements of the system, as financial institutions, payment schemes and a variety of other players seek to deploy new technology to compete with one another or to draw business away from traditional payment forms like cash and cheques. the most obvious recent example is the use of contactless payments. in mid 2012 relatively few of us would have made a contactless payment. now they have become second nature to most of us and australia has become the leading contactless market in the world. while this does not represent a fundamental change in underlying payment systems, it is a quite significant change in the way consumers interact with the payments system and changes the cost of payments to both merchants and consumers. our recent diary survey suggests that the adoption of contactless has largely reflected a switch from traditional contact - based card presentment, but that there has also been some displacement of cash, particularly at smaller transaction sizes
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conference of the chair bdf / pse, paris school of economics current challenges of monetary policy september 24, 2019 speech i by francois villeroy de galhau, governor of the banque de france press contact : mark deen ( mark. deen @ banque - france. fr ). page 1 sur 11 ladies and gentlemen, it is a particular pleasure to welcome you on the occasion of the 10th anniversary of the chair banque de france / pse. all anniversaries are worthy of celebration, but the continued partnership of banque de france with the paris school of economics is a particular reason for cheer. over the past ten years, it has been a testimony of how academic research and economic policy making can reinforce each other. in the past ten years, thanks to their interaction, much has been done to make our financial environment more capable of reining in financial excesses. thanks to both, we have introduced many new unconventional tools to implement monetary policy. but these changes have also brought new questions and new uncertainties, on which more academic research is needed. hence, i would like to elaborate on two present challenges : the conduct of monetary policy in our current economic environment, and the interaction between monetary policy and financial stability. * * 1. monetary policy in the face of new challenges 1. 1. a new environment calling for new responses these new uncertainties arise at a time when the global economic environment has itself become increasingly uncertain. in the short term, many of the uncertainties obstructing the economic outlook β and especially the manufacturing sector β are man - made β and even one - man made. contingencies that not so long ago appeared as tail risks, such as the possibility of an escalation of trade tensions or a disorderly brexit, have become looming threats. but uncertainty also pertains to long - term structural trends. over the past decade, the world economy has steadily recovered from the global financial page 2 sur 11 crisis. but it has not returned to its pre - crisis normal. interest rates remain at historical lows, due to a historically low level of the natural rate of interest r * ii. in the short run, this analysis β uncertainty as the first trigger of the present slowdown β should guide our ranking of policy answers. monetary policy plays its role, but it should not β less than ever β be the only game in town. it should not even be the first game in town. the first response
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would be for government - driven uncertainties to be addressed directly by governments, by removing the self - induced threats to world growth. failing that, a second answer is for fiscal policy to step in. fiscal stimulus from countries with fiscal space would both stimulate aggregate demand, and, with targeted, quality investment, increase long - term growth. iii wage increases in countries that have long relied on wage moderation could also help in bolstering aggregate demand and inflation. and pro - growth reforms would raise r *. monetary policy provides a third response. for the past ten years, there is little doubt that ecb monetary policy under mario draghi β s presidency has made a decisive contribution not only to safeguarding the euro in 2012, but also to the significant recovery of the euro area since 2013. over this period, more than 10 million jobs have been created. our unconventional measures are estimated to add almost 2 percentage points of growth and of inflation between 2016 and 2020. since i am talking to an audience of researchers i should of course emphasise that such numbers are subject to uncertainty. however, the most recent monetary policy decisions of the governing council have given rise to many comments. my rule of conduct has been to not add mine in the heat of the moment. two weeks later, let me only say that i supported many elements of the package, including the strengthening of the state - dependent forward guidance and the welcome introduction of a tiering system, similar to those in all other jurisdictions with negative interest rates. but i was not in favour of the resumption of net asset purchases at this time, because i thought that further purchases are unnecessary right now, given page 3 sur 11 the very low levels of both long - term interest rates and term premia, which have continued to decrease significantly since we stopped net purchases last december. the main purpose of qe is to extract more duration risk from the bond market ; indeed, term premia have already been successfully compressed β the term premium on a 10 - year ois is estimated to be significantly negative at around - 60 to - 100 bp. i also think that the significant strengthening of our forward guidance, the consequent prolongation of the reinvestment period for the very important stock of qe assets β 2600 billion euros β, and the dfr cut, were already a powerful and consistent combination. the forward guidance now states that we expect rates to remain at their present levels, or lower, until the inflation outlook robustly converge
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, the restrictions on rmb interbank transfers between personal accounts and corporate accounts were also removed. 26. with these relaxations, the key hurdles that had previously limited the development of offshore rmb wealth management business have been eliminated. market players have been responding to these relaxations quickly with the launch of a wide range of rmb investment products. these include rmb - denominated insurance policies and investment funds. investor interest in these products has been phenomenal. 27. in developing our offshore rmb business, i have to say that hong kong does not have a monopolistic power and we are also facing competition from other financial centres. however, hong kong does enjoy the first mover advantage over the others in a number of ways. over the years, the hkma has built up a very good working relationship with the mainland authorities. we have accumulated a wealth of operational and regulatory experience in rmb business. we have also developed the most advanced financial infrastructure for rmb transactions with cross - border links with the mainland. these are some of our unique strengths, and it is not easy for others to replicate them, at least in the short term. 28. with all these developments, where should we go next? at the policy level, i believe it would be important to build an effective two - way channel to increase interaction between the rmb onshore and offshore markets. a potential area that can be explored is to allow such real economic activities as fdi and odi to be possibly settled in rmb in a gradual and controllable manner. if this can be done, offshore rmb liquidity can be channelled back to the mainland in the form of fdi to support mainland β s economic activities, while in the opposite direction, mainland enterprises can make use of rmb for the settlement of odi to eliminate foreign exchange risk. given the significant share of hong kong in mainland β s fdi and odi, building such a two - way channel will also be conducive to the sustainable development of the offshore rmb market in hong kong. 29. in addition to fdi and odi, we have been in close communication with the mainland authorities to explore other possible channels. in this regard, we welcome the announcement of the people β s bank of china in august regarding the introduction of a pilot scheme allowing eligible entities in hong kong to make use of their rmb funds to invest in the mainland's interbank bond market. the launch of this scheme has opened up a
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crockett, to deliver the fourth hkma distinguished lecture. mr crockett, please.
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i would like to give my view on interrelationships between the euro area and japan, focusing on capital flows. as i have mentioned, in the euro area, monetary union has triggered various kinds of structural change, bolstering the development of the overall economy. the impact is so large that it has affected not only the euro area itself, but also japan. an example of the effect is direct investment. direct investment from western europe to japan soared more than tenfold in a year, from about 100 billion yen in 1998 to over 1 trillion yen in 1999. investment from france was especially large, which reflects the capital collaboration that was seen in the automobile industry. direct investment from japan to the euro area is also on the rise. the increase in direct investment will promote the reallocation of management resources, technology transfer, and competition, resulting in boosting both economies. the increase in capital flows between the two economies is well evidenced in portfolio investment. in 1999, japan β s portfolio investment in the euro area exceeded that in the united states. japan β s foreign portfolio investment in france, germany, the netherlands, and luxembourg, the four euro area countries for which individual data are available, totaled almost 5. 6 trillion yen in 1999. on the other hand, japan β s portfolio investment in the united states was 1. 4 trillion yen. this is rather noteworthy, because, in international capital markets, the united states, with its huge current account deficit, absorbs a lot of funds provided by the euro area and japan. despite such a situation, capital flows between the euro area and japan are surging, and both economies are growing more interdependent in international capital markets. in the increasingly integrated global market, the euro area and japan are becoming more and more dependent. i hope today β s forum will contribute to bringing the two economies closer, and serve as an opportunity to enhance communication between the private sector of the euro area and that of japan. i know this forum will be a success.
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improvements in foreign exchange settlement, and enhancing the framework for resolving cross - border failures of financial institutions must not be forgotten as well. concluding remarks already forty years ago, the nobel prize - winning economist sir john r. hicks predicted that in a globalized financial market β a national central bank will no longer be a true central bank, β but will become β single banks in a world - wide system. β whether we like it or not, this is clearly the direction we are heading. bis central bankers β speeches
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. climate change is already anchored in the realm of central banking given its crucial implications on our statutory objectives namely, price stability and financial stability. in fact, one of the first measures i took upon assuming governorship of the bank in march 2020 was to apply for membership at the network of central banks and supervisors for greening the financial system ( ngfs ). the bank was admitted as member of the ngfs in july 2020. in october 2021, i set up the bank's climate change centre, amid the pandemic. the main objectives of the centre are to integrate climate - related and environmental financial risks into the bank's regulatory, supervisory and monetary policy frameworks, while supporting the development of sustainable finance. the centre is also expected to review the bank's internal operations with a view to reducing its carbon footprint. the climate change centre has already pursued some key initiatives to drive its climate agenda. it has created awareness in the financial sector about climate - related risks and opportunities from the transition to net zero. in particular, the guideline on climate - related and environmental financial risk management, issued in april 2022, will assist financial institutions to better assess and manage climate - related risks in their lending and investment activities, thus minimizing risks of losses from the adverse impact of climate change. the guideline contains disclosure requirements which enhances market transparency and support the assessment and pricing of risks for green projects by businesses and investors. the bank has also worked together with the ministry of finance, economic planning and development and other stakeholders to put in place the appropriate regulatory frameworks for the issue of sustainable bonds by financial institutions, the corporate sector and government. in this respect, the bank has released its guide for the issue of sustainable bonds in june 2021. the guide acts as a preliminary yet compulsory consultative document which lays the foundation for the issuance of green, blue, social, climate and sustainability bonds in mauritius. the guide sets out the requirements to be followed by the issuer such as pre - issuance structure, use of proceeds and reporting. disclosure requirements with regard to use of proceeds which constitutes one of the major criteria that an issuer of green bond need to fulfil prior to engaging with potential investors. the sustainable finance framework for mauritius was published in august 2023. it governs the issuance of specific types of sustainable debt instruments by the government of mauritius, aimed at financing the implementation of the mauritius sustainability roadmap. the proceeds from these instruments will be channelled
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. calls on a bank β s liquidity will also arise when they are unable to roll over or maintain their existing funding. assumptions regarding the likelihood of this are based on the regulators β views about what forms of funding are more stable than others. going forward, these β run - off β assumptions should be expected to influence the funding strategies adopted by adis. to give one example : the incentive for adis to issue short - term debt to other financial institutions will be considerably reduced under basel iii, as funds borrowed with less than 31 days to maturity would need to be invested entirely in liquid assets. thus there will be a marked decline in the provision of such debt by banks. at the same time, the demand for liquid bank debt from other financial institutions, such as insurance companies and pension funds, is increasing, in part as a result of regulatory developments in those sectors. so there is a decrease in supply and an increase in demand for liquidity. normally, in economics, such a situation would result in a change in the price ( of liquidity in this case ) to clear the market. my concern is that it is not clear that the demand and supply curve for liquidity provided by the regulated financial system will intersect at any reasonable price. how this is resolved is not entirely clear. if it were to push the supply of liquidity outside the regulated system, that would not be a good development. in any case, it is quite probable that new funding instruments will emerge that seek to accommodate the new regulations. in some other jurisdictions, a greater reliance on debt with 31 - day notice periods ( given the 30 - day liquidity stress scenario ) has already been observed. regulators and financial institutions will need to ensure that this does not create a new stress point at 31 days as funding piles up at that maturity. one product where we are yet to see the effect of the new liquidity regulation on pricing is at - call deposits. relative to other types of deposits, these products are very expensive from a liquidity point of view, but they still offer interest rates that are a large spread above the cash rate. as banks focus on the liquidity costs of such products, i would expect to see these rates decline relative to those on other types of deposits. indeed, it would be surprising if the repricing doesn β t occur fairly soon given the liquidity regulations take full effect at the beginning of 2015. however, our liaison with banks suggests that these deposits are particularly sensitive to changes in
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indeed, with the well - being of most people in the world today. although average economic well - being has increased considerably over time, the degree of inequality in economic outcomes has increased as well. importantly, rising inequality is not a recent development but has been evident for at least three decades, if not longer. 2 the data on the real weekly earnings of full - time wage and salary workers illustrate this pattern. in real terms, the earnings at the 50th percentile of the distribution ( which i will refer to as the median wage ) rose about 11 - 1 / 2 percent between 1979 and 2006. over the same period, the wage at the 10th percentile, near the bottom of the wage distribution, rose just 4 percent, while the wage at the 90th percentile, close to the top of the distribution, rose 34 percent. 3 in 1979, a full - time worker at the 90th percentile of the wage distribution earned about 3. 7 times as much as a full - time worker at the 10th percentile. reflecting the relatively faster growth of wages of higher - paid workers, that ratio is 4. 7 today. the gap between the 90th and 10th percentiles of the wage distribution rose particularly rapidly through most of the 1980s ; since then, it has continued to trend up, albeit at a slower pace and with occasional reversals. the long - term trend toward greater inequality seen in real wages is also evident in broader measures of financial well - being, such as real household income. 4 for example, the share of income received by households in the top fifth of the income distribution, after taxes have been paid and government transfers have been received, rose from 42 percent in 1979 to 50 percent in 2004, while the share of income received by those in the bottom fifth of the distribution declined from 7 percent to 5 percent. the share of after - tax income garnered by the households in the top 1 percent of the income distribution increased from 8 percent in 1979 to 14 percent in 2004 ( congressional budget office, 2006 ). 5 even within the top 1 percent, the distribution of income has widened during recent decades. 6 the measures of inequality i have cited reflect " snapshots " of a single time period, usually a year. consequently, they may not tell a complete story about the extent of inequality or its trend. for example, the fact that an older, more - experienced worker earns more than a newly hired employee will this result is calculated using the data on compensation
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to reconcile these numbers, but to do so involves a lot of movement of people from furlough, unemployment and inactivity, in ways not so far seen. there are a number of possible outcomes to this puzzle, which have different implications for the labour market. the first is that the furloughed workers will largely be re - absorbed into their old jobs, and so even with a further reduction in unemployment and inactivity, we are left with an excess of job vacancies. if these excess vacancies are associated with shortages of workers in particular sectors, this may push up on wages. this could also happen if furloughed workers do not return to their old jobs, but are not suitable for those jobs and sectors where there are a high number of vacancies. in other words, there is a mismatch in the labour market. such an outcome is likely to raise the rate of unemployment consistent with stable wage growth i. e. the nairu. the second outcome is different. vacancies may be temporarily higher, and above their steady state level in the short - run, if firms are anticipating that it will be harder to find workers in the future when unemployment falls. in that scenario, demand picks up, the impact of matching frictions in the labour market dissipate over time, and both vacancies and unemployment fall. the nairu would be less affected in this scenario. another possible explanation is that the level of advertised vacancies is elevated due to employers overestimating the growth of demand to come just as the speed of the recovery falls off. in this case, some of the vacancies turn out not to be jobs as employers change their mind, or at least hiring is put back. the implications of these labour market outcomes are quite different for growth, inflation, and thus monetary policy, which illustrates the uncertainty we face. before turning to inflation, i want to say something on earnings. on the face of it, headline earnings are elevated. pay growth of around 8 % for july ( the latest available number ) is very high. but there are a couple of covid - related distortions that have been pushing up on this growth : there is a large base effect from the fall in average earnings last year, and a compositional effect from the pattern of impact of covid on activity across the economy and how that relates to typical pay rises by type of job [ 2 ]. all of that said,
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to help us to measure progress towards to financial inclusion in namibia. this is because we will now know where we are and how far we are from our final destination. this should then enable us to plan and act better in implementing our financial sector development and inclusion agenda. in fact, this will put us on the right path to reach our intended objectives. what is particularly pleasing to know is the fact that finscope 2011 has attempted to collect information on financial literacy. it is our hope that this would provide a view and give us a baseline with which we can work, going forward. financial literacy is an important aspect in the process of ensuring financial inclusion. this is because consumers will only be able to effectively make use of available products and services if they are aware and are well bis central bankers β speeches informed ; not only of the availability of products and services but also of how they can make use of such and on what terms. director of ceremonies, the purpose of this gathering is for finmark trust to share with us the outcome of the namibia finscope 2011 survey. let me therefore end here and allow them enough time to do just that. i thank you! bis central bankers β speeches
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ipumbu shiimi : enhancing financial inclusion in namibia welcome remarks by mr ipumbu shiimi, governor of the bank of namibia, at the launch of the namibia finscope 2011, windhoek, 8 march 2012. * * * director of ceremony heads of syndicate member institutions ms maya makanjee, ceo of finmark trust distinguished invited guests members of the media ladies and gentlemen, good morning! i would like to welcome you all to this very important workshop, held at this very important time in the development journey of our country. these are important times because we are redefining and transforming our economy for the better, especially for those who had not been able to participate meaningfully in the economy, so far. a special welcome goes to our important partners, the finmark trust team. we appreciate your contribution with a view to enhancing financial inclusion in our country. many of us here should by now be familiar with the name finmark trust as you have been in namibia many times. four ( 4 ) years ago, finmark trust came to share the results of finscope 2007 with us, and they have also presented on several other issues in between. ladies and gentlemen, i have come to learn and agree with the proponents of the saying : β if you cannot measure it, you cannot manage it β. this cannot be more relevant to us, given our current efforts of wanting to address the socio - economic challenges facing our country. as a country, namibia is being haunted by challenges of unemployment, poverty, financial exclusion amongst others. to be able to address these challenges better, we need to be able to measure the depth of those challenges. fortunately for us, finscope is one of the instruments that we are able to make use of for that purpose, in addition to other surveys undertaken nationally. the usefulness of finscope has been demonstrated during the preparation of the draft financial sector strategy 2011 β 2021, especially the chapter on financial inclusion. information from the finscope 2007 served as a basis from which new targets had to be set. one would probably argue that out - dated information was used, but at least planning was based on something. a scenario of no basis for planning would have been unacceptable. as you might know, ladies and gentlemen, the financial sector strategy advocates for the need to enhance access to financial products and services for the low income and less privileged segments of our population. we have therefore keenly awaited the results of the finscope 2011 survey, as we expect them
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pillars of macroeconomic stability of serbia and reached usd 3. 02 billion in 2006, which is almost half the value of total exports of serbia over the same period. in the course of last year, two institutions engaged in a comprehensive analysis of the types, levels and frequency of such transfers. the world bank staff analysis focused on the transfer of remittances from germany to serbia while ebrd and the government of switzerland placed the emphasis on such transfers from switzerland. the key findings of both studies are as follows : 1. serbian diaspora is among the most numerous in each of the above countries. data for 2004 rank serbia number 11 in terms of the volume of remittances transferred ( us $ 4 billion ). 2. majority of remittances, up to 80 %, is transferred by informal channels, mainly via friends or bus drivers, who often charge for such services, and only a lesser portion, mainly retirement pays, are transferred via bank channels. 3. remittances are mainly spent to cover basic living expenses to raise the standard of living of the recipients above the poverty line and are not part of total savings nor invested in the development of the country. 4. there is no strategy planned with regard to the use of such remittances nor are those funds included in investment projects. 5. transfer of money via banking channels is still expensive and slow and sometimes takes as long as five days. plus, banks in serbia are not very much interested in attracting those transfers. with the kind of organization of money transfers from abroad that we currently have in serbia, it is soon going to be cheaper to fly to belgrade by low cost airline than to send money via bank channels! this is exactly the domain of interest that the nbs is currently exploring and i hope to be able next year to inform you that we have not only established fast and efficient ways of money transfer but also that it will have become cheap, even several times cheaper than it is today. we are currently working along two parallel lines. with one mobile operator in serbia we are trying to organize money transfers via mobile phones and money withdrawals via payment cards. the other system is similar to the classic transfer of remittances and payments would also be received by using payment cards in serbia. both of the above systems imply use of the dinacard system and crediting of accounts literally within minutes. finally, let me address those who are still interested in returning to serbia after many, many years of staying
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. 4 % of gdp in 2016, bringing down the share of public debt in gdp. this helped achieve the three - year objectives of the fiscal consolidation programme, a year earlier than planned. at the same time, fully covered by foreign direct investment for the second year in a row, the current account deficit declined from 6. 0 % in 2014 to 4. 0 % of gdp in 2016. the influence of external factors and the increased resilience of our economy are also evident in the fx market β through maintenance of relative stability of the dinar exchange rate, which is no longer news for anyone. depreciation pressures, emerging late last and early this year, were in part generated by uncertainties in the international financial market and in part by the seasonally higher demand in foreign currency for the purchase of energy products. in an effort to ease excessive shortterm volatility of the exchange rate, the national bank of serbia intervenes in the fx market and will continue to do so, regardless of the direction of pressures. this means intervening on both sides. in so doing, we do not target any particular level of the exchange rate nor do we intend to influence its trend. ladies and gentlemen, dear colleagues, as is well known to you, the task of the national bank of serbia is to preserve not only price, but financial stability as well. the bank has been striving to strengthen the capacity of banks to resolve the npl issue and to encourage the development of the npl market. as a result of measures taken under the npl resolution strategy, the share of npls in total loans declined significantly β according to preliminary data, from 21. 6 % at end - 2015 to 17. 0 % at end - 2016, their lowest since 2011. this only serves to confirm once again that a systemic, interinstitutional and coordinated approach yields results in this area. while my associates from the directorate for economic research and statistics will present in detail our assessments of macroeconomic developments and our latest projections, i would like to highlight several key messages. the national bank of serbia will continue to keep a close eye on and to assess the developments and trends in the domestic market and the international environment. as so far, we shall use all available instruments to ensure that inflation stays low and stable in the medium run. this is the best way in which a central bank, while at the same time maintaining financial stability, can contribute to economic growth. growth is expected to accelerate
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11th international insurance conference paris, 25 october 2019 β insuring in the long term in a short - term world β speech by francois villeroy de galhau, governor of the banque de france chairman of the acpr press contact : mark deen ( mark. deen @ banque - france. fr ). page 1 of 6 madam president, ladies and gentlemen i am delighted to participate in this 11th international insurance conference. this will be my fourth time at this unmissable annual event, but the first for you, florence. bernard delas and i would like to offer you our warmest wishes for success at the head of the federation francaise de l β assurance ( ffa β french insurance federation ). for our part, changes are also underway and i would like to take the opportunity this evening to welcome the appointment of dominique laboureix as secretary general of the acpr, with first deputy secretary general, patrick montagner, whom you know well, at his side. the subject of your 11th conference β β insuring in the long term in a shortterm world β β perfectly sums up the real challenge to the insurance profession. i would like to begin by thanking france β s 712 authorised insurers that never waver in playing their key role in the financing of our economy, with eur 2, 600 billion of investments. in 2018, france became the leading european insurance market, outpacing the united kingdom and germany in terms of total balance sheet value and non - life premiums earned. the french insurance market has also enjoyed strong growth, with revenue up by almost 3 % [ 2. 7 % and 3. 1 % in non - life and life insurance, respectively ]. in response to the legitimate concerns that many of you have raised, i have chosen to focus on two main issues : the challenge of low interest rates ( i ) and our ambition for the solvency ii review ( ii ). * * * i. the challenge of low interest rates a. the economic situation compels us to keep interest rates low i recently marked out the limits that i believe should be set for monetary policy. i thus feel all the more obliged to clarify why the low interest rates are needed, why they are going to continue, and how we have to adapt to them together. i hear your concerns with regard to low interest rates, and i fully understand them. however, it is important not to lose sight of the long - term perspective :
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manuel sanchez : an economic outlook and policy update on mexico remarks by mr manuel sanchez, deputy governor of the bank of mexico, at the united states - mexico chamber of commerce, new york city, 26 september 2014. * * * i am honored by the invitation to be here again in the vibrant city of new york. thank you for the opportunity to share my thoughts with you on the economic outlook and policy challenges we face in mexico. a few things have changed since the last time we were together, and i hope to bring you up to date on the most important developments. i would like to talk first, about the current rebound in the mexican economy and how the financial markets are performing ; then, give you some perspective on inflation and monetary policy ; and finally, describe the most recent progress on mexico β s structural reform agenda. as usual, my comments are entirely my own and do not necessarily reflect those of the bank of mexico or its governing board. the current economic rebound at this time last year, mexico β s economy was deteriorating. today, an incipient upswing is underway. specifically, in the second quarter, mexico β s economy posted vigorous growth, similar in annualized terms to that of the united states. data for the third quarter, including the gdp monthly proxy for july, suggest that momentum continues. improvement in the industrial sector has included a strong push from manufactured products, with transportation equipment doing particularly well. after six consecutive quarters of contraction or stagnation, construction has seen some rebound. external demand has played a predominant role in the recovery due to greater manufacturing exports, particularly to the united states. within that category, automobile exports stand out. in addition, the expansion of services continued, especially those most associated with external demand. on the domestic side, consumption in the second quarter picked up, and recent sales data suggest that the pace continues. formal employment is expanding, as has been the case since 2010. however, total employment has been stagnant this year. the previous two facts are consistent with a slight decline in informality. more formal - sector jobs may have provided support for higher consumption. yet, consumer confidence remains relatively low, indicating some fragility there. furthermore, investment in the second quarter kept up a revival, driven by the private sector, and could strengthen even further in the near term. indeed, this is suggested by the business community β s more positive answer to the survey question of whether or not this is the right moment to invest. 1
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at < http : / / www. financialstabilityboard. org / wp - content / uploads / fx - bis central bankers β speeches orders. this recommendation was designed to address potential conflicts of interest arising from managing customer flow. a sizeable number of banks have implemented this recommendation by shifting the execution of fixing orders from the spot voice fx trading desk to electronic trading desks that execute them with algorithms. as a result, the share of fixing orders executed by algorithm has increased substantially, as we document in the progress report. there is also considerably enhanced internal scrutiny from senior management around fixing transactions. some firms have physically separated their fixing desk from other desks. this segregation of trading functions has involved some cost. other participants regarded the cost of implementing this recommendation as being too high, given the size of their business, and have not implemented it to date. others have decided to cease offering this service directly, in some cases offering customers a portal to other fixing services instead. again, i would like to emphasise that the intention of our recommendations was that it was to apply to all participants, with appropriate consideration to the size and structure of the market. in the case of smaller, less actively traded currencies, separation of business is clearly more complicated than for large actively traded currencies, but in these cases participants should still be able to demonstrate to their customers that appropriate processes are in place, in keeping with the fundamental motivation of the recommendation to reduce the scope for benchmark manipulation. in terms of market conduct, we made a number of recommendations around appropriate sharing of information, including around trading positions ( beyond that necessary for a transaction ) and particularly customer information. these were picked up in a statement of shared global principles that was published following the global fxc meeting in tokyo earlier this year. 3 many market participants have reflected these principles in their internal policies and codes of conduct, as well as revised policies around benchmark execution consistent with our recommendations. fx code of conduct more broadly in terms of improving market conduct, in may this year, the bis governors commissioned a working group of the markets committee of the bis to facilitate the establishment of a single global code of conduct for the fx market and to come up with mechanisms to promote greater adherence to the code. 4 i am chairing this work, with simon potter of the new york fed leading the work on developing the code and chris salmon of the bank of england leading the adherence work. 5 our group comprises representatives of the central banks of
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it, experience had shown β that a monetary framework which gives monetary policymakers a free hand usually deems them capable of more than they should be regarded as being capable of doing β. as an alternative, eucken championed a strictly rules - bound monetary policy. and this is also being given serious consideration, especially by those who feel that central bank independence has to be associated with a narrow interpretation of its mandate. the question of whether rules - based policy is preferable to a central bank independence which, when it comes to the crunch, cannot be achieved anyway, was one of the topics at the latest annual meeting of the american economic association in san diego bis central bankers β speeches it must be recognised that the aim of a stronger rules - based policy framework is to prevent the primary objective of monetary stability from being watered down. central banks use these rules to tie their own hands in order to avoid being co - opted by fiscal policy. the price central banks have to pay for this, however, is that monetary policy also surrenders its flexibility. and it is precisely the decisive contribution made by central banks to stabilisation at the height of the crisis in the autumn and winter of 2008 which showed, in my opinion, just how important and useful such flexibility can be if it is firmly anchored in a clear commitment to the primary objective of price stability. however, the risks of such a policy are likewise becoming increasingly apparent. yet it is not only the benefits of independent central banks which are being questioned. on the heels of the crisis, changes to the monetary policy framework are being proposed which are designed to give monetary policy more policy options in times of crisis. quite some time ago, some β including imf chief economist olivier blanchard β suggested that central banks should set higher inflation targets. now the talk is of switching to nominal income targets. the common idea behind price - level targeting or nominal gdp targets is that, following a period of low inflation or weak growth, monetary policy tolerates higher inflation rates for a time before returning to the target path, thereby giving the economy an additional shot in the arm. i am sceptical of these proposals. a permanently higher inflation target creates permanently higher inflation costs ; although level targets avoid this by allowing higher inflation rates only temporarily, they entail problems of their own. moreover, changing the monetary policy framework during a crisis could dent confidence in central banks and raise suspicions of ulterior motives behind a change in strategy. in an article for the financial times, uk economist
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##ed from the aggregate statistics we often consult. another panel discussion moderated by federal reserve bank of boston president eric rosengren offered valuable perspectives about how the monetary levers we pull and push affect communities, credit availability, and small businesses. in addition to the chicago conference, 7 of the 12 reserve banks have hosted fed listens sessions, and other events are planned for later this year. from these listening sessions, we have heard about innovative partnerships involving employers, workforce development groups, and community colleges to fill training gaps, and about greater flexibility in the workplace around entry requirements and working arrangements. this innovation and flexibility are coming when the labor market is tight and qualified - 13 workers are scarce, and so are welcome developments from the perspective of job creation and retention. all of our fed listens events are being conducted with a high degree of transparency. ( you can view videos of the events or read the summaries on our website. ) in coming regularly scheduled fomc meetings, we will begin our own assessment of our monetary policy strategy, tools, and communication practices, informed by what we heard at the conference and during our listening sessions in the federal reserve districts and by the work of our staff. when the committee tackles important issues, we take the time for wide - ranging and candid discussions, and so i expect our deliberations will continue over several meetings for the remainder of this year. we will share our findings with the public when we have completed our review, likely during the first half of next year. concluding thoughts the economy is constantly evolving, bringing with it new policy challenges. so it makes sense for us to remain open minded as we assess current practices and consider ideas that could potentially enhance our ability to deliver on the goals the congress has assigned us. for this reason, my colleagues and i do not want to preempt or to predict our ultimate finding. what i can say is that any refinements or more material changes to our framework that we might make will be aimed solely at enhancing our ability to achieve and sustain our dual - mandate objectives in the world we live in today. - 14 references aaronson, stephanie r., mary c. daly, william wascher, and david w. wilcox ( 2019 ). β okun revisited : who benefits most from a strong economy? β paper presented at the brookings papers on economic activity conference, held at the brookings institution, washington, march 7 β 8, https : / / www. brookings. ed
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unemployment rate is near a 50 - year low, and inflation is running close to our 2 percent objective. by conducting this review, we are ensuring that we are well positioned to continue to meet our statutory goals in coming years. in addition, the federal reserve used new policy tools and enhanced its communications in response to the global financial crisis and the great recession, and the review is evaluating these changes. furthermore, u. s. and foreign economies have significantly evolved since the pre - crisis experience that informed much of the research that provided the foundation for our current approach. perhaps most significantly, neutral interest rates β or r * β appear to have fallen in the united states and abroad. 3 moreover, this global decline in r * is widely expected to persist for years. the decline in neutral policy rates likely reflects several factors, including aging populations, changes in risk - taking behavior, and a slowdown in technology growth. these factors β contributions are highly uncertain, but, irrespective of their precise role, the policy implications of the decline in neutral rates are important. all else being equal, a fall in neutral rates increases the likelihood that a central bank β s policy rate will reach its effective lower bound ( elb ) in future economic downturns. that development, in turn, could make it more difficult during downturns for monetary policy to support spending and employment, and keep inflation from falling too low. 4 for evidence of a fall in neutral rates of interest in the united states and abroad, see, among several contributions, king and low ( 2014 ) ; holston, laubach, and williams ( 2017 ) ; rachel and smith ( 2017 ) ; and brand, bielecki, and penalver ( 2018 ). for assessments of the risks that u. s. monetary policy will be constrained by the elb and its implications for economic activity and inflation, see kiley and roberts ( 2017 ), erceg and others ( 2018 ), swanson ( 2018 ), and chung and others ( 2019 ). - 3another key development in recent decades is that inflation appears less responsive to resource slack. that is, the short - run phillips curve appears to have flattened, implying a change in the dynamic relationship between inflation and employment. 5 a flatter phillips curve is, in a sense, a proverbial double - edged sword. it permits the federal reserve to support employment more aggressively during downturns β as was the case during and after the great recession β because
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to phase out gradually some of the extraordinary liquidity provision measures and scale back the number, frequency and maturity of longer - term refinancing operations. we conducted the last 12 - month operation in december 2009 and the last 6 - month operation in march 2010. in early march, the governing council decided to return to variable rate tender procedures for the regular three - month longer - term refinancing operations, starting with the operation to be conducted on 28 april 2010. at the same time, we will continue to provide adequate liquidity to the euro area banking system by conducting the main refinancing operations as fixed rate tender procedures with full allotment for as long as needed and, at least, until october this year, so as to facilitate the provision of credit to the euro area economy and further support its recovery. needless to say, if upside risks to price stability were to emerge, the governing council would take timely and appropriate action. fiscal policies in the euro area let me now to turn to fiscal policies. budgetary positions in the euro area deteriorated significantly in 2009 as a result of the economic contraction, fiscal policy stimulus and government support measures for the financial sector. eurostat β s latest estimates show that the average general government deficit ratio in the euro area increased from 2. 0 % of gdp in 2008 to 6. 3 % in 2009. out of the 16 euro area countries, 13 are already subject to an excessive deficit procedure. this year, all euro area countries are projected to record deficits above 3 % of gdp. according to the updated stability and growth programmes, a discernible improvement in fiscal positions is not foreseen in most countries until 2011 and 2012. the magnitude of the worsening of public finances is underscored by the official estimate that the average debt - to - gdp ratio is expected to reach 87 % in 2012, compared with 66 % in 2007 β that is 21 percentage points higher than five years earlier. thus, fiscal imbalances are sizeable, broad - based and likely to persist for some time to come. the deterioration in the fiscal position has been especially acute in a number of euro area countries, with ireland, greece and spain having recorded double - digit deficit ratios in 2009. the large revisions to greece β s budget deficit for 2009 revealed a very serious fiscal imbalance and triggered adverse financial market reactions. following the announcement of additional fiscal consolidation measures by the greek authorities in march 2010, the ecb welcomed these measures as convincing
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tend to use contemporaneous market prices and do not consider the system as a whole. the ecb has developed a composite indicator of systemic stress ( ciss ) 4 that comprises five aggregate market segments accounted for by a range of variables and time - varying rank correlations between them. more recently, the ciss indicator has been used by hartmann et al. ( 2015 ), jointly with credit to the private sector and cycle variables ( industrial production, inflation and a council regulation ( eu ) no 1024 / 2013 of 15 october 2013 conferring specific tasks on the european central bank concerning policies relating to the prudential supervision of credit institutions. see ecb ( 2009 ), financial stability review, special feature b for a discussion on the concept of systemic risk. for an overview, see bisias, d., m. flood, a. w. lo and s. valavanis ( 2012 ), β a survey of systemic risk analytics β, office of financial research working paper no. 0001, january. hollo, d., m. kremer and m. lo duca ( 2012 ) β a composite indicator of systemic stress in the financial system β, ecb working paper no. 1426, march. bis central bankers β speeches short - term interest rate ) in a ms - var, to illustrate the dynamic interaction of systemic financial instability and the macroeconomy in the euro area. 5 catfin, a var and expected shortfall measure at system - wide level calculated with non - normal distributions with fat tails, showing the predictive capacity of financial volatility regarding real economic downturns was proposed by allen et al. 6 similarly, giglio et al. examine 19 measures of systemic risk for the us and 10 measures for the uk and the eu from the perspective of how well they forecast macroeconomic downturns. 7 they also build dimension - reduced risk indexes using principal components and partial quantile regression to demonstrate the robust performance of some indexes in anticipating future macroeconomic downturns. these efforts in developing composite indexes are complementary to the on - going research on the concept of a financial cycle as a sort of a generalisation of the old concept of credit cycle, distinct from the concept of the economic or business cycle. the ecb paper presented this morning by hiebert et al. 8 builds and extends on work done at the bis. 9 it shows how credit and asset prices share cyclical similarities,
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the repeated downward revisions to our estimates of potential growth. this last problem requires structural reforms rather than a monetary policy response. our most recent estimates show potential growth remaining under 2 per cent into 2018 ; this is well below the rate needed for meaningful per capita increases in income and faster job creation. lately, there has been speculation about the end of the hiking cycle possibly having been reached. while the recent improvements to the inflation outlook are a positive development, the risks in the policy environment remain too numerous to be able to say definitively that the hiking cycle is over. we will continue to be guided by the evolving data and our collective understanding as the mpc of what any new data and information suggests for the inflation trajectory. monetary policy and long - term growth this brings me to my second question, about the role of monetary policy in fostering longterm economic growth. it is now widely accepted that the appropriate role of monetary policy is in focusing on price stability in the medium to long run. it can also assist in smoothing short - term growth fluctuations provided that this does not compromise price stability. monetary policy helps to provide a stable, growth - friendly environment but it is most effective if the broader environment is similarly geared towards encouraging investment and unlocking growth potential. in south africa, we have made progress with alleviating infrastructure constraints over the past few years but now β as in the majority of emerging markets β we urgently require structural reforms. without reforms, growth will not accelerate significantly β irrespective of the appropriateness of monetary policy settings. structural reforms required refer to, for example, policies aimed at increasing competition in product and labour markets. many south african sectors are highly concentrated and the barriers to entry for small or new firms are high in an environment dominated by a few longestablished firms. small firms tend to be relatively more labour intensive than large firms, so if the barriers to entry were lowered and more small firms entered the sectors, employment would rise β and it would likely rise faster if this shift were accompanied by labour market reforms. both these policies would not only improve the competitiveness of the economy but also make it more inclusive, providing opportunity for the unemployed, existing small firms and potential entrepreneurs, many of whom are currently locked out of the formal economy. the international monetary fund β s recent article iv assessment of south africa reiterates the need for these reforms, which have also been recommended by the world bank and the oecd 5. fortunately, south africa has a long
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inflation averaged 11, 2 per cent. since 2002 β the first year in which we committed to a target β inflation has averaged 5, 9 per cent, despite two severe spikes in 2002 and 2008. that said, inflation targeting is still relatively young as a policy, and our inflation rate remains structurally high β higher, in fact, than in other emerging markets and in the countries of rival exporters. 11 it is thus especially important to ensure that expectations in south africa are appropriately anchored. inflation expectations have become much less volatile during the inflation - targeting period, indicating increased trust in the bank β s commitment to the target. however, since 2008, when severe food and energy price increases hit south africa, we have suffered exogenous price shocks that have repeatedly driven inflation outside the target range. inflation expectations have shifted upwards as a result. from an average of 5 per cent from 2004 to 2007, inflation expectations 12 rose to average 6, 1 per cent between 2011 and 2013. they have remained stable since then, but are unfortunately stable right at the top of the target the bank for international settlements conducts a triennial survey of global foreign exchange markets. it has found the rand to be the 18th most traded currency globally as of 2013. the johannesburg stock exchange is the 19th largest stock exchange in the world by this measure. see https : / / www. jse. co. za / about / history - company - overview. for example, only 10 per cent of national government debt is foreign currency - denominated. this is south africa β s most recent ranking on the global competitiveness index ( 2015 / 16 ). calomiris, c w and haber, s h. 2014. fragile by design. new jersey : princeton university press. the comparison with other emerging markets relies on international monetary fund ( imf ) world economic outlook ( weo ) data for 2001 - 2015. the inflation rate for rival exporters was calculated using imf weo and united nations comtrade data, with a weighted inflation rate calculated for 2011 - 2015 using south africa β s nine largest export categories ( 73 per cent of total ) from 2012 to 2014. as measured ( for two years ahead ) by the bureau for economic research. bis central bankers β speeches range. a situation where expectations are lower, and the target range is thus more resilient to shocks, provides more flexibility for accommodative monetary. flexible inflation targeting allows us to look through once - off shocks to prices from
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for their insight and contributions over the years. thank you all, and have a great conference.
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. in the fall of 2012, with the unemployment rate hovering stubbornly at around 8 percent and core inflation steadily drifting lower than our 2 percent target, the fed introduced open - ended asset purchases and, later, forward guidance that related federal funds rate actions to thresholds explicitly expressed in terms of our policy goals. together, these efforts have helped the economy make impressive progress toward our employment mandate and appear to be moving us closer to our 2 percent inflation target as well. with the economy undershooting both our employment and inflation goals, monetary policy does not presently face a conflict in goals ; actions that support employment growth also help move inflation up toward our target. yet, as i look to the future and assess risks, i foresee a time when a policy dilemma might emerge : namely, we could find ourselves in a situation in which the progress or risks to one of our goals dictate a tightening of policy while the achievement of the other goal calls for maintaining strong accommodation. bis central bankers β speeches so what happens when a conflict emerges? in such cases, the fomc has said that it will follow a β balanced approach β to achieving its policy goals. i will elaborate at length on this later, but let me summarize how i think we should operationalize this approach today. we should keep our focus on our policy goals and should be highly attuned to both the likelihood and the costs of missing those goals. to me, the risks imposed on an economy forced to operate at the zero lower bound on policy rates are paramount. accordingly, before the fed raises rates we should have a great deal of confidence that we won β t be forced to backtrack on our moves and face another painful period at the zlb. we should be exceptionally patient in adjusting the stance of u. s. monetary policy β even to the point of allowing a modest overshooting of our inflation target to appropriately balance the risks to our policy objectives. conflicting signs in the labor market of course, to judge the success of policy, you have to know when you β ve actually reached your targets. knowing when we hit our inflation target is straightforward. after all, a 2 percent increase in pce prices is an easily identifiable number. but full employment is a far more nuanced concept. as the fomc β s annual january β statement on longer - run goals and monetary policy strategy β recognizes, maximum employment can be influenced by a large number of structural factors that can change over time and
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to these discussions, it is worth recalling why we are here. the words of mr. kofi annan, the former un secretary general, come to mind. he said this : β where once the poor were commonly seen as passive victims, microfinance recognizes that poor people are remarkable reservoirs of energy and knowledge. and while the lack of financial services is a sign of poverty, today it is also understood as an untapped opportunity to create markets, bring people in from the margins and give them the tools with which to help themselves. β i believe we will continue to see massive changes in rapid bursts. in the process, the goal should be to help as many people as we can emerge stronger and more productive members of the human ecosystem. 3 / 3 bis central bankers'speeches
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encik abdul rasheed ghaffour : revolutionising microfinance welcoming remarks by mr encik abdul rasheed ghaffour, deputy governor of the central bank of malaysia ( bank negara malaysia ), at the global symposium on microfinance, kuala lumpur, 22 may 2017. * * * in biology, the transformation of a species is said to happen in rapid bursts. imagine an ecosystem of marine life along a shoreline. for millions of years, it can remain relatively unchanged. but an extraordinary event β such as a sudden move in sea levels β can alter everything quickly. within decades, fishes, mollusks and plants alike can dramatically change in size and shape. ultimately, those that adapt emerge as the stronger species in the ecosystem. we are gathered here today in the very different context of microfinance. nonetheless, parallels can be drawn with the theme of this event, β revolutionising microfinance β. think of the incredible pace of technological change in recent years. in 2016 alone, machine prevailed over man in the world β s hardest board game. reusable rockets became a reality. twitter helped a nation elect their president. for microfinance, that rapid burst of change is already upon us. it is therefore a great honour for bank negara malaysia to partner with the world bank in hosting this global symposium on microfinance. we are privileged to have so many learned speakers here with us to share their invaluable insights. led by innovation across the globe from bangladesh to brazil, microfinance has allowed previously excluded segments of society to grow incomes, build assets and ultimately improve their standards of living. with poverty eradication taking centre stage in the global public policy agenda, such in the united nation β s millennium development goals, these developments are welcome. here in malaysia, microfinance has been an important part of the development agenda. in 2006, the bank introduced a comprehensive microfinance institutional framework to promote the development of a sustainable microfinance industry. this facilitated greater access to financing by micro - entrepreneurs with no collateral, supported by simple application procedures, minimal documentation and quick turnaround times. the microfinance landscape in malaysia has evolved from being government - driven into one with vibrant private sector participation. at the turn of the century, total financing outstanding of the sector stood at usd35 million ( rm151 million ). since then, it has multiplied by more than 30 times to usd1. 2 billion ( rm5.
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operations, risk management, and crisis resolution. 2 they are designed to ensure see leaders β statement released after the g20 pittsburgh summit held on september 24 β 25, 2009. see committee on payment and settlement systems ( cpss ) and technical committee of the international organization of securities commissions ( iosco ), β principles for financial market infrastructures, assessment bis central bankers β speeches that the infrastructure supporting global financial markets is robust and thus well placed to withstand financial shocks. compared with existing recommendations, the new principles introduce new or more demanding requirements. for example, clearing houses that are systemically important and multi - jurisdictional and those that clear complex products will be required, at a minimum, to withstand the simultaneous failure of the two largest participants, instead of the largest participant, as in the current set of recommendations. the principles will apply to all systemically important payment systems, central securities depositories, securities settlement systems, central counterparties, and trade repositories, which collectively clear, settle, and record transactions in financial markets. the bank of japan, in close cooperation with the japanese financial services agency, has participated in the international discussions leading to the agreement on the new principles and is firmly committed to implementing them as soon as practicable. along with this international push for more robust and resilient market infrastructures, there have also been efforts that reflect japanese domestic experiences. while the failure of lehman brothers did not cause much disruption in japan, and hence cross - border spillovers were minimal, it was found that the crisis resolution mechanism at the japan government bond clearing corporation ( jgbcc ) could be further improved. it took herculean efforts at the jgbcc to come up with securities and funds that lehman brothers could not deliver after its bankruptcy filing. it was a close call. much progress has been made to reduce risk and ensure the continuity of operations even in extremely stressful situations, especially in the area of dealing with a large number of fails and raising emergency liquidity. as i have noted at the beginning, these efforts to strengthen market infrastructures in japan are moving forward at a good speed. for example, with respect to the g20 commitment to move otc derivative trading onto centralized clearing by the end of this year, japan has set up the necessary legal and institutional framework, and is probably the first market of any significant size to do so. on this basis, the clearing of cds began from july 2011, and yen interest rate swaps will also be centrally cleared
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are on the firm side. in view of the general outlook that i sketched at the beginning, that seems to us to be appropriate. having reached that position in a fairly timely fashion, the board has judged it to be sensible of late to leave the cash rate steady. my colleagues and i look forward to your questions. bis central bankers β speeches
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life is easier and architecture fosters social life, a city where innovations are born and a city that attracts visitors. obviously, global works in an international group of experts brought together through the global network of experts. his participation in the project is highly welcome, even though he is not an urban planner or sociologist. he has been included in the project team because of his valuable experience won during his participation in numerous already completed projects. problems they are dealing with include optimal location of a sewage treatment plant and usage of treated water in public lavatories, sending waste via pneumatic mail at 100 km / h directly from a rubbish chute to a waste incineration facility and using the heat from their incineration to generate power and produce heating for the neighbouring area, or the arrangement of car parks in central city districts in the form of a remotely controlled warehouse ( no room for people means much more room for cars and no more problems with battered doors ). perhaps you recall that such solutions existed in tokyo teleport town, the japanese town of future, already in 2006. evening global takes his wife to the theatre. two days ago, when he was in hong kong, during a videoconversation they decided that they would love to spend an evening together in a theatre. they both approved the idea and could simultaneously see the repertoire, and were assisted in making their choice by an e - reviewer. they chose to see shakespeare β his plays will never grow old. global β s wife can listen to this play in english via her own mini communicator earphone. during the interval they have an encounter with global β s friend from the time he was a student. it turns out that he recently got married and his wife used to work with global on a project several years ago. they decide to go for a drink together. using their communicators they choose a cosy restaurant next to the theatre and book a table. after the performance they are all in great mood, and recall the beginning of the 21st century with amusement. the waiter discreetly charges global β s non - contact e - wallet for actually ordered dishes. john can easily accept the payments after he comes back home. global registers all transaction details in his financial organizer build into the communicator. thanks to it he can track and analyze his transactions and schedule expenses. he is fully in control of his finances. his personal communicator receives financial operations on an ongoing basis, and confirms or accepts
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. alongside, the current account deficit remains within sustainable levels, other indicators of external viability such as the ratios of indebtedness to gdp and / or reserves are also reflecting a healthy improvement. the government has pursued the path of fiscal consolidation and the ratio of public debt to gdp is gradually declining. international investors have warmed to where the indian economy is currently positioned and this is reflected in sizeable foreign investment inflows. meanwhile, domestic financial markets have shown resilience and stability in spite of escalation of global geo - political uncertainty and heightened volatility in financial markets. these developments have enabled the build - up of β buffers β against unforeseen shocks. 5. taming the non - performing assets problem : a landmark development relating to resolution of stressed assets is the insolvency and bankruptcy code ( ibc ) 2016. from the reserve bank β s point of view, a great enabler in this context has been the banking regulation ( amendment ) ordinance promulgated in may and subsequently enacted in august this year. by the authority it conferred on the reserve bank to issue directions to banks to initiate resolution processes, it scales up the ability of the reserve bank to deal decisively with stress in banks β balance sheets and unclog the flow of credit to grease the wheels of growth. in the year ahead, we must seize this opportunity to overcome the debilitating problem of corporate loan delinquency and get our banks back into the mainstream of financial intermediation. the recently chalked out recapitalisation plan of the government for public sector banks will ensure that flows to productive sectors ( and credit - worthy borrowers ) are not impeded and growth impulses are 1 / 4 bis central bankers'speeches nurtured. the government has also proposed to take steps to improve the corporate governance of psbs by strengthening boards, bringing objectivity into management appointments, and decentralising decisions to the professional board. 6. the risk - based supervisory process of the reserve bank keeps flagging the risks in the balance sheet of banks which are taken up with the institutions concerned for remedy. previously, effective enforcement action on the specific violations / breaches has been a gap in implementation. the new enforcement department was established in april this year for this function ; viz., concentrate on its mandate to develop a rule based, consistent framework to deal with breaches of law, rules and directions. effective deterrence enforced through such actions is expected to contribute
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labour market flexibility. attention must now shift towards implementing this reform agenda. closing the implementation gap is essential in order to reap the full benefits of structural reforms in terms of both a higher growth potential in the medium term and improved consumer and business confidence in the short term. we are now at your disposal for questions.
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the main issuers of so - called eurobonds or international securities. today, over 250, 000 outstanding isins ( 20 % of these isins are euro - denominated ) are issued through the two icsds, with a value of roughly β¬9. 2 trillion. from a european capital 2 / 4 bis central bankers'speeches market perspective, these assets are important. they account for about 25 % of all outstanding marketable assets eligible as collateral with the eurosystem. i would like to see the announced strategy of the two groups to bring eurobonds to be settled in t2s starting to take effect by 2018. issuance as we see t2s roll out, it has become apparent that despite the progress towards a more integrated market, issuance has remained a largely national business across the eu, often as a result of legacy structures and national rules. indeed, the issue was first identified in the t2s harmonisation agenda in 2011 and remains relevant today. recently adopted legislation, namely the csdr level ii, addresses certain aspects of the location of issuance. in particular, it covers the rights of issuers, allowing them to have their securities recorded in the csd of their choice. however, despite both t2s and the csdr, fragmentation endures and a domestic issuance process at european level does not exist at the moment. there are several possible reasons why the market has failed to generate a more integrated and efficient securities issuance industry. these include legal constraints and, specifically, uncertainties arising from issuing in foreign jurisdictions, where some or all aspects of the issuer β s domestic law no longer apply. in addition, regulatory restrictions or domestic market practices may prevent issuers from reaching out to the whole eu investor base. take, for example, restrictions on the location of primary dealers in sovereign debt or national registration procedures. the result is that β regardless of the launch of a single securities settlement engine ( t2s ) and the single legal framework ( csdr ) β the market has remained national, from the perspective of securities issuance. debt instruments, even supranational ones, are issued nationally and issuers and investors often fail to reach each other across europe. although icsds issue eurobonds in a global environment, they remain in the context of specific market infrastructures ( under the rules of the market where the icsd is located ). this status quo restricts the investor base, in particular the pan
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and their ability to withstand the disruptions of lockdowns were dominating discourse in the early days of the pandemic, the corporate bond market innovated with bonds featuring conditional credit risk premium entailed to harmonise the interests of issuers preferring to lock in the low interest rates prevailing then with that of investors β concerns about credit quality. similarly, while corporate bonds in india are predominantly issued as fixed coupon bonds, during the calendar year 2021, increased issuances of floating rate bonds with coupons linked to money market and government securities benchmarks were witnessed, indicating efforts by investors to hedge against any increase in domestic interest rates. these are important metrics testifying to the resilience of the market in particular is ability to function well in times of stress. b. liquidity metrics - developing the secondary market 12. the second important metric to assess the development of a corporate bond market is the development of secondary bond markets. have secondary market trading volumes grown over the years? undoubtedly, they have ( chart 7 ). the total settled value of secondary market trades during fy 2010 - 11 was βΉ4. 50 lakh crore which rose to βΉ14. 37 lakh crore for fy 2021 - 22. clearly, secondary trading has not risen in consonance with the size of the market. βΉ crore chart 7 : secondary market trading in corporate bonds 10, 000 1, 000 8, 000 6, 000 4, 000 2, 000 - - avg. daily traded volume avg. daily trades ( rhs ) * data for fy 2022 - 23 is upto june 2022 source 7 13. but let us pause before passing judgement in this matter. a 2019 report on β establishing viable capital markets β by the bis committee of global financial system, based on a survey of a sample set of jurisdictions, concluded that the degree of liquidity concerns in the corporate bond markets of the surveyed advanced economics ( barring the us ) and emerging market economies were similar, on average. the challenges in development of liquidity in bond markets are thus clearly not unique to the corporate bond markets in india. comparable data on turnover ratios of corporate bond markets of different jurisdictions are not readily available but approximate assessments do not indicate that the indian corporate bond market lags its peers in respect of secondary market liquidity. 14. let me spend a moment to look at the underlying issues. as on june 30, 2022, the outstanding stock of corporate bonds stood at βΉ
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lie in the investor base in the market which is closely regulated and has a preference for highly rated issuances, perhaps justifiably so. the economic profile, mandate and / or regulatory environment of these entities often incentivises β buy and hold β kind of participation in corporate bond market. with a large investor base with this profile, the challenges of developing liquidity in the secondary market or of developing liquid repo and derivative markets are compounded. to take an example, insurance and pension funds are one of the most active participants of credit derivative markets globally β both as buyers and sellers of protection. without participation of these entities, it may be difficult for the credit derivatives market to develop in the country. 24. the question that arises is that what measures may be considered to widen the investor base to enhance accessibility of lower rated issuers and liquidity in the corporate bond market. given the rise in retail investments in the domestic equity market, can this category, which is conspicuous by its absence in the corporate bond market, be offered incentives to broaden the investor base in the market? what can be done to attract foreign investment in our markets? what can be done by way of incentives for regulated entities to participate more actively in risk markets, without compromising on prudential considerations? these are questions which need deliberations by all stakeholders β government, regulators and the participants of the corporate bond markets themselves. d. specialised bonds 25. in the last couple of years, there have been increasing instances of domestic corporates tapping the global markets for raising funds. to a large extent, this is only to be expected given the large pool of liquidity and benign interest rate environment that was prevailing internationally. this is also an inevitable result of greater integration of the domestic economy with the rest of the world. but there are a couple of trends which require closer examination. 26. a number of our corporates have been tapping international markets to raise environmental, social & governance ( esg ) funding while domestically such issuances have been low. i know a lot of efforts are ongoing but there is perhaps a need for us to look closely at what are the factors impeding the development of the domestic market for esg bonds and what needs to be done to attract the growing global pool of esg funds to the country. going by international experience, beyond the regulatory measures, there is a need to create conducive conditions for esg bonds - greater transparency, credible checks against greenwash
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##ties, government and corporate bonds, short - term interest rates and exchange rates, and extending to both the industrialized and the emerging economies. the reduction in volatility is largely ascribable to structural developments in the financial markets. the increase in the share of assets managed by professionals such as institutional investors and hedge funds has increased their liquidity, while the rapid growth of the markets for the transfer of risk has allowed investors to cover their exposures and to allocate risks in a way that is probably more efficient than in the past. the quality of monetary policy has also made a positive contribution. central banks today formulate their objectives more clearly and transparently, communicate them to the public more efficiently and implement monetary policy decisions with greater gradualness ; these major changes have been rewarded by a stabilization of expectations regarding inflation and short - term interest rates, with positive effects on longer maturities as well. however, this favourable scenario is not without risks : pronounced balance - of payments disequilibria, high crude oil prices, signs of inflationary pressures in the advanced countries, the risk of an inversion of the benign conditions now prevailing on the international financial markets. the current account deficit of the united states has continued to expand and is set to exceed $ 800 billion this year ; it could rise further in the coming months. the deficit has been accompanied by a further widening of the surplus of the major asian countries and the formation of huge surpluses in the oil - exporting countries. the existence of pronounced current account imbalances does not necessarily imply a threat to the stability of the international economic and financial system. deep, liquid and interconnected markets like today β s can easily permit these imbalances to be financed. the crucial problem is to understand whether the current trends are sustainable and whether the adjustment will take place in an orderly fashion. the studies and explanations presented to date help us to understand the origin and persistence of these imbalances but do not demonstrate that they can last forever. according to imf estimates, the continuation of a us deficit at the present levels, equal to 2 per cent of world gdp, would imply a further increase in the share of world financial portfolios invested in us instruments. until some time ago, the deficit was financed by building up external liabilities represented by direct investment and equity portfolio flows. more recently, purchases of debt securities have increased sharply ; a significant role has been played by the investment in us securities of the reserve assets accumulated by the countries
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meet the smes β short - term financing needs and to fund guarantee schemes so as to mitigate credit risk. regulators have envisaged specific provisions for smes in revising and strengthening the rules on banks β capital requirements. supervisory authorities have put pressure on banks to bolster their capital and thus their ability to withstand macroeconomic risks. in what follows i briefly summarize the effects of the crisis and recall the main contributions of the different policies to facilitate smes β access to finance in these circumstances, with special attention to the italian case. i conclude with some general thoughts on the financial architecture of smes, with a view to making them more robust to external shocks and to promoting the long - term growth of our economies. 2. the crisis the financial crisis in 2008 and the ensuing recession left a heavy legacy of joblessness and lost growth in the euro area. the area saw a mild recovery in 2010, but then the sharp worsening of the global growth outlook in the second part of 2011 and the eu β s slowness in shaping policies to counter the crisis, together with a perceived risk of a break - up of the bis central bankers β speeches monetary union, fuelled renewed tensions. the economic impact of the so - called sovereign debt crisis was stronger in countries with larger internal or external imbalances and was further reinforced by financial markets β fragmentation along national lines. the crisis quickly affected banks β funding conditions, since sovereign spreads have a significant impact on banks β funding costs, and hence on their ability to provide credit to nonfinancial corporations. cross - country disparities in both the growth and the cost of loans to firms mounted during 2011 ; they moderated somewhat in 2012 and the first half of 2013 but they remain significant to this day. the tightening of bank lending to firms was widespread, but findings drawn from qualitative and quantitative data consistently suggest that the effects were most severe for smes, owing to their limited ability to tap alternative sources of finance. in italy, where the increase in the sovereign risk spreads was substantial and the share of bank - dependent smes very large, these developments had even heavier repercussions than elsewhere. the average interest rate on new loans up to β¬250, 000, a proxy for the cost of credit to smes, rose more steeply than that on new loans greater than β¬1 million. moreover, large industrial groups, most of them listed, had in principle the alternative of going to the market as at
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the pyramid begins to widen. around 33, 000 students completed a - level economics in the uk in 2016 / 17, typically studying between the ages 16 to 18. encouragingly, these numbers have swelled, by around 70 %, over the past ten years. that remains only 4. 3 % of the total number of young people in this age range. beyond 18, at university and college level, student numbers in economics have also been rising rapidly, with the number graduating reaching 9, 000 in 2016 / 17, a rise of over a third in the past six years ago. this has increased the fraction of university - level students taking economics to over 2 %, similar to subjects such as politics and accountancy. it is still of course only a tiny 1 % of the total population in this age range. if we look in greater detail at just who is taking economics, the selectivity bias is more acute still. at ages 16 to 18, around 22 % of economics students are drawn from independent schools, more than double their population averages. at university, around a fifth of economics students are drawn from independent schools. so not only are economics student numbers pretty small, they have a heavy socio - economic slant. the same may well be true of other subjects. national numeracy see https : / / www. nationalnumeracy. org. uk / research - skills - life - survey - 2011 money advice service ( 2017 ). pshe association ( 2017 ), practitioner survey perhaps reflecting that, there is strong support among parents for pshe having statutory status ( phse association, parent survey ). there are also strong gender and ethnicity biases in the study of economics. there are discussed in, for example, crawford, davies and smith ( forthcoming ), tenreyro ( 2017 ) and blackaby and frank ( 2000 ). all speeches are available online at www. bankofengland. co. uk / speeches economics also appears to have a heavy regional slant, probably for related reasons. the fraction of students from london studying economics between ages 14 and 18 is roughly twice the national average. a student from the north - east of england, where i was born, is around five times less likely to study economics than one born in london. the fraction of the population of the north - east who is likely never to have had any education in economics could be as high as 98 %, similar to levels in wales and northern ireland. this is a β good news / bad news
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##s and prejudices. this comes from listening, rather than just hearing. it comes from engaging in two - way conversation, from genuine dialogue not monologue. it comes from drawing on social skills every bit as much as cognitive skills. other professions offer an object lesson here. why are doctors top of the trust league table? studies show that what matters for doctors β patient satisfaction scores is not just their clinical competence. indeed, their knowledge of the latest lancet article is irrelevant. what matters every bit as much, or more, to patients β trust in their doctor is their social skills, their listening skills, their personal touch, their bedside manner. few people would want an economist at their bedside. an economist with strong social skills is one who stares at your shoes, rather than their own, when engaged in polite conversation. and conversation does not appear to come easily to the economics profession. a recent study of twitter behaviour found that economists were the least likely discipline to engage in general conversation, on topics such as fluffy labradors. their conversations are technical in nature and narrow in reach. the bank has recently re - oriented fundamentally its outreach programme to improve its engagement with non - expert audiences, with a less technical focus and a longer reach. the bank β s agents around the uk have for many years collected intelligence on the economy and financial system, largely from companies. recently, the bank β s agents have placed greater emphasis on meeting charities, community and faith groups and trade unions, widening its non - expert contacts and expanding its intelligence pool. over a number of years now, i have been reorienting my own regional visits towards these groups. earlier this year, i augmented these regional visits with a β townhall tour β, partnering with charities, citizen and faith groups to engage with new sets of people across the whole of the uk. these are, by design, listening events. the main messages are captured in my blog and animations and photos from each of the events. the townhalls have made clear to me the benefits of asking open questions, uncontaminated by priors and prejudices. they have taught me a lot about the economic and financial issues that really matter to people, only some of which are captured by economists β theories and surveys. they have underlined for me the whittaker et al ( 2017 ), for example, found that patients were willing to wait longer for an appointment with a doctor with good listening skills. holmberg and thelwall (
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the euro as an international investment currency is likely to develop more gradually over time. from the point of view of monetary policy, let me recall that the internationalisation of the euro is not a policy objective as such and that, therefore, it will be neither fostered nor hindered by the eurosystem. turning to securities in the form of shares, close to 900 companies were newly listed on stock exchanges in the euro area in the course of 1999. this represented an increase of some 40 % compared with 1998. in the united states, there were close to 800 new stock listings in 1999, a slight decline compared with 1998, and in the united kingdom new stock listings also declined from 1998 to 1999. these changes may obviously have reflected circumstantial factors, such as differing positions in the business cycle, for example. these circumstantial factors notwithstanding, the increase in new listings also seems to have reflected the enhanced attractiveness of stock market listing in the euro area. following the introduction of the euro, a number of firms found it more attractive to issue stocks in the euro area, as these stocks could be marketed to a wider array of investors than had been possible in the stock markets of the predecessor currencies of the euro. furthermore, in 1999 and in the first half of 2000, there was an exceptional array of initiatives taken by stock exchanges with a view to forming alliances or merging activities, both within the euro area and beyond, involving exchanges located in the united kingdom and the united states. these initiatives clearly reflected not only factors specific to the euro area, but also other factors, such as the impact of new information and telecommunications technology. these new technologies seem to have led to a marked increase in the economies of scope and scale that can be achieved by stock exchanges through alliances or mergers. at the level of the euro area, the process of consolidation of stock exchanges is taking place in the context of the integration of stock markets at area - wide level. in summary, both corporate bond markets and equity markets in the euro area, while remaining somewhat less developed than their us counterparts, developed rapidly in 1999. this development seems, in particular, to have brought benefits to the less well - rated borrowers, as the amount of bonds issued by this category of borrowers increased most rapidly in 1999. it cannot be denied that the process of economic and monetary union has contributed positively to this development. with the introduction of the euro, financial prices are no longer affected by intra - area
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not really in the mood for the euro either. however, information campaigns and the reality of the new currency resulted in growing support β a trend that we are already observing in lithuania. according to the latest survey data, support for the single currency increased by 18 percentage points from late last year to mid - 2014 in lithuania. in latvia, it even increased by 30 percentage points ( to 68 % ) over the same period. 1 and, even though public support for the european project as such has been on the decline across member states during the crisis, if anything, citizens in euro area countries have persistently demonstrated solid support for the common currency. in essence, those that are sceptical about the new currency have two concerns : first, they are worried that the changeover might lead to price increases ; second, they are afraid that their country might lose part of its identity. compared with other eu member states that are not yet part of the euro area, these concerns are especially high in lithuania. three - quarters of survey respondents in lithuania believe that introducing the euro will lead to increased prices. 2 i am confident we can demonstrate that such worries are unwarranted. first, the ecb will be the competent http : / / ec. europa. eu / public _ opinion / archives / eb / eb81 / eb81 _ en. htm. http : / / ec. europa. eu / public _ opinion / flash / fl _ 400 _ en. pdf. bis central bankers β speeches monetary policy authority once lithuania is part of the euro area. and i can assure you that we take our price stability mandate very seriously and will continue to do so. second, the lithuanian authorities can draw on the experience from 18 previous euro changeovers in designing measures to prevent unjustified price increases. i trust they will make sure that the new banknotes and coins will have the same purchasing power as the litas. what about the other main concern, a loss of national identity? designed by antanas zukauskas, the new coins resemble the litas coins, showing vytis ( β the chaser β ), which is an adaption of the country β s coat of arms. but lithuania will not just bring a national symbol to the euro area. in joining the euro area, lithuania will effectively re - gain part of the sovereignty it gave up earlier. lithuania β s minister for finance, rimantas sadzius, allegedly said,
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as micro - economic weaknesses and imbalances β in the latter case i am thinking specifically about national banking systems β and recommend appropriate policies to achieve internal stability and external viability. thus, it could serve as a prominent tool for preventing externalities and international crises. of course national authorities have to be prepared to adopt corrective policies in a timely manner β if called for. the future of official international organizations to what extent the efforts of international organizations to produce stability have been successful in the past is open to debate. unfortunately, financial crises have occurred in recent years in several countries. all elements β the setting of codes, rules and procedures, their implementation and monitoring β have to be respected to safeguard international economic and financial stability. some initiatives are already under way in this respect. in general, it seems crucial that the international organizations concentrate β not least under conditions of scarce resources β on their core mandates. as concerns the imf, the surveillance function must play a dominant role on the basis of professional diagnosis and frank and open discussion of therapy. not completely new though is the problem of non - complying countries that refuse corrective policies suggested by the imf and supported by its membership. at some point in time, when non - compliance heightens the risk of a crisis, the imf must go beyond confidential channels of communication with the respective country. while we do not want the imf to become a kind of rating agency, the imf should under appropriate circumstances issue data information to encourage the respective authorities to correct some β dangerous policies β. another element of the fund β s preventive role is the design and monitoring of data publication standards like the sdds to enhance transparency of the national economic situation and policies as a means to facilitate solid judgements by markets participants that allocate financial flows. i mention the financing role of the imf at this late stage, since it generally comes into play when preventive efforts of all players have not succeeded. it is certainly a more visible and glamorous role, especially in crises situations, than the day to day business of surveillance, but it is a sign of failure of the preventive role. a rising need for imf financing reflects a poor grade for the fund β s surveillance efforts. generally speaking, the more successful the surveillance, the less imf financing is required. of course, conditionality under fund supported programs should be subject to the same test to demonstrate its effectiveness. this implies that successful work of the imf should be reflected in
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area? β, ecb working paper no. 63, and greiber, c. and neumann, m. j. m. ( 2004 ) β inflation and core money growth in the euro area β, deutsche bundesbank, discussion paper no. 36. 2 / 4 one dimension of data uncertainty refers to the problem of measuring well - defined economic aggregates. this problem occurs for example if variables cannot be measured precisely and are therefore subject to revisions after they have been published for the first time. the problem of measurement errors in real - time is most severe in case of β real economy variables β, where revisions can be very large. the gross domestic product is an important example. due to these real - time measurement problems we are left with a huge amount of uncertainty. and this is not only true for the current state of the economy, but also for our expectations of future developments. forecasts are conditional on real - time data, which may be revised at some later stage. against this background it is crucial to emphasize that monetary and financial data are far less affected by such measurement problems than data from the real economy. monetary data are available very quickly. and they are available with a much smaller measurement error than other key variables. therefore, money may serve as an important indicator of current economic activity. on a microeconomic level, private agentsΒ΄ real money holdings depend amongst other determinants on their individual real income which is known to them. 7 if agents are able to quickly adapt their money holdings, changes in their real income will quickly translate into changes in their money holding. as a consequence, changes in aggregate real income quickly lead to changes in aggregate money. money, therefore, adequately aggregates the individual information on real income development up to the macroeconomic level. measurement problems become even more severe if certain model variables are unobservable as such. important examples include the output gap and the natural rate of interest. with such variables one is faced with another severe problem : the theoretical construct has to be translated into a statistical concept. and that is exactly the point where the problems of data and model uncertainty are closely connected : an empirical quantification of the output gap, for instance, is often based on more or less detailed assumptions about an underlying model structure. if in turn a policy reaction function depends crucially on such unobservable variables, errors in assessing the size of those variables may lead to large deviations from optimal policy. as empirical studies show, this applies
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a good first step toward enhancing measurement guidance in this area. however, as i will discuss in a moment, a number of important issues warrant further consideration, especially before dramatic moves are made toward increased fair value accounting. but before discussing these specific issues, allow me to emphasize one important point. as a bank supervisor, the federal reserve believes that innovations in risk management are very important to the continued improvement of our financial system. new methods and financial instruments allow banking organizations to improve their risk - management practices by selecting target levels of risk exposures and shedding or limiting unwanted positions. whenever possible, the accounting framework should avoid providing a disincentive to better management of risk. fair value measurement issues that warrant further consideration reliability and measurement if markets were liquid and transparent for all assets and liabilities, fair value accounting clearly would be reliable information useful in the decisionmaking process. however, because many assets and liabilities do not have an active market, the inputs and methods for estimating their fair value are more subjective and, therefore, the valuations less reliable. a copy of the letter can be found at www. fasb. org / ocl / 1201 - 100 / 31186. pdf. research by federal reserve staff shows that fair value estimates for bank loans can vary greatly, depending on the valuation inputs and methodology used. for example, observed market rates for corporate bonds and syndicated loans within lower - rated categories have varied by as much as 200 to 500 basis points. such wide ranges occur even in the case of senior bonds and loans when obligors are matched. the fasb statement on the proposed fair value standard suggests that reliability can be significantly enhanced if market inputs are used in valuation. however, because management uses significant judgment in selecting market inputs when market prices are not available, reliability will continue to be an issue. the proposal identifies three levels of estimates, with the lowest priority given to level - 3 estimates. these estimates are not based on quoted prices in active markets for either identical or similar assets or liabilities, but rather on mark - to - model estimates. the proposal suggests that the use of multiple approaches, such as the market, income, and replacement - cost methods, will improve reliability of these estimates. however, the number of approaches adds little to reliability if all the methods are based on the same underlying information, as would often be the case for financial instruments. in our role as a bank supervisor, we have observed that minor changes in a number of assumptions in
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may in some cases result in questionable or inappropriate practices, such as including projected income from cross - marketing activities in the valuation of financial instruments. additional guidance to address these issues is warranted. also, consideration must be given to revenue - recognition issues in a fair value regime. we must ensure that unearned revenue is not recognized up front, as it inappropriately was by certain high - tech companies not so long ago. disclosures fair values reflect point estimates and by themselves do not result in transparent financial statements. additional disclosures are necessary to bring meaning to these fair value estimates. fasb β s proposal takes a first step toward enhancing fair value disclosures related to the reliability of fair value estimates. i believe that additional types of disclosures should be considered to give users of financial statements a better understanding of the relative reliability of fair value estimates. these disclosures might include key drivers affecting valuations, fair - value - range estimates, and confidence levels. another important disclosure consideration relates to changes in fair value amounts. for example, changes in fair values on securities can arise from movements in interest rates, foreign - currency rates, and credit quality, as well as purchases and sales from the portfolio. for users to understand fair value estimates, i believe that they must be given adequate disclosures about what factors caused the changes in fair value. considerations for credit portfolio management fair value estimates affect the information you use as credit portfolio managers. today β s financial statements are based on a mixed - attribute accounting model. this means that an entity β s balance sheet may include certain values reported at historical cost and certain values reported at fair value. you probably learned more about this in yesterday β s break - out session about managing profit and loss volatility. fair values may be used as an analytic tool in the lending process and are compared with historical cost values. this historical cost information, along with associated disclosures, contains reliable information that provides insights into a firm β s expected cash flows. as the industry moves toward expanded use of fair value, i believe disclosure of certain historical cost information will remain essential. as i mentioned earlier, the reliability of the valuations and the transparency of the methods and inputs used to calculate the values are critically important. clearly, fair valuations will have an impact on leverage ratios, capital ratios, and other ratios used in the lending and credit - management process. credit portfolio managers will need to identify and understand the impact of changes in fair value estimates that result from changes in specific factors
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banks. what is special about central banks? as policy institutions, central banks have objectives and responsibilities that differ from the financial institutions operating on a commercial basis. to enable the central banks to fulfil their responsibilities, they also have special powers β especially the monopoly of issuing currency and 1 / 7 bis central bankers'speeches reserve money. we should resist the temptation to use the special characteristics of central banks as excuses for not having to implement the best risk management techniques developed elsewhere. the risk management standard and techniques of " ordinary " banks should serve as an obvious starting point when discussing risks. there are differences, but they have to be justified in each case. how do the risks come about? central banks take on balance sheet risks as a result of their investment activities ( as in holding foreign reserves ), their monetary policy operations, and from time to time as providers of lender of last resort credit to their counterparts. as investors, central banks have traditionally been conservative. this means that when faced with trade - offs between risk and return, central banks have traditionally tended to favour assets with very low credit risk even if the expected returns from such investments have been modest. traditionally, central banks have also preferred very liquid, short - term investments. these choices have been clearly visible in the way foreign exchange reserves are usually invested. as policy makers, central banks influence market conditions and market prices in a unique way. this is the task why central banks exist today, and why they are able to conduct monetary policy. the ability, and indeed the obligation, to steer the money markets in order to deliver macroeconomic stability adds an important extra twist to the risk management problem : the central bank is not just price taker in the financial markets, it is a price maker too. this is one of the features that make them special as investors and lenders. one may see it as a sort of paradox that central banks, in making policy, themselves seem to create and control much of the risk they themselves bear as investors and creditors. however, the central banks do not actually have arbitrary powers to steer the interest rates or other market prices. they are mandated to exercise their monetary policy powers to pursue specific pre - set goals : the policy objectives for which they are accountable. in the eurosystem for instance, price stability is the overriding objective. therefore, although the actions of the central banks may have an impact on their financial risks, these actions are taken with the requirements of monetary ( and financial ) policy in view
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##ot explained the bill market of his time could be pacified. organizational aspects turning to the organizational aspects of risk management, we find both similarities and differences between central banks and other financial institutions. 3 / 7 bis central bankers'speeches starting with the similarities, a generally accepted principle that applies to both is that risk control functions and risk - taking functions should be separated. as a rule, this separation should reach the top decision - making level of the organization. the different business and reporting lines, both those that take risk on behalf of the bank and those that assess and control it, present their views directly to the decision - making level. after the financial crisis, and the unpleasant surprises which were uncovered in a number of investment and retail banks, the value of following this principle has been understood even more clearly than before. the top management must be responsible for ensuring and overseeing a strong risk governance framework, and must be able to carry this responsibility. this requires a systematic approach. it includes a strong risk culture, a well - developed and explicit policy regarding to risk taking and risk management, up - to - date methodologies for measuring financial risks, and well - defined responsibilities for risk management and control functions. an effective risk control function is a key component in the organization. this function is responsible for overseeing risk - taking activities across the institution. the important thing is that it should have the authority it needs. the risk control function should be independent, with sufficient stature, resources and direct access to the board. risk reporting to the board requires careful design in order to convey bank - wide, individual portfolio and other risks in a concise and meaningful manner. reporting should accurately communicate risk exposures and results of stress tests or scenario analyses and should provoke a robust discussion of, for example, the bank's current and prospective exposures ( particularly under stressed scenarios ). a balance should be found between the independence of the risk control function, on the one hand, and smooth horizontal information flows on the other. as emphasized in bis principles for risk management, for example, banks should avoid organizational " silos " that can impede effective sharing of information across the organization. necessary cooperation between the functions should of course never compromise the special independent role of the risk control function. in " ordinary ", for - profit institutions, the main organizational challenge is to reconcile the business orientation of the revenue - generating functions with the caution guarded by the risk controlling function. this balance has to be managed at a high, responsible decision -
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ways to grow and manage their own money. we also thank all the speakers and delegates from here and overseas who have come to contribute to the crafting of the regional agenda for child and youth finance. and to our foreign delegates, we hope you enjoy your stay here in the philippines. thank you all and mabuhay! bis central bankers β speeches
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parents of elementary school pupils. schools now request this program which runs parallel to the classroom teachings of elementary pupils. at the same time, 12 banks joined hands to launch the kiddie account program. while these banks were no stranger to children β s accounts, they all agreed on the need to make saving affordable, accessible and convenient to attract more kiddie savers. after negotiations that took nearly two years, the 12 banks agreed on a common denominator : children are welcome to open accounts with them with a minimum deposit of only 100 pesos or less than us $ 3. 00. and to further help make saving a habit, bank representatives also go directly to schools to service children β s deposits. so far, so good : thousands of new accounts are being generated by the kiddie account program and withdrawals are minimal. since children exert influence in household decisions, we hope that their habit of saving will rub off on other members of the households, including the adults. based on the results of the bsp β s household finance survey, only 20 % of philippine households maintain bank accounts. we are therefore looking at this program as a way to help raise the savings rate in the philippines. i understand that yesterday many of our foreign delegates visited the aurora quezon elementary school to observe how financial lessons are taught and to hear how banks are implementing their kiddie account programs. did you find it useful? that is good to know. ladies and gentlemen, our continuing journey takes us through uncharted territory. nevertheless, we are encouraged by positive feedback β from the pupils who start saving regularly, to the teachers who say they learn life lessons from the program. also a positive is the 2011 citi financial quotient survey where the philippines showed sustained improvements in its score. nevertheless, we have a long way to go and a lot more to learn. it is for this reason that we look forward to this regional meeting on child and youth finance for asia and the pacific. i hope therefore that our conference today will be successful and fruitful. finally, we thank the child and youth finance international for bringing this regional meeting to manila and for taking the lead in the global movement to promote the habit of saving among schoolchildren. we also commend their design props today β the multi - colored bis central bankers β speeches balloons and throw pillows. it reminds us that while we are tackling a serious subject, we should not forget that our intended beneficiaries should find it fun to find
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of inflation performance, low interest rates, employment creation, financial - market integration, and trade expansion demonstrate conclusively that the original objectives of the singlecurrency area are being fulfilled. furthermore, the euro has eliminated the potential risk of exchange - rate crises involving national currencies, to which many of our economies were previously exposed on a daily basis in a world characterized by free capital flows. moreover, the euro is now established as the world β s second most important currency, the significance of which is not lost upon a central banker. in effect, small countries, such as greece, have traded in the vulnerability associated with the free movement of capital for the greater security and credibility provided by a major international currency and its central bank. at another, no - less - important, level, the euro is a symbol of shared values and a common objective β the objective of bringing our citizens closer together in an environment in which they can prosper. i need to add, however, that the benefits of a single currency and a credible central bank do not come automatically. they depend to an important extent on the economic policies pursued by the euro area countries themselves. from a national perspective, therefore, the challenge is to maximize the benefits of participation in a monetary union by making further progress on the path of reform. for greece, it is particularly important to bring down the relatively high inflation rate in order to improve its competitive position. to achieve this objective, it is particularly important to continue on a sustainable and credible path to fiscal consolidation and to improve fiscal performance by reducing the country β s high government debt ratio. in particular, public finances should have sufficient room for manoeuvre in order to better cope with expected substantial increase in age - related expenditures. it will also be important, in both the public and private sectors, to attain moderate labor cost developments that take into account productivity growth, labor market conditions, and developments in competitor countries. attention must also focus on overcoming the structural constraints on economic growth and job creation, notably by fostering labor force participation. in this regard, the strengthening of competition in product markets, which will help keep profit margins at levels consistent with price stability, and improvements in the functioning of labor markets, are key elements in raising potential growth. for fifty years, the eu and its predecessor organizations have brought peace and stability to the member states. the single market and emu have built on that achievement by creating an edifice on which european economies can grow. by continuing to work
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decision - making structure has not yet reached its full potential. on the one hand, there is a some concern about the potential proliferation of work among the various committees and working groups and the consequent risk of confusion and wasted resources. on the other hand, the process has started to yield significant benefits, especially in the field of supervisory convergence, which should overcompensate for few negative aspects. the committee of european banking supervisors ( cebs ) the cebs, as part of the lamfalussy framework, is the institutional committee that brings together all the banking supervisors of the eu countries and the central banks, including the ecb, as observers. the cebs has three main tasks : β’ to provide advice to the commission ; β’ to ensure the consistent implementation of community legislation in the banking sector and the convergence of supervisory practices ; and β’ to promote supervisory cooperation and exchanges of information. the cebs has an advisory role within the eu legislative procedure. the cebs β s other focus is to promote a consistent approach to banking supervision through increased convergence of standards and practices and enhanced cooperation and information sharing. the ultimate goal is to build a common supervisory culture and a practical operational network of banking supervisors within the established eu legal framework. this is of particular importance for the efficient supervision of crossborder banking groups, as the appropriate dissemination of information relating to risks and the elimination ( if possible ) of work duplication are expected to reduce the administrative burden and costs for the supervised institutions, while reducing the strain on supervisory resources. this does not mean that there are no benefits for smaller institutions, with a predominantly domestic or even local focus, as convergence will imply the establishment of a level playing field across the eu. next steps changes in the regulatory framework and the organisational structure of the decision - making process are necessary but not sufficient conditions for the realisation of the eu financial market's strong growth potential. this can be more easily achieved if financial integration is accelerated. this belief is the driving force behind the new eu financial services strategy for the next 5 years, which is currently under discussion among the eu institutions, while, at the same time, market participants are being consulted. up to now, the elements that seem to be part of this strategy and are closely related to the banking sector are the completion of certain ongoing projects ( i. e. mortgage credit, consumer credit, the new legal framework for payments, etc. ) and the undertaking of new legislative initiatives ( i. e. investment funds
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evident from all the economic mistakes countries have made in history, and continue to make today. but i also know it is true because i often hear people in south africa contemplating these temptations. people ask, wouldn β t it be worth taking big risks, having more inflation, borrowing as much as we can get away with, if only we could get some growth and some jobs? they even say, in a highly unequal country like south africa, wouldn β t it be politically safer to take macroeconomic risks to try and get poverty and unemployment lower? but this is wrong, for two reasons. first, this only seems attractive until you β ve actually tried it. macroeconomic stability is like oxygen. you don β t miss it until you haven β t got it, and then it β s all you can think about. people who want to engineer a short term boom and ignore the long term costs won β t like it when the long - term shows up, which history suggest normally starts after about two years. if you don β t think inflation matters, go try some. or ask all the zimbabweans or venezuelans who had to leave their countries when their economies collapsed. unorthodox policies have totally orthodox consequences, as those people can confirm. second, countries with difficult social foundations need to be more careful about macroeconomic stability, not more reckless. that β s because a macroeconomic crisis is an incredibly wrenching social experience, and you need a very strong society to get through one peacefully. when a country blows up its own macroeconomy, its policy options narrow, to the point where all the choices are bad ones. if you can get anyone to lend to you, it will be the imf. one way or another, you will end up doing real and brutal austerity. what we have had in south africa over the past few years isn β t anything like this. we have interest rates close to all - time lows β the repo rate is at 6. 5 % currently β and government spending has been increasing every year, faster than inflation. real austerity is having interest rates at 65 %, as in argentina at present, and cutting pensions and grants and firing government employees. we should avoid reckless economic policies unless we want to risk putting our society through that pain and stress. this brings me to end of my speech. in conclusion, i would like to leave you with four principles for confronting populist economic policies, drawn from
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ruled out. to sum up, keeping domestic and external imbalances in check is the only way the cee economies will be able to cope with any strong volatility headwinds. 3 / 3 bis central bankers'speeches
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##2, the list of activities that payment institutions can carry out is being expanded to include the initiation of payments, i. e. they can initiate a payment on your behalf. they can also provide account information for accounts held at other payment service providers. actually, payment initiation services provided by third parties have existed in the market for some time now. they have been emerging in parallel with e - commerce, i. e. online shopping, offering an alternative to established payment instruments and services that were β understandably β neither conceived nor wholly suitable for the e - commerce environment. in particular, these third parties have been serving as an alternative way to carry out card - not - present payments, i. e. card payments via the phone, internet or other channels where the cardholder cannot physically present the card to the payee. this is how it works. when you make a payment online, instead of having to input the payment details into the online banking tool provided by your bank, typing in the amount, the recipient β s account details, etc., you access your online banking tool via the third party service provider, which provides the transaction - related data for you. simultaneously, the e - commerce merchant, or online retailer, receives an automatic payment notification that the payment has been completed successfully. while in some european countries, for example in the netherlands, banks began offering these payment initiation services, in other countries, such as germany, new providers entered the market. legally, these third party service providers have been operating in a grey zone. at the same time, their emergence demonstrates that an actual market need was not being covered sufficiently by the traditional market. the rationale behind the regulatory formalisation of payment initiation service providers and account information service providers with payment services directive 2 has many aspects. on the one hand, it is meant to increase competition in the market. it should remove obstacles that have been hindering non - banks from entering the payments service market. in particular, banks will not be allowed to reject access of third party service providers to the accounts that they hold. more indirectly, the provisions in psd2 may also push banks to innovate in order not to be forsaken by customers in favour of non - bank payment service providers. last but not least, the directive may also stimulate new business models and forms of cooperation between banks and non - banks. the need for a level playing field on which to compete goes both ways. all entities providing retail payment services to end -
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and before you receive the confirmation of the payment in your account statement. intuitively, the idea behind instant payments is that cashless payments become as instantaneous as cash payments, meaning that funds are immediately available to the payment recipient. some may say that there is no real need for instant payments, that a payment guarantee is sufficient in e - commerce. but we have to be aware that we are not only dealing with customer needs but also with customer expectations. at the european central bank, we receive quite frequently requests and comments from european citizens and companies regarding retail payments, and one comment that appears time and again perfectly illustrates my point. this is the comment that in the digital era, it is incomprehensible why e - payments should take longer than e - mails. people expect instant payments to be as self - evident as other services delivered via the internet, e. g. instant messages, movie streaming or instagram. nobody would accept an e - mail being delivered with the same time lag of a letter sent by surface mail. why then does an electronic payment still take a full day at least? in the following, i will discuss the three layers that are required for us to achieve instant payments : the scheme layer, the clearing layer and the settlement layer. the scheme layer refers to a set of rules and technical standards that have to be followed by payment service providers. it can be understood as a common instruction manual on how to move funds from one account to another. you may ask why we need a common scheme for instant payments. after all, innovative payment services based on instant payments are already being implemented by some national communities in europe. however, even if they are often based on the same technical standards, these services lack common rules and the harmonised implementation of standards and are therefore not easily interoperable. this means that, for example, a service deployed in germany cannot be easily used in france. what we want is for electronic payment means to work for you wherever you are, whether you are paying by card, online, or using your smartphone. with the creation of sepa, we have made huge efforts to integrate the european retail payments market. why should we not take advantage of the harmonisation and integration already achieved with the sepa project in working towards instant payments? i believe that payment service users do not want to be swamped by dozens of different solutions, having to subscribe to different platforms depending on what they want to do. what they want is a
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the substantial equity cushions built up in the years of plenty should act as shock absorbers in the years ahead. even the most pessimistic estimates of the total losses from sub - prime mortgages β around $ 400 billion β compare with total global financial assets of at least $ 110 trillion1. but there may be more shocks to come. the focus of current concerns is how far other assets may be impaired, as a result of the broader economic impact of this period of financial stress. this brings me to the other big uncertainty : how far will tighter credit conditions affect the wider economy β in the uk and the rest of europe as well as in north america? it seems highly likely that growth was supported by easier credit over last few years. but to what extent? when it comes to quantifying the effect of changes in credit conditions, our workhorse economic models still cannot help us very much. as far as the uk economic outlook goes, our central judgement is that financial stress will act as a significant drag on demand over the next two years. but there is a high level of uncertainty about this ; and, as we now see it, the risks, as they affect output, are tilted to the downside. these are two fold : first, that the financial crisis will persist and possibly intensify ; and second, that over time tighter credit conditions and asset price weakness will combine, and in the worst case feed off each other, to sap the strength of overall demand, and put downward pressure on inflation in the medium term. higher costs let me come now to the other major area of risk : the upward pressure on inflation from higher external costs. the most recent build up of global cost pressures is just the latest episode in a remarkable period of soaring commodity prices. oil prices have more than trebled since the start of 2004, and metals and food prices have more than doubled. strong demand, particularly from china has clearly been one major factor. but there have been supply side issues too. and the strength of some commodity prices also reflects their status as an investment class at a time of low global interest rates. over the past year alone, oil prices have risen by around 60 % in dollar terms and agricultural food prices by around 50 %. imported cost pressures in the uk will also reflect the fall in the effective exchange rate, down by 9 % since the beginning of august last year β the largest such decline since sterling left the erm in 1992. there are few reasons to expect this
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uk private equity industry accounting for over 50 % of the total european market. the drivers of the city β s recent growth in part the city β s recent growth reflects β as it did a century ago β a rapid growth in international trade and financial liberalisation. globalisation has brought an expansion of world imports by 180 % since 1990 compared with an 80 % increase in world gdp. progressive upgradings of a number of emerging economies have broadened and deepened international links. higher savings in the emerging asian economies, in particular, have combined with demographic change in the west to increase demand for long - term savings instruments and a fall in their yields. 10 all these trends taken together have led to a period since 2002 of unusually high returns for holders of many financial assets and the explosive growth in new products and markets. but what is driving the growth of london in particular? one approach to this question is to ask executives in major financial companies, both in the uk and abroad, why they choose to locate business here. a number of these surveys have been conducted recently and they show several common factors. 11 london benefits from english as an international language of commerce, and from its time zone, which means the working day overlaps with asia in the morning and america in the afternoon. london also has well established financial infrastructure and telecommunication networks. many of those surveyed point to the regulatory and legal environment. this is partly a matter of the regulatory style β the β risk based and proportionate β approach that the financial services authority has adopted based on general principles where possible. it is partly the simplicity of dealing with a single regulator. caballero, r. β on the macroeconomics of asset shortages β nber wp 12753, december 2006. for example, cook, g. a. s., pandit, n. r., beaverstock, j. v., taylor, p. j. and pain, k. ( forthcoming in 2007 ). β the role of location in knowledge creation and diffusion : evidence of centripetal and centrifugal forces in the city of london financial services agglomeration β. environment and planning a. english law, which is also the basis for financial services law in the united states, prevails here, with the added advantage that practitioners are less likely actually to invoke the legal system. and what has been called the wimbledonisation of the uk financial markets β the sale of nearly all the british merchant banks and stockbrokers and
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in assessing this impact on sectors and the economy. lastly, it would be remiss of me not to mention in this forum the role of investors. the creation and subsequent development of green bonds, aside from official initiatives and, essentially, in response to private investor demand, shows the growing interest for responsible investment. a brief look at the press will prove that this is a consolidated trend. in sum, the financial sphere, including both the banking sector and investors, supervisors and central banks, is committed to achieving sustainability goals ; but, as is known, transparency and information must be enhanced in order to continue moving forward. clearly, just as business solvency cannot be analysed without reliable and uniform accounting information, the risk of environmental activity cannot be evaluated in the absence of comparable information. allow me to conclude by stressing the importance of us all making every effort to row in the same direction so as to achieve an ambitious goal such as decarbonisation. events like today demonstrate the resolve and commitment of all those involved with this challenge. we must act realistically, mindful of the limitations, but also with sufficient ambition to overcome the difficulties we will have to face. i wish you all a very productive session. 2 / 3 bis central bankers'speeches thank you. 3 / 3 bis central bankers'speeches
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economy towards full decarbonisation? the response is straightforward : through correct risk measurement. when banks manage their risks properly, they are promoting the effective allocation of available economic resources, by distinguishing between those projects more likely to succeed and those not viable in the medium term. lending standards are thus geared to detecting the future ability to pay or, otherwise expressed, to measuring the credit risk of customers and firms. banks also measure and manage other conventional risks, such as market and operational risk. but, to date, they will not have been fully considering the so - called physical risks, arising from the direct effects of climate change, and 1 / 3 bis central bankers'speeches they will have only partly weighed up transition risks, stemming from public policies and regulations, technological change and decarbonisation - related behaviour. i should stress that the incorporation of these new elements into the traditional management of bank risks poses no conflict whatsoever ; the opposite is rather the case. both physical and transition risks can ultimately affect bank customers β solvency and the value of certain assets, which may be either traded or used as collateral. in addition, they may also experience an increase in the frequency and severity of weather - induced operational events. it is widely acknowledged that the transformative measures to change our productive model will affect bank borrowers. in some cases, opportunities will arise, but we cannot hide the fact that these changes will bear down negatively on certain sectors β business models. by incorporating these elements into banks β measurement of their classic risks, we pursue two goals. first, to improve the sensitivity and robustness of the management framework and, further, to promote the process of transition in the economy thanks to this better risk discrimination. to encourage the incorporation of climate risks into risk management, both the single supervisory mechanism and the banco de espana, within their supervisory remit, have recently published supervisory expectations relating to proper risk measurement and management. naturally, as supervisors and central banks we should consider these risks in our analyses, whether in our work as macroprudential supervisors or in economic forecasting. as in the case of the banking sector, the inclusion of these impacts in our analyses does not only pose no problem whatsoever, beyond the methodological challenges, but is also patently necessary. for instance, in our work we clearly cannot ignore the changes posed by the transition law, given that they will have most considerable β even systemic β effects on certain sectors of activity. in fact, we are collaborating with the ministry for ecological transition
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substantially reduced equity ratio. as a result, banks are more vulnerable to disturbances in funding markets. thus, low risk weights for residential mortgages also lead to higher liquidity risk in our banking system. a high level of tax incentives for house ownership and a large volume of adjustable - rate mortgages contribute to wide fluctuations in activity and prices in the norwegian housing market. 1 the rise in house prices over the past two decades has also been very strong compared with countries where housing bubbles have burst. we have been through the longest period of uninterrupted house price inflation. in real terms, house prices in norway have tripled since the trough in 1992. house prices fell in 2007 and 2008, but have picked up again and have, in nominal terms, surpassed the summer 2007 peak. norwegian household debt is high compared with households in other countries. the number of residential mortgages with a high loan - to - value ratio, i. e. above 80 per cent, has also increased. periods of sharply rising house prices have historically been followed by periods of declining prices. house prices can fall considerably over only a few years. loan - to - value ratios will then increase. mortgage companies should therefore take housing market fluctuations into account when issuing covered bonds. conclusion i think it is fair to say that housing finance in norway is in its infancy. there is a large proportion of adjustable - rate loans. fixed - rate loans offered in norway are less customerfriendly than, for example, in denmark, where it is less expensive to cancel a fixed - rate mortgage and where there is a secondary market, providing risk diversification. mortgage companies have a limited role in housing finance. loan - to - value ratios are in some cases alarmingly high. and last, but not least, banks finance their housing loans by means of shortterm asset swaps in foreign markets. this is not a sustainable solution. i hope that this forum can contribute towards the development of a better foundation for housing finance in norway. see van den noord, paul ( 2005 ) : β tax incentives and house price volatility in the euro area : theory and evidence β, economie internationale 101, pp. 29 β 45. this paper shows that house price volatility is higher in countries where tax regimes favour owner - occupied housing. see also imf ( 2004 ) : world economic outlook, september, p. 81, where house price volatility is higher is countries where adjustable - rate mortgages
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when their risk appetite drives prices higher relative to economic fundamentals, there may be a greater risk of outsized drops in prices that can be destabilizing. 4 the fed looks at a broad range of asset markets, including equities, treasury securities, corporate bonds, loans, and real estate. this table from our fsr shows the sizes of the asset markets discussed in this section as of q2, the most recent data available. the largest asset markets are those for residential real estate, equities, treasury securities, and commercial real estate ( cre ). 5 this year, asset valuations have generally risen notably above their historical levels. in particular, prices of residential and commercial properties remain above levels historically associated with fundamentals. house prices, relative to rents, are near alltime highs. further, prices have started increasing again in recent months after falling for more than a year. commercial property prices also remain high relative to rental income. i am watching closely the extent to which post - pandemic supply and demand patterns see the box β vulnerabilities from asset valuations, risk appetite, and low interest rates β in board of governors of the federal reserve system ( 2021 ), financial stability report ( washington : board of governors, may ), pp. 15 β 18, https : / / www. federalreserve. gov / publications / files / financial - stability - report20210506. pdf. see board of governors of the federal reserve system ( 2023 ), financial stability report ( washington : board of governors, october ), pp. 5 β 6, https : / / www. federalreserve. gov / publications / files / financialstability - report - 20231020. pdf. - 4normalize. demand in the office sector has remained weak, particularly in central business districts and coastal cities, with vacancy rates increasing further and rent growth declining. finally, average delinquency rates for commercial mortgage - backed securities have moved up recently, as office and retail loan performance has deteriorated. if delinquency rates generate selling pressure or increase notably further and result in forced sales of properties, then cre prices could decline sharply. another notable market development has been the significant increase in longerterm bond yields since june. decompositions between changes in expected rates and term premiums depend on the specific models and assumptions used, but i would say that an expectation of higher near - term policy rates does
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i conclude this speech, i also want to announce that after this ceremony there will immediately be a press release on the reforms to the primary dealer system. page 5 of 7 the press release is meant to inform the public that all licensed commercial banks will now have direct access to the primary market for government security operations and commercial banks are all eligible to open csd accounts at bou for their clients, they are all able to issue and accept bid submission forms on their clients behalf, settle their clients β successful bids and buy their clients β securities if the client wishes to sell. this is part of bou β s on - going commitment to make investing in government securities easier and more accessible to the public. i also wish to acknowledge the role that this year β s award winner has played, especially for its participation in the primary auctions, market making capabilities, consistent pricing as well as timely market intelligence. page 6 of 7 ladies and gentlemen, i am pleased to announce that this year β s winner has emerged at the top for the fifth consecutive year, stanbic bank uganda ltd is the primary dealer of the year 2016. i now invite the chairman, board of directors of stanbic bank, mr japheth katto, to receive the award. congratulations to you and your team. i thank you for listening to me. page 7 of 7
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louis kasekende : overview of the ugandan economy opening remarks by dr louis kasekende, deputy governor of the bank of uganda, at a workshop for launch of the revised reporting returns for commercial banks, credit institutions and mdis, kampala, 19 february 2010. * * * the executive director supervision the executive director research / directors staff of bank of uganda staff of commercial banks, credit institutions, microfinance deposit taking institutions, and bank of uganda distinguished resource persons ladies and gentlemen. good morning. you are once again very welcome to this workshop concerning the launch of the revised reporting forms of assets and liabilities for financial institutions supervised by bank of uganda. thank you for honoring our invitation and for your continued close cooperation with the bank of uganda, in the pursuit of overall macroeconomic stability for our country. ladies and gentlemen, on account of prudent macroeconomic management, the ugandan economy has remained resilient on the whole in the face of the global financial crisis, which later culminated into a global economic recession. the gradual effects of the global economic slowdown on the ugandan economy can be viewed from two angles : first, there was a sudden exit of offshore players in september and october 2008. second, the balance of payments was adversely affected through reductions of export earnings in some sectors, portfolio flows, interest income on offshore investments, and remittances. the bank of uganda responded by letting the economy adjust to these exogenous shocks through the flexible exchange rate policy stance. secondly, bank of uganda continued to pursue a monetary policy stance to ensure price stability. most recently, bank of uganda β s monetary policy has aimed at boosting aggregate demand in the economy in order to support economic growth. the recovery of the balance of payments is now being observed. there is now stability in the financial markets and rapid reduction of inflation. overall, real gdp turned out to be 7. 1 percent in the financial year 2008 / 09 and is projected at 6. 3 percent for this financial year 2009 / 10. despite the economic slowdown, this performance remains remarkable given that the imf ( world economic outlook, january 2010 ) projection for sub saharan african region is only 1. 5 percent for 2009 and 4. 3 percent for 2010. it is worth noting that the financial sector has continued to remain safe and sound on account of prudent risk - based supervision and regulation. the sector was not affected by the toxic assets that led to the global financial crisis in the
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of communication. at the time of the second industrial revolution, however, when the conditions for production were changed again by the petrol engine and the electric motor, sweden was in a better position to reap the benefits. in that the social structure was more suited to adopting and utilising the new technology, the pace of modernisation was faster. production became increasingly efficient as the industrialised society took shape. electrification, motor vehicles and aviation all left their mark on developments in much of the 20th century. at the same time, it was probably not the new inventions as such that provided the conditions for the rapid economic growth in the 19th and 20th centuries. it was rather their economic applications and how they spread - thereby altering patterns of production and consumption - that determined the magnitude of their impact on long - term growth. bringing about such a development involves ensuring that it is supported by the ways in which various parts of our society function. economists talk of society β s institutions or a market economy β s infrastructure. this refers to everything from the structure of government and the degree of economic stability to how the judicial system functions, with ownership playing a major role, the quality of education and the structure of taxation. as i said, a major cause of sweden β s earlier difficulties in utilising steam - engines was that various social systems were not able to latch onto the new technology and use it productively. sweden simply lacked the conditions for this initially. a historical view of transformation and development one of several possible approaches to an analysis of economic developments connected with various industrial revolutions was put forward by the austrian economist joseph schumpeter in his theory of development clusters and long cycles. this approach has been developed in sweden by economists and economic historians such as erik dahmen, johan akerman, lars magnusson and lennart schon. changes in technology are often cited as a basic cause of the long cycles. technical innovations tend to be developed in clusters that play a central part in the transformation of manufacturing. these concepts are not all that easy to define but roughly speaking it is a matter of new technology leading to extensive changes in the business community, as well as in society in general. the economy is launched into a process of transformation β a sort of struggle between old and new. new products are introduced as well as new forms of production. patterns of consumption also change and so does the demand for education. growth shifts to other parts of the country. the new demand stimulates the growth of capital markets.
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authority ) carries out very important work here in that they monitor developments in the banks and credit institutions and are prepared to take action if they consider it necessary. underlying inflation stable around target of 2 per cent the impact of monetary policy on households β living costs is something that creates large fluctuations in cpi inflation during the forecast period ( figure 5 ). the fact that the repo rate has been cut heavily over the past year has contributed to a rapid fall in cpi inflation, as changes in households β mortgage expenditure are included in this index. with effect from autumn 2010, however, the repo rate is expected to rise relatively quickly, which will correspondingly mean that cpi inflation will be close to 4 per cent at the beginning of 2012. on the other hand, one can use a measure of underlying inflation, the cpif, which excludes the direct effects of the repo rate on mortgage rates. measured in terms of the cpif, we expect inflation to be much more stable and to be close to 2 per cent for most of the forecast period. figure 5. inflation measured in terms of the cpi and the cpif, annual percentage change cpi cpif - 1 - 1 - 2 - 2 sources : statistics sweden and the riksbank there is still considerable uncertainty surrounding future developments ( figure 3 ). it is possible that the improved situation in the financial markets will contribute to a faster recovery in the world economy than we are expecting in the main scenario of the monetary policy report. on the other hand, the recovery may be slower than expected when the fiscal policy stimulation packages around the world are gradually phased out. there are many potential risks along the way. but our forecast is that if we hold the repo rate low up to autumn 2010 and then begin raising it, this together with other measures will contribute to a stable recovery and mean we attain the inflation target of 2 per cent. figure 6. gdp with uncertainty bands, annual percentage change, seasonally - adjusted data - 2 - 2 90 % - 4 - 4 75 % 50 % o utcome - 6 - 6 forecast - 8 - 8 sources : statistics sweden and the riksbank i and my colleagues on the executive board want the growth curve to look like a β v β when the economy recovers after the recession, as in the figure with our forecast for gdp growth, and not a β w β ( see figure 6 ). having said that, let me just briefly comment on my own view of monetary policy as expressed in the
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markets have had very limited effects on the chilean economy ( figure 6 ). figure 6 : exchange rates ( local currency units per us dollar, percent change ) may 2006 argentina australia brazil chile eurozone hungary indonesia japan malaysia mexico new zealand philippines poland russia south africa south korea turkey united kingdom 1, 5 5, 8 8, 0 7, 3 1, 6 7, 0 6, 6 5, 2 2, 9 5, 4 3, 3 4, 0 6, 1 0, 1 20, 3 3, 2 20, 3 2, 3 february 2007 august 2007 0, 0 3, 0 2, 6 1, 0 0, 7 0, 7 2, 0 - 4, 2 0, 7 1, 0 5, 2 1, 0 0, 6 0, 4 5, 9 1, 2 5, 1 2, 2 1, 7 argentina 10, 3 australia 8, 8 brazil 1, 9 chile 2, 4 eurozone 5, 1 hungary 3, 3 indonesia - 6, 3 japan 2, 3 malaysia 3, 1 mexico 13, 6 new zealand 4, 1 philippines 1, 8 poland 1, 4 russia 6, 8 south africa 2, 9 south korea 7, 0 turkey 3, 4 united kingdom ( 1 ) shows variation between 10 may and 27 june. ( 2 ) shows variation between 26 february and 5 march. ( 3 ) shows variation between 19 july and 17 august. source : bloomberg. long - term interest rates ( variation in basis points ) may 2006 argentina australia brazil chile eurozone hungary indonesia japan malaysia mexico new zealand philippines poland russia south africa south korea turkey united kingdom usa february 2007 - 4 - 9 - 72 - 11 - 679 - - 18 - 7 - 8 - 4 - 3 - 6 - 12 - - 5 - 75 - 9 - 13 august 2007 382 argentina - 36 australia 90 brazil - 8 chile - 26 eurozone 53 hungary 112 indonesia - 33 japan 23 malaysia 27 mexico - 60 new zealand - - philippines 12 poland 26 russia 3 south africa - - south korea 161 turkey - 34 united kingdom - 33 usa ( 1 ) shows variation between 10 may and 27 june. ( 2 ) shows variation between 26 february and 5 march. ( 3 ) shows variation between 19 july and 17 august. source : bloomberg. something very simple reflects the proper functioning of our economy : in a moment where the world has seen a major retraction of credit operations, in chile companies have continued to place long - term bonds in the private market.
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generally denoting a systemic orientation of ο¬nancial regulation and supervision linked to the macroeconomy. the objective of these earlier macro - prudential policies aimed initially at achieving ο¬nancial stability through smoother economic and ο¬nancial cycles 2. under that premise, several jurisdictions3 started implementing tools like loan - to - value ratios, margin requirements and dynamic provisions. ecb. financial stability review. may 2014 β the distinction between the micro - and macro - prudential dimensions of financial stability is best drawn in terms of the objective of the tasks and the conception of the mechanisms influencing economic outcomes. it has less to do with the instruments used in the pursuit of those objectives. β the term " macro - prudential " : origins and evolution - bis quarterly review, part 6, march 2010. notably the usa and europe. macro - prudential regulation : history, theory and policy ( bis. org ) however, it was not until the aftermath of the 2008 global ο¬nancial crisis that international organizations and regulatory bodies began to decisively develop, adopt, and implement macro - prudential policies aimed at mitigating systemic risks that can accumulate over time. this shift was informed by the crisis, which showed that, while traditional micro - prudential approaches are essential, keeping individual ο¬nancial institutions sound is not enough to protect against unchecked system - wide risks and safeguard from systemic crises. therefore, policymakers need a broader approach and a toolkit to safeguard the ο¬nancial system as a whole. the basel iii framework, as introduced by the basel committee on banking supervision ( bcbs ), is a critical step in this direction, providing regulators with tools such as the countercyclical capital [UNK] ( ccyb ) and liquidity coverage ratios that aim to enhance ο¬nancial system resilience during times of stress. the introduction of the ccyb incorporates for the ο¬rst time a macro - prudential tool within the basel standards, aimed at strengthening the resilience and ability of the ο¬nancial system to withstand shocks and to continue providing ο¬nancial services, without amplifying the original shock. in this context, basel iii β directly addressed β the risks associated with the β procyclicality β of the ο¬nancial system 4. the recent experience with the covid - 19 pandemic, showed that countries where ccyb was activated and accumulated, had some advantages over others where the [UNK] was not
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works out to be about 7. 0 percent. unless there are totally unexpected shocks, inspite of some adverse impact of tsunami which is localised, the projected gdp growth for the year in the range of 6. 0 to 6. 5 percent should materialise comfortably. in response to the impact of tsunami, rbi has adopted a three - track approach. first, ensuring supply of currency, banking services with relaxations in procedures, as appropriate, liberal provision and restructuring of credit for consumption as also resuming productive activities, finance for rebuilding houses and coordinating with state governments, nabard, nhb and commercial banks. this process is still underway and the rbi β s task force constituted for the purpose is directly in communication with over 40 branches of commercial banks catering to the affected areas. second, monitoring of financial markets, which remain largely unaffected. third, assessing the impact which indicates enormous human suffering and considerable localised loss of assets in both public and household sector but with marginal impact on overall growth and the external sector and manageable additional expenditure in the central and state budgets. the mid - term review devoted considerable attention to issues relating to price - stability and inflation expectations. the wpi inflation, on a year - to - year basis decelerated to 6. 4 percent during week ended december 25, 2004. in view of several uncertainties and the fact that all indirect effects of increases in oil prices domestically are yet to be fully transmitted, the projection at around 6. 5 percent made in the review, continues to be valid. cpi ( industrial workers ) inflation, year - on - year, rose to 4. 2 percent in november 2004 from 3. 1 percent a year ago. in this regard, it is necessary to reiterate the serious concerns expressed in the review in regard to price stability and inflation expectations for three reasons. first, inflation is a major problem for the poor. second, stabilising inflation expectations is critical to ensuring enhanced investment activity in the private sector, which is a crucial element of current strategy for growth and welfare. finally, our economy is now more integrated with the global economy, and hence, maintenance of price - stability is critical for ensuring financial stability. in this background, both monetary and fiscal policies give considerable attention to price stability, as part of a growth - oriented strategy. the hard earned gains in this regard could be reversed if there is a perception of dilution in commitment to contain undue inflationary pressures. in assessing the risks of higher inflation it
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institution β’ except, as provided below, an account holder shall not be restricted as to the number of deposits which may be made to the account without incurring any additional charge β’ the banking institution may charge account holders for transactions at electronic facilities which are not operated by the account holder β s banking institution as well as other fees and charges for specific banking services which are not covered under the basic banking account scheme β’ every periodic statement issued for the basic banking account should invariably cover on it or by way of separate communique maximum number of withdrawals permitted during each periodic cycle without additional charge and the consequences of exceeding such maximum and the fee if any, for the use of electronic facilities which are not operated by the account holder β s banking institution. an interesting feature of basic banking account scheme is the element of transparency i. e. the banking institution should, prior to opening the account, furnish a written disclosure to the account holder describing the main features of the scheme i. e. the initial deposit amount required to open the account, minimum balance to be maintained, charge per periodic cycle for use of such account, maximum number of withdrawal transactions without any additional charge and other charges imposed on transactions for availing electronic facility not operated by the account holder β s banking institution, etc. coverage of banking services ( ratio of demand deposit accounts to the adult population ) region / state / union territory northern region haryana himachal pradesh jammu & kashmir punjab rajasthan chandigarh delhi north - eastern region arunachal pradesh assam manipur meghalaya mizoram nagaland tripura eastern region bihar jharkhand orissa sikkim west bengal andaman & nicobar islands central region chhattisgarh madhya pradesh uttar pradesh uttaranchal western region goa current accounts savings accounts total population adult populatio n ( above 19 years ) total no. of accounts no. of acc. per 100 of popula tion no. of acc. per 100 of adult pop. gujarat maharashtra dadra & nagar haveli daman & diu southern region andhra pradesh karnataka kerala tamil nadu lakshadweep pondicherry all - india indian scenario bank nationalization in india marked a paradigm shift in the focus of banking as it was intended to shift the focus from class banking to mass banking. the rationale for creating regional rural banks was also to take the banking services to poor people. the branches of commercial banks and the rrbs have increased from 8321 in the year 1969 to 68, 282 branches as at the
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best out of the lamfalussy process, there is a need for a strong commitment from all involved parties, and in primis by national supervisory authorities. this model could work effectively only if all authorities endeavour to allocate enough resources and contribute to enhancing the effectiveness of the level 3 committees. there is currently an on - going debate on how to better exploit all the potentialities of the lamfalussy approach, by further developing existing tools. i note that in some directives recently issued for the securities sector new methods of supervisory cooperation have been introduced, such as the possibility to delegate responsibilities ( in the prospectus directive ) and the role of level 3 committee joint forum, ageing and pension system reform : implications for financial markets and economic policies, september 2005. as mediator ( in the market abuse directive ). the potentialities of these new instruments have to be still tested, and it is under discussion whether some of them could be introduced in other financial sectors. i note that each one of the level 3 committees is at the moment mainly working - let me put it in this way - at a different level of the lamfalussy approach. to be more precise, the ceiops is currently focusing on finalising the advice to the commission for the preparation of the level 1 solvency directive ; cesr so far has been very busy with the preparation of the level 2 implementing measures in the securities field ; cebs is working hard mainly on finalising level 3 guidelines for the implementation of the eu capital requirements framework. therefore, given the different focus and orientation of its main stream of work, each sectoral committee might have different experience and possibly views as regards both limits and strengths of the lamfalussy approach. overall, i think that the experience gained so far by each committee may benefit the others as regards both the added value and the possible limits of the lamfalussy approach. thus i consider very important in the current discussion that all stakeholders share openly their concrete experience gained so far and benefit from each other β s views as to the potentialities and possible limits of the lamfalussy framework. i hope that the conference of today about the role of ceiops could bring important and thoughtful elements to the on - going debate. let me now express my considerations as regards your committee, the ceiops. i think that ceiops is presently at the same time in a very challenging and quite privileged situation. it is in a very challenging situation because it
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some considerations on cross - sectoral issues. i have already mentioned the direct and indirect channels through which exposures in insurance sector may have an impact on financial stability. i note here that the blurring of boundaries between financial sectors in terms of financial institutions β activities, markets and financial instruments β which represents a major development of financial integration β constitutes an additional challenge for the authorities both for supervision and for financial stability monitoring. from the supervisory point of view, i note that in the last years there has been an increasing attention on a number of challenges affecting more than one financial sector, such as outsourcing, the development of hybrid financial products and credit transfer activity. it is very important to minimise potential inconsistencies in the supervisory treatment across the three sectors to avoid that allocation of risk would be decided simply on the ground of lower cost for compliance, and not for sound business considerations. therefore, close cooperation among sectoral committees and authorities is important to ensure an effective and consistent supervisory response. furthermore, close cooperation is required for the β supplementary supervision β of financial conglomerates. i note here that the three level 3 committees have recently made a proposal for carrying on the work needed to implement the financial conglomerates directive, without the need for establishing an ad - hoc level 3 committee. i just recall here the main principles underlining the lamfalussy approach, namely full transparency and accountability towards all political institutions and market participants, which should be always in the forefront and fully respected whatever arrangement is going to be put in place. as regard financial stability monitoring, in the ecb financial stability review, produced twice a year, the monitoring of risks to financial stability includes also a review of the relevant developments in the insurance sector. this assessment benefits extensively from the close co - operation between the escb banking supervision committee ( bsc ) and the ceiops, through mutual participations in the committees. the analysis of risks of a cross - sector nature is set to take advantage as well of the recent agreement among the level 3 committees to intensify their co - operation in a more organised way through a joint structure. 4. concluding remarks ladies and gentlemen, let me summarise my main messages today. first, insurance companies and pension funds play a positive role for financial stability. any new regulatory projects should recognise the long - term horizon of these institutions if we want them to remain the historically stable segment of the financial system and to enable them to act as possible shock absorbers. however, insurance companies
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monetary policy was ultimately needed to stem the high inflation and start the process of getting inflation down to the low and stable levels that were 2 / 3 bis central bankers'speeches the norm until the spring of last year. our aim is to avoid that outcome by acting with resolve now. these lessons are guiding us as we use our tools to bring inflation down. we are taking forceful and rapid steps to moderate demand so that it comes into better alignment with supply, and to keep inflation expectations anchored. we will keep at it until we are confident the job is done. 1 see ben bernanke ( 2004 ), β the great moderation, β speech delivered at the meetings of the eastern economic association, washington, february 20 ; ben bernanke ( 2022 ), β inflation isn β t going to bring back the 1970s, " new york times, june 14. 2 see paul a. volcker ( 1979 ), β statement before the joint economic committee of the u. s. congress, october 17, 1979, " federal reserve bulletin, vol. 65 ( november ), p. 888. 3 a review of the applications of rational inattention in monetary economics appears in christopher a. sims ( 2010 ), β rational inattention and monetary economics, β in benjamin m. friedman and michael woodford, eds., handbook of monetary economics, vol. 3 ( amsterdam : north - holland ), pp. 155 β 81. see alan greenspan ( 1989 ), β statement before the committee on banking, housing, and urban affairs, u. s. senate, february 21, 1989, " federal reserve bulletin, vol. 75 ( april ), pp. 274 β 75. 3 / 3 bis central bankers'speeches
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in moderating demand to better align with supply. we are committed to doing that job. the second lesson is that the public's expectations about future inflation can play an important role in setting the path of inflation over time. today, by many measures, longer - term inflation expectations appear to remain well anchored. that is broadly true of surveys of households, businesses, and forecasters, and of market - based measures as well. but that is not grounds for complacency, with inflation having run well above our goal for some time. if the public expects that inflation will remain low and stable over time, then, absent major shocks, it likely will. unfortunately, the same is true of expectations of high and volatile inflation. during the 1970s, as inflation climbed, the anticipation of high inflation became entrenched in the economic decisionmaking of households and businesses. the more inflation rose, the more people came to expect it to remain high, and they built that belief into wage and pricing decisions. as former chairman paul volcker put it at the height of the great inflation in 1979, " inflation feeds in part on itself, so part of the job of returning to a more stable and more productive economy must be to break the grip of inflationary expectations. " 2 one useful insight into how actual inflation may affect expectations about its future path is based in the concept of " rational inattention. " 3 when inflation is persistently high, households and businesses must pay close attention and incorporate inflation into their economic decisions. when inflation is low and stable, they are freer to focus their attention elsewhere. former chairman alan greenspan put it this way : " for all practical purposes, price stability means that expected changes in the average price level are small enough and gradual enough that they do not materially enter business and household financial decisions. " 4 of course, inflation has just about everyone's attention right now, which highlights a particular risk today : the longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched. that brings me to the third lesson, which is that we must keep at it until the job is done. history shows that the employment costs of bringing down inflation are likely to increase with delay, as high inflation becomes more entrenched in wage and price setting. the successful volcker disinflation in the early 1980s followed multiple failed attempts to lower inflation over the previous 15 years. a lengthy period of very restrictive
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##endatenbanken / zeitreihen - datenbank / 723452 / 723452? tsid = bbdp1. m. de. y. apt1. g. gp09sa000000. i15. a & dateselect = 2022 [ https : / / www. bundesbank. de / dynamic / action / de / statistiken / zeitreihendatenbanken / zeitreihen - datenbank / 723452 / 723452? tsid = bbdp1. m. de. y. apt1. g. gp09sa000000. i15. a & dateselect = 2022 ] source : 5. see https : / / www. bundesbank. de / dynamic / action / de / statistiken / zeitreihendatenbanken / zeitreihen - datenbank / 723452 / 723452? tsid = bbdp1. m. de. y. apt1. g. gp09sa000000. i15. a & dateselect = 2022 [ https : / / www. bundesbank. de / dynamic / action / de / statistiken / zeitreihendatenbanken / zeitreihen - datenbank / 723452 / 723452? tsid = bbdp1. m. de. y. apt1. g. gp09sa000000. i15. a & dateselect = 2022 ] 6. this β allocation risk β has been described in the bundesbank β s latest financial stability reviews ( deutsche bundesbank 2019, 2021 ). 7. see also the recent communication by the german financial stability committee ( afs ( ausschuss fur finanzstabilitat ) 2022b ). 8. the ecb ( european central bank )'s new strategy indicates that there is a clear conceptual case for the ecb ( european central bank ) to take financial stability considerations into account in its monetary policy deliberations ( ecb 2021 ). 9. this section is partly based on buch, buchholz, knoll and weigert ( 2021 ). 10. in this context, it has been argued that the harmonisation of insolvency legislation would
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β’ the transformation of our economies into internationally competitive entities. at the national level, these objectives can be gleaned from manifestos, development plans, medium term economic strategy papers, public sector investment programs and budgets. the policies which are available to achieve these objectives are β’ monetary β’ fiscal β’ trade β’ international economic relations β’ incomes β’ structural β’ social β’ environmental let me on this occasion confine myself to monetary and financial policies, given the occasion for which we are gathered. the eccb in assessing the situation both domestically and internationally has identified consistent with the objectives set by the oecs heads two major objectives which are also consistent with the purposes of the bank as set out in article 4 of the eccb. these are stability and development. under stability the bank has two goals, namely β monetary stability and financial stability. monetary stability is tied to the performance of the exchange rate. we have chosen a fixed exchange rate regime, and have managed to successfully maintain this at 2. 7 ec to the us dollar since july 1976. this has required us to maintain a very high level of foreign exchange reserves, presently 96 % to the currency in circulation. this is above the legal limit of 60 % and is approximately equivalent to four months imports where the benchmark is three months. in order for this parity to be maintained, we focus our attention on the performance of the balance of payments, the fiscal and debt ratios of the countries, and the competitiveness of the currency as assessed by the real effective exchange rate. the monetary council has therefore set a number of benchmarks in the fiscal and debt areas which member governments have been requested to adhere to. financial stability is related to the safety and soundness of the banking system and the effective regulation of non - bank financial intermediaries. this requires the appropriate legislative and legal framework and the capacity to effectively regulate the financial system. let me put these two stability conditions in a way that the ordinary layman would understand. if the currency is devalued, the ability to purchase goods from abroad will be decreased and the prices of all goods will go up due to inflation. also, on the other hand, if wages and prices increase faster than productivity we will become less competitive. the monetary council has recommended to governments that they establish tripartite committees comprised of representatives from the government, private sector and the trade unions to monitor wages, prices, employment and productivity. with respect to financial stability, whereas in the case of the devaluation you will lose
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to singapore β s strengths. while external headwinds will slow singapore β s pace of growth in the short term, domestic economic restructuring is proceeding well and will enable the economy to emerge stronger. the financial sector is a good example. growth will be slower than last year given the sector β s exposure to the external environment. but the relentless effort by financial institutions to promote innovation, harness technology, transform jobs, and upskill the workforce, will position the sector well for the future. mas will continue to closely partner the industry to make singapore the leading global financial centre in asia, supporting the region β s growth and creating good jobs for singaporeans. let me stop here and we will be happy to take your questions. 10 / 11 bis central bankers'speeches 1 this refers to growth in the finance and insurance industry, excluding holding companies. the unadjusted growth rate for the sector, published by dos, was 5. 8 %. 2 the net job creation figure of 6, 900 includes fintech jobs in the overall economy, but excludes jobs in holding companies. the employment increase of 7, 600 for the financial and insurance sector in 2018, published by mom, includes holding companies. 11 / 11 bis central bankers'speeches
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however, the real estate and construction subsectors have started to recover as restrictions on mobility and economic activity were gradually relaxed. we also saw real estate demand slip due to pandemic - related uncertainties. the capital values for office and residential units in the country β s major commercial and business 1 / 6 bis central bankers'speeches districts decreased in 2020 due to lesser demand amid the pandemic. a higher vacancy rate was also recorded during the period due mainly to slowdown in leasing activities, weak demand and a cautious market. based on the latest residential real estate price index, the residential real estate prices of various types of new housing units declined further in q2 2021. the nationwide house prices contracted by 9. 4 percent year - on - year in q2 2021, from β 4. 2 percent in q1 2021 as the pandemic hit demand. however, high base effects may also have contributed to the significant decline during the period as the index peaked in q2 2020 while posting a 4. 8 percent increase quarter - on - quarter. meanwhile, the national commercial property price index, which measures the average changes in appraised values of commercial properties, shows a deceleration in growth in the second half of 2020. the bsp anticipates that activity in the real estate market will recover in line with rebound in overall economic growth in 2022. meanwhile, the philippine banking system remained on solid footing as shown by continued growth in assets, deposits and capital, as well as positive net profit, stable capital and liquidity buffers, ample loan loss reserves and manageable loan quality. overall, the banking system β s financial condition remains supportive of the country β s financing needs. at the height of the pandemic in 2020, the bsp implemented liquidity - enhancing measures to support financing requirements of the economy. for instance, the bsp lowered the bsp β s policy rate by 200 basis points. this rate has since been maintained at 2. 0 percent, the lowest rate since the beginning of the pandemic. the bsp also reduced reserve requirements of universal banks to 12 percent from 14 percent. this policy stance has contributed to a general decline in lending rates across all loan product categories. for instance, the weighted average interest rate of housing loans dropped to 6. 6 percent as of end - june 2021 from 8 percent in end - march 2020. similarly, the weighted average interest rate of loans to corporations fell to 4. 9 percent as of
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and β decreased considerably ". net percentages for the β other factors β refer to further factors which were mentioned by banks as having contributed to changes in credit standards. latest observation : january 2023 bls. in the light of this, we increasingly need to consider the risk of overtightening. after many years of low growth, tipping the economy into a full - scale recession could trigger a permanent destruction of productive capacity and harm future employment opportunities, especially for the vulnerable members of society. even if subsequently corrected, such overtightening would be very costly, given the low flexibility of the european economy. overall, monetary policy needs to react forcefully when major shocks hit the economy and push inflation in a clear direction. but when risks are more balanced, a data - dependent approach is a prerequisite to avoiding costly mistakes. clarifying the reaction function for such a data - dependent approach to be effective and avoid exacerbating uncertainty, we need to give some guidance on our future policy. although we should avoid giving unconditional forward guidance on the policy rate path many months ahead, a meeting - by - meeting approach alone may not suffice. it may leave investors in the dark, having to guess our future moves and focusing on the near term [ 21 ]. to deal with this conundrum, we must instead provide investors with a framework for how we evaluate and respond to the incoming information. in other words, we need to clarify our reaction function. in line with our price stability mandate, our reaction function is informed by the inflation outlook as well as the risks surrounding it. and it is designed to ensure that inflation returns to 2 % without undue delay, taking into account the lags with which our monetary policy operates. a proper understanding of this reaction function can benefit from two important clarifications. the first is what will contribute to determining our reaction β that is, the set of factors that will affect inflation the most at our medium - term policy horizon [ 22 ]. at the global level, the most significant of these factors are energy prices, simply because lower energy prices are crucial for current inflationary pressures to unwind. as for the domestic economy, a key factor in the coming months will be how rapidly lower energy prices and the associated lower cost pressures for firms are passed on to retail prices. in this respect, we need to carefully monitor mark - ups and wage growth, which could push in the opposite direction ; for wages, we need to distinguish one
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, efficient authorities, and a solid and secure infrastructure. this constitutes a strong underpinning for financial service providers. but let us not rest on our laurels. we must try to avoid creating any administrative hurdles that neither contribute to stability nor bring any great benefit, but instead unnecessarily restrict the activities of financial service providers. transfer stamp tax and withholding tax, for instance, curb the potential for growth in switzerland. the reform of the withholding tax system and the abolition of transfer stamp tax on domestic bonds are expected to strengthen the swiss capital market. 2 this would not only benefit the financial sector, but also improve the financing options available to companies. it would also benefit small and medium - sized enterprises, for which such opportunities have been very limited until now. cf. roadmap for financial market policy switzerland 2020 +, advisory board for future of swiss financial centre, 2019. page 4 / 5 open market access switzerland undoubtedly owes much of the prosperity it enjoys today to open markets and thriving trade. however, for the export - oriented parts of the swiss financial industry, limited market access continues to be an obstacle restricting growth potential. market access to some countries has deteriorated since the financial crisis. this especially affects wealth managers who are operating in our relatively small domestic market. measures to facilitate market entry would therefore be helpful. and there are new opportunities to be developed in the multilateral trading system too. until now, the liberalisation of global trade has focused on goods. liberalisation of trade in services could offer new growth potential for financial service providers. closing remarks i come now to the end of my speech. ladies and gentlemen, good framework conditions are key to ensuring that our financial centre remains a global leader. they must be safeguarded at all times, and, where appropriate, improved. in addition, and speaking more generally, good framework conditions help companies in all sectors find corporate responses to challenges such as coronavirus, but also to structural changes. they provide the foundation for private market participants to be economically successful and compete at an international level. this is, of course, especially true of the financial sector. thank you for your attention. page 5 / 5
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of collateral, the crd β s risk - based lending approach uses credit scoring models to assess the capacity of smes to repay their loans. we continue to work on the credit surety fund ( csf ) program, alongside the cooperative development authority. as a credit enhancement scheme, the csf provides security for loans of msmes by way of a surety cover. with support from the various banking industry associations and the department of trade and 1 / 2 bis central bankers'speeches industry, the bsp will introduce the adoption of a standard business loan application form which will make the loan application documents of banks simple and borrower - friendly. to better help us better understand the needs and challenges faced by the msme sector, the bsp is supporting the asian development bank in conducting a national msme survey. this survey will generate new insights and more granular data on msme access to finance. we are also supporting the adoption of innovative financing schemes such as the agriculture value chain financing and supply chain financing to enhance the bankability of agri - businesses and msmes and to increase the capacity of financial institutions in serving these underserved market segments. digital financial inclusion of msmes the bsp has launched initiatives that will fast track the digital transformation of the financial ecosystem. for instance, the establishment of digital banks is envisioned to bring about greater efficiency and facilitate virtual reach of financial products and services among the unbanked, including msmes. last april we extended the payments use case of the qr ph to include person - to - merchant or p2m. with the use of qr technology, small merchants are presented with a simpler and more affordable payment facility as compared to costly point of sale terminals. we are also looking forward to the full implementation of our digital id β the philippine id system or philsys. more than 11 million filipinos have completed the registration of their demographic and biometric data. philsys will address the lack of identity document which is an oft - cited barrier to account opening. beyond seamless digital onboarding, philsys can facilitate greater innovation in digital financial services. innovation and partnerships towards inclusive msme financing all these developments sound promising. but the bsp and the government cannot solve the msme challenges alone. we need the support of all relevant players, including industry innovators, to help bridge the financing gap that has long hampered the growth of msmes. we welcome innovative solutions that leverage on data and digital technologies in providing wider
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benjamin e diokno : micro, small and medium - sized enterprises ( msme ) message by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), for the msme ( micro, small and medium - sized enterprises ) day β negosyo bounce back β, 18 july 2021. * * * a pleasant morning to all the speakers and participants of today β s webinar entitled β msme day : negosyo bounce back β. thank you investree philippines for this initiative, which aims to inspire and equip our entrepreneurs towards business recovery and growth through innovative financing solutions. the bangko sentral ng pilipinas ( bsp ) has always supported programs that will steer the country β s economy towards a strong and sustainable path to recovery. as more vaccines arrive, and as a greater share of the population gets vaccinated, we move closer towards a new economy that is β better, safer, and more technologically ready '. msmes in the new economy msmes are agile to adapt their business ventures to this new economy. they have taken advantage of the opportunities brought about by digitalization, such as e - commerce and digital payments. in fact, data from 1st quarter of 2021 show the combined volume of electronic fund transfers through pesonet and instapay hit 107 million transactions with total value of p1. 5 trillion. volume grew by 365 % and value by 171 % compared to the same period in 2020. this trend may be primarily driven by the desire to serve and retain their client - base, but it has also enabled msmes to expand their market. digital payment streams can also broaden msmes β access to finance. digital records of sales and payment transactions can be used in assessing the creditworthiness of a business which will unlock access to other welfare - enhancing financial services such as digital credit, insurance, and investment, among others. bsp β s priority initiatives for msmes the bsp has introduced a package of regulatory relief and incentive measures to ensure that banks would continue to lend to the msme sector amid the pandemic. the bsp is also aggressively undertaking various initiatives that will provide lasting benefits for msmes even after the pandemic. our credit risk database ( crd ) project in partnership with the government of japan aims to improve access to finance for smes by lessening banks β dependence on collateral during credit evaluation. instead
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their retained earnings, the banking sector is still by far the largest source of funds for the corporate sector and is likely to remain so for many more years. thus, a dysfunctional banking sector can surely threaten to undermine the strength of the economic recovery. in the near term, non - performing loans ( npl ) as well as non - performing assets ( npa ) must be reduced more speedily, and indeed this has been one major focus of my work at the bank of thailand. of the remaining 773 billion baht of npl in the banking system at end - june 2003, over 400 billion are either in the court process or have completed the court process and in the legal execution process with assets awaiting to be liquidated. to speed up the process of asset sales and liquidation, we have proposed to the ministry of finance to carve out this portion of the npls from the banks by an independent body that would be assigned the task of asset sales and liquidation. this proposal could become effective by early next year and the approach would greatly assist a speedy resolution of npl problems. the remaining npl of approximately 350 billion baht would not be a difficult problem for banks to handle, given the current low interest rate environment, the ongoing economic recovery, and improving bank profitability. as for the longer term, it is important that the banking system diversifies its services and reaches out to meet the needs of the rural population currently considered under - serviced by the industry. this will ensure that financial constraints will not remain as an obstruction to a broad - based economic prosperity of thailand. the financial sector master plan, which has been drafted by the bank of thailand and is currently under the ministry of finance β s review, has looked closely at this important issue. and last but certainly not least, even when the thai economy can manage to sustain growth, we are not immune from new challenges and risks brought about by globalization. outstanding export performance, strong domestic fundamentals, and continued gdp growth will unavoidably attract foreign capital into the country and, as in the recent months, exert upward pressure on the currency. while the economy now enjoys a more flexible adjustment mechanism compared with the past, a huge influx of foreign capital relative to the size of domestic financial and capital markets can nevertheless cause substantial market volatility and, if persists, can even lead to the emergence of asset price bubbles. regarding the upward pressure on the baht, the bank of thailand has been monitoring the currency movements
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curricular activities are selected. i am further informed that the candidates are of exemplary character and are committed to the betterment of their families, societies and the nation at large. ladies and gentlemen, i am also informed that this year, the foundation received several applications from a wide section of candidates. it is gratifying to know that many young men and women wish to have an opportunity to better their education in these trying times. it is for this reason that i call on all of us to assist, foundations like masomo, to increase the number of scholarships so that many more people could benefit from the scholarships. i therefore, urge the donors to the foundation to increase their allocation in the coming year and in future. i also call on other well wishers in this room and outside to support this noble cause. remember, an educated population is a pre - requisite to a country β s economic development. this year, the masomo scholarship is conferred on three exceptional and deserving young individuals in ms lenganji nalwamba who is studying electrical engineering, mr. wapatwa silungwe, studying civil engineering and mr. emmanuel mwila who is pursuing agricultural economics. in congratulating you on this deserved achievement, let me remind you that as you accept this scholarship, you have an obligation and duty to the masomo foundation and to the nation at large. it is this strong sense of obligation, duty, and commitments to serve the nation that enabled our fathers and fore fathers serve the nation wholeheartedly and brought us where we are today. as students with a masomo scholarship, each of you will be given a unique opportunity to prove yourself. i urge you to work hard and learn from others around you including those different from you and less endowed than you. let me also mention that as a masomo scholar, your progress and performance will be closely monitored and you will be looked upon as role models. i urge you to set the standards for others to emulate. i am confident that all three of you will live up to the highest standards and will not disappoint us. i once again congratulate you and your parents, for it is only through their guidance and care that you shall continue to succeed. i wish you well in your studies and hope to see the day when all of you will graduate with flying colors. lastly, let me commend the president of this foundation, for the noble work that you undertaking. i hope others
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3 / 4 percentage points since august, to about 4. 8 percent. with sales of new homes up a bit and starts of single - family homes little changed from january through march, builders are seeing the backlog of unsold new homes decline β a precondition for any recovery in homebuilding. in contrast to the somewhat better news in the household sector, the available indicators of business investment remain extremely weak. spending for equipment and software fell at an annual rate of about 30 percent in both the fourth and first quarters, and the level of new orders remains below the level of shipments, suggesting further near - term softness in business equipment spending. recent business surveys have been a bit more positive, but surveyed firms are still reporting net declines in new orders and restrained capital spending plans. our recent survey of bank loan officers reported further weakening of demand for commercial and industrial loans. 1 the survey also showed that the net fraction of banks that tightened their business lending policies stayed elevated, although it has come down in the past two surveys. conditions in the commercial real estate sector are poor. vacancy rates for existing office, industrial, and retail properties have been rising, prices of these properties have been falling, and, consequently, the number of new projects in the pipeline has been shrinking. credit conditions in the commercial real estate sector are still severely strained, with no commercial mortgage - backed securities ( cmbs ) having been issued in almost a year. to try to help restart the cmbs market, the federal reserve announced last friday that recently issued cmbs will in june be eligible collateral for our term asset - backed securities loan facility ( talf ). 2 an important influence on the near - term economic outlook is the extent to which businesses have been able to shed the unwanted inventories that they accumulated as sales turned down sharply last year. some progress has been made ; the bureau of economic analysis estimates that an acceleration in inventory liquidation accounted for almost one - half of the reported decline in real gdp in the first quarter. as stocks move into better alignment with sales, a reduction in the pace of inventory liquidation should provide some support to production later this year. the outlook for economic activity abroad is also an important consideration. the steep drop in u. s. exports that began last fall has been a significant drag on domestic production, and any improvement on that front would be helpful. a few indicators suggest, again quite tentatively, that the decline in foreign economic activity may also be moderating. and, as has been the
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repayments in the 12 months ahead would be woefully inadequate in small caribbean countries with fixed exchange rates and possibly even in small countries with floating exchange rates. in such regimes, experience suggests that the pool of foreign exchange reserves needs to be much higher. for the most part, holding foreign reserves in excess of short - term debt obligations could help to reduce the incidence of financial crisis. the level held in excess of short - term debt, however, depends on country - specific circumstances. issues such as the prevailing macroeconomic conditions, particularly whether there is a large and persistent external current account deficit that needs to be financed by international capital inflows, or an overvalued exchange rate that can lead to capital outflows, high levels of short - term public debt, and weak banking systems that can contribute to capital flight, are critical in this regard, and must be factored into the analysis. this underscores the need for a sound understanding of the interaction between reserves adequacy, vulnerability, and country - specific factors. for instance, in hungary, the targeting of reserve adequacy takes into account the amount of reserves needed to cover short - term debt as well as a mark - up ( a kind of assurance ) to reflect unfavourable macroeconomic fundaments β i. e., the potential for an increasing external current account deficit or real exchange rate appreciation. the imf has proposed that in addition to the benchmarking of foreign reserves to short - term debt, countries should undertake stress testing of the balance of payments. the results of these stress tests in different scenarios can serve as key inputs in the determination of reserve adequacy. for example, a ratio of one ( reserves to short - term debt ) is a simple stress test of the lack or otherwise of access to international markets for a single year, and represents a useful point of departure for more complex tests. more complex tests should reflect different market access for each type of capital inflow, be it fdi, portfolio investment or trade credits, the risk of capital flight and the need to finance an external current account deficit. however, since in the field of finance and currency crises, the experience of the past has not been a good predictor of the future, the stress tests should incorporate the maximum historical variations as a basis for potential or future variations in each balance of payments flow. it must be stressed that the balance of payments flows must be measured accurately to derive a
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exchange manipulation provide hard evidence that there remains work to be done. β 10 this is clearly an encouraging difference in perspectives. the public sector, too, has paid increasing attention to culture. the group of thirty, the basel committee, the european systemic risk board, and the financial stability board have issued papers on culture, governance, and misconduct risk. the fair and effective markets reviewa joint project of the bank of england, the financial conduct authority, and her majesty β s treasury - has called for heightened standards for market practice in matters affecting the public good. and in the last year, we have seen emerging approaches to supervision that aim to address culture, conduct, and governance. in particular, the central bank of the netherlandsde nederlandsche bank - has pioneered new techniques for the supervision of corporate governance, especially for assessing the group dynamics of boards and senior management. 11 culture also features prominently in criminal enforcement. the u. s. department of justice requires its prosecutors to determine β the pervasiveness of wrongdoing β at a corporation before seeking an indictment. according to its prosecutors β manual, β [ t ] he most important [ factor in making this determination ] is the role and conduct of management. although acts of even low - level employees may result in criminal liability, a corporation is directed by its management and management is responsible for a corporate culture in which criminal conduct is either discouraged or tacitly encouraged. β 12 individuals, including senior managers, also face criminal liability for their conduct. recent guidance from the u. s. department of justice places greater emphasis on individual culpability. 13 and the recent convictions of two traders for rigging libor, one of whom served as the global head of liquidity and finance at a major bank, may send a powerful message to bankers about the consequences of their misconduct. 14 the new acceptance of culture as an important area of focus was evident at a workshop that the federal reserve bank of new york hosted on november 5. christine lagarde, managing director of the international monetary fund, and stanley fischer, vice chairman of the board of governors of the federal reserve system, headlined a contingent of over 20 public sector authorities from around the globe. they were joined by the ceos, senior executives, and board letter of martin p. dunn to the office of chief counsel at the u. s. securities and exchange commission β s division of corporation finance, january 17, 2014. federal advisory council and board of governors, record of meeting,
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have mentioned, and summaries of our two workshops on culture. i hope you β ll take a look. to conclude, the financial crisis and subsequent scandals revealed deep and continuing flaws in the culture of banking. the responsibility to address these flaws rests with the banks themselves. many industry leaders have initiated reform programs within their firms. it is important to keep the momentum going. reform requires relentless and sustained effort : from the top of an institution to its most junior employees, and across all of the institution β s business activities. reform must include the full scope of an employee β s career, beginning with recruiting and continuing with annual performance management, compensation and promotion decisions. we in the official sector will be looking to the industry to fulfill its end of the bargainto act consistent with the public well - being, to value long - term stability over short - term gain, and to take account of all stakeholders in making decisions. thank you for your time and attention. https : / / www. newyorkfed. org / governance - and - culture - reform / index. html. bis central bankers β speeches
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than $ 600 billion, reflecting the improvement in financial conditions that has already occurred. in addition, bank reserves held at the fed will decline as the longer - term assets that we own mature or are prepaid. nevertheless, should economic conditions warrant a tightening of monetary policy before this process of unwinding is complete, we have a number of tools that will enable us to raise market interest rates as needed. perhaps the most important such tool is the authority that the congress granted the federal reserve last fall to pay interest on balances held at the fed by depository institutions. raising the rate of interest paid on reserve balances will give us substantial leverage over the federal funds rate and other short - term market interest rates, because banks generally will not supply funds to the market at an interest rate significantly lower than they can earn risk free by holding balances at the federal reserve. indeed, many foreign central banks use the ability to pay interest on reserves to help set a floor on market interest rates. the attractiveness to banks of leaving their excess reserve balances with the federal reserve can be further increased by offering banks a choice of maturities for their deposits. but interest on reserves is by no means the only tool we have to influence market interest rates. for example, we can drain liquidity from the system by conducting reverse repurchase agreements, in which we sell securities from our portfolio with an agreement to buy them back at a later date. reverse repurchase agreements, which can be executed with primary dealers, government - sponsored enterprises, and a range of other counterparties, are a traditional and well - understood method of managing the level of bank reserves. if necessary, another means of tightening policy is outright sales of our holdings of longer - term securities. not only would such sales drain reserves and raise short - term interest rates, but they also could put upward pressure on longer - term interest rates by expanding the supply of longerterm assets. in sum, we are confident that we have the tools to raise interest rates when that becomes necessary to achieve our objectives of maximum employment and price stability. fiscal policy our economy and financial markets have faced extraordinary near - term challenges, and strong and timely actions to respond to those challenges have been necessary and appropriate. i have discussed some of the measures taken by the federal reserve to promote economic growth and financial stability. the congress also has taken substantial actions, including the passage of a fiscal stimulus package. nevertheless, even as important steps have been taken to address the recession
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the taxpayer as we supply liquidity to the financial system and support the functioning of key credit markets. the congress has recently discussed proposals to expand the audit authority of the government accountability office ( gao ) over the federal reserve. as you know, the federal reserve is already subject to frequent reviews by the gao. the gao has broad authority to audit our operations and functions. the congress recently granted the gao new authority to conduct audits of the credit facilities extended by the federal reserve to " single and specific " companies under the authority provided by section 13 ( 3 ) of the federal reserve act, including the loan facilities provided to, or created for, american international group and bear stearns. the gao and the special inspector general have the right to audit our talf program, which uses funds from the troubled assets relief program. the congress, however, purposefully β and for good reason β excluded from the scope of potential gao reviews some highly sensitive areas, notably monetary policy deliberations and operations, including open market and discount window operations. in doing so, the congress carefully balanced the need for public accountability with the strong public policy benefits that flow from maintaining an appropriate degree of independence for the central bank in the making and execution of monetary policy. financial markets, in particular, likely would see a grant of review authority in these areas to the gao as a serious weakening of monetary policy independence. because gao reviews may be initiated at the request of members of congress, reviews or the threat of reviews in these areas could be seen as efforts to try to influence monetary policy decisions. a perceived loss of monetary policy independence could raise fears about future inflation, leading to higher long - term interest rates and reduced economic and financial stability. we will continue to work with the congress to provide the information it needs to oversee our activities effectively, yet in a way that does not compromise monetary policy independence. see " credit and liquidity programs and the balance sheet " on the board's website. see the monthly reports on the board's website at " credit and liquidity programs and the balance sheet, " congressional reports and other resources, federal reserve system monthly reports on credit and liquidity programs and the balance sheet.
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could ask for the same conditions and adjustments? that β s exactly the key problem. there is a discussion about relaxing the conditionality emerging in ireland and portugal, and also in greece this debate is gaining new traction. but foot - dragging on addressing the structural problems will perpetuate the crisis, and the market reaction reflects this concern. why not change those principles and make a softer adjustment? once more, the financial assistance can only buy time but does not address the root causes of the crisis. it is like a painkiller. if you do not ensure that you cure the illness you will be worse off once the effect wears off. i would also doubt that public support for the necessary reforms increases if they are spread even more over time, not to mention public support in the countries guaranteeing the rescue mechanism. bis central bankers β speeches in greece, there β s a lot of debate on the need to renegotiate parts of the program. is there space to make some changes? the key point is that there is an agreement that all involved parties including the greek government have signed. if the agreements were now seen as being open to renegotiation, then for instance the portuguese prime minister would have difficulties facing his parliament and explaining that he is to implement reforms. i think that would be a very dangerous strategy. it would harm those countries that are implementing reforms very quietly. greece is usually described as a special case. could that be so in this case, in a positive sense, allowing greece to adjust the program? greece is already receiving special treatment. adjustment will be spread over a much longer time. greece benefitted from an exceptional debt relief. you see, greece got much more support than any other country. relaxing this already softened framework even further cannot be an option. one of the leaders of the two parties that could win says that the greek government would request a total change of the program. what response would a unilateral move from greece create? who will be elected in greece is a democratic decision that we all have to accept. but also the newly elected greek government is bound by existing agreements. if it unilaterally opted out of the programme, it would mean that in my view the basis for more financial help will no longer be given. greece would have taken its decision but would also have to bear the consequences. we will all be affected, but my assessment is that greece will be worse off than everybody else. have you prepared any contingency plans
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one point is of particular importance to me here : fiscal backstops are not the path towards to greater mutual liability. fiscal means can only ever be the last resort within a well - defined liability cascade. but without this last resort, there is the risk of bank recoveries or resolutions being delayed. this is why it must be ensured in advance that fiscal means are available to plug any capital shortfalls in an emergency. only then will the resolution authority at the head of the decision - making chain take on the risk of resolving a systemically important institution. this will make creditor bail - ins the rule and not the exception. this, in turn, is the prerequisite for risks being adequately priced by lenders. 5. where is further economic policy action needed? i mentioned three aims of the banking union at the beginning of my speech : more strongly integrated and also more stable financial markets, as well as the need to disentangle the risks of banks and governments. the banking union alone will not be able to achieve these aims, but it is a key building block that must be augmented and soundly anchored. i would like to emphasise three areas. first, credibly separating the risks of banks and governments requires further regulatory action plans. the banking union by itself does not change banking regulation. in future, the resilience of institutions will be strengthened by basel iii and the additional capital requirements for systemically important financial institutions. but this is not enough. the preferential treatment afforded to government debt instruments needs to be put to an end in the medium term. sovereign bonds need, like other bank exposures as well, to be backed by capital. the existing limits on large exposures should be gradually extended to cover sovereign debt. second, deeper integration of the markets for capital in europe should be made possible. after all, cross - border investment allows opportunities β and risks β to be better shared. this strengthens the resilience of the financial system. despite the essentially free movement of capital, there are still legal and institutional barriers in europe. third, the banking union can accelerate integration of the financial markets by introducing a common set of supervisory standards. but above all, it can also contribute to better risk assumption by the private sector. the single resolution mechanism in particular is expected to make private investors participate in risks that materialise. but for this to become reality, the new rules need to be rigorously applied, and exceptions to the bail - in of creditors must be mini
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esrb has a good work process in the sense that it combines two features : first, all members are free to send participants to an esrb workstream. this is an inclusive working method where different perspectives meet, where there is a β buy - in β for the members and where peer pressure is exerted. second, there is the procedural aspect which i mentioned earlier, that the decision - making body eventually votes on what road to take. notably, the esrb has been able to publish a quite extensive amount of work and has contributed actively to the general debate. this is, in my view, very important for implementing a macroprudential culture in a broader sense, reaching outside the circle of the esrb membership. simply by shedding light on some of the macroprudential issues we are dealing with, and explaining why we see a need to tackle them, may contribute to managing expectations ; making the job of safeguarding financial stability just a little easier. the esrb β s contributions also cover very complex, and in some respects sensitive, issues where the parties involved may have started from views that are very far apart from one another. being capable of getting results even when dealing with difficult tasks like that is an important quality of a body like the esrb. i should mention that the asc, with its composition of distinguished academics with different expertise, and in a sense more independent views, has been a catalyst in some of the work i | 3 just mentioned. some of the topics on which the esrb has produced and published valuable contributions include, for instance, the regulatory treatment of sovereign exposures ; macroprudential assessments of various issues related to shadow banks, an area where there is still a lot of new ground to cover ; the insurance sector ; and commercial and residential real estate markets in the eu, to name just a few. i am also thinking of the work on structural issues regarding the banking sector, for instance in a report called β is europe overbanked? β by the asc. this is a very relevant question in my view, and one that we will most likely get back to in the first panel today, where the ecb vice president will lead the panel discussion addressing the effects of the low interest rate environment. the latter is another topic which benefits from being assessed from a macroprudential viewpoint, and which is naturally also on the esrb β s agenda. the regular identification and monitoring of potential systemic risks also benefits from the esrb
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- bank financial institutions. there is, of course, also the esrb β s role in the new regulatory framework connected to the crd / crr. in addition, i also think that the esrb more or less by construction is well | 8 placed to help its members tackle mainly national problems, by using peer pressure and working against inaction bias in various ways. this may be very important, not least when vulnerabilities emerge due to problems that are mainly beyond an individual authority β s own control. one may wish that we would have come even a little bit further in this area at this point, but it is important to realize that it takes some time to set up the necessary internal framework and processes. but by now the esrb has that kind of machinery in place. the next step is to start using it. even if we have a much more complete supervisory framework in place today, both nationally and at the eu and euro area levels, i think the role for the esrb as the eu β s macroprudential overseer is becoming more and more important. at a high level, there is in particular an increasing need to keep a truly systemic perspective, capturing all financial sectors, their interlinkages and dynamics. the eu banking sector is facing structural problems, non - bank financial institutions are becoming more important, ccps have taken on a systemically important role and the low interest - rate environment is, among other things, challenging the insurance industry, and the eu financial sector does not seem to become less interconnected. all these issues must be tackled with the impact on the financial system as a whole in mind. and i think the esrb is key in that endeavour. for every challenge we face and overcome, we learn. we learn and that makes us better prepared for tackling even more difficult challenges further down the road. that is in my view certainly true for the esrb. we learned from the financial crisis and there has been a substantial amount of learning by doing since. i must say that the blueprint was good to begin with ; pretty much all the necessary nuts and bolts were already in place to create a macroprudential body. having central banks and supervisors around the same table as european institutions, and not least, adding the independent views of the advisory scientific committee to the mix, is in my view a good set - up. furthermore, i think that the plan for how all those nuts and bolts and other components should be connected and work
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##cked globalisation of trade and finance β the washington consensus β was the best way of creating prosperity. any remaining reservations on the subject were abandoned. economists and politicians gave it their blessing and, in developed economies, made an incorrect diagnosis that went along the following lines : it β s no problem, for sure technological progress and globalisation will destroy low - skilled jobs, but we will still have an advantage, because we β re going to invest in r & d and education, and the goods and services we produce will be of better quality and we will sell them to less advanced economies. but it didn β t work that way, and there are two reasons for this, in my view. first, emerging economies, and china in particular, have seen much quicker improvements in quality than expected, and at the same time technological disruption has meant that technical progress hasn β t just destroyed lowskilled jobs, it is also destroying medium - skilled jobs and maybe soon, as a result of artificial intelligence, start affecting high - skilled jobs. second, we didn β t manage to invest in education and r & d that would have enabled us to stay ahead. education is an area that is particularly concerning and one of the big challenges for france, looking at the findings of the oecd and of the public think tank france strategie. by 2030, one in five people will be over 65. is it possible that, at some point in the future, there will be quantitative easing for financing of the voluntary sector? for the kinds of investment in associations which, since they provide support for elderly people and employ large numbers of people, are known to generate wellbeing, health, and so on? i disagree, but for institutional reasons rather than economic ones. it β s clear that significant demographic developments change the structure of our economies and, thus, the way in which we conduct monetary policy. for instance, the japanese presidency of the g20 has made demographic change one of its priorities for 2019. we β ve had seminars, among central banks too, on its impact on relative prices, inflation and the structure of production. but the ecb doesn β t have a mandate to finance adjustments in the economy. money creation holds a certain fascination, and there is always a temptation to project public policy failings onto the ecb by asking it to remedy them. there is the same debate about adjusting to climate change, which some expect the ecb to finance. but asking the ecb to finance
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lisa d cook : exploring careers in economics welcoming remarks by ms lisa d cook, member of the board of governors of the federal reserve system, at the " exploring careers in economics " conference, sponsored by the board of governors of the federal reserve system, washington dc, 4 april 2023. * * * good afternoon, and welcome to " exploring careers in economics. " i am disappointed i cannot be with you in person, but i am thrilled you will hear from boston fed president susan collins. she is an outstanding colleague and economist, a good friend. you are in for a fantastic discussion. this event has a fairly self - explanatory title - exploring careers in economics. but the broad range of opportunities is anything but straightforward. economics touches every aspect of daily life, and you can see its impact in the world outside your door - and inside as well. some of you are veterans of economic study, while some of you are just " econ - curious. " either way, i hope that when you sign off today, you will have a totally different view of what economics can offer you. i was raised by academics in a college town, but even that access and insight did not give me the full picture of what was out there. a career in economics can take you in directions you never thought possible. we live in a constantly changing world, which means there is always new research to undertake, questions to be posed, and ground to break. my own studies allowed me to investigate everything from the impact of patents on the nation's economic growth to the banking system in post - soviet russia. they also took me to the archives of the kremlin and to university in the united kingdom and senegal. and that was just during my education! my career has taken me all over the globe. economics can take you just about anywhere, figuratively and literally. so i do hope that we do a good job of showing you the world of possibilities in the field. because economics needs you. any field that studies the behavior of an entire population, as economics does, should reflect the population it studies. we all come to the table with different experiences and backgrounds, which give each of us unique perspectives. your generation has seen two once - in - a - century economic events within two decades. your economic experiences are different from anyone else's. that insight and understanding will be critical to policymakers. the economics profession needs your perspective. future fed staff, governors, and chairs may
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. of course, keeping one β s house in order and putting in place rulesbased policy frameworks are decisive contributions to the stability of the global economic system. however, given the rising degree of global integration, these efforts alone do not eliminate the potential for spillovers from one country to another, adversely affecting the stability of the global system. therefore, policy cooperation at the international level is vital to strengthen the ability of the global economic system to absorb shocks and hence to deliver the public good of global financial stability. a conditio sine qua non is that the various fora and institutions that form the international financial architecture are designed and constantly upgraded so that they are up to the task. this is an important and ongoing responsibility that policymakers from around the globe are faced with. living up to this responsibility will ensure that, going forward, global economic integration will lead to further global economic prosperity.
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as β quantitative easing β, the moniker is somewhat misleading as it focuses attention on the associated reserve expansion, rather than the change in the portfolio composition of the central bank and private sector. but do they work? under ricardian equivalence the answer would be no, as the associated transfer of risks from private sector balance sheets onto the public sector β s is matched by offsetting movements in future taxes ( gauti eggertson and woodford, 2003 ). be that as it may, event studies by joe gagnon and others ( 2010 ) for the united states, and mike joyce and others ( 2010 ) for the united kingdom suggest that long - term bond rates in each jurisdiction fell by around 100 basis points as a result of the purchase programmes, though the ultimate impact on aggregate demand is harder to judge. from this i draw my fourth lesson : central banks do not run out of ammunition when policy rates reach their zero lower bound. despite that, as we have seen only too clearly, it is next to impossible to stabilise activity in the face of a financial crisis, as indebted households, businesses and intermediaries all seek to de - leverage simultaneously. moreover, the upswing of the credit cycle is frequently associated with an increase in lending to purchase assets, especially property ; that was certainly true on this occasion. if the consequence is an investment or construction boom β as was the case in the united states, ireland and spain β the result is a capital overhang that needs to be worked off. there are welfare gains from avoiding such capital misallocation. that leads naturally to my fifth lesson : prevention is better than cure. the marginal funding cost is the three - month libor plus the average of the five - year cds premia of the major banks. the corporate loan rate is the three - month libor plus the average of the spread on sub - investment grade syndicated loans. if no other policies were available, then one might be tempted to conclude that the inflation target should just be higher in normal times, as advocated by olivier blanchard, giovanni dell β ariccia and paolo mauro ( 2010 ). by ignoring the other policies that are available to deal with, and prevent, financial crises, to my mind this is giving up too easily. bis central bankers β speeches but how best to do that? could a different choice of monetary policies have led to a better outcome? ahead of the crisis, there was a robust debate on whether monetary policy should seek to moderate
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emmanuel tumusiime - mutebile : uganda β s banking sector speech by prof emmanuel - tumusiime mutebile, governor of the bank of uganda, at the uganda bankers β association dinner, kampala, 27 november 2009. * * * the guest of honor, hon minister of finance, planning and economic development distinguished guests, ladies and gentlemen, allow me to congratulate uganda bankers association ( uba ) for organizing this inaugural annual diner. you must continue so that you allow the chairmen and members of the board of directors of banks to understand some of the things we discuss every month between the governor and chief executives of banks. i wish to take this opportunity to congratulate all the banks upon satisfactory operating results for the year ended 2008 and hope that the operating results for the year ended 2009 will be as good if not better despite the world trends. when i first stated that the world financial crisis would not affect uganda β s banking and financial sector, i was called all sorts of names : β crank β ; one newspaper said i should go back to school! they have not apologized because now at the end of it all, the crisis hasn β t affected ugandan banks. but the economic crisis may be having second round effects, but all the banks are strong, safe and sound. i also take this opportunity to thank banks for enabling us maintain a sound and stable financial sector. many other countries envy what you have done and let us continue working together to ensure that we are the envy of those people who sometimes call us names because of other events unrelated to banking. the banking sector has remained largely profitable and solvent with average capital averaging 22 percent of risk weighted assets as in the third quarter of 2009. it is testament to the prudent macroeconomic policies and the strengthening of banking supervision that the bank has put in place. notwithstanding, it β s important to note the second round effects of the economic crisis due to external shocks which has affected both the current and capital accounts and reduced growth in aggregate demand must be felt. slower growth in aggregate demand has put real gdp growth lower with gdp growing at 7 percent in 2008 / 09 which was lower than 9. 5 percent growth rate projected. but this growth rate is still much higher than the rates of sub saharan african countries. let us not go down and say economic situation is bad because it β s good and together with you we can make it even better. and in particular i want to tell you that bou is
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determined to ensure that the current appreciation of the exchange rate will not lead to an unnecessary reduction in aggregate domestic demand. we will take and use every measure at our disposal to ensure that this does not happen and that the economy remains buoyant. i have said before that i am not committed to a particular exchange rate of the shilling but because of the problems that are happening now which lead to a reduction in domestic demand, the bou will ensure that the appreciation of the exchange rate doesn β t worsen the situation regarding aggregate demand. we are not changing the policy of not having an exchange rate level to defend. i am saying that we will not allow the appreciation of the exchange rate to cause other problems on our goals. i am not changing the rule which we have followed all this while that the bou will not intervene in the market except when there is volatility. i herewith therefore announce that, from tomorrow, november 28, 2009, in addition to volatility, we will, until further notice, intervene to stop excessive appreciation of the exchange rate. we have a challenge of ensuring financial access. we have a challenge of ensuring that agricultural credit is made available to a wider sector of uganda β s population since it β s agricultural. i must say that while stanbic bank has come up with additional program to the finance minister β s agricultural credit program, i still want to see other banks come up and offer more credit. i am very committed to a liberal financial system and i am not persuaded that edicts about interest rates work. let β s work together and make sure that financial inclusion is expanded. let make sure that any attempts by some of the remaining elements in government who want to control interest rates are not given the chance to do so. it will be disaster if we attempt to control interest rates. mr. minister, hon. prof kamuntu, since you are the first person to free the shilling to float and to liberalize interest rates, i am glad to invite you to address this gathering.
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and fintech firms over the past year, we have often heard them confirm our view that the pandemic is acting as a catalyst for their business models. market developments that normally need four to five years are now taking place within the space of four to five months. people expect a great deal from electronic payment systems. they want them to be safe, quick and above all convenient. this also places demands on us as central banks and on the europewide infrastructure we operate, such as the system for large - value payments that the bundesbank improves and advances together with the banco de espana, the banca d β italia and the banque de france. advances on the digitalisation front have also sparked a debate surrounding digital currency. july saw the eurosystem launch a two - year investigation phase on the introduction of a digital euro. this digital currency could be implemented alongside commercial banks β book money as failsafe, universally accepted central bank money. the intention is to create a digital euro that makes it easy to send and receive payments in real time while at the same time satisfying high standards in terms of payment data integrity and security. the digital euro could be used to underpin innovative products developed in the private sector. for instance, smart contracts β protocols that automatically execute payments once the right contractual conditions have been met β might open up entirely new business areas. 2 / 3 bis central bankers'speeches what matters from the bundesbank β s perspective is that the traditional allocation of functions between private and public players is not undermined. central banks deliver the backend infrastructure in payments, but it is up to the ( european ) private sector to develop customerfriendly payment solutions for end users. it has not yet been decided what features the digital euro might have or when it might be introduced. one thing is clear, though : the digital euro would complement cash and book money, not replace them. 3 conclusion ladies and gentleman, as important as money may be in our business and economic world, there is one particular spanish saying i hold very dear : β vive. el dinero se recupera, el tiempo no. β β β live. you can get back the money but not the time. β on that note, mr huttner, please accept my best wishes that you will have plenty of time to forge new contacts and foster relationships, to get to know and love madrid β and, of course, to represent the bundesbank well here in spain. i
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european countries, inflation was above our inflation target because of oil and food prices and the european central bank raised its interest rate only month before. although it is certain that the, at that time actual, forecast did not match the data perfectly, with no doubt it identified the break point and by that served very well its purpose. naturally, the forecast accuracy, i. e. the ability to identify breaking points reasonably well, has not come out of the blue sky. the actual way in which forecasts are produced and used in central banks has changed substantially over the past two decades. these changes have reflected developments both in the economic ( and econometric ) theory and in monetary policy regimes. bearing in mind the failure of large - scale models in 1970s, the profession has started to prefer smaller - scale models with a sounder microeconomic background, built in recent decades usually along the lines of new keynesian economics. well, maybe we are still not able to match all the statistical numbers perfectly, but i hope that we are more skilled in recognising important breaks in the development of our economies than we were 10 years ago. indeed, the use of general equilibrium models forces us to think about the economy in a consistent way and the use of multivariate filters has improved our knowledge about the current position of the economy in the business cycle. you probably all remember that inflation targeting was in our case introduced in a challenging situation, after a period of currency turmoil in may 1997, which ended the fixed exchange rate period and resulted in higher inflation and rising inflation expectations. the economy needed a new nominal anchor in order to return to a disinflation path. inflation targeting was chosen as β the best of all bad β alternatives at the time. such a sudden switch from a fixed exchange rate system to inflation targeting required a radical and fast change in the central bank β s mentality. this was perhaps the biggest challenge that the cnb had to face. over the past five years it has involved much work on improving our forecasting tools, leading to substantial development in our internal analytical processes. at the beginning of 2002, the cnb settled on a new forecasting process. this integrates expert judgment and short - term analyses β which were the key pillars of the cnb β s forecasting tool - kit in the first years of inflation targeting β with a macroeconomic model that provides a consistent framework for the policy analysis. an important element of this step was a switch from a forecast with a
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result of the financial crisis. it actually went negative in the us and euro area for several quarters on the back of lower energy and food prices, but it has since rebounded a little. measures of so - called β core β inflation in these countries have been trending down since the start of the crisis. the inflation record in australia has been similar to new zealand, except over the past few years as their economy avoided recession and some price pressures continued. in new zealand there have already been several government policy developments that have affected prices : the amended emissions trading scheme coming into effect on 1 july, changes to tobacco and excise taxes and acc charges all have had significant effects on inflation. despite this, consumer price inflation is likely to be close to 2 percent again in the september 2010 quarter. however, the most significant event is the increase in the rate of gst on 1 october. this will push headline inflation substantially higher. this mainly involves direct effects of gst on goods and services purchased. the figure shows the forecasts we published in the june monetary policy statement, implying some price pressure this quarter and a 2 percent price shock next quarter. since then our expectation of the peak in inflation has eased back to around 5 percent or just below. the figure shows that the spike in inflation is expected to be short - lived. the inflationary effects should be largely out of the system by later next year. our industry intelligence to date suggests that the gst increase is not being treated as a big disruptive event by the retail industry. pre - stocking does not appear major, nor does prepurchasing, and a last quarter sales fall - off is not expected. the spending effects of the gst increase are counter - balanced by the income tax reduction. as the economy grows, employment levels are expected to increase, and plant and equipment will be worked harder. as this occurs underlying inflationary pressures are likely to gradually increase, but consumer price inflation is forecast to remain comfortably inside the target band in the second half of our forecast horizon. higher headline inflation would obviously pose a challenge for monetary policy. there have, of course, been periods in the past when inflation moved temporarily outside the bank β s target band. the policy targets agreement with the government deliberately gives the bank the ability to β look through β temporary inflation spikes. the agreement defines the bank β s price stability target in terms of the consumers price index. however, it also instructs us to focus on the medium - term trend
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where we talk with and listen to people from all walks of life. we set out some of the high - level themes from those conversations in a report from the chairs of the regional panels published today. what we hear from them is sobering. at a recent citizens β panel in leeds, for example, a young woman shared her story of trying to juggle studies with caring responsibilities for her parents. higher costs of transport, food and heating had left her struggling to cope, let alone to make the most of her time at university. in manchester, a carer told us how higher fuel prices had eaten into her pay as she relied on private transport to deliver vital services to vulnerable people. a woman at our panel in durham told us how she received her pay on a weekly basis and struggled to budget for her monthly direct debits. although she had health concerns, she felt unable financially to take time off from her full - time work. she told us she had cut back on all but the most essential purchases. we hear many such stories. for many people, this really is a cost of living crisis. let me provide some wider context. the uk economy has been hit by a series of significant economic shocks. these include the change in our trading relationship with the european union, the covid pandemic with associated bottlenecks in global supply chains, and the sharp rise in global energy prices related to russia β s brutal war on ukraine and its people. for the united kingdom, these shocks have eroded the terms on which we trade with the outside world. the prices we can get for the goods we sell have not kept up with the prices we have to pay for the goods we buy. this has made us poorer as a country. the fall in our national real income has manifested itself in a rise in the prices we have to pay for the things we buy as consumers. the developments in energy prices have been particularly stark. the impact of that is very clear in the data so forgive me for spending a bit of time setting that out too. chart 1 : cpi inflation projection with direct energy contribution based on market interest rate expectations the purple bars on this chart show that a big part of the rise in consumer price inflation has been caused directly by energy prices. but the chart also shows the almost mechanical flipside of that. in the mpc β s central projection, inflation falls quite sharply over 2023 as last year β s large increases in energy prices drop out of the annual calculation.
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jean - claude trichet : interview with frankfurter allgemeine zeitung interview with mr jean - claude trichet, president of the european central bank, and the frankfurter allgemeine zeitung conducted by mr benedikt fehr, frankfurt am main, 17 december 2008. * * * mr trichet, ten years ago you were governor of the french central bank. how did you celebrate the historical event, the introduction of the euro? at midnight i invited all employees, who had worked extremely hard towards this event, to join me to celebrate both the euro and the new year with foie gras and champagne. and i told them that the people of europe were very fortunate that they had performed this task so well, as had all other colleagues in the euro area. what did the introduction of the euro mean to you personally? i can tell you that i was full of pride on that day. i had been in favour of the creation of the euro for a long time. in the early 1990s i had negotiated, on behalf of the french government, the maastricht treaty regarding the creation of the currency union ; and it was an honour to negotiate with horst kohler, then german staatssekretar and now president of the federal republic of germany. as the governor of the independent banque de france, which became fully independent on 1 january 1994, i had, together with my colleagues on the conseil de la politique monetaire, conducted a monetary policy which resulted in inflation in france averaging 1. 4 % per year in the five years prior to 1 january 1999. if we had not achieved this, the euro could not have been introduced. have you ever doubted the success of the euro in the past ten years? no, certainly not. but of course we are living in times when one cannot sit back complacently. like all central banks, the european central bank has had to manage many challenges and shocks, such as the asian crisis, the bursting of the internet bubble, the oil and commodity price shock or the threats to the stability and growth pact. but i was always convinced that the euro is a success β and proof of the fact that the people of europe are able to put into effect a historic plan that they have undertaken. not all europeans share your enthusiasm. according to some surveys, many europeans are still critical of the euro. the survey i have in mind was conducted by the european commission
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, while their implementation could be improved, in particular as regards the preventive arm of the pact. finally, let me support the calls expressed in the report of the high level group chaired by wim kok to renew the impetus in the lisbon process and to sharpen its focus. in this context, we restate our strong support for all efforts on the part of governments, parliaments and social partners implementing the reform agenda and focusing on those reforms that will support employment growth, foster investment and stimulate innovation and productivity. progress in this direction will not only enhance the underlying growth potential of the euro area economy over the medium term but will also help to bolster consumer and business confidence over a shorter horizon. we are now at your disposal for questions.
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speech of the cbbh governor senad softic, ph. d. at the first europe - wide international monetary fund regional economic outlook entitled β regional economic perspectives for europe β. sarajevo, november, 13, 2017 honorable guests dear mr. decressin, panelists, coleagues, ladies and gentlemen. it is my pleasure to welcome you to premises of the central bank of bosnia and herzegovina today for presentation of the first europe - wide imf regional economic outlook. thank the imf for choosing bosnia and herzegovina for such event. we are meeting today at a good time for europe and bosnia and herzegovina. economic growth is gaining strength. in the euro area, growth is expected to remain about 2 percent in 2018. inflation, big concern for us central bankers, is expected to remain stable in 2018. in bosnia and herzegovina, growth was 3. 1 percent in 2016. we expect the recovery to continue. the central bank of bosnia and herzegovina continues to maintain monetary stability through strict implementation of the currency board arrangement, as defined in the law. inflation remains firmly anchored to price developments in the euro area. we expect prices not to increase by more than 1. 5 percent in 2018. it is very important for us in bosnia and herzegovina that growth in the european union is sustained over the medium term. the eu is our largest trading partner and foreign investor. a large bosnian diaspora sends remittances close to 12 percent of gdp per year. these are very strong economic links that should be considered together with our diaspora as important resource for economic development of the country. however, policy makers in europe, and also here in bosnia and herzegovina, should take advantage of the recovery to implement ambitious economic measures and structural reforms. for bosnia and herzegovina, we should focus on three broad areas : 1. first, we need to improve the composition of the budgets at all levels of government. the general governments of bosnia and herzegovina are on track to achieve a combined overall fiscal surplus for the second year in a row. however, there needs to be a reorientation of spending towards infrastructure, to help catch up with european standards, and to improve connectivity and competitiveness of our economy. 2. second, we need to continue to strengthen the single financial system of bosnia and herzegovina. the banking system in bosnia and herzegovina is strong and stable. there is enough liquidity and sufficient capital. progress was made since 2015 in putting in place new banking legislation that brings bosnia and herzegovina banking system closer to european standards. still
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, there is a lot of work to be done to resolve issues from the past financial crisis. at more than 11 percent of total loans, npls continue to burden the balance sheets of banks. in this respect, adoption of new bankruptcy legislation at the entity level and clarification of tax - treatment of npl sales will help address this issue in the period ahead. 3. third, we should redouble our efforts to improve our institutions and address governance shortcomings. foreign direct investment is stuck at around two percent of gdp per year. this is too low to support higher growth rates that will reduce unemployment and emigration. improvements in regulatory quality, fair and transparent β rules of the game β, and transparent and accountable institutions will help attract higher levels of foreign investment. therefore, we have to send clear message about positive outcomes of our reforms, increase reputation of bosnia and herzegovina, improve our competitiveness to increase investments and growth, and at the same time strengthen the single economic space to finally pave the way to our european future. thank you very much for your time, and i hope that you have a wonderful event.
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of banks has not been so long as to suggest that the bank of mauritius has been ineffective as a regulatory authority of banks. the us controller of currency wrote a letter of guidance to banks way back in december 1863. three short lines in the letter give an idea as to why the five banks lost their banking licences. the lines read as follows : β pursue a straightforward, upright, legitimate banking business. never be tempted by the prospect of large returns to do anything but what may be properly done under the national currency act. β splendid financiering β is not legitimate banking, and β splendid financiers β in banking are generally rascals or humbugs. β bis central bankers β speeches in 1996, the bank of mauritius had revoked the banking licence of the mauritius cooperative central bank ltd ( mccb ). the mccb, as the bank was popularly known, suffered from serious capital deficiency. the bank had a scheme to attract deposits at the mind - boggling rates of interest of over 15 per cent. the rates were of course far higher than the then prevailing market rates. when the chicken had come to roost, the bank did not have liquidity. the bank β s shareholders and staff as well as informed depositors had started withdrawing funds. the bank barrelled towards failure and dashed around like a panicked headless chicken. the shareholders of the bank, representatives from the small - planters community and those personalities who were politically well connected clamoured for the bank of mauritius intervention. the then bank of mauritius was not yet independent. as per the bank of mauritius act 1971, the minister of finance was fully empowered to issue directives to the bank. reluctantly, the bank of mauritius had intervened by way of capital and liquidity injection. already, public trust in the bank was lost and irrecoverable. the death sentence of the bank was readable on the wall for quite some time. yet, the bank of mauritius was asked to revive a clinically dead bank. the bank of mauritius had yet to learn a fundamentally important lesson when dealing with banks in trouble : a troubled bank can survive without capital for some time. but without liquidity, that bank is bound to collapse within hours. no amount of liquidity injection by tax - payers would be sufficient to rescue such a troubled bank. once public confidence in a troubled bank is lost more so in a small gossip - ridden society like ours, it stays lost. this sad story and other equally
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of the resilience and strength of our banking sector lies in our early adoption of specific basel iii measures. i look forward to continuing the implementation of the remaining basel iii measures and, accordingly, we have planned the roll out of a slew of regulatory upgrades including : 1. the introduction of the net stable funding ratio which will ensure that banks maintain a stable funding profile over the long term ; 2. the introduction of a leverage ratio as an additional measure to limit excessive leverage in the banking sector ; 2 / 3 bis - central bankers'speeches 3. the alignment of regulatory risk weights for credit, liquidity, market and operational risk exposures with basel iii ; and 4. improving our disclosure and reporting requirements which will also comprise climate - related disclosures. a three - day exposure might not be enough for you to master all the reforms but the journey must start somewhere. this is what we are doing today, together with you. while the bundesbank experts will be taking us through the contours of basel iii, i am confident that at the end of sessions, you will have a solid understanding of the main amendments required to our existing framework as well as the challenges ahead. this is why in addition to the early adoption of certain basel iii measures, i have since assuming governorship in 2020 ensured that the ongoing upgrade of the bank of mauritius'overall supervisory and risk management framework be targeted at the specificities of our own risk topography. in this respect, we are expediting the full implementation of our risk - based supervision framework which is an innovative supervisory toolkit and which provides us with a novel capacity to deep - dive into specific risk areas and even look for feedback loops at the financial stability level. it will blend particularly well with the risk - centric approach of basel iii. in particular, i have in mind the market risk module which is providing us with important insights during the current period of heightened interest and re - pricing risk. nevertheless, existing regulatory toolkit and planned upgrades have to be complemented by continuous skills training for our supervisors for them to be really effective. our supervisors are at the center - stage of our rapidly evolving banking sector and banking regulation and, perhaps, the pace of change we are witnessing here is far greater than in more mature jurisdictions. in this respect, we are particularly keen on ensuring that our supervisors have the required skills to keep abreast with latest developments through a combination of local and overseas training sessions. i would here encourage all banks to continuously
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